Re Russell I Evans Holdings Pty Ltd
[2015] VSC 368
•2 July 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 01363
IN THE MATTER OF RUSSELL I EVANS HOLDINGS PTY LTD
(ACN 006 045 718)
| RICHARD IVOR EVANS & ORS | Plaintiffs |
| v | |
| ANTHONY GUY EVANS & ORS | Defendants |
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JUDGE: | Robson J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 July 2015 |
DATE OF JUDGMENT: | 2 July 2015 |
CASE MAY BE CITED AS: | Re Russell I Evans Holdings Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2015] VSC 368 |
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TRUSTS – Application to appoint a new trustee of a family trust – Breakdown in relations between family members who are beneficiaries of the trust – Objection to independent accountant being appointed as the new trust – Objection rejected – Concerns of one beneficiary that the new trustee may make decisions adverse to his interests – Condition attached to appointment of new trustee to protect interests of beneficiaries – Section 48 of the Trustee Act 1958.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Nolan, one of Her Majesty’s Counsel | Robert M Phelan & Co |
| For the Defendants | Mr P M Bornstein | Hendersons Legal |
TABLE OF CONTENTS
Introduction.......................................................................................................................... 1
Mr Gibbs’ independence.................................................................................................... 2
Limitations on the trustee’s discretion............................................................................. 5
Discharge of order of 27 June 2014.................................................................................... 6
Orders.................................................................................................................................... 7
HIS HONOUR:
Introduction
I have before me an interlocutory process dated 4 June 2015 whereby the plaintiffs seek the following orders:
(a) Pursuant to s 48 of the Trustee Act 1958 (Vic), David Ian Gibbs be appointed as trustee of the Russell Evans Family Trust in substitution for Russell I Evans Holdings Pty Ltd (ACN 006 045 718) (trustee).
(b) Pursuant to ss 51(2)(a) and 52(1) of the Trustee Act 1958, the property of Russell Evans Family Trust shall be vested in David Ian Gibbs.
(c) That the first defendant deliver up to the new trustee all documents and things held by him on behalf of the Russell Evans Family Trust.
(d) That the first defendant:
(1) pay the plaintiffs’ costs of the proceeding, including reserved costs;
(2) pay the second defendant’s costs of the proceedings (if any);
(3) indemnify the second defendant from any costs it may be obliged to pay the plaintiffs in respect of this proceeding; and
(4) such further or other orders as the court deems appropriate.
The interlocutory application is made in a wider dispute between three siblings who are beneficiaries of the Russell Evans Family Trust. It is unnecessary for me to recite the details of that dispute, save to say that there arose a deadlock in the conduct of the trustee and a great deal of distrust and ill feeling exists between the three siblings.
Most of the disputes concerning the family trust was resolved in mediation. The mediator was Associate Justice Efthim. After two mediation sessions, he enabled the parties to enter into a deed of settlement.
Consequent upon the deed of settlement, the trust has disposed of most of its assets and distributed the proceeds to the beneficiaries, save that approximate $2 million has been retained. The assets of the trust essentially consisted of six properties and a substantial share portfolio. The deed of settlement in its recitals provided in paragraph G as follows:
The parties attended a mediation before Associate Justice Efthim on 7 and 11 August 2014. The parties agreed to resolve the deadlock in the management of the Trust on the basis that there would be an even distribution between Richard, Elizabeth and Anthony subject to any claims (disputed or otherwise) and adjustments which have not been agreed upon. The parties agree that a new trustee would be appointed and any claims (disputed or otherwise) and adjustments will be a matter for consideration by the new trustee. The parties acknowledge that this deed does not affect or limit the right of any party in relation to any claim (disputed or otherwise) or adjustment.
The parties agreed to the appointment of Mr Gibbs, an accountant, to act as the new trustee.
Despite the agreement of the parties to Mr Gibbs’ appointment, the first defendant, Mr Anthony Evans, now opposes the appointment of Mr Gibbs.
Secondly the first defendant contends that a limitation should be put on the powers of the new trustee; that is, the new trustee should be only entitled to distribute corpus or income of the discretionary trust in accordance with the default provisions of the deed of the discretionary trust, the default provisions being the distribution that would occur on the termination of the trust in the absence of any discretionary decision being made by the trustees.
Mr Gibbs’ independence
The first defendant’s grounds for opposing the appointment of Mr Gibbs were that information has now come to his attention which would suggest that he may not act independently in carrying out the role of the new trustee.
