Re Section 55 Pty Ltd (as trustee for the XLNS Unit Trust)
[2019] ACTSC 99
•18 April 2019
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Re Section 55 Pty Ltd (as trustee for the XLNS Unit Trust) |
Citation: | [2019] ACTSC 99 |
Hearing Date: | 15 March 2019 |
DecisionDate: | 18 April 2019 |
Before: | McWilliam AsJ |
Decision: | See [70] – [71]. |
Catchwords: | TRUST – Application for judicial advice – where trust established for single purpose investment – where some beneficiaries threaten litigation regarding outstanding invoices and allegations of mismanagement of trust – whether trustee is justified in defending proceedings or paying the invoices – whether auditor should be appointed |
Legislation Cited: | Trustee Act 1925 (ACT), ss 59(4), 63 |
Cases Cited: | Application of Gnitekram Marketing Pty Limited [2010] NSWSC 1328 Castle Hill Joinery and Interiors Pty Ltd (as trustee for the Gladstone Road Trust) [2013] NSWSC 1525 Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844 |
Parties: | Section 55 Pty Ltd as trustee for the XLNS Unit Trust (Plaintiff) |
Representation: | Counsel Mr D Barlin (Plaintiff) |
| Solicitors Roberts & Partners Lawyers (Plaintiff) | |
File Number: | SC 550 of 2018 |
McWilliam AsJ:
The XLNS Unit Trust (Trust) was established to hold, develop and sell an item of real property located in Narrabundah in the Australian Capital Territory. The Trust is managed by the applicant, Section 55 Pty Ltd (Trustee). The Trust property has been subdivided and sold, and the net proceeds of sale are in the process of being distributed.
Under a ‘Fixed Deed’, initially executed on 14 January 2013 and signed by the current beneficiaries on 22 July 2016 (Trust Deed), there are three unit-holders in the Trust. They are:
(a) Stefan Belavic as trustee for The Belavic Investment Trust as to fifty shares;
(b) Trebla Group Pty Ltd as trustee for the Trebla Family Trust as to one share;
(c) Kurt Meier and Michele Meier as trustee for Meier Superannuation Fund as to forty-nine shares.
The Trustee has received complaints from members of the Meier family, and associated entities such as Meier Building Services Pty Ltd (MBS) about the payment of certain invoices and allegations of mismanagement, coupled with the threat of legal action.
These complaints have caused the Trustee to make an application for judicial advice pursuant to s 63 of the Trustee Act 1925 (ACT) (the Trustee Act).
Section 63(1) of the Trustee Act provides:
A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.
The advice may be given without any affected parties being given notice of the application: s 63(4) of the Trustee Act. Despite this, there is evidence before the Court that Kurt and Michele Meier were notified on 27 February 2019 of the Trustee’s intention to seek judicial advice, although the precise hearing date does not appear to have been communicated to them.
Questions for which advice is sought
The questions now before the Court for determination (as ultimately pressed at hearing) are as follows:
(a) Is the Trustee justified in defending any proceedings instituted by Meier Building Services Pty Ltd in relation to an invoice dated 30 June 2018 and issued by the Meir Building Services Trust (MBS Trust) to the Trust?
(b) Is the Trustee justified in expending Trust funds for the purposes of defending any such proceedings?
(c) Is the Trustee justified in paying an invoice issued by Build Co (ACT) Pty Ltd (Build Co) dated 10 September 2018 in the amount of $64,500 out of Trust funds?
(d) Is the Trustee justified in paying the invoice issued by Equity Partners dated 31 August 2018 for the amount of $18,150 out of Trust funds?
(e) Is the Trustee justified in paying two invoices numbers 744 and 745 issued by Classic Tiling Services Pty Ltd in the amount of $22,343.40 out of Trust funds?
