Re Lauer; Corby v Lyttleton

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY & PROBATE LIST

S CI 2013 05226

IN THE MATTER of the will and estate of ELIZABETH ANNA MARIA LAUER, deceased

-and-

IN THE MATTER of an application pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 for the determination of a question arising in the administration of the estate

BETWEEN:

ROSS CORBY and GEORGE ANDERSON (as executors and trustees of the will and estate of Elizabeth Anna Maria Lauer, deceased)	Plaintiffs
v
SUZANNE MARY LYTTLETON (as legal personal representative of the estate of George Nagy, deceased)	Defendant

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JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	On written submissions
DATE OF JUDGMENT:	30 November 2017
CASE MAY BE CITED AS:	Re Lauer; Corby & Anor v Lyttleton
MEDIUM NEUTRAL CITATION:	[2017] VSC 728

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TRUSTS— Creation of express trusts — Three certainties — Where residue of estate bequeathed to purported express trust — Where multiple deeds of trust — Whether express trust validly created — Where no evidence of intention of settlor — Where no evidence of trust property — Where no evidence of trust beneficiaries — Byrnes v Kendle (2011) 243 CLR 253 — Harpur v Levy [2011] VSC 653 — La Housse v Counsel [2008] WASCA 207.

PRACTICE AND PROCEDURE — Where defendant died prior to closing submissions — Where no evidence before the Court as to personal representative — Administration and Probate Act 1958, s 29 – Supreme Court (General Civil Procedure) Rules 2015, rr 9.06, 9.09, 16.03.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Ms E Coates	Roberts Beckwith Partners
For the Defendant	Mr P Pascoe	Suzanne M Lyttleton

HER HONOUR:

Elizabeth Lauer (‘the deceased’) died on 10 May 2011. Probate of her will, dated 21 November 2002 (‘the will’), and estate was granted to the plaintiffs on 29 September 2011. At the date of her death, the deceased was 88 years old and had never married. From approximately 2006 onwards, the deceased suffered from dementia.

For probate purposes, the value of the deceased’s estate was estimated to be $448 168. At the commencement of this application on 8 October 2015, however, the estate had diminished to approximately $300,000.[1] This was on account of a property at 133 Spray Street, Mornington being sold for less than the initial estimated value, payment of certain distributions in accordance with clause 6 of the will, and legal costs.
[1]An updated financial statement dated 24 May 2017 provided by the plaintiffs shows the value of the estate at that time to be $255 053, having diminished due to fees and disbursements.

Clause 6 of the will bequeaths six legacies totalling $38 000. Clause 8 of the will devises the deceased’s interest in a property at 216 Eastbourne Road, Rosebud (‘the Eastbourne Road property’) to the defendant. That property was sold in 2005. Relevantly, clause 9 of the will then leaves the residue of the estate to ‘the Trustee for the time being of the Elizabeth Lauer Family Trust for the Trustees to apply as capital contribution to the Trust’.

George Nagy (‘the defendant’)[2] was a friend of the deceased, the two having met in or about 1990. From about 2001, the defendant assisted the deceased with daily activities, and in the three years prior to the deceased’s death, helped her with her medications and managed her financial affairs. The deceased was also said to have an affection for the defendant’s adult daughter, who has a mental disability.
[2]Pursuant to orders made 25 September 2017, the defendant is no longer a party to the proceeding. The representative of the defendant’s estate, Ms Lyttleton, was added as a defendant in substitution for the defendant, Mr Nagy: see [58]–[62] below. However, for expedience, I have described Mr Nagy as ‘the defendant’ and referred to Ms Lyttleton by name throughout these reasons.

The defendant asserts that he is trustee of the Elizabeth Lauer Family Trust (‘the Trust’). Due to certain issues surrounding the defendant’s capacity, on 3 June 2016 the Court appointed Ms Suzanne Lyttleton as litigation guardian for the defendant. The defendant subsequently died, and on 25 September 2017 orders were made appointing Ms Lyttleton to represent the interest of the defendant’s estate in the proceeding.

The plaintiffs seek the determination of questions arising in the administration of the estate pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) as follows:

(a) Did the Trust fail to come into existence due to lack of formalities?

(b) Is the Trust void for uncertainty as to its beneficiaries or any other terms?

(c) Has the Trust been terminated by distribution of capital?

(d) Ought the residue of the estate be distributed to the ‘Trustee for the time being’ of the Trust or according to the law applying to an intestacy?

For the reasons that follow, the Court declares that a trust by the name of the ‘Elizabeth Lauer Family Trust’ failed to come into existence. The residue of the estate ought to be distributed in accordance with s 52 of the Administration and Probate Act 1958, noting that by orders made 8 August 2014 in the proceeding, the Court ordered that in the absence of any further evidence, the estate be administered on the footing that no aunt or uncle survived the deceased and that Klaus Alfred Lauer is the deceased’s sole surviving nephew.[3]
[3]See Re Benjamin; Neville v Benjamin [1902] 1 Ch 723.

These conclusions have been reached with a degree of difficulty. It is apparent that the defendant and the deceased were friends over a number of years and that the deceased intended to bequeath a share of her estate to what she viewed as the Elizabeth Lauer Family Trust. However, the evidence does not support a finding that such a trust came into existence.

Procedural history

The defendant initially engaged Mr Michael Morehead of Moreheads Lawyers to act on his behalf. Mr Morehead met with the defendant on 30 August 2012 and 4 September 2012, and corresponded with the solicitors for the executor, Roberts Beckwith Partners, regarding administration of the deceased’s estate. On 6 May 2013, Roberts Beckwith advised that they had briefed counsel to institute proceedings in order to determine how the residuary of the estate should be distributed.

The proceeding was commenced on 8 October 2013. In or around October 2013, the defendant suffered a stroke requiring hospitalisation for three weeks. As a consequence of his stroke, the defendant suffered aphasia. Mr Morehead was informed of this when the defendant and the defendant’s brother-in-law attended his office on 28 October 2013, four days after Mr Morehead sought to file an appearance on behalf of the defendant in the proceeding. On 29 October 2013, Mr Morehead contacted the defendant’s daughter, Ms Sonja Martin, who was to provide details of the defendant’s capacity, any power of attorney and his will.

By orders made on 6 November 2013, the defendant was added as a party to the proceeding and his appearance of 24 October 2013 was ordered to stand. On 7 November 2013, Mr Morehead contacted the defendant by telephone but the defendant was unable to understand him.

Between 7 November 2013 and 21 August 2014, Mr Morehead sought information from both the defendant and Ms Martin as to the defendant’s capacity. During this time, Mr Morehead received from Ms Martin a note from a speech pathologist dated 4 March 2014 who had assessed the defendant both shortly after his stroke and in January of that year. The note identified that the defendant had moderate to severe receptive aphasia such that he was only able to ‘process perhaps two words of a sentence and only able to answer basic questions with gesture, writing of key words and a lot of repetition’.

On 21 August 2014, Mr Morehead attended the defendant’s home and together with the defendant, went through the defendant’s draft affidavit. Mr Morehead checked that the defendant understood each paragraph and was comfortable that the defendant was appropriately deposing the affidavit. While Mr Morehead maintained some concerns as to the defendant’s capacity, he deposed that as there was no capacity assessment critical of the defendant, it was foremost in his mind to comply with orders of the Court seeking evidence from the defendant.

Mr Morehead continued to seek evidence from the defendant, particularly regarding the defendant’s capacity.

On 1 December 2014, the initial date for commencement of the hearing, the defendant did not attend court and Mr Morehead informed the Court that he was not satisfied of the defendant’s capacity. Despite attempts early in 2015, Mr Morehead was unable to obtain clear instructions or medical evidence as to the defendant’s capacity. By summons filed 19 February 2015, he sought leave to cease to act for the defendant,[4] which was granted on 20 February 2015. At the hearing of the summons the defendant’s son, Mr Peter Nagy, and Mr Morehead informed the Court that the defendant no longer had capacity. Mr Peter Nagy also informed the Court that he intended to seek substitute legal representation for the defendant.
[4]Supreme Court (General Civil Procedure) Rules 2015, r 20.03.

A representative of the defendant did not appear at a directions hearing on 17 March 2015 and the matter was adjourned to allow the defendant to obtain appropriate representation. Notice was then given to the defendant and three of his adult children as to the possibility of referring the matter to VCAT for the appointment of an administrator under s 66 of the Guardianship and Administration Act 1986 and an associated hearing. There was no appearance by a representative of the defendant at that hearing.

The plaintiffs subsequently sought final orders in the proceeding. On 10 June 2015, the Court ordered that the defendant and three of his adult children be served with the proposed final orders, and that the application for final orders was to be heard on 14 August 2015.

