Smorgon v Es Group Operations Pty Ltd

[2021] VSC 608

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST

S ECI 2020 03496

IN THE MATTER of an application pursuant to Order 54 of the Supreme Court Rules of Civil Procedure

BETWEEN:

SAMANTHA JANE SMORGON	Plaintiff
v
ES GROUP OPERATIONS PTY LTD (ACN 069 851 305) as Trustee of THE ES GROUP OPERATING TRUST NO 1 & ORS (according to the schedule)	Defendants

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	3 May 2021
DATE OF JUDGMENT:	27 September 2021
CASE MAY BE CITED AS:	Smorgon v ES Group Operations Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2021] VSC 608

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EQUITY – Trusts – Application by discretionary beneficiary for inspection of trust documents – Discretionary approach applied – Whether presumption of disclosure to discretionary beneficiary - Proximity of beneficiary to trusts – Whether applicant is a ‘named beneficiary’ in the trust deeds – No allegation of breach of trust – Schmidt v Rosewood Trust [2003] 2 AC 709; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405; Deutsch v Trumble (2016) 51 VR 108; Chan v Valmorbida Custodians Pty Ltd [2020] VSC 590; Erceg v Erceg [2017] 1 NZLR 320; Wright v Stevens [2018] NSWSC 548; Chaine-Nickson v Bank of Ireland [1976] IR 393 HC; Spellson v George (1987) 11 NSWLR 300; Murphy v Murphy [1999] 1 WLR 282; Foreman v Kingston [2004] 1 NZLR 841 considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms C Sparke QC	KCL Law
For the Defendants	Mr L Glick QC with Mr R Kruse	Aptum Legal

HIS HONOUR:

Introduction

1. The plaintiff, Samantha Smorgon (‘Ms Smorgon’) is the daughter of the late Robert Smorgon.  Robert Smorgon was the son of the late Eric Smorgon.  Robert Smorgon passed away on 23 September 2019.

1. Ms Smorgon was born to Robert Smorgon’s first wife, Michelle.  Ms Smorgon has been told she was conceived by artificial insemination.  Ms Smorgon’s birth certificate names Robert Smorgon as her father.  However, Robert Smorgon’s will describes Ms Smorgon as his stepchild and states that he had no biological children.

1. In this proceeding, Ms Smorgon seeks orders that the defendants, each a trustee of one or more discretionary trusts, produce various categories of documents for her inspection.  There are 18 trusts in total.  Each trustee is a member of the Escor Group founded by Eric Smorgon.  The directors of each trust include members of the Smorgon family.  The relevant trusts are:

(a)   The ES Group Operating Trust No. 1 (the trustee of which is ES Group Operations Pty Ltd ACN 069 851 305);

(b)  The ES Group Operating Trust No. 2 (the trustee of which is ES Group Holdings (OPS) Pty Ltd ACN 069 851 314);

(c)   The Escor Property (Yanchep) Trust (the trustee of which is Escor Property (Yanchep) Pty Ltd ACN 108 438 731);

(d)  The Escor Opportunity Trust No. 1 (the trustee of which is Escor Opportunity Pty Ltd ACN 106 395 322);

(e)   The ES (Baeckea) Trust (the trustee of which is Baeckea Pty Limited ACN 005 304 610);

(f)    The Escor Reserve Trust No. 5 (the trustee of which is Escor Opportunity Pty Ltd ACN 106 395 322);

(g)  The Escor Reserve Trust No. 6 (the trustee of which is Escor Opportunity Pty Ltd ACN 106 395 322);

(h)  The ES Group Reserve Trust 1 (the trustee of which is Escor Opportunity Pty Ltd ACN 106 395 322);

(i)     The ES Group Reserve Trust 2 (the trustee of which is Escor Opportunity Pty Ltd ACN 106 395 322);

(j)     The ES Group Reserve Trust 3 (the trustee of which is Escor Opportunity Pty Ltd ACN 106 395 322);

(k)  The Escor Family Art Trust (the trustee of which is Escor Family Art Pty Ltd ACN 114 773 143);

(l)     The ES Group Development Trust[1] (the trustee of which is ESCOR Property Investments Pty Ltd ACN 081 842 944);

[1]Now known as the Escor Property Investment Trust.  The trust is referred to by its original name in the originating process and in these reasons.

(m)             The Escor Reserve Trust No. 7 (the trustee of which is ES Reserve Shelf No. 2 Pty Ltd ACN 115 092 272);

(n)  The Escor Reserve Trust No. 8 (the trustee of which is ES Reserve Shelf No. 2 Pty Ltd ACN 115 092 272);

(o)   The Eric Smorgon (1977) Family Trust (the trustee of which is Leiby Pty Ltd ACN 005 792 941);

(p)  The ES Group Finance Trust (the trustee of which is ES Group Finance Pty Ltd ACN 080 815 345);

(q)  The ES Group Investments Trust No. 1 (the trustee of which is ES Group Investments Pty Ltd ACN 069 851 234);

(r)    The ES Group Investments Trust No. 2 (the trustee of which is ES Group Holdings (INV) Pty Ltd ACN 069 851 252);

(collectively, ‘the Trusts’; their trustee entities, ‘the Trustees’).

1. Ms Smorgon seeks the following categories of documents, for the preceding seven financial years to the date of the Court’s order:

(a)       tax returns and financial statements including profit and loss statements, balance sheets and bank statements for the Trusts;

(b)      documents relating to the administration and management of the funds of the Trusts;

(c)       meeting minutes by which the Trustees have made determinations about the administration of the Trusts and the distribution of trust funds (as distinct from any written reasons of the Trustees for the distribution decisions they have made, which are expressly not sought); and

(d)      any other documents in the possession of the Trustees which a beneficiary has a right to inspect

(collectively, ‘the documents’).

1. Each of the Trusts was established by a separate deed of settlement.  Each is a discretionary trust.

1. Ms Smorgon is one of a number of discretionary objects under each Trust.

1. Ms Smorgon’s entitlement to the documents, if any, flows from her status as a beneficiary of the Trusts.  Her status as Robert Smorgon’s daughter has no direct relevance to her claim, save to the extent that it renders her a beneficiary under certain of the deeds.

1. Under the ES (Baeckea) Trust deed, dated 1 July 1977, she is named as an ‘Income Beneficiary’; as an Income Beneficiary she falls within the definition of ‘General Beneficiary’.  Under the Eric Smorgon (1977) Family Trust, created by deed dated 30 June 1977 she is named as a ‘Primary Beneficiary’.  Under the 16 remaining Trusts, which were settled after 1977 (for convenience, ‘the 16 Trusts’), she falls among a wide class of ‘General Beneficiaries’.

Background to the application

1. Ms Smorgon relies upon two affidavits in support of her application: an affidavit sworn 28 August 2020 (‘the first Smorgon affidavit’) and an affidavit sworn 4 December 2020 (‘the second Smorgon affidavit’).

1. The Trustees rely upon two affidavits to oppose the application: an affidavit of Michael John Meehan sworn 11 November 2020 (‘the Meehan affidavit’), Chief Financial Officer of the Escor Group; and an affidavit of the Trustees’ solicitor exhibiting pre-litigation correspondence between Ms Smorgon’s solicitors, KCL Law (‘KCL’) and the previous solicitors for the Trustees, Riordan & Riordan (‘Riordans’).   

1. On 24 January 2020, KCL wrote to Jack Smorgon and Norman Smorgon[2] requesting the following documents in relation to Robert Smorgon’s estate:

   [2]Jack Smorgon and Norman Smorgon are directors, along with others, of the Trustees.

(a)   Robert Smorgon’s tax returns for the previous even years;

(b)  trust deeds for all trusts in which Robert Smorgon held an interest or was an officeholder and in which Ms Smorgon fell within the class of beneficiaries;

(c)   evidence of all loan accounts in favour of Robert Smorgon;

(d)  tax returns, profit and loss statements, balance sheets and bank statements for:

(i)     any company in which Robert Smorgon was a shareholder or director;

(ii)  any trust in which Robert Smorgon held an interest whether discretionary or fixed;

(iii)             any entity in which Robert Smorgon had an interest; and

(iv)             any superannuation fund in which Robert Smorgon had an interest;

in the seven years preceding his death;

(e)   evidence of any superannuation entitlements including copies of any trust deeds (including any deeds of variation and nominations made by Robert Smorgon);

(f)    evidence of any employee entitlements, director’s payments, dividends, fees or director’s loans; and

(g)  evidence of the balance of any accounts, bonds, or investments, as well as any assets owned by Robert Smorgon.

1. In the letter, the entitlement to this information was said to arise by reason of s 91A of the Administration and Probate Act 1958 (Vic) (‘APA’), and by reason of Ms Smorgon’s status as a beneficiary of certain trusts.

1. The letter attached a copy of an email sent by KCL to the late Robert Smorgon’s wife, Vicki Smorgon. In that email, KCL notified Vicki Smorgon that Ms Smorgon intended to commence a family provision claim against Robert Smorgon’s estate pursuant to s 91A of the APA.

1. On 6 February 2020, Riordans responded by email on behalf of Jack Smorgon and Norman Smorgon.  They rejected the request for the documents, among other things noting that even if Ms Smorgon was a beneficiary of any relevant trust that status alone would not entitle her to the documents.

1. On 27 February 2020, KCL advised Riordans by letter that Ms Smorgon had a proprietary right to be provided with trust documents.  KCL stated that this was ‘a right well-recognised at common law statute and usually within each trust deed itself’.  The letter referred to Re Fairbairn[3] to support the proposition that beneficiaries are entitled to inspect documents in which they have a proprietary and beneficial interest.  The letter notified Riordans that, in the event that it became necessary for Ms Smorgon to commence proceedings to obtain the requested documents, Ms Smorgon would seek indemnity costs against the trusts, against Riordans, or against their clients.[4]

   [3][1967] VR 633.

   [4]The particular clients were not identified.

1. On 12 March 2020, Riordans responded to KCL, contesting the summary of the law in the KCL letter of 27 February 2020.  Riordans advised that copies of all trust deeds for trusts of which Ms Smorgon may be a beneficiary had been provided to Vicki Smorgon as executrix of Robert Smorgon’s estate, and suggested that Ms Smorgon seek copies of those deeds from her.

1. On 25 March 2020, KCL by email reiterated their claim that the trustees were obliged to provide Ms Smorgon with the requested information, in accordance with her rights as a beneficiary under the trusts.  KCL asserted that the information should be provided without objection or diversion, and reiterated Ms Smorgon’s intention to apply for indemnity costs (now expressed to be against either the trusts or Riordans’ clients) in the event that an application to the Court became necessary.

1. On 27 March 2020, Riordans responded by email, advising that copies of the relevant trust deeds and any deeds of variation would be provided to KCL. 

1. On 28 April 2020, KCL by email acknowledged receipt of the trust deeds for the Trusts (and, where applicable, of any deeds of variation or amendment).  Further, KCL requested confirmation that there were no other relevant deeds in the Trustees’ possession.

1. In addition, KCL requested for each of the Trusts copies of the tax returns and financial statements and notes thereto including balance sheets and profit and loss statements for the preceding seven years.

1. By email of 3 July 2020, KCL reiterated its requests for copies of, for each of the Trusts:

(a)   tax returns and financial statements and notes thereto, including balance sheets and profit and loss statements for the preceding seven years; and

(b)  minutes of meetings and resolutions signed by the relevant trustees for the preceding seven years.

The letter continued, ‘to be clear, the trust documents must be provided without delay and without exception’ and reiterated Ms Smorgon’s intention to seek a personal costs order (now expressed to be against Riordans or its clients) on an indemnity basis in the event that an application to the Court became necessary. 