(f) If the Trustee is justified in paying the said invoices out of Trust funds, is the Trustee then justified in paying the remaining amount of Trust funds to the unit holders in the following proportions:
i. 47.20% to the trustee of the Belavic Investment Trust;
ii. 47.20% to the trustee of the Meier Superannuation Fund; and
iii. 5.6% to the trustee of the Trebla Family Trust?
(g) Is the Trustee justified in either:
i. not appointing an auditor because the Trust has insufficient Trust funds to pay for the service; or
ii. seeking to appoint an auditor only on the basis that the auditor limit the Trustee’s liability for payment to the extent of the net assets held subject to the Trust; or
iii. appointing an auditor and then terminating the auditor’s services pursuant to clause 99 of the trust deed of the Trust?
Evidence before the Court
Three affidavits were read on the application. The first was an affidavit sworn by Mr Stefan Belavic who is the sole director of the Trustee. The remaining two affidavits were sworn by Christiaan Roberts, solicitor for the plaintiff.
One of the affidavits sworn by the solicitor included an opinion by counsel, who appeared for the plaintiff on the application. This was an appropriate course to take: see Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844 at [107]-[121]. In the present case, the opinion has been of great assistance and parts of the applicable principles referred to in the opinion have been incorporated in the reasons that follow.
The Court’s power to give advice
For the Court’s jurisdiction to be enlivened under s 63 of the Trustee Act, the applicant for judicial advice must point to the existence of a question with respect to the management or administration of trust property or a question regarding the interpretation of the trust instrument: Macedonian Orthodox Community Church St Petka Incorporated v His Eminance Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australian and New Zealand [2008] HCA 42; 237 CLR 66 (Macedonian Church case) at [58].
The phrase ‘management or administration of property’ is not a term of art. It refers to both the manner in which the trust property is managed or administered and the actual carrying out of those functions: Application of Gnitekram Marketing Pty Limited [2010] NSWSC 1328 at [13].
Here, the nature of the advice in questions (a)-(e) set out above concerns how the Trust is to be managed and administered. The nature of the advice in questions (f) and (g) is in relation to the interpretation of the Trust instrument. Thus, the jurisdictional bar is overcome.
Is it appropriate to give judicial advice?
The Court has a discretion under s 63 of the Trustee Act whether to give judicial advice. In exercising the discretion, the Court should be guided by the scope and purpose of the section. The section’s primary purpose, and the advice given under it, is to protect the interests of the trust. Another purpose is the protection of the trustee who acts upon the advice: Macedonian Church Case at [196] per Kiefel J (as her Honour then was). See also Castle Hill Joinery and Interiors Pty Ltd (as trustee for the Gladstone Road Trust) [2013] NSWSC 1525 at [18] per Darke J.
An application for judicial advice is primarily for the purpose of enabling the trustee to be advised as to the nature or extent of their powers and duties of management or administration of the trust property: Re BTA Institutional Services Australia Ltd [2009] NSWSC 1294 (Re BTA) at [6].
Given the complaints already made against the Trustee in relation to the matters upon which the Trustee seeks advice, the interests of the Trust will be served by the Court exercising its discretion to provide an opinion on the questions asked. The advice may remove a concern of the Trustee about exposure beyond its usual indemnity (to use the phraseology of Kiefel J in the Macedonian Church Case at [196]).
Accordingly, it is appropriate for the Court to give the requested advice.
Is the Trustee justified in defending proceedings for the payment of an invoice?
In the Macedonian Church Case, the plurality stated at [74]:
A necessary consequence of the provisions of s 63 is that a trustee who is sued should take no step without first obtaining judicial advice about whether it is proper to defend the proceedings.
Here, the Trustee has not yet been sued. However, a trustee’s indemnity is for all costs and expenses properly incurred in the performance of the trustee’s duties. Earlier at [70]-[71] in the Macedonian Church Case, the plurality referred to the obtaining of judicial advice as a way of resolving doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation, as those costs might carry a risk of being outside the indemnity.