By letter dated 6 August 2015, the defendant contacted the Court directly. The contents of that letter raised concerns that the defendant may not understand the central issues in the proceeding, and on 17 August 2015 the Court declined to make final orders. Rather, after a number of further procedural steps, on 3 June 2016 the Court appointed Ms Lyttleton as the defendant’s litigation guardian. This was on the basis of the earlier evidence of Mr Morehead, including the note of the speech pathologist, the concerns raised by the defendant’s letter of 6 August 2015, and the failure of the defendant to appear or comply with orders of the Court since 20 February 2015.

Ms Lyttleton met with the defendant and has filed an affidavit in the proceeding.

On 11 April 2017, the defendant died. This was prior to the Court receiving the defendant’s and the plaintiffs’ final written submissions, dated 30 April 2017 and 2 June 2017 respectively.

An issue arises as to the reliability of the evidence given by the defendant in this proceeding prior to his death. It is apparent that as a consequence of his stroke, the capacity of the defendant became an issue in or around October 2013, and a number of procedural difficulties were encountered thereafter. The Court is satisfied, however, on the basis of Mr Morehead’s evidence, that the defendant’s affidavit of 21 August 2014 was appropriately deposed. Evidence of the defendant after that date is considered unreliable.

Evidence

The parties consented to the proceeding being determined on the papers. The plaintiffs rely on an affidavit sworn 30 September 2013, and two affidavits of their solicitor, Mr Charles Beckwith. The defendant relies on an affidavit that he swore on 21 August 2014, an affidavit of Mr Morehead sworn 18 February 2015, and an affidavit of Ms Lyttleton sworn 10 February 2017.

Much of the evidence is not in dispute, and the following summary draws from all of the affidavits relied upon by both parties.

The deceased and the defendant met in 1990 as members of the same church group. At that time, the deceased was approximately 66 years old and the defendant was approximately 54 years old. The deceased became friends with the defendant, his wife and his adult daughter, Ms Anna Nagy.

On 1 April 2002, the deceased appointed the defendant as her attorney under an enduring power of attorney. The same day, the deceased and the defendant entered into a written agreement, witnessed by Mr Gunther Graff, in which the defendant was described as ‘Trustee’ and pursuant to which the deceased agreed:

to pay all expenses incurred by my Trustee in relation to finding a suitable nursing home for myself and all other expenses incurred in my day to day care as discussed and agreed (such as nursing home fees, petrol, traveling expenses, personal items and special needs as required).

In or around winter 2002, the deceased asked the defendant to organise a family trust for her. After obtaining quotes from law firms and being surprised at their cost, the defendant instead decided to copy and amend the ‘family trust’ of his friend, Mr Larry Callaghan. Although when recounting this period since losing capacity the defendant reported obtaining a deed from a lawyer, the defendant’s earlier explanation is consistent with a later comment of Mr Callaghan, who reported that the earlier explanation is ‘exactly how matters transpired’.

The defendant deposed that on 24 September 2002 he organised for a trust deed to be signed by himself and the deceased. The version of the trust deed that the defendant asserts was executed at this time (‘the defendant’s version’), referred to as ‘the signed original’, bears a cover page with the date ’24 September 2002’ and a rectangular stamp with the words and numerals ‘Received 16 October 2002 Rosebud Vic.’.

On 16 October 2002, a new cheque account was opened at the Rosebud branch of the Commonwealth Bank of Australia (‘CBA’), account number 10317069, in the name ‘The Elizabeth Lauer Family Trust’ (‘the Trust Account’). The individual initially authorised to operate the Trust Account was the deceased, who was described as ‘Trustee’ in the relevant authority and appears to have signed her name under this description. The authority bears a rectangular stamp with the words and numerals ‘Received 16 October 2002 Rosebud Vic.’. An internal document from the CBA dated 18 October 2002 indicates that the account name was subsequently changed to ‘George Nagy in Trust for the Elizabeth Lauer Family Trust’.

The defendant drove the deceased to lawyers Roberts Beckwith on 21 November 2002, which was the date of execution of the deceased’s last will. The associated file of Roberts Beckwith is unable to be located and there is the chance that it has been destroyed.

Bank records show that on 17 December 2004, the Trust Account had a balance of $4694, and on 14 January 2005 it received a deposit of $104 104.

On 8 February 2005, the Trust Account was debited $25 000. That same day, the Nagy Family Trust CBA account number 10342694 (‘the Nagy Family Trust Account’) was credited with $25 000.

On 22 April 2005, the deceased disposed of her interest in the Eastbourne Road property, which she had owned as tenant in common with Ms Queenie Williams. The property appears to have been sold for $265 000. Ms Lyttleton deposes that the associated transfer is dated 23 March 2005, and the record of stamp duty is dated 11 April 2005.

The Trust account was debited $25 000 on 1 June 2006. Again, on the same day the Nagy Family Trust Account was credited with $25 000. A further $60 000 was debited from the Trust Account on 18 July 2007. Also on that day, a CBA term deposit account number 50215817 was opened in the name of Elizabeth Lauer with an initial balance of $80 000. Other than the significant credit and debits already discussed, statements for the Trust Account identify a number of minor credits, some of which are described as ‘rent’. On 21 May 2008, the Trust Account was closed.

From approximately 2006, the deceased began to suffer from dementia. According to the defendant, he commenced managing the deceased’s financial affairs in mid-2009 when it became apparent that she was not managing her utilities and other bills.

On 28 July 2009, an application for an administration and guardianship order in relation to the deceased was made to VCAT. Roberts Beckwith represented the deceased in the proceeding, during which the defendant was required to furnish the Trust deed and certain financial records, including a statement of trust.

Counsel appeared for the plaintiff at a hearing before VCAT on 15 October 2009. The backsheet of counsel’s brief notes that the ‘Trust deed was provided however page 10 was missing’, and that the Member was of the view that the full trust deed was required. On 15 October 2009, VCAT ordered the defendant to lodge with State Trustees Limited, VCAT Examinations, a ‘full copy of the Deed of Trust’. Subsequent orders of 4 March 2010 by the same Member note that the defendant provided VCAT with a copy of the Trust deed. In orders made 15 April 2010, VCAT dismissed the applications for administration and guardianship, and certain conditions were placed upon the defendant as the deceased’s attorney.[5]
[5]The conditions related to the ongoing provision of financial records to VCAT and restriction on the sale of the property at 133 Spray Street, Mornington without VCAT’s prior approval.

The deceased died on 10 May 2011. On 25 May 2011, the defendant attended the office of Roberts Beckwith and informed Mr Beckwith of the deceased’s death. At that time Mr Beckwith, recalling that page 10 of the Trust deed was missing during the 2009 VCAT proceeding, asked the defendant to supply the missing page.

On 15 June 2011, Mr Beckwith wrote to the defendant again requesting the missing page of the Trust deed. This was followed by a phone call the next day, during which the defendant said he would provide the missing page.

On 2 August 2011, a VCAT registrar wrote to the defendant enclosing ‘the original Deed of Trust “The Elizabeth Lauer Family Trust” dated 24 September 2002, as per [the defendant’s] request’. Reference was made to a letter of the defendant’s dated 26 July 2011.

By letter dated 4 September 2012, Moreheads provided Roberts Beckwith with a photocopy of a trust deed for the Trust dated 24 September 2002, said to be obtained from their file associated with representing the defendant at the VCAT proceeding (‘Morehead’s version’). Roberts Beckwith then checked their own file in relation to the 2009 VCAT proceeding. That file contained a copy of a trust deed for the Trust (‘Roberts Beckwith’s version’), also dated 24 September 2002, but containing a different page 10 to Morehead’s version. Markings on the top of page 10 of the Roberts Beckwith’s version indicate that it was sent by facsimile transmission on 16 June 2011 from ‘Fletchers Sorrento’. This is consistent with the discussion between Mr Beckwith and the defendant at that time and it appears that the page was erroneously filed in Roberts Beckwith’s 2009 VCAT file.

The defendant’s version of the Trust deed is exhibited to his affidavit sworn 21 August 2014.

Two additional copies of the Trust deed have been identified. In response to a subpoena for production issued by the plaintiffs on 15 January 2015, VCAT produced a copy of the Trust deed (‘VCAT’s version’), and the CBA has also produced a copy in response to a subpoena for production issued by the defendant on 12 September 2016 (‘CBA’s version’).[6] Consequently, five versions of the deed of Trust are before the Court as follows.

The defendant’s version[7]

[6]See Supreme Court (General Civil Procedure) Rules 2015, O 42A.

[7]Referred to by the plaintiffs as ‘the 2012 version’.