1. On 16 July 2020, KCL wrote to Riordans again contending that the law was clear regarding Ms Smorgon’s entitlement to the documents.  The letter asserted that Ms Smorgon was entitled to the documents pursuant to her status as a beneficial object of the Trusts, independently of whether she had ever received distributions.  The letter referenced Schmidt v Rosewood Trust (‘Schmidt’)[5] in support.

   [5][2003] 2 AC 709.

1. Also on 16 July 2020 Riordans responded, advising that the Trustees’ position remained unchanged.  Riordans accepted the relevance of Schmidt, referring to Lord Walker’s reasons in that case:[6]

However, the recent cases also confirm (as had been stated as long ago as In re Cowin 33 Ch D 179 in 1886) that no beneficiary (and least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties. Disclosure may have to be limited and safeguards may have to be put in place. Evaluation of the claims of a beneficiary (and especially of a discretionary object) may be an important part of the balancing exercise which the court has to perform on the materials placed before it. In many cases the court may have no difficulty in concluding that an applicant with no more than a theoretical possibility of benefit ought not to be granted any relief.

[6]Ibid, 734–5 [67] (Walker LJ).

1. On 31 August 2020, Ms Smorgon commenced this proceeding by originating motion.

1. In the first Smorgon affidavit, Ms Smorgon deposed to her belief that her father was a man who controlled substantial wealth.  Helpfully, she summarised in tabular form the identity of each Trustee, its directors, the Trust it held and its primary beneficiaries.[7] 

   [7]The table did not include the date of the trust, which has been added in these reasons.

Trust	Trustee	Directors	Primary Beneficiary/ies	Date of Trust
The ES Group Operating Trust No 1	ES Group Operations Pty Ltd ACN 069 851 305	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blode, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children of Eric Smorgon (deceased) as to 40% in equal shares; and The grandchildren of Eric Smorgon (deceased) as to 60% in equal shares	12 July 1995
The ES Group Operating Trust No. 2	ES Group Holdings (OPS) Pty Ltd ACN 069 851 314	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children of Eric Smorgon as to 40% in equal shares; and The grandchildren of Eric Smorgon (deceased) as to 60% in equal shares	12 July 1995
The Escor Property (Yanchep) Trust	Escor Property (Yanchep) Pty Ltd ACN 108 438 731	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children and grandchildren of Eric Smorgon (deceased)	4 May 2004
The Escor Opportunity Trust No. 1	Escor Opportunity Pty Ltd ACN 106 395 322	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children and grandchildren of Eric Smorgon (deceased)	26 April 2005
The E.S. (Baeckea) Trust	Baeckea Pty Limited ACN 005 304 610	Jack Smorgon and Norman Anthony Smorgon	All the children of Eric and Annie Smorgon (both deceased)	1 July 1977
The Escor Reserve Trust No. 5	Escor Opportunity Pty Ltd ACN 106 395 322	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children, grandchildren and great grandchildren of Eric Smorgon (deceased)	26 April 2005
The Escor Reserve Trust No. 6	Escor Opportunity Pty Ltd ACN 106 395 322	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children, grandchildren and great grandchildren of Eric Smorgon (deceased)	26 April 2005
The ES Group Reserve Trust 1	Escor Opportunity Pty Ltd ACN 106 395 322	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children of Eric Smorgon (deceased) as to 40% in equal shares; and The grandchildren of Eric Smorgon (deceased) as to 60% in equal shares	24 September 2003
The ES Group Reserve Trust 2	Escor Opportunity Pty Ltd ACN 106 395 322	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children of Eric Smorgon (deceased) as to 40% in equal shares; and The grandchildren of Eric Smorgon (deceased) as to 60% in equal shares	24 September 2003
The ES Group Reserve Trust 3	Escor Opportunity Pty Ltd ACN 106 395 322	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children of Eric Smorgon (deceased)as to 40% in equal shares; and The grandchildren of Eric Smorgon (deceased) as to 60% in equal shares	24 September 2003
The Escor Family Art Trust	Escor Family Art Pty Ltd ACN 114 773 143	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children, grandchildren and great grandchildren of Eric Smorgon (deceased)	1 July 2005
The ES Group Development Trust (now known as the Escor Property Investment Trust)	ESCOR Property Investments Pty Ltd ACN 081 842 944	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children of Eric Smorgon (deceased) as to 40% in equal shares; and The grandchildren of Eric Smorgon (deceased) as to 60% in equal shares	3 March 1998
The Escor Reserve Trust No. 7	ES Reserve Shelf No. 2 Pty Ltd ACN 115 092 272	Jack Smorgon and Norman Smorgon	The children, grandchildren and great grandchildren of Eric Smorgon (deceased)	28 July 2008
The Escor Reserve Trust No. 8	ES Reserve Shelf No. 2 Pty Ltd ACN 115 092 272	Jack Smorgon and Norman Smorgon	The children, grandchildren and great grandchildren of Eric Smorgon (deceased)	28 July 2008
The Eric Smorgon (1977) Family Trust	Leiby Pty Ltd ACN 005 792 941	Jack Smorgon and Norman Smorgon	Jack Smorgon, Valerie Smorgon, Norman Anthony Smorgon, Lisa Jane Smorgon, Anthony Charles Smorgon, Michael James Smorgon, Robert Smorgon, Michele Smorgon, Ms Smorgon, and the spouses and the future children, grandchildren and great grandchildren of such persons	30  June 1977
The ES Group Finance Trust	ES Group Finance Pty Ltd ACN 080 815 345	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children of Eric Smorgon (deceased) as to 40% in equal shares; and The grandchildren of Eric Smorgon (deceased) as to 60% in equal shares	14 May 1999
The ES Group Investments Trust No. 1	ES Group Investments Pty Ltd ACN 069 851 234	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blade, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children of Eric Smorgon (deceased) as to 40% in equal shares; and The grandchildren of Eric Smorgon (deceased) as to 60% in equal shares	12 July 1995
The ES Group Investments Trust No. 2	ES Group Holdings (INV) Pty Ltd ACN 069 851 252	Michael James Smorgon, Jack Smorgon, Anthony Charles Smorgon, Andrew Wayne Blode, Norman Anthony Smorgon and Stephen Jesse Smorgon	The children of Eric Smorgon (deceased) as to 40% in equal shares; and The grandchildren of Eric Smorgon (deceased) as to 60% in equal shares	12 July 1995

1. Ms Smorgon further deposed that she was a beneficial object of each of the 16 Trusts as she was one of the General Beneficiaries, falling within the definition of a ‘relative of a Primary Beneficiary’.

1. Ms Smorgon further deposed that  she was a ‘named discretionary Income Beneficiary’ and a General Beneficiary of the ES (Baeckea) Trust; and a Primary Beneficiary of the  Eric Smorgon (1977) Family Trust.

1. Ms Smorgon deposed that she had never:

(a)   received any information about the assets held in any of the Trusts;

(b)  received any information from the Trustees about the administration of the Trusts;

(c)   been told by any of the Trustees that they were making a decision about distributions of either capital or income of the Trusts;

(d)  been asked by any of the Trustees of the Trusts for information about herself; and

(e)   to her knowledge, received an income or capital distribution from any of the Trusts. 

1. She deposed to a belief that each of the Trusts held substantial assets, inferred from her beliefs that:

(a)   Robert Smorgon was a businessman with valuable interests in companies and businesses;

(b)  the Smorgon family had for many years held interests in various businesses in the meat, paper, chemicals, plastics, electronics and steel industries; and

(c)   on or around 1995 the family decided to restructure those businesses, with Robert Smorgon and his brother Jack receiving a portion of the family interests and leaving the larger Smorgon consolidated group to form the Eric Smorgon Corporation (or Escor Group).

1. As noted above, the Trustees relied upon the Meehan affidavit.  Mr Meehan deposed that the nature and activities of the Trusts varied.

1. In particular, the ES (Baeckea) Trust and the Escor Family Art Trust are ‘passive trusts’, in the sense that they hold assets but are not engaged in business activities (together ‘the Passive Trusts’).  Moreover, Mr Meehan deposed that the assets of the Escor Family Art Trust are not income producing, and the trust does not make distributions of income or capital to beneficiaries.

1. Mr Meehan further deposed that seven of the Trusts are ‘dormant trusts’, in that they have never traded; hold nominal capital; do not prepare financial accounts; do not have bank accounts; and do not make distributions of income or capital to beneficiaries.  Those Trusts are as follows:

(a)   The ES Group Reserve Trust 1;

(b)  The ES Group Reserve Trust 2;

(c)   The ES Group Reserve Trust 3;

(d)  The Escor Reserve Trust No 5;

(e)   The Escor Reserve Trust No 6;

(f)    The Escor Reserve Trust No 7; and

(g)  The Escor Reserve Trust No 8

(together ‘the Dormant Trusts’).

1. Mr Meehan deposed that the remaining Trusts were ‘active trusts’, in the sense that, broadly speaking, they were engaged in business activities, either directly or through holdings in companies or other trusts.  Those Trusts are as follows:

(a)   ES Group Operating Trust No 1;

(b)  ES Group Operating Trust No 2;

(c)   Escor Property (Yanchep) Trust;

(d)  Escor Opportunity Trust No 1;

(e)   ES Group Development Trust;

(f)    Eric Smorgon (1977) Family Trust;

(g)  ES Group Finance Trust;

(h)  ES Group Investments Trust No 1; and

(i)     ES Group Investments Trust No 2

(together ‘the Active Trusts’).

1. Mr Meehan deposed that the business activities of the Active Trusts include investments in securities and real property.  As part of their investments, some of the Active Trusts are party to joint ventures and other business relationships involving third parties. 

1. Mr Meehan deposed that for the Dormant Trusts there are no documents falling within the categories sought for the preceding seven financial years.

1. Mr Meehan deposed that to disclose the tax returns of the remaining Trusts (that is, the Active Trusts and the Passive Trusts) would reveal information which was commercially sensitive and confidential; namely:

(a)   the income, losses, and deductions of the Trusts;

(b)  the name and details of the Trusts’ tax agents;

(c)   the tax file number of the Trusts;

(d)  the assets and liabilities of the Trusts; and

(e)   for those Trusts that make distributions of income, the names, tax file numbers, residential addresses, dates of birth of the beneficiaries of the Trusts, and the amounts of any distributions made to them.

1. Mr Meehan further deposed that the disclosure of profit and loss statements for those Trusts would disclose commercially sensitive and commercial information; namely:

(a)   the total income distribution;

(b)  any foreign and domestic interest received;

(c)   any capital gains and losses;

(d)  any interest paid;

(e)   the gross profit and net profit;

(f)    any income relating to third parties, including shares of joint venture profits or losses;

(g)  any dividends from private company investments; and

(h)  for those Trusts that make distributions of income, the amounts of distributions made to beneficiaries of the Trusts and their names.

1. Mr Meehan likewise deposed that disclosure of the balance sheets for those Trusts would reveal commercially sensitive and confidential information; namely:

(a)   the total current assets and details of those current assets;

(b)  any investments or group investments, including third party investments;

(c)   the purchase price or cost of any investments, including joint venture interests;

(d)  the total private equity investments of each Trust;

(e)   any details of relevant loans including loan balances;

(f)    the balance of any unpaid entitlements and the names of entitled beneficiaries;

(g)  the net assets of the Trusts; and

(h)  the trust capital of the Trusts.

1. Related objections were made in relation to provision of bank statements for the Trusts. 

1. Mr Meehan deposed to his belief that the category ‘documents relating to the administration and management of the Trusts’ was broad and uncertain, appearing to encompass every document held by the Trustees relating to the administration and management and investments of the Trusts; and for the Active Trusts, to their business activities.

