Rosenbaum v Baidarman (No 2)

[2021] NSWSC 574

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Rosenbaum v Baidarman (No 2) [2021] NSWSC 574

Hearing dates:

25 - 29 May 2020 and 1 - 12 June 2020

Date of orders:

21 May 2021

Decision date:

21 May 2021

Jurisdiction:

Equity

Before:

Williams J

Decision:

Parties are to bring in short minutes of order giving effect to these reasons, including a declaration that the partnership has dissolved, an order that the partnership business be wound up under the direction of the Court, an order for the taking of partnership accounts and an order for the appointment of a new trustee to two trusts.

Catchwords:

PARTNERSHIP — oral partnership agreement — dissolution of partnership — winding up of partnership business — taking of partnership accounts — ordinary basis or wilful default — difficulty in identifying assets and liabilities of partnership due to lack of records and conduct of partners — claim for compound interest

TRUSTS — application for general administration order — alternative application for appointment of new trustee — applicable principles

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 100

Corporations Act 2001 (Cth), ss 601AD, 601AE, 601AH

Evidence Act 1995 (NSW), s 69

Partnership Act 1892 (NSW), ss 5, 20, 24, 26, 29, 39, 44

Trustee Act 1925 (NSW), s 70

Uniform Civil Procedure Rules 2005 (NSW), rr 20.14, 46.7, 54.3

Cases Cited:

Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd [2017] NSWCA 99

Bloomingdale Holdings Pty Ltd v 87 Stevedore Street Pty Ltd (2010) 6 ASTLR 271

Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26

Cappe v Tsung [2018] NSWCA 86

Commissioner of State Revenue v Rojoda Pty Ltd (2020) 376 ALR 378

Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599

Fox v Percy (2003) 214 CLR 118

Foxman v Credex National Australian Trade Exchange Pty Ltd (in liq) [2007] NSWSC 1422

Fulham Partners LLC v National Australia Bank Limited [2013] NSWCA 96

Gooley v Motasea Pty Ltd [2015] NSWCA 31

Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298

Hung v Warner; In the matter of Bellpac Pty Ltd (Receivers and Mangers appointed) (In liquidation) [2013] FCAFC 48

Hungerford v Richardson [2018] NSWSC 1543

Lithgow City Council v Jackson (2011) 244 CLR 352

Massoud v NRMA Insurance Limited (2005) 62 NSWLR 653

McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623

McNee v Lachlan McNee Family Maintenance Pty Ltd [2020] VSC 273

Meehan and Others v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146

Mudocca v Murdocca (No. 2) [2002] NSWSC 505

Northwest Capital Management v Westgate Capital Limited (2012) 264 FLR 424

Re Cenco Holdings Pty Ltd (2005) 53 ACSR 484

Re Gaydon [2001] NSWSC 473

Re Hillsea Pty Ltd [2019] NSWSC 1152

Re Tebbs (deceased) [1976] 2 All ER 858

Sidameneo (No 456) Pty Ltd v Alexander (No 2) [2012] NSWCA 87

Sze Tu v Lowe (2014) 89 NSWLR 317

Torlonia v Wright [2016] NSWSC 1139

Watson v Foxman (1995) 49 NSWLR 315

Texts Cited:

Clarry, D., The Supervisory Jurisdiction Over Trust Administration (Oxford University Press, 2018)

Meagher Gummow & Lehane’s Equity Doctrines and Remedies (5th ed, 2015)
The Law of Trusts: Ford and Lee (Thompson Reuters, 2019)
 

Category:

Principal judgment

Parties:

Eduard Rosenbaum (First Plaintiff / First Cross-defendant)
Ironwell Pty Ltd (Second Plaintiff / Second Cross-defendant)
Alla Rosenbaum (Third Cross-defendant)
Tanya Rosenbaum (Fourth Cross-defendant)
Jacob Baidarman (Defendant / Cross-claimant)
Ella Baidarman (Fifth Cross-defendant)
Dabjade Pty Ltd (Sixth Cross-defendant)
Excelsea Pty Ltd (Seventh Cross-defendant)

Representation:

Counsel:
Ms F Rogers (Plaintiffs / First to Fourth Cross-defendants)
Mr D Smallbone (Defendant / Cross-claimant)

Solicitors:
McNamee Legal (Plaintiffs / First to Fourth Cross-Cross-defendants)
DCE Lawyers (Defendant / Cross-claimant)

Submitting appearance filed for the Fifth and Sixth Cross-defendants

Seventh Cross-defendant joined to proceedings by order made by consent after conclusion of the hearing

File Number(s):

2012/301100

Publication restriction:

N/A

Judgment

A. INTRODUCTION

Introduction to the parties

1. Mr Eduard Rosenbaum is the first plaintiff and first cross-defendant in this proceeding (Mr Rosenbaum). Mr Jacob Baidarman is the defendant and cross-claimant (Mr Baidarman). Mr Rosenbaum and Mr Baidarman commenced a property development business in partnership in about 1987 (the Partnership). ^[1] It is common ground that it was a term of their oral partnership agreement that each partner would contribute equally to the Partnership and would share equally in the profits or losses of the Partnership. ^[2]

   1. Further Amended Statement of Claim filed on 10 June 2020 (Claim), paragraph 1; Defence filed on 28 June 2019 (on which the defendants continue to rely notwithstanding the subsequent filing of the Claim) (Defence), paragraph 1.

   2. Claim, paragraph 2; Defence, paragraph 2.

2. Ironwell Pty Limited (Ironwell) is the second plaintiff and second cross-defendant in this proceeding. Ironwell was initially established by third parties as a shelf company but Mr Rosenbaum and his wife Alla Rosenbaum (Mrs Rosenbaum) have been the sole directors and shareholders of Ironwell since November 1991. ^[3] Mrs Rosenbaum is the third cross-defendant in this proceeding.

   3. Claim, paragraph 24; Defence, paragraph 21.

3. Ironwell is the trustee of the Ironwell Employees Superannuation Fund (Ironwell Super). ^[4] It is common ground that, at all material times, the beneficiaries of Ironwell Super were Mr and Mrs Rosenbaum and the fourth cross-defendant, Tanya Rosenbaum (the daughter of Mr and Mrs Rosenbaum). ^[5]

   4. Further Amended Cross-Claim filed on 11 June 2020 (Cross-Claim), paragraph 61; Defence to Amended Statement of Cross-Claim filed on 28 November 2019 (on which the cross-defendants continue to rely notwithstanding the subsequent filing of the Cross-Claim (Cross-Claim Defence), paragraph 52 (page 11).

   5. Cross-Claim, paragraph 62; Cross-Claim Defence, paragraph 52 (page 11).

4. It is convenient to refer to Mr and Mrs Rosenbaum, Ironwell and Tanya Rosenbaum collectively as the Rosenbaum parties.