The version of the deed exhibited to the defendant’s affidavit of 21 August 2014 has a cover page citing the date as ‘24^th September 2002’ as well as the names ‘Q.P. Williams’ near the word ‘Settlor’ and ‘George Nagy’ near the word ‘Trustee’. Additionally, as well as the stamp as already described, it bears the words ‘Deed of Trust’ and ‘The Elizabeth Lauer Family Trust’. The page has been hole-punched and shows staple holes, but otherwise appears to be a photocopy.

Pages one to nine of the deed also appear to be photocopies and the text is in a consistent font. Page one refers to the date of execution as ‘the twenty fourth day of September Two Thousand and Two’. Page ten is drafted in a differing font, although it too appears to be photocopied. It lists three schedules. The first schedule identifies the ‘Settlor’ as ‘Queenie Patricia Williams of 138 Spray Street’ and the ‘Trustee’ as ‘George Nagy of 83 Iona Street’. The second schedule lists the ‘Beneficiary’ as ‘Bernard Lyle Wright, Markus Rashie, Bettina Lauer, George Nagy, Anna Nagy’.

Clause 1(a)(ii), as to income beneficiaries, and clause 12, as to the name of the trust, both refer to schedule three. That schedule contains the words ‘The Lauer Family Trust’.

Clause 1(e) refers to a fifth schedule, which is not included in the deed, as follows:

The ‘termination date’ shall mean the date when the youngest child of the person named in the Fifth Schedule hereto attains the age of twenty one years or such earlier time as provided by Clause 11 or any other Clauses thereby enabling an earlier date to be determined.

Page 11 of the deed bears the execution clauses. It contains two signing clauses, one for the ‘Common seal of Elizabeth Lauer’ and another for ‘the said Trustee’. The common seal of Elizabeth Lauer is said to be affixed ‘pursuant to a resolution of the Board of Directors’. To the right of the first signing clause is a circular stamp in blue ink, bearing the words ‘The Common Seal’ of the ‘Elizabeth Lauer Family Trust’, and four signatures. The first, appearing above the seal and perhaps not in the original ink, appears to be that of the deceased. Beneath this within the seal is a blue signature, and both below the seal and beside the text ‘Director’ a black signature. The blue and black signatures have been identified as those of Ms Karen Straub, the defendant’s sister-in-law. Ms Straub has stated that at the defendant’s request she attended the home of the defendant and witnessed the signatures of the deceased and the defendant. She only signed one document, and the second witness to the deed, Mr Gunther Graff was not present at that time.

Below the signature of Ms Straub appearing in black is a second signature of the deceased, perhaps in original ink, beside the word ‘Secretary’.

To the right of the execution clause for the ‘said Trustee’ is the same circular stamp in blue ink. A black signature that does not appear to be in original ink overlays the seal, as do the words ‘George Nagy’ in blue ink immediately below the black signature. To the left of the blue seal is a signature in blue ink said to be that of Mr Gunther Graff, and to the right, the signature of Ms Straub in blue ink. Although at a time when the defendant’s capacity was uncertain, the defendant has identified his signature as that within the second ‘common seal’ stamp.

When questioned about the deed in 2016, the defendant also asserted that he and the deceased attended a local business that made rubber stamps to purchase the ‘common seal’. Ms Williams was a friend of the deceased who died approximately three to four years before the deceased. Mr Graff died on 1 January 2017, prior to the representatives of the defendant being able to contact him.

Morehead’s version

The version of the deed forwarded to Roberts Beckwith by Morehead’s on 4 September 2012 appears to be a photocopy of the defendant’s version, save for the lack of a staple in the defendant’s version that appears in the photocopy.

Roberts Beckwith’s version[8]

[8]Referred to by the plaintiffs as ‘the 2009 version’.

Roberts Beckwith’s version of the deed of trust discovered in the 2009 VCAT file bears a cover page the same as that of the defendant’s version, and the text of pages one to nine also appears identical. Page ten, however, differs in a number of respects. First, the formatting of the text of clauses 10, 11 and 12 is not identical to that in the defendant’s version. Secondly, four schedules are identified rather than three, and both the settlor and beneficiaries of the trust have changed. The settlor of the trust is identified as ‘Kim Michod’ of 17 Attuna Crescent, and the ‘Beneficiary’ is described as ‘Bernard Lyle Wright, Markus Rashle, Bettina Lauer’. Further, the third schedule identifies the ‘income beneficiary’ as ‘my Trustee George Nagy’ and the fourth schedule notes the name of the trust as the ‘Elisabeth Lauer Family Trust’. Finally, the top of page ten of Roberts Beckwith’s version shows what appears to be text of a facsimile transmission with the numerals and text ’16-06-11; 03:28PM; Fletchers – Sorrento; 613 59 84 2611’. This has since been identified as the number for Fletchers Real Estate in Sorrento.

Page 11 of Roberts Beckwith’s version also differs from the defendant’s version, as the signature of Mr Graff does not appear to the left of what the defendant identified as his signature.

VCAT’s version

The deed produced by VCAT in response to the plaintiffs’ subpoena bears the same cover page as the defendant’s version save for two additional stamps of the word ‘copy’. The formatting and text of page 10 also appears the same. The deed, however, then has two pages identified as page 11. The first, although still having the execution clause for the common seal of Elizabeth Lauer, has no seal affixed. Rather, beside this clause is the deceased’s signature, and adjacent to the word ‘Director’ is a signature that does not appear on the defendant’s version. Adjacent to the execution clause for the trustee is the signature identified as the defendant’s.

The second page 11 bears copies of the same two seals and signatures as the defendant’s version of page 11, save that the signature of Mr Graff does not appear. As such, the second page 11 resembles that of Roberts Beckwith’s version of the deed.

CBA’s version

The version of the trust deed produced by the CBA has the same cover page as the defendant’s version. It lacks, however, page 10. Page 11 differs from that of the defendant’s version of the deed as, although it still has execution clauses for the common seal of Elizabeth Lauer and the Trustee, only one signature of Elizabeth Lauer appears to the right of the former, and only the signature of the defendant to the right of the latter. No stamps have been affixed to the clauses nor are there signatures of any witnesses.

Other comments on differing versions of the deed

Final points of note regarding the versions of the deed of trust are: each of the versions refers to a fifth schedule in clause 1(e), but no fifth schedule is attached; the settlor does not appear to have executed any of the deeds; and Roberts Beckwith’s version, which in schedule three identifies the income beneficiary as the defendant, is the only version that matches the definitions provided in clauses 1(a) and 1(b) of all versions of the deed as to the beneficiary, income beneficiary and settlor.

Death of the defendant

A preliminary issue that needed to be resolved was how the proceeding could continue in light of the death of the defendant. The defendant’s death came prior to the parties submitting written submissions to the Court and consenting to have the matter determined on the papers.

As stated, the defendant was given notice and became a party to the proceeding. Although the proceeding remains one of ‘private advice’, the Court ensured the defendant’s views continued to be represented even after he lost capacity. The defendant’s family was notified of the proceeding and chose not to represent the defendant and the Court appointed Ms Lyttleton as the defendant’s litigation guardian. She and counsel for the defendant have provided valuable assistance to the Court. On the death of the defendant, the basis of Ms Lyttleton’s representative capacity ceased.

The Court is of the view that the defendant had, in a broad sense, an interest in the form of a ‘cause of action’ that supported his application to become a party to the proceeding which vested in his estate upon his death,[9] such that s 29 of the Administration and Probate Act 1958 and r 9.09 of the Rules were likely to be applicable. Even if the Court were to consider appointing Ms Lyttleton pursuant to r 16.03 of the Rules, the case law suggests that ordinarily, attempts would be made to identify and notify any personal representative of the defendant’s estate.
[9]In this regard, I adopt the meaning of ‘cause of action’ as ‘every allegation of fact which the [party] must prove to establish the right to the relief claimed’: Rowson v Alpass [2017] VSC 401 (7 July 2017) [32] (Derham AsJ), citing Letang v Cooper [1965] 1 QB 232; Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234; Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458, 462–3 [24] (R D Nicholson J).

In my view, such attempts needed to be made and the evidence suggested that Ms Martin may have been of particular assistance in this regard.[10] Of note, however, was the role of the Civil Procedure Act 2010 as identified in Culve Engineering Pty Ltd v Apollo General Engineering (Aust) Pty Ltd (in liq).[11] In the current circumstances:
[10]See [10] above.
[11]Culve Engineering Pty Ltd v Apollo General Engineering (Aust) Pty Ltd (in liq) [2017] VSCA 182 (7 July 2017) [20] and [64] (Whelan and Ferguson JJA).