If a trustee should obtain advice before prosecuting proceedings, I consider that the Trustee in this case can also obtain advice before being called upon to defend threatened litigation.
On 6 September 2018, the Trustee received an invoice dated 30 June 2018 for $250,000 for a ‘project management fee’. It was issued to the Trust with an invoice header of the MBS Trust. The Trustee has presently declined to pay the invoice.
The evidence discloses the following:
(a) On 30 March 2017, the Trustee contracted (via an ACT Home Building Contract) to pay Build Co $1,280,000 to undertake building works with respect to the Trust asset in Narrabundah.
(b) The sole director and shareholder of Build Co was Mr Karl Meier, who is the son of Kurt Meier and Michele Meier. I will refer to each of them as Karl, Kurt and Michele for convenience and without intending any disrespect by the informality.
(c) There is a document entitled ‘Agreement between Karl Meier and Stefan Belavic’ which Mr Belavic deposes to entering into with Karl. Although the agreement is neither signed nor dated, it appears from the context of the affidavit that the agreement was made sometime in 2015.
(d) One of the terms of the agreement was that Karl would be paid a management fee of $1,500 per week to manage the construction of the redevelopment of the Trust asset, which was to be paid after the sale of the asset.
(e) There is no contract to provide project management services between the Trustee and MBS (presumably on behalf of the MBS Trust, as a trust has no legal personality).
(f) There is nothing to indicate that the Trustee otherwise requested MBS to perform a project management role as part of the development of the Trust asset.
(g) The Trust asset was sub-divided and two residential properties were built on the site. Contracts for the sale of each of the properties were exchanged in July 2018 and the sale of the Trust asset settled on 11 September 2018.
(h) On 24 October 2018, Build Co issued an invoice to the Trustee for ‘additional build costs’ in the sum of $253,493.85. On that invoice, Build Co directed the Trustee to pay the amount to MBS. It is uncertain whether that amount was for any project management fees undertaken by MBS on behalf of Build Co or for something else.
(i) The Trustee has paid the invoice issued 24 October 2018 by Build Co as directed (namely to MBS) but not the separate invoice issued on 6 September 2018 by the ‘MBS Trust’.
Details of the arrangement between Build Co, MBS and the MBS Trust have not been provided to the Trustee. On the current documents provided, there is no clear legal obligation for the Trust to pay any project management fee to what I assume must be MBS on behalf of the MBS Trust, notwithstanding the header on the invoice.
Kurt and Michele allege that the agreement between the Trustee and Kurt to pay a project management fee was terminated in mid-2016 when MBS commenced work. However, neither Kurt nor Michele are parties to the agreement.
It may be that MBS on behalf of the MBS Trust undertook project management work for Karl and Build Co. There is no document or other evidence to confirm that was the case; and in any event, that is a matter for resolution between the members of the Meier family. Even if there was such an arrangement, it is likely that the recourse for MBS in recovering payment for the work would lie against Karl or Build Co, not the present Trustee.
That includes project management work where a third party may have benefited and the claim is for fair and just restitution for a benefit derived at the expense of MBS, as seen in cases such as Lumbers v W Cook Builders Pty Ltd (in Liquidation) [2008] HCA 27; 232 CLR 635. In that case, a sub-contractor had performed work on a property, but was unable to sue the owners of a property based on unjust enrichment as a result of the work done, because the request for the work to be done was made by the builder as head-contractor and the owners were unaware of the arrangement with the sub-contractor.
Here, there is nothing to suggest that the Trustee made any request of MBS to perform project management work in respect of the Trust asset, nor that there was any ‘implied contract’ between the Trustee and MBS (as asserted by Kurt and Michele in correspondence). On the contrary, the evidence presented does not establish that the Trustee even knew that MBS was performing work in respect of the Trust asset.
There may be further facts that have not been supplied, such as conversations or communications between MBS and the Trustee, and it is noted that Michele and Kurt allege that the Trustee was aware of a number of matters relating to finance and communications with MBS during the development of the Trust asset.