5. The sixth cross-defendant, Dabjade Pty Limited (Dabjade) is the trustee of the Baidarman Superannuation Fund (Baidarman Super). ^[6] It is common ground that, at all material times, the beneficiaries of Baidarman Super were Mr Baidarman and his wife, Mrs Ella Baidarman, who is the fifth cross-defendant (Mrs Baidarman). ^[7]

   6. Cross-Claim, paragraph 61; Cross-Claim Defence, paragraph 52 (page 11).

   7. Cross-Claim, paragraph 63; Cross-Claim Defence, paragraph 52 (page 11).

6. From about 1997, the property development activities that had previously been undertaken by the Partnership were instead undertaken by the IPD Trust and Omega Unit Trust. Messrs Rosenbaum and Baidarman caused these trusts to be established on the basis of advice from an accountant to the effect that it would be tax effective for Ironwell Super and Baidarman Super to fund the property development activities and to earn the profits of those activities.

7. It is not in dispute that: ^[8]

   8. Cross-Claim, paragraphs 60-66; Cross-Claim Defence, paragraphs 52-54 (page 11).

1. the Omega Unit Trust and the IPD Trust were each established in May 1997;

2. Innovative Property Developments Pty Ltd (under a previous name) was appointed as the trustee of each trust in May 1997;

3. Ironwell (as trustee of Ironwell Super) and Dabjade (as trustee of Baidarman Super) were beneficiaries of the IPD Trust (which is a discretionary trust) and are also the only unit holders in the Omega Unit Trust; and

4. in March 2006, Innovative Property Developments Pty Ltd was removed as trustee of the Omega Unit Trust and the IPD Trust and replaced by Excelsea Pty Limited (Excelsea); and

5. the only directors of Excelsea at all material times were Mr Rosenbaum and Mr Baidarman.

8. The Partnership undertook the following development projects: ^[9]

   9. Claim, paragraph 6; Defence, paragraph 5.

1. a project at Merton Street, Sutherland, during the period from 1987 to 1992 (the Merton Street project and the Merton Street property);

2. a project at Port Hacking Road, Caringbah, during the period from 1991 to 1994 (the Port Hacking Road project and the Port Hacking Road property);

3. a project at The Boulevard, Miranda during the period from 1996 to 1997 (the Miranda project); and

4. a project at Wonga Road, Yowie Bay during the period from 1994 to 1998 (the Wonga Road project and the Wonga Road property).

9. Three further projects were undertaken after the IPD Trust and the Omega Unit Trust were established in 1997:

1. a project at Hotham Road, Gymea Bay during the period from 1998 to 1999 (the Hotham Road project);

2. a project at Military Road, North Bondi during the period from 2001 to 2004 (the Military Road project); and

3. a project at Old South Head Road, North Bondi, the land for which was sold in 2011 prior to development (the Old South Head Road project and the Old South Head Road property).

10. The parties did not seek to characterise the projects undertaken by the trusts as, in substance, a continuation of the Partnership.

11. At the hearing before me, the Rosenbaum parties were represented by Ms Rogers of counsel, instructed by Mr McNamee, solicitor. The defendant and cross-claimant, Mr Baidarman, was represented by Mr Smallbone of counsel, instructed by Mr English, solicitor.

12. On 30 October 2019, Mrs Baidarman and Dabjade filed a submitting appearance stating that they submit to the making of orders sought, and the giving of entry of judgment in respect of all claims made save as to costs. Mrs Baidarman and Dabjade were therefore not represented.

13. As I will explain in more detail later in these reasons, Excelsea was first joined as a party to these proceedings after the conclusion of the hearing.

Financial affairs of the Partnership

14. Messrs Rosenbaum and Baidarman did not establish a bank account for the Partnership. Nor did they take any steps to cause financial statements to be prepared, or tax returns to be filed, for the Partnership. During the entire period of the Partnership, transactions for the purpose of Partnership activities were undertaken by Mr Rosenbaum, Mr Baidarman, Ironwell or Dabjade on behalf of the Partnership. The evidence does not disclose whether or to what extent those transactions were reflected in tax returns filed on behalf of Mr Rosenbaum, Mr Baidarman, Ironwell or Dabjade.

15. During that same period, Mr Rosenbaum and Mr Baidarman were also engaged in activities unrelated to the Partnership, and Ironwell and Dabjade had responsibilities as trustees of Ironwell Super and Baidarman Super respectively. This has given rise to disputes between the parties in relation to numerous transactions about whether those transactions were part of the business of the Partnership, or whether Mr Rosenbaum, Mr Baidarman, Ironwell or Dabjade entered into those transactions for purposes unrelated to the Partnership.

16. These difficulties are compounded by the fact that the parties did not adopt any process to keep track of the transactions undertaken in relation to the Partnership. From approximately 2006, Messrs Rosenbaum and Baidarman did seek advice from their mutual accountant about some transactions. However, many transactions in connection with the Partnership’s business activities were simply left to be the subject of adjustments between the partners at some later time, without any agreement or discussion about precisely when or how this would be done. Records of Partnership payments and receipts were not maintained along the way for the purpose of any future adjustments except in a manner that can only be described as haphazard. ^[10]

    10. Affidavit of Waldemar Wawrzyniuk affirmed on 28 June 2019, paragraphs 17-27.

17. In respect of some transactions undertaken by either Mr Rosenbaum or Mr Baidarman for the purpose of the Partnership, an adjustment as between the partners was later made by one of the partners making a payment directly to the other “rather than through the partnership accounts”. ^[11] The Rosenbaum parties refer to these payments as “direct transactions”. In reality, these “direct transactions” were the only means of making financial adjustments as between partners because there were no “partnership accounts”.

    11. Claim, paragraph 111(a); Defence, paragraph 112.

18. The Rosenbaum parties contend that, from time to time during the course of the Partnership, one partner paid personal expenses on behalf of the other partner. Mr Baidarman does not admit that any such payments were made. ^[12] The Rosenbaum parties contend that payments of this nature should be included in an accounting between partners in the same manner as the direct transactions to which I have referred above. Mr Baidarman contends that any such payments occurred entirely outside the Partnership and should not be included in the winding up of the Partnership or the taking of accounts of the Partnership. ^[13] It is convenient to refer to this class of transaction as “private matters”, adopting the terminology used by the Rosenbaum parties during the hearing.

    12. Claim, paragraph 111(b); Defence, paragraph 112.

    13. T845.19-845.21.

2006 Reconciliation and the subsequent payments

19. In 2006, Mr Rosenbaum and Mr Baidarman undertook a process that each of them described as a “reconciliation” of what they described as their respective “contributions” to and “withdrawals” from the Partnership since its inception (the 2006 Reconciliation). ^[14]

    14. Claim, paragraphs 8-14, 112-113; Defence, paragraphs 7-12, 114-115.

20. It is common ground between Mr Rosenbaum and Mr Baidarman that the 2006 Reconciliation was not complete or final. Neither party relies on it as a settled account, or as a binding agreement between them as to the manner in which any or all transactions of the Partnership and dealings of each of them in relation to the Partnership were to be accounted for. Even at the time it was undertaken, the 2006 Reconciliation was subject to various matters recorded as outstanding. Each of Mr Rosenbaum and Mr Baidarman subsequently identified certain additional matters concerning their respective alleged contributions to and withdrawals from the Partnership that they say were not addressed, or not addressed adequately, in the 2006 Reconciliation. ^[15]

    15. Claim, paragraphs 8-14; Defence, paragraphs 7-12.

21. Importantly, both the Rosenbaum parties and Mr Baidarman acknowledge that the 2006 Reconciliation was superseded by the reference (could make a defined term) conducted in the course of this proceeding, to which I will refer below. ^[16]

    16. T836.10-836.20.

22. Messrs Rosenbaum and Baidarman produced a lengthy handwritten document during the 2006 Reconciliation process. I will refer to it as the 2006 document. ^[17] It bears the handwriting of Mr Rosenbaum in parts, and Mr Baidarman in other parts. There is some dispute about the precise role of each of them in the preparation of the 2006 document, ^[18] but nothing turns on that.