1. Further, in relation to the Active Trusts and the ES (Baeckea) Trust, Mr Meehan deposed that disclosure of the documents sought would reveal further commercially sensitive and confidential information; namely:

(a)   any joint venture agreements;

(b)  any shareholder agreements in relation to private company investments;

(c)   any external finance loan agreements;

(d)  any deliberations of the Trustees about the way in which the Trustees have exercised their discretions, powers or authorities;

(e)   any deliberations of the Trustees about business decisions, including decisions concerning joint ventures and other business activities;

(f)    the reasons for the exercise by the Trustees of a discretion, power or authority in a particular way;

(g)  the reasons for the Trustees’ business decisions, including decisions concerning joint ventures and other business activities;

(h)  the material on which the deliberations or reasons of the Trustees might have been based when exercising a discretion or power;

(i)     the material on which the Trustees’ business decisions were made, including material on which decisions concerning joint ventures and other business activities were made; and

(j)     commercially sensitive information concerning business decisions and ventures, including purchase prices or costs of investments, transaction costs, debt funding, and profit shares.

1. Further, Mr Meehan deposed that disclosure of any minutes for meetings at which the Trustees had made determinations as to the administration of the Trusts and the distribution of trust funds would, even if written reasons of the Trustees for their distribution decisions were excluded, require the disclosure of commercially sensitive and confidential information; namely:

(a)   the amounts of distributions made to beneficiaries of the Trusts, and the names of those beneficiaries;

(b)  deliberations of the Trustees about the way in which they have exercised their discretions, powers or authorities;

(c)   the material on which the deliberations or reasons of the Trustees when exercising a discretion, exercise or power were or might have been based.

1. Mr Meehan also adverted to the practical difficulty in collating the relevant documents.  Having regard to their breadth and uncertainty - particularly in relation to the category of documents noted in paragraph [40] above - Mr Meehan deposed that collation of the documents sought would be difficult, time-consuming and expensive; and as such the application for production of those documents was oppressive.

1. Mr Meehan further deposed that for each of the 16 Trusts (but not for the ES (Baeckea) Trust and the Eric Smorgon (1977) Family Trust), the trust deeds contained a specific clause restricting disclosure to a beneficiary.  Clause 5.18 of the deeds of each of the 16 Trusts provides:

5.18     Restriction on disclosure of documents

In addition to any right of the Trustee under general law to refuse disclosure of a document, the Trustee cannot be required to disclose to a beneficiary or to any other person:

(a)a document which discloses deliberations of the Trustee about the way in which the Trustee exercises any discretion, power or authority or discloses the reasons for exercise of a discretion, power or authority in a particular way or discloses the material on which the reasons are or might have been based; or

(b)any other document relating to the exercise or proposed exercise by the Trustee of a discretion, power or authority given by this Deed or under law.

1. In the second Smorgon affidavit, sworn in response to the Meehan affidavit and the solicitor’s affidavit, Ms Smorgon noted that she had never been the recipient of a request by the Trustees that she give a confidentiality undertaking as a condition for providing a relevant document. 

1. She noted that, in addition to not seeking written reasons of the Trustees for the distribution decisions they have made, she did not presently seek any deliberations as to how the Trustees came to their decisions.  Instead, Ms Smorgon deposed that she sought documents ‘in order to know how the trust money is invested and administered’.

1. Ms Smorgon concludes her second affidavit by deposing that she has never been asked to attend any shareholders meetings or other meetings for any of the Trusts or relayed business entities; that she has never been asked by the Trustee of any of the Trusts about her personal or financial circumstances; and that she has no social contact with any of the Trustees or their controllers. 

Important provisions of the trust deeds

1. Before proceeding to consider Ms Smorgon’s submissions in greater detail, it is useful to set out some key provisions of the trust deeds.  The deeds for all the 16 Trusts (but not the ES (Baeckea) Trust and the Eric Smorgon (1977) Family Trust) are relevantly identical in form.[8]  The provisions of the trust deeds set out immediately below relate to those of the 16 Trusts; the provisions of the ES (Baeckea) Trust and the Eric Smorgon (1977) Family Trust are dealt with later in paragraphs [162] to [197].

   [8]The trust deed for The Escor Opportunity Trust No. 1 was omitted from the bundle of trust deeds exhibited to the first Smorgon affidavit.  It was submitted that the deeds for the 16 Trusts are essentially the same and this application has proceeded on that basis.

1. The trust deed for the ES Group Operating Trust No 1 provides a useful example of the provisions pertaining to the 16 Trusts.[9]  The trust deed is dated 12 July 1995.  The parties to the deed are the settlor, Pamela Joy Fradken, and the trustee, ES Group Operations Pty Ltd.[10] The guardian and appointor under the trust is Kallena Downs Pty Ltd.  It is convenient to summarise the following provisions and parts of the deed in broad terms:[11]

   [9]One of the Active Trusts as deposed to by Mr Meehan.

   [10]The common seal of ES Group Operations Pty Ltd as trustee was affixed to the deed by the authority of the Board of Directors in the presence of two of its directors, one of which was Robert Smorgon. 

   [11]Of the 16 Trusts, each of:

(a)   Clause 2.1 provides that the Trustee will stand possessed of the Trust Fund and its income on the trusts, with and subject to the powers and provisions of the deed.

(b)  Clause 3.1 provides that the Trustee shall determine the income of the trust fund for each Accounting Period.[12]

[12]Broadly, the ‘Accounting Period’ is defined as the financial year, or part thereof remaining from the date of execution of the deed.

(c)   Clause 3.2 provides that:

(v)  the Trustee may in its discretion determine whether any receipt, profit, gain or outgoing or any sum of money or investment is to be regarded as being on account of capital or income or partly of one or partly of the other; and

(vi)             in determining the income of the trust fund for any Accounting Period the Trustee may exercise the powers conferred on it under sub-cl 3.2 so as to minimise the liability to income and capital gains tax of the beneficiaries and of itself as trustee of the trust fund.

(d)  Clauses 3.5 and 3.6 provide that the Trustee shall in each Accounting Period retain such income in the trust fund as it determines, or pay, apply, or set aside the whole or such part of the income for the beneficiaries as it sees fit.

(e)   Clause 3.7 provides that the Income not paid, applied, or set aside under cl 3.3 be held on trust for the Primary Beneficiaries, or where a Primary Beneficiary is deceased, their children as tenants in common in equal shares for the proportion that Primary Beneficiary would have taken had they been living.

(f)    Clause 4.1 obliges the trustee to keep a register of all assets which are ‘Constituent Assets’[13] and to keep specified particulars in relation to each asset.

[13]‘Constituent Assets’ is defined to mean cash or other authorised investments forming a constituent part of the trust fund.

(g)  Clauses 4.2 and 4.3 empowers the Trustee to manage and administer the trust fund and gives the Trustee wide powers to do so.

(h)  Clause 5.1 provides, among other things, that the Trustee’s powers or authorities under the deed must be exercised bona fide; are absolute and uncontrolled; and exercisable at the trustee’s absolute and uncontrolled discretion.  Clause 5.1(e)  further provides that where a Guardian is named in the schedule the trustee must not, among other things, exercise the power under cl 3.3(a) in relation to any General Beneficiary other than a Primary Beneficiary without the Guardian’s consent.[14]

[14]Unless the power has been exercised before in relation to that General Beneficiary. 

(i)     Clause 5.2 sets out various Trustee’s covenants, including a covenant on the part of the Trustee to use all reasonable endeavours to carry on and conduct the trust fund in a proper and efficient manner; and a covenant to exercise due diligence and care in preserving and maintaining the trust fund and in protecting the rights of beneficiaries.

(j)     Clause 5.5 confers indemnities on the Trustee for costs, disbursements, liabilities and expenses incurred in exercise or otherwise of its powers, in prosecuting or defending actions in respect of the Trust, or in obtaining advisory opinions in relation to legal proceedings or in interpretation or construction of the deed.

(k)  Clause 5.6 provides that the Trustee is not liable to anyone - including a beneficiary - in any way for, among other things, any act or default done or omitted in the exercise or bona fide intended or purported exercise of its powers and discretions.

(l)     Clause 5.7 provides that nothing in cls 5.5 or 5.6 (that is, the Trustee’s indemnities and immunities) limits the trustee’s obligations under cl 5.2 (that is, in respect of the Trustee’s covenants), or prevents or restricts any determination as to whether there has been a breach of trust; nor do those clauses affect any legislation prescribing the circumstances under which the Trustee may obtain relief from breach of trust.

(m)             Clause 5.16 entitles the Trustee to charge and be paid a reasonable commission not exceeding the commission which could be charged by a trustee company under the Trustee Companies Act 1958 (Vic)[15] if the Trustee Company were the only Trustee.

[15]Now superseded by the Trustee Companies Act 1984 (Vic).

(n) Clause 5.18 headed ‘Restriction on Disclosure of Documents’ is set out at [44] above.

(o)   Clause 5.19 entitles the Trustee to require a beneficiary to provide the Trustee with any information which the Trustee determines is necessary or desirable for the Trustee to perform any of its duties or obligations or to exercise any of its powers or discretions.

(p)  Clause 5.20 provides that the Trustee must make a copy of the trust deed and any supplemental deeds available to beneficiaries for inspection.

(q)  Clauses 6.1 and 6.2 require the trustee to ensure that the books of the trust fund are kept at its office and to prepare or procure preparation of accounts of the trust fund at the end of each Accounting Period, in accordance with generally accepted accounting principles.

(r)    Clauses 7.1 and 7.2 provide for the Appointor to remove the Trustee and appoint a new or additional Trustee; and that where there is no Appointer then the right to remove and appoint a Trustee may be exercised successively by the Guardian, the Trustee, the last surviving Trustee, or the legal representative or the liquidator of the last surviving Trustee.

(s)    Clause 7.6 provides for automatic disqualification of the Trustee in circumstances of insolvency, or in the case of a natural person where the trustee is not Eric Smorgon or a relative of Eric Smorgon; or in the case of a body corporate where one-fifth or more of the directors of that corporation are not Eric Smorgon or relatives of Eric Smorgon.

(t)    Clause 8.1 provides that the trust fund must vest on the ‘Termination Date’, defined earlier in the deed as the 80^th anniversary of the date of the instrument.

(u)  Clause 8.7 provides that on the ‘Termination Date’, in the absence of any supplemental deed appointing other final beneficiaries, the property of the Trusts is to be held on trust for the Primary Beneficiaries as tenants in common in the proportion specified in the schedule, or where a Primary Beneficiary is deceased:

(i)       for their all the grandchildren of Eric Smorgon if the Primary Beneficiary was a child of Eric Smorgon; or

(ii)      for that Primary Beneficiary’s issue on a per stirpes basis, if the Primary Beneficiary was a grandchild of Eric Smorgon.

(v)  Clause 9.7 obliges the Trustee to keep proper minutes of any proceedings and resolutions.

1. The schedule to the trust deed identifies the Primary Beneficiaries as comprising the children of Eric Smorgon as to 40% in equal shares and the grandchildren of Eric Smorgon as to 60% in equal shares.

1. The schedule further identifies Eric and Annie Smorgon and various other corporate entities as ‘Additional General Beneficiaries’ (in many instances in their capacity as trustee of various of the other trusts the subject of this proceeding).  The Additional General Beneficiaries also comprise any other persons or entities nominated by the Appointor in writing, subject to the Trustee’s consent.