There is insufficient detail on the information available to the Court to give rise to any apparent legal basis to pay the invoice issued to it, based on any agreement to be implied from conduct between the Trustee and MBS, let alone the terms of any contract such as to found a project management fee in the sum claimed.
From the correspondence between Karen Meier (Michele and Kurt’s daughter) and the Trustee dated 20 September 2018, it appears the dollar figure for ‘project management’ was simply made-up by MBS, based on what it considered to be a market rate, as opposed to any amount agreed between the Trustee and MBS. That correspondence emphasises that the dispute is between Karl and his family as to who performed work on the project and who should be paid for it, as opposed to any direct interactions (or legally binding communications) with the Trustee.
Assuming no further documents or information are provided to the Trustee to support the claim for payment, the Trustee has a reasonable foundation for presently declining to pay the invoice, and would be justified in defending any proceedings commenced.
It must be emphasised, however, that the above consideration will in no way bind a future court called upon to decide the issue, given that the cause of action, joinder of issues and evidence may all be different from that identified in this application. It is noted that the correspondence from Kurt and Michele raises allegations of conflicts of interest, refers to the invoice as being for a ‘commercial and equitable management fee’, and threatens litigation relating to the alleged oppression of unspecified ‘equitable rights’. Further allegations have then been made about the management of the trust account and ‘equitable duties’ to the Trust. No advice has been sought with respect to those issues.
Is the Trustee justified in expending Trust funds in defending any proceedings instituted seeking payment of the invoice on behalf of the MBS Trust?
The advice in relation to question 2 is tied to the advice given in relation to question 1. Subject to the terms of a trust, a trustee is entitled to be indemnified against debts and liabilities incurred in the proper execution of its duties and powers under the trust out of the assets of the trust. This established principle was restated recently in Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; 354 ALR 436 at [35] per Allsop CJ, with whom Siopis and Farrell JJ agreed.
In this case, the terms of the Trust indemnify the Trustee out of the assets of the trust in respect of any liability incurred in connection with acting as trustee of the trust, excluding circumstances of fraud, gross negligence, or breach of trust. The terms of the Trust are consistent with s 59(4) of the Trustee Act:
A trustee may reimburse himself or herself, or pay or discharge out of the trust property, all expenses incurred in or about the execution of his or her trusts or powers.
It follows that if the defence of the foreshadowed litigation is considered proper, then the trustee is entitled to expend Trust funds to pay for the legal costs of conducting such litigation.
As the Trustee would be justified in defending any litigation seeking payment of the invoice for project management services, and assuming that such litigation was limited to that issue, the Trustee would also be justified in expending Trust funds for the purpose of defending those proceedings.
Is the Trustee justified in paying the invoices in question out of Trust funds?
There are four invoices for consideration:
(a) An invoice of $64,500 issued by Build Co on 10 September 2018;
(b) An invoice for $18,150 issued by Equity Partners dated 31 August 2018; and
(c) Two invoices totalling $22,343.50 issued by Classic Tiling Services Pty Ltd on 7 November 2018.
Build Co invoice for $64,500
The invoice rendered by Build Co comprises the following sums:
(a) $53,500 for the ‘Payment of agreed wage of $1,500 plus GST over 40 weeks ($66,000) Less $12,500 already paid as shown in Meier Building Services MYOB ledger’; and
(b) $11,000 for ‘Unit / Separate Titling works’.
$5,863.64 of the total sum represents GST.
As stated above, Build Co has issued an invoice to the Trustee for ‘additional build costs’ in the sum of $253,493.85. However, it is not clear what building costs were included in that figure. If they included a project management fee, or the cost of titling works, there may be a double counting. It would be prudent for the Trustee to clarify the details of the invoice it has already paid, so as to ensure that the Trust is not paying for goods and services rendered twice.