(a) the defendant’s immediate family were previously informed of the proceeding and chose not to represent the defendant as his litigation guardian;

(b) no application has been made under r 9.09 of the Rules;

(c) the deceased’s estate is small, having diminished to a value of $255 053; and

(d) Ms Lyttleton, who is familiar with the defendant’s case and well-positioned to represent his estate for the remainder of the proceeding, could provide her consent to represent the defendant’s estate pursuant to r 16.03 of the Rules.

In the interests of resolving the proceeding in a just, efficient, timely and cost-effective manner, the Court determined that while attempts should be made to notify the personal representative of the deceased’s estate and obtain his or her view on being substituted as a party, the associated time and expense should be minimised. Accordingly, on 26 July 2017 the Court requested that Ms Lyttleton notify the defendant’s children of the need to substitute the legal personal representative of the defendant’s estate for the defendant in this proceeding. By letter dated 16 August 2017, Ms Lyttleton gave the defendant’s children such notice. As of 11 September 2017, no response to her letter had been received. Accordingly, on 25 September 2017, pursuant to r 16.03(1)(b) of the Rules, Ms Lyttleton was appointed to represent the interests of the estate of the defendant in this proceeding and, in accordance with r 9.06(c), was added as a defendant in substitution for Mr Nagy.

Consideration

For the purposes of the consideration of each of the substantive questions for determination, it is noted that the plaintiffs concede both that a gift of residue to ‘the trustee for the time being’ of an existing discretionary trust is valid,[12] and that even though the deed was not charged duty, the Court can admit evidence of the deed if it is satisfied that the deed effects a dutiable transaction and approves arrangements for the payment of the duty.[13]
[12]Gregory v Hudson (1998) 45 NSWLR 300.
[13]Duties Act 2000, s 272.

Did the Trust fail to come into existence?

There is a degree of overlap between the first two questions for determination. Accordingly, submissions on both questions are considered in the following analysis.

Plaintiffs’ submissions

The plaintiffs submit that it is not clear if any of the deeds were effective to declare a trust, in light of the requirements of certainty of intention, subject matter and object. The deeds identify two possible settlors, neither of whom have executed the deeds. Further, given the state of the signatures and the witnessing of those signatures over the various versions, the Court cannot be satisfied that a witness actually witnessed the deceased or defendant sign their names. Specifically, it is asserted that Ms Straub may have witnessed the signatures of the defendant and the deceased sometime after 16 October 2002.

There is no proof that the settlement sum of $500 was paid in execution of the Trust, and there is a lack of contemporaneous documents that would evidence existence of the Trust. The importance of contemporaneous documents in circumstances where there are unreliable witnesses was noted in Harpur v Levy.[14] In that case, Dixon J relied on contemporaneous documents where none of the principal lay witnesses gave reliable evidence on key events. His Honour stated:

One category of [contemporaneous documents] is important transactional documents, such as the trust declarations, Notes, assignments and the like. As Gummow and Hayne JJ recently affirmed in Byrnes v Kendle, the fundamental rule of interpretation of [a trust] Deed is that the expressed intention of the [settlor] is to be found in the answer to the question, ‘What is the meaning of what the [settlor has] said?’, not to the question, ‘What did the [settlor] mean to say?’ Gummow and Hayne JJ added:
There is good sense in such a rule. Issues of the construction to be placed upon the words or actions of alleged settlors are apt to arise long after the event. For example, the dispute in Kauter v Hilton … arose between the executors of the will of Mr Hickey (who had died in 1950) and his niece, and concerned the construction to be placed upon his words and acts respecting certain bank accounts in the last five years of his life. Further, trusts give rise to proprietary interests, dealings which may engage third parties who are strangers to the original actors.[15]

[14]Harpur v Levy [2011] VSC 653 (15 December 2011) [12] and [68]–[69], which finding was not altered on appeal: Harpur v Levy [2013] VSCA 209 (15 August 2013) [48]–[49] and [90] (Neave JA).

[15]Harpur v Levy [2011] VSC 653 (15 December 2011) [69], quoting Byrnes v Kendle (2011) 243 CLR 253, 274 [56].

Insofar as it may be suggested that the deceased used her own funds to settle the Trust, the plaintiffs contend that this is inconsistent with the CBA documents on 16 October 2002 showing that she signed her name as ‘trustee’. Moreover, the identification of the deceased as a settlor of the Trust is inconsistent with all versions of the deed and it is not clear who changed the authority on the Trust Account. It is also uncertain who transferred the funds into the Trust Account, as the defendant may have been acting in his capacity as attorney. The plaintiffs suggest that while it is open to the Court to find that the deceased intended to appoint the defendant as attorney to manage her finances, she did not intend to establish a trust. Further, the deed apparently provided to the CBA did not contain page 10, and even if it did, the appointment of ‘beneficiaries’ in the document may be explicable on ‘the basis that the deceased wished for the named persons to share in her funds remaining after her death’.

The plaintiffs contend that, excluding a charitable trust, there must be a person or persons who will benefit,[16] and the versions of the deed before the Court contain different beneficiaries. In the defendant’s version and VCAT’s version there are five named beneficiaries, in Roberts Beckwith’s version there are three beneficiaries, and CBA’s version is missing page 10 altogether. As such, it is submitted that there is insufficient evidence as to certainty of objects. Although the defendant seeks to propound his version of the deed, he does not explain the other versions before the Court.
[16]J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis, 7^th ed, 2006) [108] (‘Jacobs’).

The original deed is not available and it may not be possible to determine which, if any, version is correct. Cases involving uncertainty as to beneficiaries have generally dealt with interpretation of a deed, not determining the true contents of the trust deed. It is asserted, however, that unless there is certainty of beneficiaries, such that the trust can be administered, the trust will fail.[17] The plaintiffs contend that ‘a test of the validity of a trust is that it must be of such a nature that it can be administered by a court’.[18] Here, the defendant cannot be acquainted with the terms of the trust deed in circumstances where he cannot produce the original deed or know where the true version is.
[17]McPhail v Doulton [1971] AC 424; [1970] 2 All ER 228.
[18]Palmer v Ayres (2017) 91 ALJR 325, 344 [84] (Gageler J).

The defendant’s version is inherently inconsistent as to schedule three, and there is no schedule five. While it is conceded that the trust does not have to be manifest in writing,[19] and the deceased’s last will was executed only two months after the date that is shown on the various deeds, the terms of the trust are uncertain. Moreover, the evidence shows that CBA’s version was not properly executed in 2002 and may have been incomplete in 2009 during the VCAT proceeding. It is asserted that overall, there is insufficient evidence to conclude that a trust by the name of the ‘Elizabeth Lauer Family Trust’ was created in or about September 2002, and uncertainty as to the beneficiaries, among other inconsistencies, is said to lead to the conclusion that the trust is void and unenforceable.

Defendant’s submissions

[19]Property Law Act 1958, s 53. See also Milroy v Lord (1862) 4 De GF & J 264; (1862) 45 ER 1185.

The defendant submits that the Court can, on the basis of the evidence, conclude that Moreheads’ version of the trust deed is a copy of the original of a deed constituting the Elizabeth Lauer Family Trust which satisfies the certainties of intention and objects, and formalities of execution in that it:

(a) was brought into existence on the date which it bears, being a date before it was stamped at the CBA Rosebud branch;

(b) it consists of 11 pages containing content usually found in a deed of trust, including a declaration of trust, a named settlor and trustee, and named beneficiaries; and

(c) it was executed by the trustee and deceased in the presence of Ms Straub.

Although the deed was not executed by the named settlor, the defendant asserts that this is immaterial as the deed takes effect against the parties who have executed it. In support of this submission the defendant cites Hewlett-Packard Australia v Exeed,[20] Mirzikinian v Waterhouse[21] and Sanwick v Kalyk.[22]
[20]Hewlett-Packard Australia Pty Ltd v Exeed Pty Ltd (2004) 48 ACSR 670.
[21]Mirzikinian v Waterhouse Pty Ltd [2009] NSWCA 296 (8 October 2009).
[22]Sanwick Pty Ltd v Kalyk [2016] NSWSC 100 (15 February 2016).

Hewlett-Packard Australia v Exeed was an application under s 265(4) of the Corporations Act 2001 (Cth) for an order extending the period for lodgement of a notice of a charge. The charge was in the form of a deed, which the plaintiffs executed in a defective manner. Lindgren J determined that this did not affect the validity and enforceability of the charge:

The charge is thus an instrument validly executed by the obligor for the benefit of an obligee who is identified in it but who has not executed it. A long line of authority establishes that such an instrument is valid and enforceable: Cooker v Child (1673) 2 Lev 74 ; 83 ER 456 (successful action by co-owner of ship for debt on indented charter party, executed by charterer and containing covenant by charterer in favour of plaintiff co-owner but not executed by him)…[23]

[23]Hewlett-Packard Australia Pty Ltd v Exeed Pty Ltd (2004) 48 ACSR 670, 675 [35].