1. ‘General Beneficiary’ is defined as follows:

‘General Beneficiaries’, … means persons who are or fall within any of the following classes of persons:

(a)       a Primary Beneficiary;

(b)a relative of a Primary Beneficiary, except a corporation which is a trustee of a settlement, and the relatives of the relative;

(c)a member for the time being of a Primary Beneficiary that is a corporation, except a corporation which is a trustee of a settlement, and the relatives of the member;

(d)a person for the time being having an interest in a settlement of which the Primary Beneficiary is trustee, and the relatives of the person;

(e)       the trustee of an eligible trust;

(f)       an eligible corporation;

(g)a legal person at least one share or other interest in which is beneficially owned or held by a beneficiary including, without limitation, an eligible corporation and the trustees of an eligible trust;

(h)      an employee of:

(i)        the Trustee;

(ii)       an associate of the Trustee;

(iii)      a sub-contractor of the Trustee;

(iv)     a sub-contractor of an associate of the Trustee;

(v)      a beneficiary;

(vi)     an associate of a beneficiary;

(vii)     a sub-contractor of a beneficiary; or

(viii)a sub-contractor of an associate of a beneficiary, and the relatives of the employee;

(i)        a charity;

(j)the persons, if any, named, described or defined in the Schedule as additional general beneficiary.

1. ‘Primary Beneficiary’ is defined as:

a person named, described or defined as such in the Schedule and includes persons who from time to time until the Termination Date come or fall within any description or definition of Primary Beneficiaries in the Schedule although those persons are not yet alive or in existence or do not now come or fall within any description or definition of Primary Beneficiaries in the Schedule and, in the case of trustees, although the trusts or settlements of which they are trustees have not yet been established or do not now come or fall within any description or definition of Primary Beneficiaries in the Schedule.

1. ‘Relative’ is defined as:

(a)       in relation to a natural person … :

(i)the parent, grandparent or remoter ancestor, child, grandchild or remoter issue, brother, sister, uncle, aunt, nephew, niece, first cousin of any degree, second cousin of any degree or third cousin of any degree of the person or of the spouse of the person, whether the relationship is of the whole blood or half-blood or by affinity although the relationship is traced through or to a person of illegitimate birth or a person born by means of artificial insemination, in vitro fertilisation or a similar procedure and although the relationship depends on the adoption of a person; and

(ii)the spouse of the person or of a person referred to in subparagraph (i).

1. Importantly for the issues in this case is the definition of ‘child’, which:

… in relation to a person (‘relevant person’) includes a person of illegitimate birth born to the relevant person, but does not, except in the definition of ‘relative’, include a person:

(a)born by means of artificial insemination, in vitro fertilisation or a similar procedure if the relevant person is not one of the biological (DNA matched) parents of the person; or

(b)       legally adopted by the relevant person,

and:

(c)‘grandchild’ and ‘issue’ and cognate expressions have, in relation to the relevant person, a corresponding meaning; and

(d)except in the definition of ‘relative’, Ms Smorgon Jane Smorgon is deemed not to be a child of or in relation to Robert Smorgon or to be a grandchild of or in relation to Eric Smorgon.

(underline added)

1. Ms Smorgon asserts that she is ‘named as a discretionary object’ for each of the 16 Trusts.  This is true in a literal sense: Ms Smorgon’s name appears in each of the trust deeds and that she is an object of each of the Trusts.  However, the manner in which  Ms Smorgon is named in the deeds is significant.  Ms Smorgon is named specifically to deem her not to be a child of or in relation to Robert Smorgon or to be a grandchild of or in relation to Eric Smorgon; save for the purposes of the definition of ‘relative’.

1. This is significant.  Unlike all other grandchildren of Eric Smorgon, Ms Smorgon is not a Primary Beneficiary.  Consequently, Ms Smorgon, unlike all other children and grandchildren of Eric Smorgon, is not a beneficiary who stands to receive such part of the trust fund as has not been distributed on the Termination Date.[16] 

   [16]See cl 3.6. 

1. Relevantly, Ms Smorgon is a General Beneficiary because she is a ‘relative’ of a Primary Beneficiary.  The trust deed affords Ms Smorgon a commensurate status with all other General Beneficiaries (who are not also Primary Beneficiaries).  When establishing the 16 Trusts, each settlor did so on a basis which differentiated Ms Smorgon from all other children of Robert Smorgon and all other grandchildren of Eric Smorgon, and did so on a different basis to the approach taken by the respective settlors under the earlier established ES (Baeckea) Trust and the Eric Smorgon (1977) Family Trust.

1. The persons who comprise the class of General Beneficiaries is vast.  It extends not merely to employees of the Trustee, but to an employee of a subcontractor to the Trustee, and to the relatives of that employee.  ‘Employee’ too is defined widely, and includes former employees.[17]

   [17]The relevant definition reads:

1. As has been seen above, the definition of ‘relative’ is also wide.  It extends not only to parents, grandparents or remoter ancestors, children, grandchildren, brothers, sisters and the like, but further to second cousins of any degree and third cousins of any degree. 

1. Thus, the class of General Beneficiaries would extend to such persons as relatives (and necessarily a relative as distant as a third cousin) of a past employee of the Trustee or the third cousin of a past employee of a subcontractor to the Trustee.  Under each of the 16 Trusts, Ms Smorgon enjoys the same status as those persons.

The parties’ submissions

1. The parties agree that there are two bases on which a beneficiary may inspect a trust document.  On the first basis, the so-called ‘proprietary approach’, a beneficiary who has a vested proprietary interest in the trust fund itself is considered to have a proprietary interest in the trust documents, and thus a prima facie entitlement to inspect and copy all trust documents.[18] 

   [18]O’Rourke v Derbyshire [1920] AC 581, 626 (Parmoor LJ).

1. On the second basis, the so-called ‘discretionary approach’ is derived from the exercise by the Court of its inherent supervisory jurisdiction over the administration of the trust and is not contingent upon the proprietary rights of any beneficiary.[19] 

   [19]See Schmidt (n 5).

1. There is some debate as to the respective merits of each approach.  In Australia, some judges have followed the proprietary approach; in New South Wales, notably Mahoney JA in Hartigan Nominees Pty Ltd v Rydge (‘Hartigan Nominees’).[20]  Importantly, in Victoria Hargrave J applied the proprietary approach in Deutsch v Trumble (‘Deutsch’).[21]  

   [20](1992) 29 NSWLR 405, 435 (Mahoney JA); cf 421–2 (Kirby P), 444 (Sheller JA). See also McDonald v Ellis (2007) 72 NSWLR 605, [46]–[52] (Bryson AJ).

   [21](2016) 52 VR 108, 125–6 [66]–[72].

1. Recently, in Chan v Valmorbida Custodians Pty Ltd (‘Chan’),[22] Delany J held that he was bound to apply the proprietary approach (though he applied the discretionary approach in the case at hand, as the moving party did not have a proprietary interest in the trust).  His Honour could not conclude that the reasoning of Hargrave J in Deutsch was obviously wrong, despite a trend in favour of the discretionary approach. 

   [22][2020] VSC 590, [71].

1. Other judges have followed the discretionary approach.  For example, Gzell J of the Supreme Court of New South Wales in Avanes v Marshall;[23] Bergin CJ in Equity of the Supreme Court of New South Wales in AIT Investment Group Pty Ltd v Markham Property Fund (No 2) Pty Ltd;[24] and Beach J of the Federal Court of Australia in Webster (Trustee) v Murray Goulburn Cooperative Co Ltd (No 3).[25]

   [23](2007) 68 NSWLR 595, 599 [15].

   [24][2015] NSWSC 216, [66]–[90].

   [25](2018) FCA 990, [110].

1. In the present case, Ms Smorgon concedes that she does not have a vested proprietary interest in the trust fund, and that as a consequence she cannot rely upon the proprietary approach in her application. 

1. Instead, Ms Smorgon argues that she is entitled, as a discretionary object of the Trusts, to approach the Court for an order compelling disclosure of the relevant documents; such order to be granted pursuant to the discretionary approach.  That application is made in the Court’s inherent supervisory jurisdiction over the administration of trusts.  The Trustees do not dispute this.

1. The classic statement of the discretionary approach is found in the judgment of Walker LJ delivered on behalf of the Privy Council in Schmidt. His Lordship wrote:[26] 

   Their Lordships consider that the more principled and correct approach is to regard the right to seek disclosure of trust documents as one aspect of the Court’s inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts.  The right to seek the Court’s intervention does not depend on entitlement to a fixed and transmissible beneficial interest.  The object of a discretion (including a mere power) may also be entitled to protection from the court of equity, although the circumstances in which he may seek protection, and the nature of the protection he may expect to obtain, will depend in the Court’s discretion. 

   [26]Schmidt (n 5) 729 [51] (Walker LJ).

2. Relevantly, his Lordship identified three areas in which the Court may have to form a discretionary judgment:[27] 

(a) Whether a discretionary object (or some other beneficiary with only a remote or wholly defeasible interest) should be granted relief at all;

(b) What classes of document should be disclosed, either completely or in a redacted form; and

(c) What safeguard should be imposed (whether by undertakings to the Court, arrangements for a professional inspection, or otherwise) to limit the use which may be made of documents or information disclosed under the order of the court.

(list added; the ‘first’, ‘second’, and ‘third discretionary factors’ in that order)

[27]Ibid 730 [54].

1. His Lordship further wrote:[28]

However, the recent cases also confirm (as had been stated long ago as Inre Cowin 33 Ch D 179, in 1886) that no beneficiary (and least of all the discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the Court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties. Disclosure may have to be limited and safeguards may have to be put in place. Evaluation of the claims of a beneficiary (and especially of a discretionary object) may be an important part of the balancing exercise which the Court has to perform on the materials placed before it. In many cases the Court may have no difficulty in concluding that an applicant with no more than a theoretical possibility of benefit will not be granted any relief.

[28]Ibid 734–5 [67].

1. Whilst the parties agree that the discretionary approach is appropriate in the circumstances of this case, they differ as to the starting point of the discretionary approach and as to its proper application.

1. Accordingly, it is necessary to set out Ms Smorgon’s submissions in greater detail.

Summary of Ms Smorgon’s  submissions

1. Ms Smorgon relies on the Court’s inherent supervisory jurisdiction over the administration of trusts.  She submits that this jurisdiction exists, among other reasons, to ensure the trustees are held accountable to the beneficiaries on whose behalf they hold the asset.

1. Ms Smorgon argues that beneficiaries have a prima facie right to call upon the Trustees for accurate information as to the state of the trust; as well as a correlative right to inspect documents relating to the trust.  Ms Smorgon accepts that the right is not absolute. However, she notes that even under the proprietary approach, the Court might exclude certain categories of documents from production, such as the reasons of the Trustee for its decisions.

1. Ms Smorgon submits that the law on the discretionary approach is correctly stated in Jacobs’ Law of Trusts in Australia (‘Jacobs’):[29]

Where the beneficiaries wanting information are not beneficiaries of a strict trust, but are merely potential objects of the exercise of a discretionary power of appointment over a trust fund, whether it be a bare power or a trust power, appeals to proprietary rights cannot exist, because they have none.  It has been held, however, that they have more than the right to ensure that due consideration is given to the exercise of a power and to complain of mala fide exercises of it.  Since the trustees are obliged to hold and deal with the trust property for the benefit of the class of potential beneficiaries, and to account to the class for their stewardship, they must allow inspection of trust accounts and give information about the trustee’s management of the trust funds, whether or not breach of trust is alleged.  Here too there may be a distinction between documents which are used by the trustees in administering the trust, but which are their property and not that of the trust.  And here too the exceptions based on confidentiality apply. 

(emphasis added, citations omitted).

[29]J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia, (LexisNexis Butterworths, 8^th ed, 2016) 350-4 [17–16].

1. Thus, Ms Smorgon argues that, irrespective of which approach is followed, the practical application of the two approaches is likely to be the same.  In either case there might be a basis to exclude certain categories of document.

1. Ms Smorgon argues that under the discretionary approach the question of disclosure is ‘an issue of enforcement of the trust, thereby ensuring the trustee’s accountability’,[30] but one which is subject to a ‘balancing exercise’[31] to determine the extent of the trustee’s obligation. 

   [30]Wright v Stevens [2018] NSWSC 548 (‘Wright’), [298] (Hallen J).