Subject to the amounts not already having been paid, the management fee is provided for in the agreement, which the Trustee and Kurt on behalf of Build Co both continue to accept as binding on each party privy to that agreement.
There is also evidence to demonstrate that the Trust asset was partitioned into two separate titles prior to each unit being sold. The underlying basis for calculating the amount of $11,000 does not appear to have been provided. The Trustee sought to clarify the amount and Karl responded by email as follows:
“Separating Titling Works” pertains to all associated works relating to obtaining two separate titles for the purpose of sales and for two properties that have been built on the same block.
This task involves liaising with the appropriate authorities. This task can and did take months to ensure that all the criteria stated in our Notice of decision was met.
Such work also does not appear to have been included in the building contract signed by the Trustee, however it might properly be characterised as being work ancillary or incidental to the completion of the building works under the contract. It was work done for the benefit of the Trust asset and necessary to fulfil the purpose of the Trust, but it was separate to what might be described as building work that was the subject of the contract.
Although the work was performed for the benefit of the Trust, I am not satisfied on the evidence before the Court that there is a fair and reasonable basis for the payment of such a sum, if it is being claimed outside the scope of the building contract. It appears to have no basis in outgoings, such as paying application fees to regulatory authorities. Rather, the figure appears to have been added on as a made-up figure by Karl on behalf of Build Co. Why the time spent liaising with authorities would be charged at an additional rate to the project management fee is not clear.
Accordingly, without proper justification from Build Co, the Trustee is not presently justified in paying that part of the invoice (including the GST).
Equity Partners Invoice
Equity Partners is the accountant for the Trustee. It has rendered an invoice to the Trust. Again, perhaps it would have been more correct to address it to the Trustee. The services for which the invoice is payable include preparation of financial statements and tax returns for the Trust for the 2017 and 2018 financial years, preparation and lodgement of an ATO Clearance Certificate, work performed relating to an ACT Revenue Office audit and associated meetings with unitholders.
There is nothing to suggest that the invoice is anything other than fair and reasonable and the Trustee is justified in paying it out of the Trust funds.
Classic Tiling Services Pty Ltd Invoice
There are two invoices from Classic Tiling Services Pty Ltd that appear to have been issued late to Build Co (after the settlement of the sub-divided Trust asset had taken place in September 2018). Build Co has passed them on to the Trustee for payment. They are clearly referable to tiling work undertaken for the Trust asset.
However, Build Co has rendered invoices for staged payments in accordance with the building contract, and those invoices have been paid by the Trustee when progress claims were made. The tiling work should have been factored in as part of the $1,280,000 contract price as it is clearly building work referable to the contract.
There is no document before the Court to suggest that the Trustee agreed to pay additional costs or that there was a contract variation. I am not satisfied that Build Co has established a sufficient legal foundation to pass on those late invoices to the Trustee. I advise that the Trustee is presently not justified in paying the invoices from Classic Tiling Services Pty Ltd. The liability for payment appears to lie with Build Co.
In what proportions should the Trustee pay the balance of the trust funds to beneficiaries?
The Trustee has revised its position since the Originating Application was filed. According to the advice submitted by counsel for the Trustee, it now proposes to take the following approach:
(a) The outstanding invoices the subject of judicial advice are to be paid;
(b) Any other expenses and liabilities are to be paid;
(c) Any unpaid beneficiary entitlement is to be paid;
(d) Any remaining Trust funds are to be paid in proportion to the unit holdings, being:
i. 51% to the trustee of the Belavic investment Trust;
ii. 49% to the trustee of the Meier Superannuation Fund; and
iii. 1% to the trustee of the Trebla Family Trust.
The sole question for advice is in relation to apportionment of the balance of the proceeds of sale. Clauses 42 and 92 of the Trust Deed are as follows:
The distribution of income
42 The trustee must distribute the remaining income of the trust for a financial year to those who, immediately before the commencement of the next financial year, are unit holders. The Trustee must do so in proportion to the number of units they hold.