In Mirzikinian v Waterhouse, Ipp JA cited Hewlett-Packard Australia v Exeed in relation to the proposition that ‘the grantee of a deed, who is intended to be a party to the deed, may sue the grantor although the grantee has not executed the deed and the deed contains cross-covenants on the part of the grantee’.[24] Sanwick v Kalyk was a case in which a trustee sought orders rectifying a trust deed. Stevenson J was satisfied that the deed was valid and effective so far as it concerned the party that executed it, namely, the settlor.[25]
[24]Mirzikinian v Waterhouse Pty Ltd [2009] NSWCA 296 (8 October 2009) [50].
[25]Sanwick Pty Ltd v Kalyk [2016] NSWSC 100 (15 February 2016) [12].

The defendant concedes that there is no evidence that the sum of $500 was settled. There is, however, evidence that the Trust Account came into existence on or about 16 October 2002, and as at 17 December 2004 had a credit balance of $4696. It is accepted that the trustee acquired and received monies credited to the Trust Account as trustee, until it was closed on 21 May 2008, as trust property. Regarding the $104 104.52 deposit on 14 January 2005, it is submitted that the dates of the deposit and transfer are not inconsistent with the source of the funds being derived from the sale of the Eastbourne Road property, and further, that the exact nature of the sum including the 52 cents is consistent with it being related to a settlement of the sale of property.

The defendant asserts that the deceased, in executing the deed was bound by it, and insofar as it was her monies that were placed by the trustee to the credit of the Trust Account, she was a settlor in relation to the Trust. Here, the defendant relies upon a paragraph from Dal Pont, Equity and Trusts in Australia, stating:

A person (termed the ‘settlor’) can create a trust expressly by declaring herself or himself a trustee of her or his own property, or by transferring the property to another person as trustee. Such a trust is termed an ‘express trust’ because it is created pursuant to the intention of the settlor. The term ‘express’ here is a little misleading, as it also covers trusts the courts infer the settlor intended to create, an inference that can be made when the court is satisfied that the parties intended to create an equitable interest in a third party and the trust relationship is the means of creating that interest or giving effect to that intention.[26]

[26]G E Dal Pont, Equity and Trusts in Australia (Thomson Reuters, 6^th ed, 2015) [16.15] (‘Dal Pont’).

Ultimately, it is submitted that the answer to the first question should be ‘no’.

Turning to the terms of the deed, the defendant submits that the second question only arises because of page 10 of Roberts Beckwith’s version of the deed. That document, it is submitted, only came into existence on or about 16 June 2011. As such, it is obvious that it was never executed by the deceased. The differences between it and Morehead’s version are therefore said to be irrelevant and do not give rise to any uncertainty as to the terms of the latter.

As to the inconsistency regarding schedule three and the income beneficiaries, it is submitted that this is an irregularity that does not create uncertainty. Further, ‘Beneficiary’ is adequately defined by reference to named persons. While paragraph four refers to ‘Capital Beneficiary’ and the phrase is not defined, this does not create uncertainty.

In relation to clauses 11 and 3, the defendant notes that the drafter of the deed eschewed the opportunity afforded by s 5 of the Perpetuities and Accumulations Act 1968 to fix the period of perpetuity. Instead, the common law is relied upon. In absence of schedule five, no measuring lives are expressly stated. It is submitted, however, that in the events that have occurred the relevant lives are the trustee and the deceased.

As such, the defendant asserts that the answer to the second question is ‘no’.

Findings regarding the evidence

As a consequence of certain inconsistencies in the evidence, it is necessary to make a number of factual findings. Although the defendant’s version of the deed was referred to as ‘the signed original’, the Court does not accept that that version of deed was signed on 24 September 2002. CBA’s version of the deed and the defendant’s version of the deed appear identical, save for the missing page 10 and certain parts of the execution clauses. Notably, the consistency between the two deeds extends to the stamp of the Rosebud CBA on the cover page, dated 16 October 2002, and the signatures of both the deceased and defendant beside the execution clauses. Discrepancies exist in the execution clauses as to the stamps in blue ink, and additional signatures appearing in both blue and black ink.

While the Court accepts that the deceased and the defendant signed a version of the deed on or prior to 16 October 2002, that was then provided to the CBA, it is more probable than not that the defendant’s version of the deed is a copy of that received by the CBA, that has then been added to in original ink. This is consistent with the defendant’s statement that he and the deceased signed a deed on 24 September 2002, without reference to the witnesses also signing at that time.

A number of factors also point to the conclusion that a copy of CBA’s version of the deed was added to over time:

(a) CBA’s version of the deed was only signed by the defendant and the deceased;

(b) the versions of the deed produced to VCAT in 2009 and 2010 had two pages marked ‘11’, both with signatures of the defendant and the deceased identical to those in CBA’s version of the deed. Additionally, however, they bear the signatures of Ms Straub and an unidentified individual;

(c) Ms Straub said that she signed one version of the deed, and that she signed in the absence of Mr Graff;

(d) Mr Graff’s signature only appears on the defendant’s version of the deed. That deed, however, contains signatures of the defendant, the deceased and Ms Straub that are identical to VCAT’s version of the deed and Roberts Beckwith’s version of the deed; and

(e) the differing page 10, bearing the fax date 16 June 2011, does not appear in any of the other versions of the deed.

Insofar as CBA’s version of the deed is missing page 10, an issue arises as to whether the version of the deed as originally signed by the deceased and the defendant was also missing page 10. With a degree of hesitation, the Court is prepared to accept that the terms of the original document signed by the deceased and the defendant are reflected in the defendant’s version of the deed. It is noted that the defendant propounded as the original a deed that appears to have been, in part, a copy of a deed provided to and stamped by the CBA. Moreover, the deeds initially provided to VCAT and in the file of Roberts Beckwith were both lacking page 10, and the page 10 that was later provided to Roberts Beckwith remains unexplained by the defendant. Such evidence is to be balanced, however, with the execution of the deceased’s will on 21 November 2002. In bequeathing the residuary of her estate to the ‘Elizabeth Lauer Family Trust’, it is probable that the deceased’s thoughts turned to the beneficiaries of the named trust. Had the trust deed that she signed on or before 16 October 2002 not contained page 10, identifying the beneficiaries of the trust, it is more probable than not that the error would have been rectified at this time.

Finally, the page 10 received by Roberts Beckwith bearing the facsimile date 16 June 2011 should be addressed. Although the page appears to have been faxed on that date, the facsimile markings give no indication of when the page was drafted. The Court accepts, however, that the page 10 received by Roberts Beckwith was not contained within the version of the deed signed by the defendant and the deceased on or before 16 October 2002. This conclusion is drawn on the basis of the Roberts Beckwith version of page 10:

(a) not being produced to VCAT in 2010 when the defendant was ordered to find the missing page;

(b) bearing an inconsistency in the spelling of the deceased’s name in schedule 3 of that version of page 10, namely, ‘Elisabeth’ rather than ‘Elizabeth’;

(c) being faxed to Roberts Beckwith on 16 June 2011, the same day that Mr Beckwith requested the missing page from the defendant; and

(d) not naming the settlor as Ms Queenie Williams, who died prior to 2011.

Applicable law

The issues and evidence before the Court require consideration of whether a trust by the name of the ‘Elizabeth Lauer Family Trust’ was created and possibly terminated.

It is of assistance to briefly review the fundamental concept of a trust. In Korda v Australian Executor Trustees (SA), French CJ quoted the following definition of an express trust, namely:

a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of charity or for one or more persons, at least one of whom is not the sole trustee.[27]

[27]Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62, 70, quoting the American Law Institute’s Restatement Third, Trusts, §2.

Similarly, in their Principles of the Law of Trusts, Ford and Lee note more broadly that a trust may be described as:

an obligation in equity which rests on a person (the trustee) as owner of some specific property (the trust property) to deal with that property for the benefit of a certain person (the beneficiary) or persons, or the advancement of certain purposes.
…
The main obligation of a trustee is to account in respect of the trust property. For a trust to exist the owner must have become subject to a minimum obligation to act honestly and in good faith in relation to the trust property for the benefit of the beneficiary or purpose.[28]

[28]H A J Ford and W A Lee, Thomson Reuters, Principles of the Law of Trusts (at 19 June 2015) [1.010] (‘Ford and Lee’).