The first defendant relied upon two matters in support of that submission. First, it was said that Mr Gibbs was a partner in a firm of accountants that previously had prepared the accounts for the family trust and provided advice to the family on taxation matters. The first defendant submits that the issue of taxation is relevant, or may be relevant, to some of, what he anticipates will be, contested distributions, and he is concerned that these may result in investigations and adjustments by the new trustee as envisaged in the settlement deed.
As I understand his submission it is that distributions were made to the first defendant or his family in the books of account of the trust to attract a lower rate of taxation than if they had been distributed equally amongst the siblings. Therefore, whether or not an adjustment should now be made by the new trustee in the entitlement of the beneficiaries may depend upon the taxation advice that was received at the time.
The evidence shows that it was Mr Gibbs’ then partner who acted in providing accountancy services to the trust. Mr Gibbs has sworn an affidavit that he has no recollection of the matter, and he also deposes that he has discussed the matter with his former partners who have no recollection of the matter. Mr Gibbs was not cross‑examined on his evidence that he has no recollection of the matter.
The second matter that the first defendant relies on in challenging the appointment of Mr Gibbs is that he is concerned that communications have taken place between Mr Gibbs and the plaintiffs or their solicitors that neither he nor his solicitors were party to that may have compromised Mr Gibbs’ independence.
The first defendant refers to Mr Gibbs’ observation in an email of 26 July 2014 that he sent to the solicitors for the plaintiffs, which email responds to a request that he act as trustee. In the email, he says that he notes that one of the family members may be residing at an estate property at 15 Meek Street, Brighton, and that he would be interested to know the circumstances surrounding this occupancy.
The first defendant submitted that an examination of the correspondence with Mr Gibbs discloses that that piece of information (regarding the occupancy of the Brighton property) was not communicated to Mr Gibbs in the parties’ correspondence, and the first defendant submits that that raises the inference that there was a conversation, or conversations, between the solicitors for the plaintiffs and Mr Gibbs that is not referred to in the written communications.
The first defendant suggests that an adverse inference may be drawn against his interest, because it is he that has resided in this property and because it may well be considered that he resided there at the expense of the estate.
Mr Phelan, of the solicitors for the plaintiffs, swore an affidavit on 26 June 2015 in which he refers to the affidavit of the first defendant where he raises these matters. Mr Phelan describes the first defendant’s assertions concerning the appointment of Mr Gibbs as trustee as being ‘based upon alleged conflict of interest, alleged lack of independence because of communications with me and on the grounds that Mr Gibbs is not a registered and official liquidator.’
Mr Phelan says the agreement of the parties to the appointment of Mr Gibbs as trustee embodied in the deed of settlement executed by the parties on 14 August 2014 came about through the mediation conducted on 7 August 2014 by his Honour Efthim AsJ. He says the affidavit of Mr Gibbs and the affidavit of Robyn Frances Parsons, who also consented to the appointment as trustee, were filed on 6 August 2014, the day before the mediation. He says:
I have had no dealings with Mr Gibbs in any other matter, other than in relation to this proceeding. I have no personal acquaintance with Mr Gibbs. His name was provided to me by Carolyn Sparke QC as a person who might be an appropriate Trustee. My communications with him have consisted of the following:
…
Then Mr Phelan lists all the written communications with Mr Gibbs. As I have stated above, Mr Phelan was not cross‑examined on this evidence or at all.
Further, in relation to the subject of the alleged communications between the plaintiffs (or their solicitors) and Mr Gibbs, Mr Nolan of counsel for the plaintiffs pointed out to the court that the company search that Mr Gibbs refers to in his email of 26 July 2014 disclosed that the first defendant’s address was at 15 Meek Street, Brighton and that Mr Gibbs had been informed, when being informed of the assets of the trust, that one of the assets was the property at 15 Meek Street, Brighton.
I am satisfied that the only communication between Mr Phelan and Mr Gibbs was as set out in Mr Phelan’s affidavit of 26 June 2015, which did not include any discussion of the first defendant residing in the trust property at 15 Meek Street, Brighton.
I am also satisfied on the evidence that there are no grounds to question the independence and probity of Mr Gibbs. I also find that Mr Gibbs being not registered as a liquidator is no reason why the agreement to appoint him as the trustee should not be observed. Accordingly, I propose to order that Mr Gibbs be appointed the trustee of the Russell Evans Family Trust.