Termination
92 On termination of the trust, the trustee must realise the assets of the trust, pay all its liabilities and distribute the remainder (after deducting any amount the trustee is entitled to and any amount the trustee decides is appropriate to cover actual, contingent and future liabilities) to the unit holders in accordance with their entitlements, in proportion to the number of units in respect of which they are registered.
The approach now proposed to be taken is entirely in accordance with the express terms of the Trust Deed and the terms of the Trustee Act.
The reference to ‘any other expenses and liabilities’ in counsel’s advice appears to be a reference to the legal costs of these proceedings and to other miscellaneous expenses that have subsequently been received and which were disclosed in the affidavit of Christiaan Roberts, solicitor for the Trustee (such as an annual review fee payable to Australian Securities and Investments Commission for $263). There is nothing remarkable about the subsequent miscellaneous expenses or the estimate of legal fees to be claimed for past and future costs and disbursements of no more than $33,000 inclusive of GST.
The reference to ‘unpaid beneficiary entitlement’ may be a reference to repayment of equitable amounts being claimed by Kurt and Michele as being an initial outlay by their superannuation fund. I have not been asked to give advice on those matters.
The basis for the proportions raised in the Originating Application was not set out and as I understand the application as ultimately argued, is no longer pressed. The proposed distribution of profits is now in accordance with the percentage of units held by the unit holders, meaning the Trustee is entirely justified in paying out the Trust funds in those proportions.
Should the Trustee appoint an auditor?
The final question for judicial advice is whether the Trustee is justified in refusing to appoint an auditor, or appointing an auditor only on the basis that the auditor limit the Trustee’s liability to the extent of the Trust funds, or appointing an auditor and then terminating the auditor’s services pursuant to clause 99 of the Trust Deed.
Clause 99 is in the following terms:
The trustee may appoint an auditor for the trust.
Unit holders holding at least 20% of the units on issue may at any time request in writing that the trustee appoint an auditor to examine the books and accounts of the trust to ascertain whether any financial statement is correct and to inquire into the financial affairs of the Trust. The unit holders may name the auditor or leave it to the trustee to choose one. The trustee must give the auditor access to the books and accounts and must give the auditor any information or explanation the auditor asks for and must co-operate fully with him or her. The costs of the audit are to be paid out of the trust. The trustee may terminate the services of the auditor.
The request for an auditor to be appointed was made by Kurt and Michele as trustees for Meier Superannuation Fund. Their shareholding is more than 20% and they were entitled to name the auditor, being Rodd Scott of Nexia Canberra.
The request complies with the terms of the Trust Deed.
However, although the Trust Deed empowers the Trustee to act to appoint an auditor, it does not expressly require the Trustee to appoint an auditor, nor do I consider it impliedly requires that such an appointment be made when read with clause 73 of the Trust Deed:
The trustee is entitled not to enter into an agreement, execute a document or assume liability of any type in connection with the trust unless it includes a provision limiting the trustee’s liability to the extent of the trustee’s right to an indemnity from the assets of the trust.
Clause 78 of the Trust Deed is also relevant. It provides:
The trustee has an absolute discretion whether to exercise a power under this deed and as to how to exercise a power. Neither a unit holder nor any other person may challenge an exercise of a power or a failure to exercise it, or require a reason for its exercise or non-exercise.
Read in the context of these other clauses of the Trust Deed, the preferable construction of clause 99 is that subject to the Trust having sufficient funds to pay for the costs of the audit, and subject to the auditor agreeing to limit the liability of the Trustee, the Trustee may appoint an auditor. If the Trustee does so, then it has certain obligations as to the provision of books and accounts to the auditor so engaged.
The evidence before the Court establishes:
(a) There is approximately $160,000 remaining in Trust Funds.