Of significance in both definitions is the trustee’s obligations being ‘with respect to’ property. In this regard, the obligations may be described as being ‘annexed’ to,[29] or impressed upon, the property the subject of the trust.[30]
[29]Heydon and Leeming, above n 16, [110].
[30]Dal Pont, above n 26, [16.10].

Express trusts can be created by transfer or declaration. They must satisfy the ‘three certainties’ outlined by Lord Langdale MR in Knight v Knight,[31] namely, certainty of intention, certainty of subject matter and certainty of object.[32] Insofar as certainty of intention is required, the test is an objective one. As the Court of Appeal stated in Melbourne Orthopaedic Group v Stamford Aus-Trade & Press:

In several recent cases, the High Court has emphasised the test for establishing whether there has been an intention to create a trust is an objective test and that evidence of a putative settlor’s subjective intentions is irrelevant. In that respect, the test corresponds to the ‘objective theory’ of contract formation. It is necessary to look at what the parties said and did and the circumstances in which they did so. There must be evidence of a manifestation of intention to create a trust. The question is ‘what the settlor or settlors did, not what they intended to do’. Evidence of a party’s subjective intentions is inadmissible.[33]

[31]Knight v Knight (1840) 3 Beav 148, 173; (1840) 49 ER 58, 68.

[32]Clay v Clay (2001) 202 CLR 410, 431 [42] (Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ); Pascoe v Boensch (2008) 250 ALR 24, 29 [20] (Finn, Dowsett and Edmonds JJ).

[33]Melbourne Orthopaedic Group Pty Ltd v Stamford Aus-Trade & Press Pty Ltd [2015] VSCA 150 (18 June 2015) [110] (Santamaria JA) (citations omitted).

In Byrnes v Kendle, Gummow and Hayne JJ determined:

…the 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?’ The point is made as follows, with reference to several decisions of Lord Wensleydale, in Norton on Deeds:
The word 'intention' may be understood in two senses, as descriptive either (1) of that which the parties intended to do, or (2) of the meaning of the words that they have employed; here it is used in the latter sense.

…
The question, as Megarry J put it, ‘is whether in substance a sufficient intention to create a trust has been manifested’. The point was made by Lord Millett in Twinsectra Ltd v Yardley:
A settlor must, of course, possess the necessary intention to create a trust, but his subjective intentions are irrelevant. If he enters into arrangements which have the effect of creating a trust, it is not necessary that he should appreciate that they do so; it is sufficient that he intends to enter into them. [34]

[34]Byrnes v Kendle (2011) 243 CLR 253, 273–4 [53], [55] (citations omitted).

A distinction is drawn between cases in which a declaration of trust is explicit, and those where the language employed by the parties is inexplicit.[35] As Gummow and Hayne JJ (with whom on this point French CJ agreed) also espoused in Byrnes v Kendle:

In the present case there was no degree of informality, the trust being manifested and proved by deed using the technical term ‘upon trust’. Accordingly, to adopt what was said in Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In liq):
This is not one of those cases where the language employed by the parties for the transaction is inexplicit so that the court is left to infer the relevant intention from other language used by them, from the nature of the transaction and from the circumstances attending the relationship between the parties.[36]

[35]Ibid 272–4 [49], [54] (citations omitted); Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62, 69 [3] (French CJ), 100–1 [109] (Gageler J).

[36]Byrnes v Kendle (2011) 243 CLR 253, 272 [49], quoting Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588, 605 [34] (Gaudron, McHugh, Gummow and Hayne JJ).

Similarly, French CJ reasoned in Korda v Australian Executor Trustees (SA):

The question whether an express trust exists must always be answered by reference to intention. An express trust cannot be created unless the person or persons creating it can be taken to have intended to do so. Absent, as in this case, an explicit declaration of such an intention, the court must determine whether intention is to be imputed. It does so by reference to the language of the documents or oral dealings having regard to the nature of the transactions and the circumstances attending the relationship between the parties.
…
Certainty of intention is one of the three certainties necessary to an express trust — the others being certainty of subject matter and certainty of object. The necessary intention is imputed when made manifest by an explicit declaration as in Byrnes v Kendle. In the case of a written text an ‘express trust’ depends upon the construction of the written instrument.[37]

[37]Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62, 69 [3], 71 [7] (citations omitted).

Evidence in support of a manifestation of an intention to create a trust can include the transfer of a trustee’s own funds into a trust account.[38] La Housse v Counsel, although determined prior to Byrnes v Kendle, provides an example. In that case a father opened two bank accounts in 1999 as trustee for his two daughters and on the same day deposited $50 into each account. In 2003, he deposited $82 167 into each account, later withdrawing the funds to purchase a property in his own name. An issue that arose was whether the father intended to create trusts in 2003. The Court of Appeal of Western Australia determined that he did, based upon: the deposit of funds into the accounts; a fax written by the deceased stating that he was the trustee for each daughter and they held the funds in the account; and statements that he had made.[39]
[38]JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891, 921 (McGarvie J); La Housse v Counsel [2008] WASCA 207 (9 October 2008) [42] (Pullin JA).
[39]La Housse v Counsel [2008] WASCA 207 (9 October 2008) [41]–[45] (Pullin JA).

More generally, evidence of parties agreeing to place money in a ‘trust account’ weighs in favour of an intention to create a trust.[40] Additionally, the intention must be one to create a trust immediately.[41] While the relevant intention is that of the settlor,[42] in certain contexts, particularly rectification applications, the presence of so-called ‘nominal settlors’ has been acknowledged and the intention of other parties has been considered.[43]
[40]Mercantile Mutual Insurance (Australia) Ltd v Farrington (1996) 44 NSWLR 634, 642 (Bryson J); Tonkin Thompson & Associates Pty Ltd v Mayr (1998) 72 SASR 346, 352 (Doyle CJ); Re Sutherland (2003) 59 NSWLR 361, 368 [19] (Campbell J). See also Dal Pont, above n 26, [17.15].
[41]Harpur v Levy (2007) 16 VR 587, 597 [40] (Neave JA). See also Ford and Lee, above n 28, [2.010].
[42]Byrnes v Kendle (2011) 243 CLR 253, 274 [55] (Gummow and Hayne JJ), 289 [113] (Heydon and Crennan JJ).
[43]See, eg, Public Trustee v Smith [2008] NSWSC 397 (5 May 2008) [73] (White J); Sanwick Pty Ltd v Kalyk [2016] NSWSC 100 (15 February 2016) [9] (Stevenson J). See also John Glover, ‘Nominal or ‘dummy’ settlors: Is it time to reform the law of trusts?’ (2012) 6 Journal of Equity 19, 37.

The subject matter of the trust must be identifiable, and can include choses in action.[44] Indeed, funds deposited into trust accounts are technically choses in action—rights to recover from the bank the balance standing to the trustee’s credit.[45] If there is no property held on behalf of the trust, however, an essential element of the trust is thereby missing and the trust ends.[46]
[44]Ford and Lee, above n 28, [4.210].
[45]Croton v The Queen (1967) 117 CLR 326, 330.
[46]Dal Pont, above n 26, [25.155].

It is not uncommon for property of nominal value to be transferred to a trustee in order to establish a trust, followed by transfers of greater value to the same trustee. A family trust may be created, for example, when a nominal settlor transfers a small sum to a trustee, before individuals more closely involved in the trust then transfer more significant funds to the trustee.[47] In the context of taxation, Menzies J determined that payment of money to a trustee to hold under a trust already constituted could not be described as a person having ‘created a trust’ for the purposes of the Income Tax Assessment Act 1936-1965 (Cth).[48] Beyond this statutory context, however, on the issue of ‘adding’ property to trusts, Ford and Lee state that:

Anglo-Australian trusts law contains no category of ‘adding’ property to existing trusts. No equitable interest is thereby created. Property added to existing trusts, without more, is held for its transferor on resulting trust.[49]

[47]Ford and Lee, above n 28, [2.160].

[48]Truesdale v Federal Commissioner of Taxation (1970) 120 CLR 353, 363, followed in Commissioner of Taxation v Galland (1984) 4 FCR 566, 574 (Bowen CJ and Fisher J). See also Glover, above n 43, 27.

[49]Ford and Lee, above n 28, [2.160].

Such comments reflect the notion that strictly, the second transfer of property involves the creation of a new trust.[50] In La Housse v Counsel, it appears that the Court of Appeal of Western Australia followed such an approach.
[50]Glover, above n 43, 31, referring to Atwill v Commissioner of Stamp Duties (1970) 72 SR (NSW) 415; Kennon v Spry (2008) 238 CLR 366, 444 [229] (Kiefel J).