Limitations on the trustee’s discretion
As I mentioned earlier, the first defendant sought an order that the trustee only distribute the income and corpus in accordance with the default provisions of the trust deed. As I have indicated, the first defendant has sought such a limitation on the trustee’s power as he is concerned that there may be adjustments in the accounts of the trust against his interests.
In my view, it is not appropriate to fetter the actions of the trustee by such a provision. The deed of settlement contemplated that there would be adjustments and therefore contemplates that the new trustee will be making enquiries and presumably drawing up accounts to ascertain whether adjustments in the trust accounts should be made, perhaps against the first defendant. Nevertheless I think it is appropriate, in light of the fact that the first defendant anticipates that there will be adjustments made against his interests, that some sort of mechanism should be implemented or provided for, so that he is given the opportunity to contest any such adjustment, if he wishes.
I believe the appropriate way to provide that protection for the first defendant and for the other parties, is to provide as follows:
(a) that the new trustee must not make any distribution of income or capital, other than equally between the plaintiffs and the first defendant, unless the trustee gives 30 days’ notice in writing to each of the plaintiffs and the first defendant with his reasons therefore; and
(b) that in the event that any such notice is given to the plaintiffs and the first defendant and any party objects within 30 days’ receipt of such notice to the proposed distribution, the new trustee shall seek direction from the court that he is justified in making distribution or such further order that the court deems appropriate.
I should also add at this stage that, in view of the fact that there appears to be such ill feeling between the beneficiaries, the trustee should be reminded that if at any stage he feels he needs the direction of the court, he is entirely at liberty and entitled to approach the court for directions.
Discharge of order of 27 June 2014
Another matter was raised in the hearing before me, which was an application to discharge an order that was made on 27 June 2014. The order is that the first defendant shall preserve the funds held in a Bankwest account BSB 303 092, account 0140663 and BSB 303 092, account 4437395, (the Bankwest term deposit account) at or above the balance as at the date of that order and shall reinvest in three‑month term deposits the balance of the Bankwest term deposit upon maturity. Under the terms of the order I propose to make, if that money is trust property, it must be delivered up to the trustee in any event.
If there is a dispute as to whether it is trust property, then naturally the trustee can bring such proceedings for directions in this court about the recovery of that sum of money.
I do not propose to discharge that order in those circumstances.
Orders
Accordingly, I propose to make orders that reflect those decisions I have made. I indicated those decisions to the parties when the matter was before me on Monday and the parties have informed me that they do not consent to those orders, although they do not oppose them.
For the following reasons, therefore I propose to order as follows:
(a) Russell I Evans Holdings Pty Ltd ACN 006 045 718 is removed as trustee of the Russell Evans Family Trust.
(b) David Ian Gibbs, chartered accountant of 390 St Kilda Road, Melbourne is appointed trustee of the Russell Evans Family Trust.
(c) The property of the Russell Evans Family Trust is vested in David Ian Gibbs as Trustee of the Russell Evans Family Trust.
(d) The defendants deliver up to David Ian Gibbs all property and documents held by them on behalf of the Russell Evans Family Trust, save for the funds held in the Bankwest account referred to in paragraph 1(e) of the orders made by the court on 27 June 2014. [I will pause here to note that no order was sought that the plaintiffs deliver up any property of the trust and so no such order is being made.]
(e) The application to vary or discharge order 1(e) of the orders made in this proceeding on 27 June 2014 is refused.
(f) The new trustee appointed pursuant to paragraph (b) hereof, must not make any distributions of income or capital of the trust, other than equally between the plaintiffs and the first defendant, unless the trustee gives 30 days’ notice in writing to each of the plaintiffs and the first defendant with his reasons therefor.
(g) In the event that any such notice is given to the plaintiffs and the first defendant and any party objects within 30 days of receipt of such notice to the proposed distribution, the new trustee shall seek direction from the court that he is justified in making a distribution or such further order as the court deems appropriate.
As to the question of costs, I indicated on Monday the orders I proposed to make about costs and I gave my reasons therefore. The orders are:
(1) The plaintiffs’ costs of the proceeding, including any reserved costs, be paid out of the assets of the Russell Evans Family Trust.
(2) The first defendant’s costs of the proceeding be borne by the first defendant.
(3) The first defendant pay the second defendant’s costs of the proceeding, if any.
(4) There be liberty to apply.
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