(b) If the Trustee pays approximately $73,000 to Build Co and Equity Partners in accordance with the judicial advice given, and at the most $33,000 in legal fees, there will be approximately $54,000 remaining in Trust Funds for distribution to the beneficiaries.
(c) The Trustee has communicated with the nominated auditor to seek an estimate of fees prior to engagement. On 19 November 2018, Mr Scott advised that he would expect the fees for external auditing of the financial statements since 2012 to be in the order of $80,000 to $100,000 minimum and would be highly dependent on the nature of the trusts records. If the scope of services extended to reviewing payments made to certain parties, Mr Scott estimated this could cost a further $20,000 - $40,000.
(d) Mr Scott was not willing to limit the fees to the Trustee’s right of indemnity from the Trust.
The Trustee appears to have acted in good faith in attempting to engage the nominated auditor and by attempting ensure that the auditor limited his fees to the extent of the funds held by the Trust. However, it can readily be seen that the appointment of an auditor is not in the interests of the Trust, as it would in all likelihood require more funds than those held by the Trust.
The basis for appointing an auditor is also fairly vague. Assuming an auditor could be found to limit the fees charged to only those held by the Trust, the audit process is nevertheless likely to totally deplete the remainder of the Trust funds. Although the beneficiaries do not need any reason for requesting the appointment of an auditor under clause 99, the Trustee would need to have some cause to exercise the discretionary power, given the likely result.
The allegations of Michele and Kurt rise no higher than a concern about a conflict of interest, a complaint about the invoices which have been the subject of judicial advice and considered above, and a complaint about transparency of the total unit holdings, which is resolved simply by reading the Trust Deed.
I note that clause 64 of the Trust Deed contains ‘specific powers’ held by the Trustee. One of those is that the Trustee may exercise a power or discretion even though a director of the Trustee (Mr Belavic) may have a direct or indirect interest or may receive a benefit as a result of excising of the power, provided the Trustee acts in good faith.
There is nothing to prevent Michele and Kurt from inspecting the books themselves (as they are permitted to do under clause 98 of the Trust Deed), and from paying an auditor separately if they consider that Mr Belavic has not acted in good faith or that there has been some sort of breach of trust. At present, the evidence does not objectively give rise to that concern.
In the circumstances where the Trust is about to be terminated as it has achieved its purpose; where the remaining funds remaining are small and the expense is likely to totally subsume at least those funds; and where there does not appear to be any particular reason to appoint an auditor; I advise that the Trustee would be acting within its powers as set out in the Trust Deed in declining to appoint the nominated auditor or any other auditor, and would be justified in doing so on this occasion given the expense involved.
Conclusion
The questions for judicial advice should be answered as follows:
(a) Until further order, the Trustee is justified in defending any proceedings instituted by Meier Building Services Pty Ltd in relation to the invoice issued by it dated 30 June 2018.
(b) Until further order, it is proper for any costs and disbursements incurred in defending any such proceedings be paid out of the assets of the XLNS Unit Trust on an indemnity basis.
(c) The Trustee is justified in paying part of an invoice issued by Build Co (ACT) Pty Ltd dated 10 September 2018 in the amount of $53,500 out of Trust funds.
(d) The Trustee is justified in paying the invoice issued by Equity Partners dated 31 August 2018 for the amount of $18,150 out of Trust funds.
(e) The Trustee is not justified in paying two invoices numbered 744 and 745 issued by Classic Tiling Services Pty Ltd in the amount of $22,343.40 out of Trust funds.
(f) The Trustee would be acting within its powers as set out in the Trust Deed in declining to appoint the nominated auditor or any other auditor. It is not necessary to advise in relation to the other two alternatives.
The costs of this application should be paid out of the Trust funds on an indemnity basis. It is unnecessary to make an order to that effect as it is provided for by s 59(4) of the Trustee Act.
| I certify that the preceding Seventy-One [71] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam Associate: Date: 18 April 2019 |
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