    17. Tab A of Exhibit ER1 to Mr Rosenbaum’s affidavit sworn on 25 February 2019 (Exhibit 2).

    18. Claim, paragraphs 8-9; Defence, paragraph 8.

23. The 2006 document commences with a page entitled “Outstanding Issues”.

24. The second page is entitled “Jacob” and calculates an amount “Owing to Co.” or “Owing to Jacob” for specified periods between 1992 and 2006. The result of those calculations is a total amount “Owing to Jacob” of $493,792. The third page of the 2006 document is entitled “Eddie” and calculates an amount “Owing to Co.” or “Owing to Eddie” in respect of the same periods between 1992 and 2006. The result of those calculations is a total amount “Owing to Eddie” of $110,100. References to “Jacob” and “Eddie” in these pages and throughout the 2006 document are references to Mr Baidarman and Mr Rosenbaum respectively. It is plain from the transactions recorded in the 2006 document that references to “Co.” or “Company” must be understood as meaning the Partnership. Page 5 of the 2006 document includes the statements (underlining in original): ^[19]

“Company owing to Eddie

1,102,381 – 992,281 = 110,100

Company owing to Jacob

1,308,792 – 815,000 = 493,792”

19. Exhibit 2, page 5.

25. It is common ground between the parties that the meaning of these pages of the 2006 document is that Messrs Rosenbaum and Baidarman had provisionally calculated that: ^[20]

1. Mr Rosenbaum’s advances to the Partnership since its inception had exceeded his withdrawals from the Partnership by a total amount of $110,100; and

2. Mr Baidarman’s advances to the Partnership during the same period exceeded his withdrawals from the Partnership by a total amount of $493,792.

   20. Claim, paragraph 12; Defence, paragraph 9(a).

26. It is also common ground that, during the period from December 2008 to March 2009, Mr Rosenbaum and Mr Baidarman were paid the amounts of $110,100 and $493,792 respectively. ^[21]

    21. Claim, paragraph 13; Defence, paragraph 11.

27. It is possible to discern from the remaining pages of the 2006 document, when considered together with other evidence, some elements of how the amounts of $110,100 and $493,792 were calculated. However, the 2006 document records information in a manner that was clearly designed to be capable of being understood by Mr Rosenbaum and Mr Baidarman, who had some knowledge of the relevant transactions. The document is largely impenetrable to any other reader.

28. The 2006 document also refers to certain transactions in the “private matters” category to which I have referred above. It states that the sum of $13,329 was “owing to Jacob” in respect of those private matters. It also contains a handwritten statement that this amount was “paid back on 20/10/2010”. ^[22] It is common ground that this payment was made.

    22. Exhibit 2, page 4.

29. At the hearing before me, the Rosenbaum parties sought to tender the whole of the 2006 document “as a business record”. Mr Baidarman objected to the tender of the document as evidence of the truth of its contents. I required counsel for the Rosenbaum parties to identify the specific previous representations made in the 2006 document that they sought to tender as an exception to the hearsay rule under s 69 of the Evidence Act 1995 (NSW), identify the fact asserted by each such representation and articulate the reasons why those previous representations satisfied the requirements for admissibility under s 69: Lithgow City Council v Jackson (2011) 244 CLR 352 at [17]-[21]; see also Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26 at [85]-[87]. Counsel did not undertake this exercise in any meaningful way. Ultimately, the 2006 document was admitted into evidence subject to an order made under s 136 of the Evidence Act limiting its use to evidence of the creation and existence of the document and its contents, with the exception of seven specific statements contained in the 2006 document that were admitted as evidence of the truth of facts asserted by those statements.

30. The 2008 and 2009 payments to which I have referred at [26] above were funded by monies that Mr Rosenbaum caused to be withdrawn from an account held by Excelsea as trustee of the Omega Unit Trust. In June 2009, Ironwell Super was treated as having redeemed 603,892 units in the Omega Unit Trust to fund those December 2008 and March 2009 withdrawals. ^[23] The Rosenbaum parties do not admit the accuracy of the unit holdings in Omega Unit Trust presently recorded (1,437,246 units held by Baidarman Super and 678,740 units held by Ironwell Super). ^[24] The Rosenbaum parties did not plead a positive case as to how many units are in fact held by each superannuation fund in the Omega Unit Trust, but contended during submissions that the 2008 and 2009 withdrawals should not have resulted in any reduction in Ironwell Super’s units. The accountant for the Omega Unit Trust, Ironwell Super and Baidarman Super gave evidence that those withdrawals had to be accounted for as a redemption of units by Ironwell Super. Mr Baidarman maintains that there is no basis to doubt the accuracy of the unit holdings presently recorded. ^[25]

Disputes relating to the Omega Unit Trust and the IPD Trust

23. See [590]-[611] below.

24. Cross-Claim, paragraphs [67]-[69]; Cross-Claim Defence, paragraph 55 (page 11) and paragraph 45 (page 12).

25. See [595]-[611] below.

31. In about 2010, Mr Rosenbaum and Mr Baidarman decided that they did not wish to undertake any further property development activities in partnership or through the trusts.

32. Financial statements had been prepared for the Omega Unit Trust and the IPD Trust up to and including the financial year ending 30 June 2010. However, disputes emerged in the course of discussions between Mr Rosenbaum and Mr Baidarman about the affairs of the two trusts. There are essentially three issues in dispute.

33. The first issue is the unit holdings of Ironwell Super and Baidarman Super in the Omega Unit Trust. I have referred to this aspect of the dispute at [30] above.

34. The second issue relates to an amount of $1,720,674 that was withdrawn from the Omega Unit Trust funds on 28 September 2010 and paid to:

1. Dabjade (as trustee of Baidarman Super) in the amount of $1,060,291; and

2. Ironwell (as trustee of Ironwell Super) in the amount of $660,383.

35. The parties are in dispute about whether this was a final distribution or an interim payment subject to adjustment. If it was an interim payment, then the dispute concerning the unit holdings is plainly relevant to the question as to the proportions in which the sum in question should be distributed to the unit holders on a final basis. ^[26]

    26. Claim, paragraphs 58-61; Defence, paragraphs 51-54; Cross-Claim, paragraphs 72-86; Cross-Claim Defence, paragraphs 48-59 (pages 10-11).