   [31]Schmidt (n 5) 734–5 [67] (Walker LJ).

1. In relation to the first discretionary factor identified by Lord Walker in Schmidt (whether a discretionary object ought be granted relief at all), Ms Smorgon in written submission contented that as a beneficial object of each of the Trusts she has a prima facie entitlement to inspect trust documents.  In oral submission Ms Smorgon advanced this point in more nuanced terms, contending that as a beneficial object she holds, in words again drawn from the case of Erceg v Erceg,[32] an ‘expectation of disclosure’[33] capable of being displaced in certain (rare) circumstances.

   [32][2017] 1 NZLR 320 (O’Regan J).

   [33]Ibid 340 [62].

1. In relation to the second discretion (the scope of documents to be provided), Ms Smorgon’s submissions returned to the oft-criticised[34] formulation of Salmon LJ in Re Londonderry’s Settlement; Peat v Walsh (‘Re Londonderry’s Settlement’);[35] namely that she is entitled to inspect ‘trust documents’, being documents which the beneficiaries are entitled to inspect.[36] 

   [34]As circular; see eg, Kirby P’s dissent in Hartigan Nominees n 21, 413, 418.

   [35](1965) Ch 918.

   [36]Ibid 938.

1. In relation to the third discretion, Ms Smorgon submits that the documents that have been requested by her are documents of a type which ought be kept by the trustees as a matter of course, and that the context of her request is the core function of ascertaining the assets and administration of the trust.

1. Ms Smorgon also relies on the following statement in Lewin on Trusts (‘Lewin’):[37] 

But if the beneficiary seeks disclosure for a purpose, or partly or apparently for a purpose, which is contrary to the interests of the beneficiaries as a whole, particularly where the purpose or apparent purpose involves an attack on the trust or trust property, the trustees will, rightly, be cautious in making disclosure of trust accounts and the exercise of the discretion becomes of real importance.  Even in this context however there is a strong presumption in favour of disclosure.  Normally concerns of the trustees or the Court will be adequately met by the imposition of appropriate confidentiality undertakings restricting the disclosure of trust accounts to third parties or their use in other proceedings.

(underline added; citations omitted)

[37]Lynton Tucker, Nicholas Le Poidevin, and James Brightwell, (Thomson Reuters, 20^th ed, 2020) 895, [21–034].

1. Similarly, Lewin also states:[38]

Although a beneficiary does not have an absolute right to disclosure of information about the state of the trust, in the absence of circumstances showing why such information should not be disclosed, or should not be made to the beneficiaries seeking disclosure having regard to the nature of his rights as such, and subject to safeguards for the protection of information of a confidential nature, the trustee should normally make disclosure in the courts with the following principles.  A beneficiary ordinarily has the right to call upon the trustee for accurate information as to the state of the trust, and a trustee may be called upon to give information to a stranger with whom the beneficiary is proposing to deal.  Hence, in a trust for sale and payment of debts, the party entitled to the trust may say to the trustee:  what estates to be sold? what is the amount of money raised?  what debts have been paid?  A trustee should give the beneficiaries proper information as to the investment of the trust estate.  A beneficiary is normally entitled to inspect trustee’s vouchers for their expenditure.  Likewise, it is not sufficient for the trustee merely to say ‘I have invested the trust money on a mortgage’, but he must normally produce the mortgage deeds, and where trust money is invested in gilts a beneficiary is entitled to authority from the trustee to enable him to see if there are any charging or stop orders.  Ordinarily a beneficiary may seek reasonable information and supporting documents about transactions concerning the trust property and property owned by companies owned by the trust entered into by or with the authority of the trustee. 

(underline added; citations omitted)

[38]Ibid 897 [21–038].

1. Likewise, Lewin states that:[39] 

Ordinarily a beneficiary may see reasonable breakdowns and supporting documents in relation to fees and expenses of the trustees including fees and expenses charged to companies owned by the trust.

(citations omitted)

[39]Ibid 898 [21–040].

Summary of the Trustees’ submissions

1. The Trustees recognise Ms Smorgon’s right, as a discretionary object of the Trusts, to approach the Court in its supervisory jurisdiction over the administration of the trusts. However, they contend that on the evidence before the Court there is no proper basis to intervene in the administration of the Trusts.

1. The Trustees submit that Ms Smorgon’s approach fundamentally misstates the law. They contend that Ms Smorgon’s submission is premised on a prima facie entitlement to inspect trust documents, notwithstanding her apparently contradictory acceptance that she holds no vested proprietary interest in the Trusts.

1. The Trustees draw particular attention to two matters in the Court’s exercise of its discretion.

1. First, the Trustees argue that Ms Smorgon’s degree of proximity to the Trusts and her likelihood of benefitting from the Trusts is remote.  They note that she is one of a large number of potential beneficiaries, all of whom have no entitlement to any interest in each trust fund unless and until the Trustees exercise a discretion in their favour.  Further, they emphasise that she is not a Primary Beneficiary of any of the 16 Trusts, and nor has she ever received a distribution from any of the Trusts.

1. Secondly, the Trustees note that Ms Smorgon makes no complaint as to administration of each of the Trusts.

1. Thirdly, the Trustees submit that the Court should have regard to the various discretionary factors set out by the Supreme Court of New Zealand in Erceg (‘the Erceg factors’),[40] in much the same way as Delany J approached the question of disclosure to beneficiaries in Chan.

   [40]Erceg (n 32) 338–9 [56].

1. Ms Smorgon accepts that the Court should consider the Erceg factors.  However, she submits that on proper analysis Erceg is supportive of her approach.  She contends that Erceg is authority for a presumption of disclosure to beneficiary, absent unusual circumstances (such as those present in Erceg). 

1. Ultimately, both parties agree that each case must turn on its own facts, and that care must be taken in relying upon statements made in particular cases and applying those statements generally, without regard to the particular circumstances of the case at hand.

Overview of the authorities

1. Having regard to the differences in approach (or more accurately, the difference in emphasis) which arises in the parties’ agreed application of the discretionary approach, it is necessary to submit each party’s submissions to closer scrutiny with reference to the authorities.

1. It is convenient to commence an analysis of Ms Smorgon’s submissions in returning to the statement in Jacobs referred to above at paragraph [76]. The highlighted parts of the cited extract reference by footnote three cases in support: Chaine-Nickson v Bank of Ireland (‘Chaine-Nickson’);[41] Spellson v George (‘Spellson’);[42] and Murphy v Murphy (‘Murphy’).[43]  The extract also states in a footnote that the proposition it asserts was questioned by Mahoney JA in Hartigan Nominees.[44]  It is necessary therefore to touch upon each of those cases.  Further, I will consider the key authorities on the discretionary approach and how they relate to the present issue: Schmidt,[45] Foreman v Kingston (‘Foreman’),[46] Wright v Stevens (‘Wright’),[47] and Erceg.[48]

Chaine-Nickson

[41][1976] IR 393 HC (Kenny J).

[42](1987) 11 NSWLR 300, 315–16 (Powell J).

[43][1999] 1 WLR 282, 290 (Neuberger J).

[44]Hartigan Nominees (n 20), 431-2 . 

[45]Schmidt (n 5).

[46][2004] 1 NZLR 841 (Potter J).

[47]Wright (n 30).

[48]Erceg (n 32).

1. In Chaine-Nickson, the plaintiff was the son of the settlor and one of the objects of a discretionary trust.[49]  The trust had been established by the plaintiff’s father for the benefit of his family and any future spouses or children of his daughter and son (the plaintiff).[50]  The plaintiff had previously received distributions under the trust.[51]  The trustees invested the trust funds in equity in a private company that did not pay dividends, and in real property.[52]  The plaintiff sought the trust accounts, particularly the details of the equity investment and the real property investments.[53]

   [49]Chaine-Nickson (n 41) 394 (Kenny J).

   [50]Ibid 394.

   [51]Ibid 395.

   [52]Ibid 395.

   [53]Ibid 395.

1. Kenny J of the High Court of Ireland considered Re Londonderry’s Settlement and concluded that the two matters in that case did not concern discretionary objects under a trust.[54]  Ultimately, Kenny J relied on the Irish case of Moore v McGlynn,[55] and ordered the defendant trustees to furnish the plaintiff with the trust accounts, as well as the balance sheets and profit and loss accounts of the private company in which the trust funds had been invested.[56]  Further, the court ordered the trustees to inform the plaintiff of the names of persons residing on any land purchased by the trustees, and details of any associated outgoings paid out of the trust funds.[57]  

Spellson

[54]Ibid 398–9.

[55][1894] 1 LR 74. In that case, the brother and son of a testator held assets on a discretionary trust, in favour of the settlor’s wife and children.  One of the children, a discretionary beneficiary, compelled the trustees to account.

[56]Chaine-Nickson (n 41) 399.

[57]Ibid 399.

1. In Spellson, Powell J of the Supreme Court of New South Wales considered an application for inspection of trust documents by a discretionary object. 

1. In 1967, the plaintiff, James Thomas Spellson, had married Dianne Spellson (née George).[58]  In 1969, they had their first child, a son.[59]  Subsequently, a discretionary trust was established by Thomas George, the settlor and a relative of Dianne Spellson.[60]  The objects of the discretionary trust were Dianne Spellson’s children, her grandchildren, the spouses of her children or grandchildren, Dianne Spellson herself, as well as James Thomas Spellson (the plaintiff).[61]  Some two and a half years later Dianne George and the plaintiff had another son.[62]  In 1983, the marriage between the plaintiff and Dianne George was dissolved by decree made in the Family Court of Australia.[63]  The decree notwithstanding, no orders relating to the custody or guardianship of the two children of the marriage had been made.[64]  Following the dissolution of the marriage, the plaintiff’s solicitors sought from the defendants and their solicitors documents and information relating to the various trusts.[65] 

   [58]Spellson (n 42), 303 (Powell J).

   [59]Ibid 303.

   [60]Ibid 303–4.

   [61]Ibid 304.

   [62]Ibid 304.

   [63]Ibid 307.

   [64]Ibid 307.

   [65]Ibid 308.

1. Turning to the question of whether a discretionary object has a right to obtain information from a trustee, his Honour commenced his analysis with the proposition that one of the essential elements of a private trust, discretionary or otherwise, is that the trustee is subject to a personal obligation to hold and to deal with the trust property.[66]  A necessary corollary of that obligation is that the trustee is liable to account to the beneficiaries of the trust; that being so, the trustee was obliged not only to keep proper accounts and allow a beneficiary to inspect them, but also on demand to give the beneficiary information and explanations as to its dealings with the trust property.[67] 

   [66]Ibid 315.

   [67]Ibid 315–6.

1. Accordingly, his Honour determined that the object of a discretionary trust, even before the exercise of the trustee’s discretion in his favour, had rights against the trustee; both the right to have the trustee consider in good faith whether or not to exercise its discretion in the plaintiff discretionary object’s favour and the right to have the trust property properly managed and to have the trustee account for his management.[68]  His Honour considered that a similar view appeared to have been shared by Kenny J in Chaine-Nickson.[69]

   [68]Ibid 316.

   [69]Ibid 316.

1. Ultimately, his Honour recorded that a potential object of the exercise of a discretionary power of appointment in respect of a trust fund has the right to seek and obtain from the trustee information concerning the trustee’s management of the trust fund.[70]  The exercise of that right does not require allegations that the trustee has, in the course of his management of that trust fund, been guilty of fraud or other breach of trust.[71]

Murphy

[70]Ibid 316.

[71]Ibid 316–7.