Turning to certainty of objects, excluding trusts for a purpose, the beneficiaries of an express trust must be capable of being ascertained.[51] In the context of fixed trusts, list certainty is required,[52] that is, the requirement is that ‘that the creator of the trust provide a description of the objects precise enough to enable the whole range of objects to be listed’.[53]
[51]Morice v Bishop of Durham (1804) 9 Ves 399; (1804) 32 ER 656, 658; McPhail v Doulton [1971] AC 424; [1970] 2 All ER 228.
[52]Commissioner of State Revenue v Viewbank Properties Pty Ltd [2004] VSC 127 (21 April 2004) [20] (Nettle J), citing Re Gulbenkian's Settlement Trusts [1970] AC 508.
[53]Ibid [20].

In order to be completely constituted, ‘the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding’.[54] Trusts in relation to land must be evidenced by writing,[55] however there is no such requirement for trusts over personal property.[56]
[54]Milroy v Lord (1862) 4 De GF & J 264, 274; (1862) 45 ER 1185. See also Heydon and Leeming, above n 16, [615].
[55]Property Law Act 1958, s 53(1).
[56]Grey v Inland Revenue Commissioners [1960] AC 1.

Finally, a trust cannot infringe the rule against remoteness of vesting. In Victoria, if a trust instrument does not specify a time for vesting, as provided for in s 5 of the Perpetuities and Accumulations Act 1968, then the general law applies. According to the general law, an interest must not be capable of vesting, or a power to create an interest must not be able to be exercised, more than 21 years after the end of a life existing at the time of the trust’s creation. That life may be specifically identified, or, where it is not expressly stated, implied by the Court. The relevant life or lives to be implied are those ‘necessarily involved in the limitations’ associated with the trust power or interest.[57]
[57]Yeomans v Yeomans [2006] 1 Qd R 390, 395–6 [21] (McMurdo J). See also John Glover, ‘The rule against perpetuities and its application to unit and discretionary trusts’ (2007) 14 Australian Property Law Journal 225, 227.

Consideration

Having regard to the ‘three certainties’ of trust creation and the evidence, it is apparent that there are two key points in time in which a trust may have been created: 2002, when the original deed was signed by the deceased and the defendant; and 2005, when funds were deposited into the Trust Account, particularly the amount of $104 104.52.

Did a trust come into existence in 2002?

Two obstacles in particular preclude a conclusion that a trust was created in 2002. First, the relevant intention to create a trust is that of the settlor. Although at times courts have recognised that the intentions of others may have greater relevance, and have consequently inferred that a nominal settlor has adopted the intentions of others, such cases have surrounded applications for rectification of trust instruments and have involved at least some evidence of the intention of the settlor. Here, the absence of evidence regarding the intention of the settlor cannot be overlooked. The named settlor in the defendant’s version of the deed, Ms Queenie Williams, did not execute the deed and as such, there is no evidence manifesting her intention to create a trust. Moreover, it is not possible to find that she may have adopted the intentions of others.

It can be accepted, however, that the terms of the defendant’s version of the deed and the signatures of the deceased and the defendant, support a finding that in 2002 the deceased and the defendant manifested an intention to create a trust. The submissions of the plaintiffs invite the Court to consider the surrounding evidence, and conclude that the actions of the deceased may otherwise be explained as the deceased seeking to appoint the defendant as the ‘trustee’ of her affairs, reflecting his appointment as her attorney. There is a degree of discord, however, between such an approach and the approach of the High Court in Byrnes v Kendle. Here, the terms of the defendant’s version of the deed, as signed by the deceased and the defendant, adopt the explicit language ‘upon trust’. As such, it is unnecessary to look for inferences drawn from the surrounding circumstances. Even if this course is taken, based upon the trust not necessarily having to be manifest in writing and the ambiguities in the terms of the deed, particularly the unusual execution by the deceased and lack of execution by the settlor, the Court’s finding as to the manifest intentions of the deceased and the defendant would not change. The facts upon which the plaintiffs rely in this regard are:

(a) the written agreement of 1 April 2002 in which the deceased referred to the defendant as ‘my Trustee’, relating to expenses incurred in caring for the deceased; and

(b) the deceased signing the CBA authority dated 16 October 2002 as ‘Trustee’ of the Trust Account.[58]

[58]In her affidavit sworn 10 February 2017, Ms Lyttleton also refers to the defendant stating that the Trust was created in order to ‘protect’ the deceased. Such evidence is unreliable, however, as the comments were made in 2016 at a time when the defendant’s capacity was considered uncertain.

These facts, however, do not outweigh the existence and language of the trust deed. Moreover, the deceased had already executed a formal instrument to assist the defendant in managing her affairs, namely, the power of attorney. Consequently, the evidence overall still manifests an intention of the deceased and the defendant to create a trust. That said, it is evident that in the absence of the intentions of a settlor in 2002, those of the deceased and the defendant assume limited relevance.

The second factor that prevents the finding that the Trust was created in 2002 is the absence of evidence of subject matter. Property is referred to in the defendant’s version of the deed in both the recitals, and cl 1(d). The former states that upon execution the settlor will pay the sum of $500 to the trustee to be held upon trust. The latter defines ‘Trust Property’ broadly as including, inter alia, not only the $500, but ‘all monies investments or property paid or transferred to or otherwise acquired by the Trustee and accepted by it as additions to the property’. There is no evidence, however, that $500 was ever transferred by the settlor. Indeed, other than the reference to that sum, there is no evidence of any property to which trust obligations could be affixed in 2002. As such, while the Court accepts that in 2002 the defendant and the deceased sought to establish a trust by the name of the Elizabeth Lauer Family Trust, no trust was created.

Did a trust come into existence in 2005?

The only property identified in the evidence before the Court to which trustee obligations may have attached relates to the funds in the Trust Account. The earliest statement of account indicates that on 17 December 2004 the Trust Account held $4694, and approximately one month later, it received a deposit of $104 104.

The defendant asserts that he accepted money into the Trust Account as trustee. However, little is known regarding the origin of these funds. The Court is invited to infer that: the $104 104 came from the deceased’s share of the proceeds of sale of the Eastbourne Road property; the deceased transferred the funds to the Trust Account; and, an express trust was created by this transfer. Moreover, the deceased and the defendant were bound by the terms of the defendant’s version of the deed as signed in 2002, which then applied to the newly created trust.

As the submissions of the defendant focus upon the creation of a trust, the Court can put to one side the possibility that the Trust Account funds were an ‘addition’ or ‘accretion’ to the settlement of $500 that failed in 2002. Instead, analysis turns to whether the transfer of funds into the Trust Account in 2005 created a trust. On the issue of an intention to create a trust, as there is no explicit language in evidence regarding the transfers, an intention must be inferred from the nature of the transaction, other language used by the parties and the circumstances attending the parties’ relationships. Here, for the reasons stated by the defendant, the Court is prepared to accept that the $104 104 originated from the sale of the deceased’s interest in the Eastbourne Road property. While it can also be accepted that depositing funds into a trust account is a particularly significant manifestation of an intention to create a trust, evidence surrounding who transferred the funds and the circumstances in which the transfers occurred is lacking. Unlike in Harpur v Levy, contemporaneous documents are almost entirely absent. In circumstances where the deceased was dealing with a considerable asset which, as indicated by her last will in 2002, she had intended to devise to the defendant, in the absence of such evidence the Court cannot infer that it was the deceased who transferred the money.

Further, the submissions of the defendant require inferences to be drawn as to certainty of objects. It is asserted that the relevant funds were to be held on trust on the terms of the defendant’s version of the deed. While the authorities identified by the defendant suggest that the deceased and the defendant may be bound by the terms of the defendant’s version of the deed, this does not lead to the conclusion that the obligations contained therein are automatically annexed to the property identified in 2005. The only link between the defendant’s version of the deed and the property later identified is the Trust Account. In my view, this alone is not enough to support the requisite inferences. The circumstances are distinct, for example, from those in La Housse v Counsel, as there:

(a) the initial trusts came into existence;

(b) the funds were transferred into the trust accounts by the trustee of the earlier trusts; and

(c) contemporaneous evidence was adduced, both written and oral, manifesting an intention of the trustee that the beneficiaries of the later trusts were the same as those of the earlier trusts.

Ultimately, on the evidence of the funds in the Trust Account alone, albeit funds realised from the sale of the Eastbourne Road property, the Court cannot conclude that the funds were transferred by the deceased to be held on trust on the terms of the defendant’s version of the deed. To draw such inferences would be verging upon speculation, which, as touched on by Gummow and Hayne JJ in Byrnes v Kendle,[59] is particularly inappropriate when potentially creating property rights enforceable against third parties.
[59]Byrnes v Kendle (2011) 243 CLR 253, 273–4 [54]–[56].