36. The third issue relates to the net proceeds of the sale of the Old South Head Road property in 2011. The net sale proceeds amount to $1,188,196.82 and are currently held in an account in the name of Excelsea as trustee of the IPD Trust. There is a deadlock between Mr Rosenbaum and Mr Baidarman, as directors of Excelsea, as to how those net sale proceeds should be distributed between unit holders.

37. Due to these ongoing disputes, Mr Rosenbaum and Mr Baidarman, as directors of Excelsea, have not caused financial accounts to be completed for the Omega Unit Trust and IPD Trust for the financial year ended 30 June 2011 and subsequent years. ^[27]

    27. Cross-Claim, paragraph 70; Cross-Claim Defence, paragraph 46 (page 10).

History of this proceeding to date

38. This proceeding was commenced in 2012 and has already had a long history.

39. At some stage prior to 20 May 2016, the Rosenbaum parties prepared a document referred to as the plaintiff’s schedule of contributions and withdrawals from the partnership. This document was marked for identification as MFI-1. The document set out a list of amounts that the Rosenbaum parties claimed Mr Rosenbaum had contributed to and withdrawn from the assets of the Partnership. Mr Baidarman then prepared a document referred to as the defendants’ schedule of omissions from the plaintiff’s schedule of contributions and withdrawals. This schedule, which was marked for identification MFI-5, was a list of additional withdrawals that Mr Baidarman claimed Mr Rosenbaum had made from the Partnership assets and had omitted from MFI-1. ^[28] In the terminology that is applied in the taking of accounts, MFI-5 was a list of surcharges. ^[29]

    28. Defence, paragraph 14. The schedules are referred to in the orders made in these proceedings on 20 May 2016.

    29. Uniform Civil Procedure Rules 2005 (NSW), r 46.7(1); Hungerford v Richardson [2018] NSWSC 1543 at [19]-[21].

40. Similarly, Mr Baidarman prepared a list of amounts that he claimed to have contributed to and withdrawn from the Partnership assets (MFI-4) and the Rosenbaum parties prepared a list of Mr Rosenbaum’s surcharges in respect of Mr Baidarman’s withdrawals from the Partnership assets (MFI-2). ^[30]

    30. Defence, paragraph 14. The schedules are referred to in the orders made by Robb J on 20 May 2016.

41. In addition to preparing their respective lists of surcharges, each of the Rosenbaum parties and Mr Baidarman annotated the other’s lists of contributions and withdrawals to identify whether they accepted or disputed the other’s claimed contributions and withdrawals (in amount or otherwise). In the terminology that is applied in the taking of accounts, these annotations were falsifications to the extent that they disputed the other partner’s claimed contributions and surcharges to the extent that they sought to charge the other partner with receipt of an amount in excess of the withdrawal acknowledged by that other partner. ^[31]

    31. Uniform Civil Procedure Rules 2005 (NSW), r 46.7(1); Hungerford v Richardson [2018] NSWSC 1543 at [19]-[21].

42. The Rosenbaum parties and Mr Baidarman also prepared a schedule of direct transactions between the parties (MFI-3 and MFI-6 respectively). Each of those schedules contained a list of amounts that the partner who prepared the schedule claimed to have contributed to the Partnership assets by direct payment to the other partner. ^[32] These schedules were also annotated by the other partner to identify whether they accepted or disputed the direct payments. These annotations were falsifications to the extent that they disputed the contributions that the other partner claimed to have made to the Partnership by direct payments.

    32. Defence, paragraph 14. The schedules are referred to in the orders made by Robb J on 20 May 2016.

43. On 20 May 2016, the Court made an order pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 20.14 referring the matters described immediately below to Mr Ian Paul, forensic accountant, as referee, for enquiry and report. ^[33]

    33. Orders made on 20 May 2016, as reproduced in section 23 of the referee’s report dated 12 September 2017 (Exhibit 1).

44. The orders directed the referee to receive the schedules that had been marked as MFI-1 to MFI-6.

45. If a party accepted unconditionally an entry in a schedule prepared by the other party, the referee was entitled to act on that admission without further evidence.

46. The referee was directed to consider the transactions claimed within each schedule and any supporting documents provided by the parties, verify those transactions objected to by reference to the supporting documents and any other evidence provided in the reference and determine:

1. whether the relevant payment, withdrawal or direct payment in fact happened;

2. who made the payment;

3. what was the purpose of the transaction; and

4. the amount paid.

47. Where the referee determined that a payment, withdrawal or direct payment occurred on the basis of the 2006 document, the orders required him to identify this in the schedules and the orders stated that further consideration of those items was reserved.

48. The referee’s final report was required to include, with respect to each transaction:

1. a determination as to whether the payment, withdrawal or direct payment occurred in fact;

2. whether each disputed item in the direct payments schedules was paid directly by one partner to the other partner;

3. brief reasons for the determinations; and

4. in respect of the transactions that the referee determined had occurred:

1. who made the payment;

2. to whom the payment was made;

3. what was the purpose of the contribution, withdrawal or direct payment (save in respect of a small number of specified items in the schedules); and

4. the amount paid.

49. The items in respect of which the referee was not required to determine the purpose of the payment related to:

1. a payment of $37,000 made by Mr Rosenbaum to Ironwell Super on 23 December 1993, which he claimed as a contribution to the Partnership;

2. payments of certain taxation liabilities which Mr Rosenbaum contended were withdrawals by Mr Baidarman from the Partnership assets;

3. a payment of $26,000 that Mr Rosenbaum claimed to have made to Mr Baidarman on 21 October 1994 as a loan and which he contended should be treated as contribution by him to the Partnership assets; and

4. the payment of $13,329 made by Mr Rosenbaum to Mr Baidarman on 20 October 2010 in relation to “private matters” to which I have referred at [28] above.

50. The referee delivered his final report on 12 September 2017.

51. The report recorded that Mr Baidarman had accepted that Mr Rosenbaum had made contributions to the Partnership totalling $813,745 ^[34] and had objected to further contributions claimed by Mr Rosenbaum totalling $379,748.32. ^[35] Of those contributions objected to, the referee had determined that payments totalling $209,183 had been verified. ^[36] The referee determined that all of those verified payments had been made by Mr and/or Mrs Rosenbaum. However, he made no determination as to the source of funds from which Mr and/or Mrs Rosenbaum had made the payments, including whether the payments had been made from Partnership funds. ^[37] The referee’s determination as to the purpose of the each payment was limited to identifying the immediate purpose of the payment (e.g. “Pay legal fees”; “Loan to Dabjade PL”; “Architect”) and did not engage with the question whether the payment was made for the purpose of the Partnership. Verification of the payment by the referee did not therefore involve a determination as to whether the payment was in substance a contribution by Mr Rosenbaum to the Partnership. ^[38] The report attached a revised version of schedule MFI-1 that was annotated to record whether the referee determined each contribution objected to by Mr Baidarman to be “verified” or “not verified”.