1. In Murphy, Neuberger J sitting in the Chancery Division considered an application by the plaintiff, the son of the defendant, for orders that the defendant disclose the identities of trustees of various trusts which the defendant had settled.  The facts were unusual; prior to the creation of the first trust, the defendant, his wife, and their two sons (which included the plaintiff) each had shareholdings in a family company.[72]  In 1968 and 1970 the plaintiff settled the remainder of his shares on discretionary trusts, with entities in the Isle of Man as trustees; allegedly at the defendant’s direction.[73]  The terms of 1968 and 1970 settlements deliberately excluded the plaintiff himself, the defendant (his father), and any wife of either from the class of potential beneficiaries.[74]  The plaintiff maintained that the shares of the 1968 and 1970 settlements were subsequently settled again on further discretionary trusts by the trustee companies; and that the plaintiff was likely to be an object of the those subsequently settled trusts.[75]  The plaintiff maintained that this unusual procedure was part of a structure to organise the tax liabilities of the plaintiff and the defendant.

   [72]Murphy (n 43) 284 (Neuberger J).

   [73]Ibid 284.

   [74]Ibid 284.

   [75]Ibid 285.

1. The plaintiff was a director of the family company until 1987, when he fell out with the defendant.[76]  In 1994, the plaintiff issued proceedings against two trustee companies asserting that he retained beneficial ownership of all the shares the subject of 1968 and 1970 settlements.[77]  In response, the defendant trustees pleaded that the plaintiff had parted with his beneficial interest in the family company by executing the 1968 and 1970 settlements; and that further relief should be refused by reason of his acquiescence and laches.[78]

   [76]Ibid 285.

   [77]Ibid 285.

   [78]Ibid 285–6.

1. In 1997 the plaintiff issued the originating summons, seeking an order that the defendant disclose the names and addresses of the trustees of each of the 1968 and 1970 settlements affecting shares in the family company.[79]  The plaintiff relied on his status as an object of the discretionary trust settled in 1965.[80]  The plaintiff sought to communicate with the present trustees of the subsequently settled trusts so as to bring his circumstances to their attention, to note his status as a potential beneficiary, and for the purposes of a foreshadowed claim to set aside the 1968 and 1970 settlements.[81]

   [79]Ibid 284.

   [80]Ibid 286.

   [81]Ibid 286.

1. His Honour held that the Court had jurisdiction to order a third party to disclose the identity of the trustees to a potential beneficiary (such as the plaintiff) even though there was no suggestion of any wrongdoing by the trustees.[82]  His Honour noted the jurisdiction to supervise the administration of trusts carried with it a broad discretion, and that since the plaintiff’s desire was to communicate to the trustees his circumstances and claims so as to be considered as a potential beneficiary and to know what had happened to the trust assets, it would impose no unfair burden on the defendant or the trustees to make such an order.[83] 

   [82]Ibid 290.

   [83]Ibid 292–3.

1. In the context of the disposition of that unusual application, His Honour took the view that as the plaintiff was merely within the class of discretionary beneficiaries and there was no question of wrongdoing on the part of the trustees was a factor going to  the exercise of the discretion, rather than a factor going to whether the discretion existed at all.[84]  Of some importance in the context of the present application, his Honour also noted that:[85]

… it is not as if the plaintiff is, as it were, something of a remote beneficiary, or one beneficiary among a great many.  The number of potential discretionary beneficiaries is pretty limited, and, at least if one looks at the order in which the potential beneficiaries are identified in the defendant’s 1965 settlement, the plaintiff … could be said to come at the top of what is a fairly short list. 

(underline added)

Hartigan Nominees

[84]Ibid 290.

[85]Ibid 292. 

1. In Hartigan Nominees, Mahoney JA of the Court of Appeal of the Supreme Court of New South Wales expressly followed Re Londonderry’s Settlement, the classic statement of the proprietary approach.[86] 

   [86]Hartigan Nominees (n 20) 435 .

1. Re Londonderry’s Settlement recognised that a beneficiary’s entitlement to trust documents is curtailed by the principle that documents evidencing a trustee’s exercise of discretion will remain confidential.[87]  In Re Londonderry’s Settlement, Harman LJ adopted the dictum of Wrenbury LJ in O’Rourke v Derbyshire; there his Lordship stated:[88]

If the plaintiff is right in saying that he is a beneficiary, and if the documents are documents belonging to the executors as executors, he has a right to access to the documents which he desires to inspect upon what has been called in the judgments in this case a proprietary right.  The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary.  They are in a sense his own.  Action or no action, he is entitled to access to them. 

[87]Ibid 933 (Harman LJ); 936 (Danckwerts LJ); 938 (Salmon LJ).

[88]O’Rourke v Derbyshire (n 18) 626–7.

1. HartiganNominees involved an application by an object of a discretionary trust for access to a memorandum of the wishes of the instigator of the trust, the terms of which the trustees had regard when performing their obligations under the trust.[89]  The applicant was a grandchild of the instigator.[90]  The primary judge allowed the applicant access to the memorandum of wishes.[91]

   [89]Hartigan Nominees (n 20) 408–9 (Kirby P).

   [90]Ibid 408.

   [91]Ibid 409–10.

1. On appeal, the Court refused access to the memorandum.  Mahoney JA expressly followed Re Londonderry’s Settlement; however, he held that the memorandum ought not be disclosed to the plaintiff on confidentiality grounds.[92]  Sheller JA was critical of the proprietary approach in Re Londonderry’s Settlement,[93] but nevertheless accepted the reasoning concerning the right of a trustee to refuse to produce documents disclosing the reasons for exercising a discretionary power or information provided to a trustee in confidence.[94] 

   [92]Ibid 435.

   [93]Ibid 444.

   [94]Ibid 446.

1. Kirby P in dissent stated that he did not consider that the proprietary approach represented the law in Australia and would have ordered disclosure.[95]

   [95]Ibid 421–2.

1. Importantly for the issues in this case, Mahoney JA stated:[96]

However, if a beneficiary requests it, the trustee is in general obliged to provide documents and information to the beneficiary, at his cost, in relation to the trust property and to provide an accounting in respect of the administration of it.  These principles have been long recognised:  see eg Walker v Symonds (1818) 3 Swans 1; 36 ER 751. A number of the decided cases are reviewed in Re Fairbairn, (deceased) [1967] VR 633, 636 et seq. A beneficiary may make such request even though his interest be only contingent: Re Dartnell; Sawyer v Goddard [1895] 1 Ch 474. Notwithstanding cases such. Notwithstanding cases such as Chaine-Nickson v Bank of Ireland [1976] IR 393 it may be that such a right does not exist where the request is made by a person who is only a possible beneficiary under a discretionary trust.

At least, I would reserve the question whether one of a large number of possible beneficiaries may make such a request.  In many cases, the class of possible beneficiaries may be extensive and, to an extent, the persons who are or may be a member of the class may not be clearly defined. In the present case, the definition of eligible beneficiaries includes not merely several groups of persons but, in addition, persons who are nominated in writing to the trustees by the father, his legal personal representatives, or the trustees themselves.  As at present advised, I doubt that a person whose interest lies not in property but in possibility and is in respect of part but not all of the trust property may demand such information.  However, the present plaintiff is an eligible beneficiary within the description and the trust document and I shall accept for the purposes of this appeal that he is possessed, in general, of such a right.

(underline added)

Schmidt

[96]Ibid 431-2. 

1. Subsequently, the Privy Council handed down its decision in Schmidt, expressing a clear preference for the discretionary approach and relying upon parts of Kirby P’s dissent in Hartigan Nominees.

1. The key considerations identified by Lord Walker as relevant to the court’s discretion to order disclosure of trust information have been set out above. Of importance to the present case is Walker LJ’s statement that:[97]

… no beneficiary (and least of all the discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document.  Especially when there are issues as to personal or commercial confidentiality, the Court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties.  Disclosure may have to be limited and safeguards may have to be put in place. Evaluation of the claims of a beneficiary (and especially of a discretionary object) may be an important part of the balancing exercise which the court has to perform on the materials placed before it.  In many cases the Court may have no difficulty in concluding that an applicant with no more than a theoretical possibility of benefit ought not be granted any relief.

(underline added)

Foreman v Kingstone (‘Foreman’)

[97]Schmidt (n 5) 734 [67].

1. Support for Ms Smorgon’s submission is also derived from the decision of Potter J of the High Court of New Zealand in Foreman v Kingstone.

1. In Foreman, the plaintiffs were the children of the first marriage of Mr Bill Foreman.[98]  Mr Foreman had by deed settled a trust dated 26 March 1959 (‘the 1959 Trust’).[99]  The assets of the 1959 trust were later resettled by Mr Foreman and his third and then-wife on another trust dated 26 February 1999 (‘the 1999 Trust’); this trust had an expanded class of beneficiaries.[100]  Additionally, a third trust with separate assets was settled by Mr Foreman’s second wife, Mary Pat Foreman, (‘the MP Foreman Trust’) who had died in 1987, before Bill Foreman’s marriage to his third and current wife;[101] Mary Pat Foreman’s estate was also held on trust by the defendant trustees.[102]  The MP Foreman Trust was wound up in 1996.[103]  Each trust held shares in a company which carried on a very successful and substantial business originally founded by Mr Foreman and subsequently sold by him.[104]

   [98]Foreman v Kingstone (n 46) 843 [5] (Potter J).

   [99]Ibid, 844 [9].

   [100]Ibid 846 [28]–[29].

   [101]Ibid 845 [23].

   [102]Ibid 843 [3].

   [103]Ibid 846 [27].

   [104]Ibid 844 [8].

1. The plaintiffs alleged that the winding up of the MP Foreman Trust, the resettling of the 1959 Trust property in the 1999 Trust, and certain income distributions to Bill Foreman were invalid.  The plaintiffs sought, among other things, financial statements relating to each of the three trusts; the basis upon which the decision was made to resettle the assets of the 1959 Trust on the 1999 Trust; full details of the winding up of the MP Foreman Trust; as well as copies of all letters, memoranda of wishes or any other communications by the settlors of each of the trusts to the trustees.[105]

   [105]Ibid 847 [39].

1. The trustees supplied to the plaintiffs copies of each of the trust instruments and advised that they would further supply copies of the accounts in the estate of MP Foreman to which the plaintiffs were entitled, but otherwise submitted that they were not obliged to furnish the plaintiffs with the other documents or information the subject of the request.[106] 

   [106]Ibid 848 [40].

1. The Court accepted that plaintiffs’ interests under the trusts were as objects of a discretionary power.[107] 

   [107]Ibid 848 [44].

1. The Court conducted a detailed analysis of the relevant authorities, including Schmidt, Hartigan, Chaine-Nickson, Spellson and Murphy,[108] before turning to the parties’ submissions.  The plaintiffs submitted that as discretionary beneficiaries of the trust they were entitled ‘as of right to the documents they seek’.[109]  By contrast, the defendants  submitted that beneficiaries have no absolute right to disclosure of any documents held by trustees, but that where a trustee refuses to provide documents the Court may, in the exercise of its general power to supervise the administration of trusts, require the trustees to disclose such documents as the Court determines.[110]  The defendants submitted that there were a number of factors necessary to be considered in the exercise of the Court’s discretion which militated against disclosure:[111]

   [108]Ibid, 849–53 [49]–[69].

   [109]Ibid, 855 [77].

   [110]Ibid 855 [78].

   [111]Ibid 856–7 [80].

(a)   In Chaine-Nickson, though there was no suggestion of a breach of trust or of any other actuating circumstance of note prior to the beneficiary’s request, the beneficiary was clearly a close beneficiary and had received distributions from the trust.  

(b)  In Hartigan Nominees, the information sought was confined to a memorandum of wishes of the settlor, sought by a grandchild of the settlor.  In the context of the narrow category of information sought, the applicant would in all likelihood have been regarded as a close beneficiary.  Importantly, Mahoney JA (who applied the proprietary approach but who nevertheless refused access on confidentiality grounds) specifically distinguished the applicant’s position from that of the wider class of beneficiaries.[160]

[160]See [112] above.