As such, the answer to the first question is ‘yes’; that is, a trust by the name of the Elizabeth Lauer Family Trust failed to come into existence.

Is the Trust void for uncertainty as to its beneficiaries or any other terms?

In the event that the forgoing conclusions are incorrect, consideration turns to the particular terms of the defendant’s version of the deed. Of specific relevance are the clauses regarding the beneficiaries of the Trust and the perpetuity period.

In clause 1(e), ‘termination date’ is defined as when the youngest child of the person named in the ‘Fifth Schedule’ attains the age of 21 years, or as otherwise provided in the deed. However, no fifth schedule is contained within the deed. The trustee is afforded the power, by clause 11, to terminate the ‘trusts’ declared by the deed at any point prior to the termination.

Clause 3 provides:

The Trustee shall hold capital of the trust property until the termination date (as herein after defined) and shall pay transfer and deliver the trust property to the Beneficiary or any one or more of them then living in such proportion between them as the Trustee in his absolute discretion shall decide (with full power to exclude any one or more of them from participation therein) each for his or her sole respective use or benefit at the cost of the beneficiary or such other person as aforesaid to whom the trust property is so paid transferred and delivered and shall make all such applications execute such documents and do all such acts and things that may be necessary for the purpose of enabling the trust property to be paid transferred and delivered to the beneficiary or such persons aforesaid. In default of the Trustee exercising his discretion as aforesaid within one year of the termination date then the Trustee shall pay transfer and deliver the trust property as aforesaid to the Beneficiary and if more than one equally between them.

Clause 4 provides:

The Trustee shall hold the income of the trust property accruing up to the termination date on trust for the Income Beneficiaries and Capital Beneficiary who shall be entitled and shall have the immediate right to receive such income when it is received by the Trustee and shall apply the same for or towards the maintenance, education, benefit and advancement in life of the Income Beneficiaries and Capital Beneficiary or such person or persons to whom the capital of the trust property would be payable pursuant to Clause 3 hereof if the termination date were the date on which such payment or application is in fact made and the Trustee shall pay to or so apply such income equally between such person if there is more than one of them.

‘Beneficiary’ is defined as the person or persons named in second schedule, which identifies five individuals. ‘Income Beneficiaries’ is defined to be the persons named in the third schedule: ‘The Lauer Family Trust’. In accordance with cl 12, however, the name of the Trust is that set forth in the third schedule.

Clause 4 affords the trustee the power to apply income toward the Income Beneficiaries and Capital Beneficiaries, or such persons to whom the capital is payable under cl 3. The trustee has no discretion regarding the application of income, which must be applied equally. Consequently, at least as to the income of the Trust, there must be list certainty. It is not possible, however, for the trustee to compile the requisite list. There is no evidence regarding: the existence of a trust called the ‘Lauer Family Trust’; whether the ‘Lauer Family Trust’ was a mistaken reference to the ‘Elizabeth Lauer Family Trust’; or whether schedule three was intended to refer to both the income beneficiary and name of the Trust. While the defendant contends that such uncertainty is an ‘irregularity’, there is no evidence before the Court upon which the clause can be rectified. As such, the requirement of certainty of objects is not satisfied. Even if, contrary to the Court’s earlier findings, the terms of the defendant’s version of the deed can be said to apply to the funds transferred to the Trust Account, the Trust fails due to uncertainty of objects.

In order to address the defendant’s submissions in relation to cl 1(e) and the rule against perpetuities, or more correctly, remoteness of vesting, it is necessary to consider if and when any interests created by the terms of the deed vest. In this regard, certain complexities in the construction of cl 3 and the powers of appointment of the trust capital are apparent. Specifically, on one view the interest of the beneficiaries may be vested, such that the rule against remoteness of vesting does not apply. Such matters, however, were not the subject of submissions by the parties and in light of the conclusions in relation to cl 4, it is unnecessary to consider the issue further.

Has the Trust terminated by distribution of capital?

In the event that, contrary to the Court’s earlier conclusions, a trust was created, the plaintiffs assert that any trust terminated on distribution of its capital. Specifically, the Trust Account was closed on 21 May 2008 and at the date of the deceased’s death there was no asset held in the name of the ‘Elizabeth Lauer Family Trust’.

The defendant, however, concedes that in the absence of any proof of a loan of $60 000 to the deceased, he wrongly paid that amount from the Trust Account to the deceased’s term deposit. As such, although the Trust Account was closed, the trust property now comprises an equitable chose in action. On this point, the plaintiffs suggest that the payment could otherwise be explained by the defendant acting in his capacity as attorney, rather than trustee. That is, the arrangement between the deceased and the defendant was not intended to be one of trust, but a mechanism to allow the defendant to manage the deceased’s affairs.

Ultimately, the answer to this question turns upon the existence of any trust obligations annexed to the $60 000 and the $104 104 from which the $60 000 appears to have originated. As the Court has concluded that the terms of the defendant’s version of the deed did not apply to the $104 104, on the evidence before the Court it cannot follow that a claim arises on the terms of that deed to the $60 000. Moreover, it is of note that contemporaneous documents are again lacking as to exactly where the $80 000 in the term deposit derived from. As the plaintiffs suggest, absent such documents, an alternative explanation may be that the $104 104 was held on trust for the benefit of the deceased, and the payment of $60 000 was in accordance with those trust obligations. While this conflicts with the submissions of the defendant, a degree of doubt perhaps surrounds those submissions as:

(a) the term deposit account in the name of the deceased was opened the same day as the transfer;

(b) no attempt was made to correct the payment of $60 000;

(c) $60 000 was a significant transfer relative to the size of the Trust; and

(d) the Trust Account was subsequently closed without any further significant transactions.

In the event that, contrary to the Court’s findings, an express trust was formed in 2005 on the terms of the defendant’s version of the deed, it can be accepted that any newly appointed trustee may have a right to pursue the $60 000 incorrectly transferred. The existence of such an equitable chose in action would preclude a finding that the Trust was terminated when the Trust Account closed.

If the Trust is void for uncertainty or has terminated, how should the executors administer the estate?

As the ‘Elizabeth Lauer Family Trust’ failed to come into existence, there was no trustee to take at the time of her death. Consequently, the gift in residue lapses and there is a partial intestacy.[60] In the present circumstances, the residue of the estate ought to be distributed to Klaus Alfred Lauer.
[60]Re Pugh’s Will Trusts [1967] 3 All ER 337.

If the Trust exists, how can a new trustee be appointed?

Given the Court’s preceding conclusions, it is unnecessary to answer this question. If it were applicable, however, it is noted that, by cl 9 of the defendant’s version of the deed, the power of appointment is vested in the defendant’s legal personal representative. For the Court to appoint a new trustee, as provided for in s 48 of the Trustee Act 1958, it would have to be shown that it is expedient to do so and inexpedient, difficult or impracticable to do so without the assistance of the Court. As this Court noted in Re Cooper Street Property Trust:

This statutory power is in addition to the inherent jurisdiction of the court, and should only be relied upon where alternative avenues to appoint a new trustee have been exhausted.[61]

[61]Re Cooper Street Property Trust [2016] VSC 756 (9 December 2016) [84].

As such, of relevance would be evidence of attempts to appoint a new trustee pursuant to cl 9.

Conclusions

In 2002, the deceased and the defendant sought to create a trust and opened the Trust Account. At that time, however, a trust failed to come into existence by virtue of a lack of subject matter. Moreover, there is no evidence of the intention of the settlor. In 2005, although property within the Trust Account can be identified, the evidence manifesting the intentions of the parties regarding that property is sparse. Indeed, the only evidence supporting the conclusion that the property was intended to be held on trust is that it was deposited into the Trust Account. Beyond this, it is unclear who deposited the funds into the account and who the intended beneficiaries were. While the defendant invited the Court to apply the terms of his version of the deed from 2002 to the property identified in 2005, such a conclusion was not supported by the limited evidence before the Court. Further, even if the Court was prepared to take such a step, the terms of defendant’s version of the deed are uncertain, specifically as to the income beneficiaries.

It follows that at no time did a trust named ‘the Elizabeth Lauer Family Trust’ come into existence, such that cl 9 of the deceased’s will fails and Klaus Alfred Lauer, as the deceased’s sole surviving nephew, takes the residuary estate. While this outcome is inconsistent with the deceased’s intentions as expressed in her will and as such, is not entirely satisfactory, the conclusions of the Court are drawn upon significantly limited evidence. These circumstances serve as a reminder that the need for contemporaneous objective evidence cannot be overstated on the issue of the creation of a trust.

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Citations

Re Lauer; Corby v Lyttleton [2017] VSC 728

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30 November 2017