    34. Exhibit 1, pages 14, 65-71.

    35. Exhibit 1, pages 17, 72-74.

    36. Exhibit 1, pages 21, 75-78.

    37. Exhibit 1, page 4 (paragraph 1.9), pages 75-78.

    38. Exhibit 1, page 4 (paragraphs 1.8-1.9), pages 75-78.

52. The referee referred to the amounts that the Rosenbaum parties claimed to have contributed to the Partnership assets by direct payment to Mr Baidarman (being the transactions in schedule MFI-3) as “the plaintiff’s direct contributions”. The report noted that Mr Baidarman had accepted $54,444 and objected to $60,758 of those direct contributions. ^[39] The referee determined that one of those direct contributions was verified, being the payment of $26,000 made on 21 October 1994 to which I have referred at [49] above. ^[40] For the reasons already explained in [51] above, verification of that payment did not involve a determination by the referee that the payment was a contribution by Mr Rosenbaum to the Partnership assets.

    39. Exhibit 1, pages 15, 18.

    40. Exhibit 1, page 22.

53. The referee adopted the same approach to verification of contributions and “direct contributions” claimed by Mr Baidarman in respect of which the Rosenbaum parties had made falsifications. The report recorded that contributions totalling $1,082,500.26 had been claimed by Mr Baidarman and accepted by the Rosenbaum parties ^[41] and a further $598,120 of contributions claimed by Mr Baidarman had been objected to by the Rosenbaum parties. ^[42] The referee determined that $460,046 of those disputed contributions were verified. ^[43] The report attached a revised version of schedule MFI-4 that was annotated to record whether the referee determined each contribution claimed by Mr Baidarman and objected to by the Rosenbaum parties to be “verified” or “not verified”. In addition, the report recorded that $1,900 of direct contributions claimed by Mr Baidarman had been accepted by the Rosenbaum parties ^[44] and objection had been taken to one claimed direct contribution of $39,800. ^[45] The referee verified that disputed direct contribution. ^[46] The referee’s verification determinations in relation to the disputed contributions and direct contributions have the same limitations that I have referred to in [51] above.

    41. Exhibit 1, pages 29, 80-96.

    42. Exhibit 1, page 32.

    43. Exhibit 1, pages 32, 97-122.

    44. Exhibit 1, page 30.

    45. Exhibit 1, page 32.

    46. Exhibit 1, page 37

54. In relation to withdrawals from the Partnership, each partner raised various objections to withdrawals that the other partner acknowledged he had made. The revised version of schedule MFI-1 attached to the referee’s report records whether each withdrawal acknowledged by Mr Rosenbaum was accepted by Mr Baidarman and, if not, whether the transaction was determined by the referee to be verified. The revised version of schedule MFI-4 attached to the report records the same information in respect of withdrawals acknowledged by Mr Baidarman.

55. In relation to Mr Baidarman’s surcharges in MFI-5, the referee’s report recorded that the Rosenbaum parties had accepted surcharges totalling $71,947.65 ^[47] and objected to surcharges totalling $119,905.12. ^[48] The referee verified $71,943.20 of those disputed surcharges. ^[49]

    47. Exhibit 1, page 31.

    48. Exhibit 1, page 33.

    49. Exhibit 1, pages 38-39 and schedule MFI-5 attached to the report.

56. In relation to Mr Rosenbaum’s surcharges in MFI-2, the referee’s report recorded that Mr Baidarman had accepted surcharges totalling $120,979 ^[50] and objected to surcharges totalling $249,149. ^[51] The referee verified $93,856 of those disputed surcharges. ^[52]

    50. Exhibit 1, page 16.

    51. Exhibit 1, page 19.

    52. Exhibit 1, pages 23-25 and schedule MFI-2 attached to the report.

57. The verification of surcharges has the same limitations that I have referred to in [51] above. That is to say, the referee’s determination that a partner had made a “withdrawal” alleged by the other partner involved a finding that the transaction had occurred, but the referee made no finding as to whether the withdrawal had been made from funds that were properly characterised as Partnership funds or whether the transaction ought to be treated as a withdrawal by the relevant partner from Partnership assets.

58. As I have referred to at [21] above, it is common ground that the reference superseded the 2006 Reconciliation. ^[53] This is illustrated by the fact that, during the reference, the partners did not adopt their calculations of their respective contributions and withdrawals undertaken during the 2006 Reconciliation as the starting point for the process to be undertaken by the referee. On the contrary, both partners treated the amounts of $110,100 and $493,792 calculated during the 2006 Reconciliation as “owed” by the Partnership to Mr Rosenbaum and Mr Baidarman (respectively), and subsequently paid in 2008 and 2009, as a withdrawal from the Partnership by Mr Rosenbaum and Mr Baidarman (respectively). ^[54] At the same time, each partner itemised his contributions and his other withdrawals, and raised surcharges against the other partner, in respect of the whole of the period of the Partnership.

    53. T836.10-836.20.

    54. Mr Rosenbaum’s “withdrawal” of $110,100 is shown at item 292 of schedule MFI-1 to the referee’s report as having been accepted by Mr Baidarman. Mr Baidarman’s “withdrawals” totalling $493,792 are shown at items 848A and 848B of schedule MFI-4 to the referee’s report as having been accepted by Mr Rosenbaum. The orders made by the Court adopting the referee’s report did not include any qualification or exclusion in relation to those items.

59. By orders made on 10 September 2018, the Court did not adopt the referee’s report in relation to: ^[55]

    55. Orders 1.5, 1.7, 1.8, 1.13, 1.17.

1. six specified items in the plaintiffs’ schedule of contributions and withdrawals (schedule MFI-1);

2. eleven specified items in the defendant’s schedule of omissions (schedule MFI-5), which were not pressed by the defendant;

3. five specified items in the plaintiffs’ schedule of direct contributions (schedule MFI-3);

4. two specified items in the defendant’s schedule of contributions and withdrawals (schedule MFI-4);

5. six specified items in the plaintiffs’ schedule of omissions (schedule MFI-2); and

6. items listed in a schedule served by Mr Baidarman on 31 August 2018.

60. Those items remained to be determined by the Court, subject to the right of any party to contend that the other had lost the right to put those items into contention.

61. The orders also noted that the Rosenbaum parties no longer pressed one item in schedule MFI-1 and one item in schedule MFI-2.