(c)   Murphy involved an unusual set of circumstances. The plaintiff sought the names of the trustees of a trust so that he could alert the trustees to his existence and communicate to them matters that might cause the trustees to exercise their discretions in his favour.  There was no suggestion of an antecedent breach; however, the judge evidently did not regard the plaintiff as a remote beneficiary, or at the least not one of many. 

(d)  In Schmidt, the plaintiff was the only child of the settlor and thus was clearly a close beneficiary. Moreover, the plaintiff was one of 3 beneficiaries of his father’s estate and there was evidence that his father specifically wished his son to benefit from at least two of the trusts.[161] 

[161]Schmidt (n 5) 720 [18]–[21] (Walker LJ).

(e)   In Wright, there was evidence of payments made to those who were not beneficiaries, and having regard to the unusual nature of the trust, the plaintiff, a resident of Dorrigo, was as close a beneficiary as any other eligible beneficiary.

(f)    In Chan, disclosure was sought by a person in close proximity to the trust and against the background of allegations of breach of trust.

(g)  In Spellson, there was no suggestion of any antecedent breach of trust, and the proximity of the beneficiary’s interest may have been open to debate.  The request for information appears to have arisen in the context of unresolved matrimonial property settlement issues between the plaintiff and his former wife.  The former wife was clearly a close beneficiary of the trust, which had been settled by her immediate family; whether the plaintiff remained a close beneficiary in circumstances where he was apparently estranged from the settlor’s family is more difficult to discern.  However, it was not yet resolved which parent would have custody of the children, and the children were themselves beneficial objects of the trust.  Nonetheless, I acknowledge that Spellson is of some assistance to Ms Smorgon.

1. In the present case, Ms Smorgon is not a close beneficiary of any of the 16 Trusts. This distinguishes her from the applicants in Chaine-Nickson; Hartigan Nominees; arguably Murphy; Schmidt; Wright; and Chan.  Nor does Ms Smorgon seek a narrow category of documents, such as those sought in Hartigan Nominees, Murphy or Wright. 

1. Similarly, unlike the applicants in Wright or Chan, Ms Smorgon cannot point to any circumstance of note antecedent to her request, beyond her mere curiosity.  Ms Smorgon’s request is made by a remote beneficiary for a large body of documentation that is ‘in the air’, in the sense in which Salmon LJ used that phrase in Re Londonderry’s Settlement:[162]

The position is quite different where the beneficiary seeks disclosure of documents from the trustees in the air, as in this case, from the position where the beneficiary seeks discovery of documents in an action in which allegations are being made against the bona fides of the trustees.

[162]Re Londonderry’s Settlement (n 35) 938.  Note his Lordship applied the proprietary approach.

1. In that context, having rejected any presumptive right or prima facie expectation of disclosure on the part of Ms Smorgon, it is difficult to discern any basis for the Court to exercise its discretion so as to intervene in the administration of the trusts.  That is all the more so where each of the trust deeds for the 16 Trusts contain a clause restricting disclosure to a beneficiary.  As Mahoney JA stated in Hartigan:[163]

In deciding questions of disclosure, it is important in my opinion to have regard to the essential nature of such discretionary trusts.  Such a trust is not a mere commercial document in which the public may have an interest.  It is a private transaction, a disposition by the settlor of his own property, ordinarily voluntarily, in the manner which he is entitled to choose.  Special cases apart, it is proper that his wishes and his privacy be respected. 

[163]Hartigan Nominees (n 20), 436. 

1. To similar effect Campbell J of the Supreme Court of New South Wales writing extra-judicially explained[164] that ‘in deciding who is entitled to receive some degree of explanation of the affairs of the trust, the court is deciding a matter of the settlor’s likely intention’[165] because ‘it is only insofar as the trust documentation is silent that the general law has a role to play’.[166]  Thus:[167]

… courts need to decide, construing each trust deed individually in its context, whether faithful performance of the intention of the settlor of that particular trust deed requires information of the type that a court is considering to be disclosed to the relevant class of beneficiary, to be kept secret from the relevant class of beneficiary, or to be disclosed or not as the trustee thinks best.

[164]J C Campbell, ‘Access by Trust Beneficiaries to Trustees’ Documents and Reasons’ (2009) 3 Journal of Equity 97.

[165]Ibid 144.

[166]Ibid 143.

[167]Ibid 145.

1. In addition, and of relevance to the seventh Erceg factor, it is not in my view possible to bracket the circumstances that led to the present application.  The request arose in the context of the death of Robert Smorgon and the subsequent grant of probate over his will, and there is clearly an apprehension on Ms Smorgon’s behalf that she has been insufficiently provided for by her late father.  Whilst I accept Ms Smorgon’s uncontradicted evidence as to her motivations for requesting the documents, appropriately and carefully she deposes that she does not presently seek documents which reveal the deliberations of the Trustees in reaching their decisions or distributions in administration of the Trusts.

1. There is a distinct possibility that disclosure of the documents sought may give rise to the potential for family discord; if not between Ms Smorgon and the recipients, then possibly between recipients or between other Primary Beneficiaries some of whom may have received distributions and some of whom may not.  The documents sought expressly condescend to naming the recipients of distributions under the Trusts.  

1. Of course, the potential for such discord is an inevitable consequence of discretionary trust arrangements.[168]  Nonetheless, as Erceg acknowledges, the likelihood of such discord is an appropriate factor for a Court to have regard when exercising its discretion.

   [168]See the remarks of Potter J in Foreman (n 46) at 860–1 [94]–[95].

1. The need for documentation evidencing the identity of recipients of distributions is not apparent given that Ms Smorgon’s request for access has been made in order to ‘assist in demonstrating how the assets of the trust are invested, including the assets and liabilities of the trusts and documents which support the investments and the liabilities’.  The identity of those to whom previous distributions have been made is not necessary to advance such understanding, certainly not to an extent sufficient to warrant the discretionary intervention of a Court of Equity in the administration of the trusts.

1. For the reasons above, I do not consider that is an appropriate exercise of the Court’s discretion to make the orders sought with respect to the 16 Trusts.

The ES (Baeckea) Trust and the Eric Smorgon (1977) Family Trust

1. It is necessary to consider the position of the ES (Baeckea Trust) and the Eric Smorgon (1977) Family Trust separately.  In both trusts there is no clause in the trust deed restricting disclosure.  Moreover, in both trusts Ms Smorgon’s status as a beneficiary differs from the rather remote position she occupies in relation to the 16 Trusts.

1. The ES (Baeckea) Trust was established by deed of settlement dated 1 July 1977, between Lionel K Congold as settlor and Baeckea Pty Ltd as trustee. It provides that:

(a)   The Primary Beneficiaries are all the children of Eric Smorgon and Annie Smorgon, namely Jack Smorgon and Robert Smorgon (Ms Smorgon’s father). 

(b)  The General Beneficiaries named in the schedule comprise Eric Smorgon and Annie Smorgon.  

(c)   The Income Beneficiaries comprise Eric Smorgon; Annie Smorgon; Jack Smorgon; Valerie Smorgon; Robert Smorgon and Michelle Smorgon and all their children namely Ms Smorgon, Jane Smorgon; Norman Smorgon; Lisa Smorgon; Anthony Smorgon; Michael Smorgon, and/or any  other children[169] born after the date of the deed. 

(d)  The vesting day, as varied by a subsequent deed, is 30 June 2050.

[169]It seems clear enough that the reference to any other children means any other children of Eric Smorgon, Annie Smorgon, Valerie Smorgon, Robert Smorgon and Michele Smorgon, and that those named commencing with Ms Smorgon were children of Eric, Annie, etc.

1. ‘General Beneficiaries’ is defined to mean, among others, the brothers, sisters, and children of the Primary Beneficiaries, and their children in turn; as well as those persons named as General Beneficiaries. 

1. ‘Beneficiary’ or ‘beneficiaries’ is defined to mean any of the Income Beneficiaries, Primary Beneficiaries, or General Beneficiaries. 

1. Clause 3(1) provides that the Trustee shall from time to time put aside such of the net income during the Accounting Period as he or she thinks fit for a charitable purpose or for the benefit of all or any one or more of the Income Beneficiaries, in his or her absolute discretion.

1. Clause 3(3) provides that on the Vesting Day any income not paid, applied, or set aside under clause 3(1) is to be held on trust for the Primary Beneficiaries still living on trust as tenants in common in equal shares, or if a Primary Beneficiary has died, for their children as tenants in common in equal shares for the proportion that Primary Beneficiary would have taken had they been living.

1. Clause 4 provides that on the Vesting Day the Trustee shall stand possessed of the trust fund for the Primary Beneficiaries still living on trust as tenants in common in equal shares, or if a Primary Beneficiary has died, for their children as tenants in common in equal shares for the proportion that Primary Beneficiary would have taken had they been living; of for such charitable purposes or beneficiaries appointed in writing by the Trustee prior to the Vesting Day.

1. Clause 6 entitles the trustee at its absolute discretion to pay amounts out of the capital of the trust to any of the general beneficiaries prior to the vesting day.

1. Clause 7 of the trust deed gives the trustee wide powers of investment to be exercised in its absolute discretion. 

1. Thus, Ms Smorgon’s status under the trust deed is that of an Income Beneficiary, and by that status she is also a General Beneficiary.  Further, although the class of General Beneficiaries extends beyond the family members of the Primary Beneficiary,[170] it is considerably narrower than the definition of General Beneficiary for the 16 Trusts. 

   [170]For example, it extends to relatives by blood or marriage of the appointor and body corporates in which a share is held beneficially by a beneficiary.

1. Moreover, as the daughter of a Primary Beneficiary (that is, as the daughter of Robert Smorgon), Ms Smorgon will derive a vested interest as a tenant in common of the undistributed part of the trust fund on the vesting day. 

1. As such, Ms Smorgon is considerably closer to  the ES (Baeckea) Trust than to the 16 Trusts.

1. In my view, and notwithstanding that Ms Smorgon has not to this point received any distributions or information from the ES (Baeckea) Trust, she can be regarded as a close beneficiary of that trust.

1. In addition, and as noted above, there is no clause in the trust deed for the ES (Baeckea) Trust restricting disclosure to the beneficiaries. 

1. However, as with the 16 Trusts, Ms Smorgon requests a large body of documents, and does so in a context where she does not point to any circumstance antecedent to that request beyond her curiosity to ‘know how the trust money is invested and administered’ and to demonstrate ‘how the assets of the trust are invested, including the assets and liabilities of the trusts and documents which support the investments and the liability’. 

1. In Erceg, the Supreme Court categorised the types of documents sought by the applicant.  In ‘Category 1’, the Court placed the trust deed, deeds of variation, and financial statements; describing such documents as ‘basic documents for which the strongest case for disclosure can be made’.[171]  In ‘Category 2’, the Court placed the minutes and resolutions of the trustee; describing them as ‘similar to Category 1 save for the fact that disclosure without redactions may reveal the reasons for the trustees for the distributions made by them’.[172] 

   [171]Erceg (n 32) 342–3 [73].

   [172]Ibid 342–3 [73].

1. Further, the Court noted that ‘a primary discretionary beneficiary would normally have a good case for disclosure of the trust deed and financial statements relating to the trust’.[173]

   [173]Ibid 348 [99].

1. In my opinion, as Ms Smorgon is a named Income Beneficiary, as well as the child of a Primary Beneficiary, she is akin to a Primary Beneficiary.  Accordingly, Ms Smorgon has a reasonably strong case for disclosure of Category 1 information. 

1. That case for disclosure, however, must nevertheless be subject to a consideration of the other discretionary factors considered in Erceg.  Confining myself at this stage to  the basic trust documents, namely the trust deeds and deeds of variation (which have already been provided) and the financial statements, I consider that the practical difficulty in providing the financial statements can largely be put to one side.