62. The referee’s report was otherwise adopted by the Court subject to:

1. certain amendments; ^[56]

   56. Order 1.1 and Annexure A; order 1.15.

2. certain notations and directions identifying issues that remain to be determined by the Court; ^[57]

   57. Order 1.2.

3. notations in relation to four specified items in the plaintiffs’ schedule of contributions and withdrawals (schedule MFI-1) to the effect that, although the referee’s findings were adopted, the referee had not made a finding about who made the relevant payments; ^[58]

4. notations in relation to twelve specified items in the plaintiffs’ schedule of direct contributions (schedule MFI-3) to the effect that, although the referee’s findings were adopted, the referee had not made a finding about who made the relevant payments; ^[59]

5. notations in relation to five specified items in the plaintiffs’ schedule of contributions and withdrawals (schedule MFI-1) and four specified items in the defendant’s schedule of contributions and withdrawals (schedule MFI-4) to the effect that the referee had not made any finding that the payments were a contribution by Mr Rosenbaum to the Partnership (or that the Court did not adopt any such finding made by the referee); ^[60]

6. notations to the effect that the status of payments to and withdrawals from Ironwell Super and Baidarman Super remains in issue between the parties and that this affected 14 specified items in the plaintiffs’ schedule of omissions (schedule MFI-2), in respect of which the Court adopted the referee’s finding that the transactions had occurred but the question whether those transactions were contributions to or withdrawals from the Partnership remained in issue; ^[61] and

7. three specified items in the plaintiffs’ schedule of direct contributions (schedule MFI-3) being transferred to the plaintiffs’ schedule of contributions and withdrawals (schedule MFI-1). ^[62]

   58. Order 1.3.

   59. Orders 1.4, 1.14, 1.16.

   60. Orders 1.6, 1.10, 1.11.

   61. Orders 1.11, 1.12.

   62. Order 1.18.

63. The orders made on 10 September 2018 are not the subject of any published reasons for judgment.

64. As I have explained above, the referee’s report did not make findings as to whether or not transactions were contributions to or withdrawals from the Partnership. Nevertheless, in the orders made on 10 September 2018, the Court’s notations that this question had not been determined related only to a limited number of the transactions addressed in the referee’s report. I proceed on the basis that, after the adoption of the referee’s report, it remained open to the parties to litigate issues concerning the character of transactions as a contribution to or withdrawal from the Partnership only in respect of those transactions specifically identified in the said notations.

65. This approach is consistent with the pleadings filed by the Rosenbaum parties’ after the adoption of the referee’s report, in which they claim to have addressed the issues that were not referred to the referee for determination or that were the subject of an exception or reservation in the Court’s adoption of the referee’s report. ^[63] Mr Baidarman’s pleadings engage with the Rosenbaum parties’ contentions about those issues and also raise certain additional issues that he claims were not determined by those parts of the referee’s report adopted by the Court. ^[64]

    63. Claim, paragraphs 20-21.

    64. Defence, paragraphs 17-18; Cross-Claim.

66. This is also reflected in the terms of the declarations, orders and directions for the taking of a final account of the Partnership as formulated by Mr Rosenbaum and Ironwell and by Mr Baidarman during the course of the hearing before me. It is convenient to refer to those proposed declarations, orders and directions formulated by Mr Rosenbaum and Ironwell as the plaintiffs’ proposed partnership accounting orders ^[65] and to refer to those formulated by Mr Baidarman as the defendant’s proposed partnership accounting orders. ^[66]

    65. MFI-9.

    66. MFI-10.

63. The hearing conducted before me from 25 May to 12 June 2020 was directed principally to issues concerning alleged contributions to and withdrawals from the Partnership assets that had not been the subject of findings made by the referee and adopted by the Court. The determination of those outstanding issues in these reasons for judgment will facilitate the completion of the process of tallying up the partners’ contributions and withdrawals that began before the referee. I expressed my concern during the hearing about whether it would facilitate the taking of an account in accordance with ss 39 and 44 of the Partnership Act 1892 (NSW) with a view to ascertaining the assets and liabilities of the Partnership and ensuring that each partner receives his share of the surplus assets following the dissolution of the Partnership. ^[67] Counsel for both parties maintained that the tallying up of contributions and withdrawals was the best that could be achieved in all the circumstances of this case. I will return to this subject below.

    67. See Commissioner of State Revenue v Rojoda Pty Ltd (2020) 376 ALR 378; [2020] HCA 7 at [30]-[40] (Bell, Keane, Nettle and Edelman JJ) and [72]-[73] (Gageler J).

64. The history that I have set out above explains why, notwithstanding that this proceeding has already been on foot for eight years and has already been the subject of a lengthy reference process, the relief now sought by the parties includes an order that an account be taken of all the dealings and transactions of the Partnership and of the partners in relation to the Partnership.

65. The other issues addressed during the hearing before me were the three disputes concerning the Omega Unit Trust and the IPD Trust that I have summarised at [33]-[36] above.

66. The outstanding issues concerning the Partnership and the two trusts are addressed in detail in Section C of these reason. It is convenient to summarise the parties’ claims for relief before delving into the detail of those issues.

Claims for relief

Claims relating to the Partnership

71. It is common ground that the Partnership was a partnership at will. ^[68] Either partner was entitled to terminate the Partnership by giving notice to the other of his intention to do so: Partnership Act, s 26.

    68. Claim, paragraph 5; Defence, paragraph 4.

72. Mr Rosenbaum claims a declaration that the Partnership is dissolved and an order that the Partnership business be wound up under the direction of the Court. Mr Baidarman agrees that this declaration and order should be made. ^[69] The parties did not address the question of when the Partnership was dissolved. It may be that this first occurred in about 2010 when they decided to cease carrying on any activities together: see [31]. It may be that it occurred earlier at about the time the Omega Unit Trust and IPD Trust were established. The parties will need to give further consideration to this question when preparing short minutes of order to give effect to these reasons.

    69. Claim, prayers 1-2; Defence, paragraph 138(a).

73. Mr Rosenbaum claims an order that an account be taken of all the dealings and transactions of the Partnership and of the partners in relation to the Partnership. ^[70] Mr Baidarman agrees that such an order should be made but contends that, in so far as the account concerns Mr Rosenbaum’s dealings in relation to the Partnership, the account should be taken on the basis of wilful default. ^[71] Mr Rosenbaum opposes an order that the account in respect of his dealings be taken on the basis of wilful default. ^[72]

    70. Claim, prayer 3.

    71. Defence, paragraph 138(a); Cross-Claim prayer 3.

    72. Cross-Claim Defence, paragraph 64.

74. As I have mentioned at [66] above, each of Mr Rosenbaum and Mr Baidarman seeks declarations, orders and directions as to the manner in which specific transactions are to be treated in the taking of the Partnership account. The declarations, orders and directions for which they each contend reflect their respective contentions about the disputed contributions and withdrawals and otherwise seek to give effect to the findings made by the referee and adopted by the Court. To the extent that they relate to disputed matters, the terms of the plaintiffs’ proposed partnership accounting orders and the defendant’s proposed partnership accounting orders are identified issue by issue in Section C of these reasons.

75. Mr Rosenbaum seeks an order against Mr Baidarman for payment of the amount found to be due to Mr Rosenbaum by Mr Baidarman on the taking of the Partnership account, together with interest. ^[73]

    73. Claim, prayer 4.

76. Mr Baidarman denies that any amount is owing by him. ^[74] He claims an order that Mr Rosenbaum and Ironwell pay to him the amount found due by Mr Rosenbaum on the taking of the Partnership account, together with interest. He claims a declaration that he is entitled to compound interest on the amounts found to have been contributed by him to the Partnership in excess of the amounts contributed by Mr Rosenbaum from time to time. ^[75]

    74. Defence, paragraph 138(b).

    75. Cross-Claim, prayers 5-7; Cross-Claim Defence, paragraph 65; defendant’s written submissions dated 21 May 2020, paragraphs 233-234.

77. As I have already mentioned above, counsel conducted the hearing before me on the basis that a calculation of the partners’ respective contributions to and withdrawals from the Partnership and an order for payment by one partner to the other, so as to equalise their net withdrawals from the Partnership assets, would serve as the Partnership account and facilitate the distribution to each partner of his entitlement in accordance with ss 39 and 44 of the Partnership Act, subject to the question of interest. In other words, it was assumed that the winding up of the Partnership under the direction of the Court would involve nothing more than an order requiring final payment to be made by one partner to the other in an amount to be calculated by applying the referee’s findings (as adopted or varied by the Court) and the Court’s findings.

78. I respectfully consider that this assumption is misconceived. The manner in which the partners conducted the Partnership has created an evidentiary problem when it comes to identifying the assets, liabilities, profits and losses of the Partnership. The evidence that has been adduced tends to suggest that all of the assets of the Partnership have been distributed to or appropriated by one or other of the partners through various transactions made prior to the commencement of these proceedings. The last property development project undertaken by the Partnership was completed in 1998. There is no evidence of any remaining real property that is owned by or on behalf of Mr Rosenbaum and Mr Baidarman in partnership. There is no evidence that the Partnership generated any goodwill. The tallying up of all of each partner’s contributions to and withdrawals from the Partnership is a crude methodology for identifying whether or not each partner has contributed equally to generation of the assets of the Partnership in accordance with their agreement and the amount of assets already withdrawn by each partner. That crude methodology is all that is available in the circumstances of this case.

79. However, the liabilities of the Partnership must also be taken into account in determining the amount to which each partner is entitled as against the other following the dissolution of the Partnership: see Partnership Act, ss 39 and 44; Commissioner of State Revenue v Rojoda Pty Ltd (2020) 376 ALR 378; [2020] HCA 7 at [30]-[40] (Bell, Keane, Nettle and Edelman JJ) and [72]-[73] (Gageler J); Hungerford v Richardson [2018] NSWSC 1543 at [16], [26]-[27]. Whilst the Partnership has undertaken liabilities in the past, including loans to fund the development of various projects, the evidence did not suggest that the Partnership presently has any outstanding liability other than potential taxation liabilities. As I have already mentioned, no tax returns were ever prepared for the Partnership. Any tax liabilities of the Partnership (including any applicable fines and penalties) need to be ascertained. Any such liabilities may or may not result in the Partnership incurring a loss which the partners are required to bear equally in accordance with their agreement. This will need to be provided for as part of the taking of the Partnership account and the process for winding up the Partnership.

80. During the hearing before me, counsel for Mr Rosenbaum and Mr Baidarman expressed their expectation that they will be able to agree on the outcome of the Partnership account once they have had an opportunity to consider my reasons for judgment. As I indicated during the hearing, it may be necessary to order a further reference if that agreement is not achieved.

Claims relating to the Omega Unit Trust

81. Mr Baidarman claims an order that the administration and execution of the Omega Unit Trust be completed by and under the direction of the Court, and all declarations and orders necessary to be made to cause the beneficiaries’ entitlements therein to be ascertained and paid. The Rosenbaum parties also contend that such an order should be made. ^[76]

    76. Cross-Claim, prayer 10B; Cross-Claim Defence, paragraph 61.

82. Mr Baidarman also claims an order that an account be taken of the transactions of the Omega Unit Trust since 1 July 2010, including an enquiry into the respective entitlements of unitholders therein in respect of the sum of $1,720,674 paid on 28 September 2010 and the allowance to Baidarman Super of an adjustment for an alleged overpayment therefrom to Ironwell Super Fund. ^[77] Mr Baidarman also seeks a declaration that the trustee of the Omega Unit Trust has not determined the apportionment of, or final entitlement to, the sums totalling $1,720,674 paid to Baidarman Super and Ironwell Super in September 2010. ^[78]

    77. Cross-Claim, prayer 10D.

    78. Cross-Claim, prayer 10F.

83. The Rosenbaum parties do not oppose an order that an account be taken of the transactions of the Omega Unit Trust, but they contend that the account should be taken of the transactions since 1 July 2008. They accept that the taking of the account should include an inquiry into the respective entitlements of the unitholders in the Omega Unit Trust in respect of the sum of $1,720,674 paid in September 2010. They contend that the account should extend to any adjustments made to the beneficiary loan accounts and to the unit holdings of the Omega Unit Trust during the financial year ended 30 June 2009. ^[79] This would include the reduction of Ironwell Super’s unit holdings by 603,892 units following the 2008 and 2009 withdrawals referred to at [30] above.

    79. Cross-Claim Defence, paragraph 61 (page 11).

84. At the time of the hearing before me, there was a fundamental problem that affected both the application for an order for general administration referred to at [81] above and the claims for orders for the taking of an account of the Omega Unit Trust referred to at [82]-[83] above. The fundamental problem arose from the fact that Excelsea, the trustee of the Omega Unit Trust, had been deregistered in August 2014. ^[80]

    80. Excelsea was deregistered on 17 August 2014 as a result of its failure to pay annual fees to the Australian Securities and Investments Commission: Cross-Claim, paragraph 82; Cross-Claim Defence, paragraph 57 (page 11).

85. During the hearing, I raised with counsel the futility of an order for general administration in circumstances where the parties apparently intended that Excelsea would carry out any steps ordered by the Court in the working out of any general administration order. Upon its deregistration, Excelsea had ceased to exist and its property vested in the Commonwealth (subject to pre-existing rights and interests in that property, including any rights and interests of the unit holders) pursuant to s 601AD of the Corporations Act 2001 (Cth). ^[81]

    81. Re Cenco Holdings Pty Ltd (2005) 53 ACSR 484 at [21]-[24]; Bloomingdale Holdings Pty Ltd v 87 Stevedore Street Pty Ltd (2010) 6 ASTLR 271; [2010] VSC 268 at [25].

86. This state of affairs would also give rise to difficulties if an order were made for the taking of an account of the transactions of the Omega Unit Trust. Under such an order, the trustee would account to the beneficiaries who would then be at liberty to falsify the account and raise surcharges. The parties did not appear to contemplate that the Commonwealth would prepare the account, standing in the shoes of Excelsea as trustee pursuant to s 601AE(1) of the Corporations Act. The Commonwealth was not a party to the proceedings, in any event.

87. Mr Rosenbaum and Mr Baidarman then applied to the Australian Securities and Investments Commission (ASIC) to reinstate the registration of Excelsea. That application was successful and Excelsea’s registration was reinstated after the conclusion of the hearing. Orders were then made by consent of all parties to these proceedings on 27 July 2020 joining Excelsea to the proceedings as the seventh cross-defendant. Excelsea had not been legally represented at the hearing and did not seek to be heard after being joined to the proceedings.

88. From the date of reinstatement of its registration, Excelsea is taken to have continued in existence as if it had not been deregistered. The cessation of its existence that caused it to cease to be the trustee of the Omega Unit Trust becomes invisible in the eyes of the law: Re Cenco Holdings Pty Ltd (2005) 53 ACSR 484; [2005] NSWSC 293 at [28]-[29]. Mr Rosenbaum and Mr Baidarman immediately became directors of the company again and property of Excelsea that had vested in the Commonwealth revested in Excelsea: Corporations Act, s 601AH. There is no evidence to suggest that Excelsea purported to deal with that property during the period of its deregistration, so I need not grapple with the issues discussed by White J (as his Honour then was) in Foxman v Credex National Australian Trade Exchange Pty Ltd (in liq) [2007] NSWSC 1422 at [42]-[44] and [65].

89. The parties’ application for an order for general administration referred to at [81] above raises three further issues that it is convenient to identify at this stage.

90. First, the effect of a general administration order is to bring a halt to the administration of the trust so that no step may be taken without the leave of the Court. This is a cumbersome process, and it is relevant to the exercise of the discretion whether to make a general administration order that more targeted remedies are available to resolve specific questions arising in the administration of a trust: McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 633-636. ^[82] Those more targeted remedies include applications under UCPR r 54.3 for the determination of any question which could be determined in proceedings for the execution of a trust under the direction of the Court, or for an order directing any act or thing to be done that the Court could order to be done if the trust were being executed under the direction of the Court. As Mr Baidarman’s submissions acknowledged, an order under s 70 of the Trustee Act 1925 (NSW) appointing a new trustee in substitution for an existing trustee is another targeted remedy that presents an alternative to a general administration order in the circumstances of this case. ^[83]

    82. See also Mudocca v Murdocca (No. 2) [2002] NSWSC 505 at [43]-[46]; The Law of Trusts: Ford and Lee (Thompson Reuters, 2019) at [17.9050]; D Clarry, The Supervisory Jurisdiction Over Trust Administration (Oxford University Press, 2018) at [4.01]-[4.12].

    83. T803.15-803.19.

91. Second, it appears from the terms of the proposed general administration order, which refers to the administration and execution of the trust being “completed by and under the direction of the Court”, ^[84] the parties intend that the Court will make orders that will have the effect of bringing the trust to an end.

    84. Emphasis added.

92. The Trust Deed for the Omega Unit Trust dated 2 May 1997 ^[85] does not provide for the trustee to wind up or terminate the trust. Unitholders are at liberty to redeem their units, but the trustee is obliged to hold the “Trust Fund” on the trusts created by the deed until the vesting day. The trust deed contains the common definition of vesting day, being 80 calendar years after the date of the deed or 18 calendar years after the date of death of the last survivor of the descendants of King George VI who are living as at the date of the deed. The definition of vesting day also provides that the trustee may in its absolute discretion determine an earlier vesting day. However, the parties made it clear in their oral closing submissions that they did not wish to bring about the vesting of the trust property in the unitholders. I infer that the parties apprehend adverse tax consequences for the unitholder if the trust property is vested in them.

    85. Exhibit WW2 to the affidavit of Waldemar Wawrzyniuk affirmed on 28 June 2019 (Exhibit 20, pp 24-54).

93. The Court cannot terminate a trust in the same way that it would wind up a company or dissolve a partnership. It is the Court’s duty to uphold and protect the trust, not bring it to an end: Re Gaydon [2001] NSWSC 473 at [29] (Barrett J, as his Honour then was).

94. Third, there is some doubt as to whether Mr Baidarman has standing to apply for a general administration order because he is not a beneficiary of the Omega Unit Trust: McLean v Burns Philp Trustee Co, supra, at 636-637. The parties’ submissions did not address the question of standing.

95. In the alternative to the proposed general administration order, Mr Baidarman claims an order that a new trustee be appointed to the trust. The Rosenbaum parties oppose the appointment of a new trustee. ^[86]

    86. Cross-Claim, prayer 10C; Cross-Claim Defence, paragraph 65 (page 12).

96. In addition to the issues affecting the proposed order for general administration that I have referred to at [89]-[94] above, the parties’ applications for orders for the taking of an account of the transactions of the Omega Unit Trust did not grapple with the nature of an order for the taking of an account of the transactions of a trust.

97. As I have mentioned above, such an order requires the trustee (as the fiduciary) to account to the beneficiaries (or, in this case unitholders) for the transactions undertaken in the discharge or purported discharge of the trustee’s powers and duties. That is because the trustee is the accounting party in the accounting relationship between trustee and beneficiary: Meagher Gummow & Lehane’s Equity Doctrines and Remedies (5^th ed, 2015) at [26‑085]; see also, for example, Torlonia v Wright [2016] NSWSC 1139 at [8]-[9] and [53].

98. In this case, the parties assumed that Excelsea would take no steps to comply with any order for the taking of an account. Under the orders proposed by Mr Baidarman (without opposition from the Rosenbaum parties), the first step in the taking of the account would be for Mr Baidarman on the one hand and the Rosenbaum parties on the other hand to put forward their competing contentions as to the transactions undertaken by Excelsea as trustee of the Omega Unit Trust. The parties’ desire to approach the matter in this way is no doubt attributable to the state of deadlock between Mr Rosenbaum and Mr Baidarman that has paralysed Excelsea since about 2010. That state of deadlock calls into question the utility of an order for the taking of an account if Excelsea remains the trustee of the Omega Unit Trust. However, it does not support an order for the taking of an account coupled with ancillary orders of the kind proposed that purport to remove any requirement for Excelsea to take any step for the purpose of that account being taken. ^[87]

    87. Cross-Claim, prayer 10G.

Claims relating to the IPD Trust

99. Mr Baidarman claims an order that the administration and execution of the IPD Trust be completed by and under the direction of the Court, and all declarations and orders necessary to be made to cause the beneficiaries’ entitlements therein to be ascertained and paid. The Rosenbaum parties also contend that such an order should be made. ^[88]

    88. Cross-Claim, prayer 10B; Cross-Claim Defence, paragraph 61.

671. For those reasons, the claims for general administration orders and the taking of accounts in relation to both trusts will be dismissed. The minute of orders to be prepared by the parties will need to reflect that, and to include an order for the appointment of an appropriately qualified independent trustee to both trusts. The Court will need evidence of that trustee’s consent to appointment before the order is made under s 70 of the Trustee Act in relation to each trust. I will hear the parties as to the identity of the independent trustee to be appointed if there is a dispute about it. The minute of order will also need to provide for the independent trustee’s renumeration and expenses.

672. I will hear the parties in relation to costs.

ORDERS

681. I make the following directions:

1. The parties are to prepare and send to the Associate to Williams J by 4:00PM on 18 June 2021 short minutes of order giving effect to these reasons for judgment.

2. Any element of disagreement about the precise terms of the orders that will give effect to these reasons is to be indicated within the relevant part of the short minutes of order by juxtaposing the contentious aspects of the terms propounded by each party in different colours.

3. Each party is to file and serve by 4:00PM on 18 June 2021 written submissions of no more than 3 pages in support of their contentions concerning any disputed elements of the terms of the orders and in relation to costs.

4. The matter is listed at 3:00PM on 21 June 2021 for the making of orders.

Endnotes

Amendments

25 May 2021 - Formatting issue with footnotes corrected