1. However, I remain concerned at the potential for discord in the event that the documents provided disclose the identity of income beneficiaries who have received distributions from the Trust.  Further, noting that the Trustee’s power to make such distributions is a matter for its absolute discretion and that Ms Smorgon has made no complaint to date as to the manner in which the Trust has been administered, I can see no basis for the exercise of an equitable jurisdiction to intervene in the administration of the trust in a way which discloses such information, particularly having regard to the purpose for which the information is sought.[174]

   [174]See [176] above.

1. In Erceg, the Supreme Court considered the possibility of redactions to ameliorate that concern, but concluded that such redactions would render useless the information sought by the plaintiff.[175]  Further, the Supreme Court took the view that disclosure was generally inappropriate in the somewhat unusual circumstances of that case.[176] 

   [175]Erceg (n 32) 348 [100].

   [176]Ibid 349 [101].

1. However, in the present case I note that Ms Smorgon’s deposed basis for the request is to enable her to ‘know how the trust money is invested and administered’ and to demonstrate ‘how the assets of the trust are invested, including the assets and liabilities of the trusts and documents which support the investments and the liability’.  It appears to me that this motivation is assisted, or at the very least it is not rendered useless, by the disclosure of financial statements that have been redacted to preserve the privacy of income beneficiaries who have received distributions.  Disclosure of the financial statements will enable Ms Smorgon, as a close beneficiary to the trust, to ‘know how the trust money is invested and administered’ (though not, of course, to whom it has been distributed) and will demonstrate to her ‘how the assets of the trust are invested including the assets and liabilities of the Trusts’. 

1. Those documents which support the investments and the liabilities raise different questions and are considered separately below.

1. There remains the question of whether disclosure of the financial statements would be an impermissible disclosure of commercially sensitive and confidential information.  Mr Meehan deposed that the disclosure of the balance sheets and the profit and loss statements would disclose commercially sensitive and commercial information in respect of, among others:

(a)   the total current assets and details of those current assets;

(b)  the income, losses and deductions of the trusts;

(c)   the total income distribution;

(d)  any foreign and domestic interest received and paid;

(e)   any capital gains or losses;

(f)    the gross profit and net profit;

(g)  any income relating to third parties including shares of joint venture profits/losses;

(h)  any dividends from private company investments; and

(i)     for those trusts that make distributions of income, the amounts of distribution made to beneficiaries of the trust and the name of those beneficiaries.

1. Putting aside those entries which identify beneficiaries to whom distributions have been paid or to whom unpaid entitlements are owed, I am not persuaded that disclosure of information in those limited categories would amount to a disclosure of commercially sensitive and confidential information.  Any legitimate concerns could be subject to a confidentiality undertaking.

1. Therefore, the financial statements of the ES (Baeckea) Trust should be disclosed to Ms Smorgon; subject to Ms Smorgon entering into appropriate confidentially arrangements (or providing undertakings), and subject to the Trustee redacting from the financial statements the names of those beneficiaries who have received distributions from the Trust and who are owed unpaid entitlements, disclosure of the financial statements of the ES (Baeckea) Trust to Ms Smorgon should be provided. 

1. I will not order the provision of further documents by the Trustee.  To do so would not be in the best interests of the Trust as a whole; it would not be appropriate exercise of my discretion in supervising the administration of the Trust.  The provision of further documents, such as the underlying commercial documentation supporting the entries in the financial statements has a far greater potential to compromise legitimate privacy or confidentiality concerns, and will give rise to the concerns as to the scope of the documentation sought adverted to by Mr Meehan.  The Trustee is not obliged to provide reasons for its decisions (including decisions as to particular investment opportunities), and they have absolute and wide discretionary powers to effect such investments under the relevant trust deeds.  Noting that, and given the limited purpose for which Ms Smorgon seeks the information, there is no need for the Court to order disclosure of the minutes or of underlying documents of the breadth sought by Ms Smorgon.  Disclosure of such a vast body of documentation is unnecessary for Ms Smorgon’s purposes, and is subject to the legitimate concerns advanced by Mr Meehan and discussed at paragraphs [40] to [43] above.

1. The underlined portions of the extract from Lewin at paragraph [83] above cite Clarke v Earl of Ormonde,[177] White v Lady Lincoln,[178] Nouillan v Nouillan’s Executors,[179] Re Tillott[180] and Wingate v Butterfield Trust (Bermuda) Ltd.[181]Those cases do not all concern discretionary trusts; but they do apply the discretionary approach, which is good law in England.  The cases do not support the proposition that a discretionary object (however close) is entitled to disclosure where the body of information sought is as vast as that sought by Ms Smorgon in the present case.  In particular:

   [177](1821) Jac 108, 120(Eldon LJ).

   [178](1803) 8 Ves Jr 363 (Eldon LJ).

   [179](1991) SLT 270 (Clyde LJ).

   [180][1892] 1 Ch 86 (Chitty J).

   [181][2008] WTLR 357, [38]-[41] (Bell PJ).

(a)   Clarke v Earl of Ormonde concerned estates settled on trust to be sold for the payment of debts.  In a brief judgment, Lord Eldon stated that the beneficiary (who was not a discretionary object) was entitled to be informed of the value of the trust property, the amount of monies raised on sale of the trust property, and the status of the  remaining debts and encumbrances; as well as to inspect vouchers for the trustees’ expenditure.[182]

[182]Clarke v Earl of Ormonde (n 177), 120.

(b)  White v Lady Lincoln concerned a solicitor, who was variously agent and trustee for the Duke of Newcastle, and whose estate claimed a debt against the estate of the Duke.[183]  The amount owing was in dispute; the solicitor and the Duke had had a relationship of trust, with the solicitor closely managing the Duke’s financial affairs.[184]  The executors of the solicitor’s estate had made up the sum of the alleged debt from ‘memorandum books and papers to a very voluminous extent’,[185] but, in the words of Lord Eldon, ‘furnished nothing that could claim the character of an account of any of his transactions from his first connection with the [agent] until his death.’[186]  There was a suggestion that only documents favouring the solicitor had been disclosed by the executors for the solicitor.[187]  His Lordship ordered that all bills by the solicitor against the estate of the Duke ought to be presumed paid, in circumstances where the solicitor could not produce the appropriate vouchers.  White v Lady Lincoln is very different from the present case: it is not strictly a case about a beneficiary’s right to trust documents, and it involves allegations of impropriety.

[183]White v Lady Lincoln (n 178) 364 (Eldon LJ).

[184]Ibid 364-7.

[185]Ibid 365-6.

[186]Ibid 367.

[187]Ibid 372.

(c)   Nouillan v Nouillan’s Executors concerned a unanimous request by children under their father’s will for vouchers supporting accounts already provided to the beneficiaries.[188]  Lord Clyde noted that the defendant trustee had provided no reasons for not producing the vouchers, and that in the absence of such reasons the plaintiffs were unable to satisfy themselves as to the proper administration of the trusts.[189]  Lord Clyde said that the actions of the trustee in resisting production ‘might well invite a sinister inference’.[190]  Nouillan v Nouillan’s Executors is markedly different from the present case: all the direct beneficiaries were being denied information, and in circumstances where his Lordship clearly believed there was a reasonable suspicion cast on the trustee.

[188]Nouillan v Nouillan’s Executors (n 179) 271 (Clyde LJ).

[189]Ibid 271.

[190]Ibid 271.

(d)  Re Tillott concerned a discrete request by a beneficiary who was not a discretionary object for information from the trustee confirming that the trust property, comprising British Consols, was not encumbered.[191]  Proof of unencumbered title to a single class of trust asset is to be contrasted with the broad swathe of documents sought by Ms Smorgon in the instant case.

[191]Re Tillott (n 180) 88-9 (Chitty J).

(e)   Wingate v Butterfield Trust (Bermuda) Ltd concerned a family trust.  The plaintiff was one of a small group of income and capital beneficiaries.[192]  The plaintiff was already in possession of some of the trust accounts, however some information was missing and the plaintiff was concerned as to certain aspects of the trustee’s management disclosed by the accounts in his possession. He sought, and was granted:

[192]Wingate v Butterfield Trust (Bermuda) Ltd (n 181) [2] (Bell PJ).

(vii)            disclosure of the trustee’s fees, which there was some evidence may have been excessive;[193]

[193]Ibid [10], [36].

(viii)          information concerning distributions which had not been properly accounted for in the accounts;[194]

[194]Ibid [37].

(ix)information concerning transactions which may amount to distributions but had not been accounted for as such;[195]

[195]Ibid [38].

(x)   information concerning a company held by the trust whose assets had allegedly been stripped from it.[196]

Puisne Judge Bell of the Supreme Court of Bermuda ordered production of these categories of documents in circumstances where there were allegations of, and evidence of, genuine concerns of the trustee as to whether the trust assets were being managed appropriately; in the present case, there is nothing on the evidence that could give rise to suspicion that the Trusts are being mismanaged.

Further, unlike in the above cases, here no reason for the disclosure is proffered save for idle curiosity. 

[196]Ibid [39].

1. In any event, the matters raised by Mr Meehan have significant weight given the breadth of the information sought. 

1. The Eric Smorgon (1977) Family Trust confers a similar status on Ms Smorgon.  She is one of 11 named Primary Beneficiaries, which class also extends to the spouses and the future children, grandchildren and great-grandchildren of such persons.  The class is therefore confined to Smorgon family members.  Importantly, it does not extend to the reaches of the class of General Beneficiaries under the 16 Trusts. 

1. The class of General Beneficiaries comprises the Primary Beneficiaries (of which Ms Smorgon is one), together with Eric Smorgon and Annie Smorgon (described as ’Additional members of the class of General Beneficiaries’).

1. By a deed of variation made 22 August 1985, the class of General Beneficiaries was expanded significantly.  It now extends to a class of similar breadth to the class of General Beneficiaries under the 16 Trusts.  However, Ms Smorgon remains a Primary Beneficiary. 

1. The provisions of the Eric Smorgon (1977) Family Trust deed permit distributions of income prior to the Vesting Day by the Trustee as the Trustee shall think fit, for such charitable purposes, or for the benefit of all or any one or more the General Beneficiaries, or both.

1. The deed further provides that in default of distributions made prior to the vesting day, the Trustee shall on the Vesting Day stand possessed of the trust fund upon trust for such of the Primary Beneficiaries or their children as are living as tenants in common in equal shares.

1. Thus, as is similar to the ES (Baeckea) Trust, Ms Smorgon is a discretionary object in respect of whom the Trustee may at its discretion choose to distribute during the income of the Trust, and further is a residuary beneficiary who will stand possessed of a share of the trust fund at the Vesting Day as tenant in common along with the other Primary Beneficiaries.

1. For substantially the same reasons as in my analysis of the ES (Baeckea) Trust, and subject to the receipt of appropriate confidentiality arrangements or undertakings from Ms Smorgon and redactions by the Trustee, I consider that it is appropriate to order the disclosure of financial statements (the profit and loss statements and balance sheets) for the Eric Smorgon (1977) Family Trust to Ms Smorgon. 

Disposition

1. In conclusion, subject to the entry into of suitable confidentiality arrangements (whether by deed or by undertakings to the Court) to the effect that Ms Smorgon will not disclose the content of the profit and loss statements and balance sheets for the ES (Baeckea) Trust and the Eric Smorgon (1977) Trust (save to her legal and accounting advisers or as otherwise required by law); and subject to the Trustee of each of those Trusts having an opportunity  to redact the names of any beneficiaries shown to have received distributions or to hold unpaid entitlements,  the fifth defendant, Baeckea Pty Ltd, as trustee for the ES (Baeckea) Trust, and the fifteenth defendant, Leiby Pty Ltd, as trustee for the Eric Smorgon (1977) Family Trust, shall provide to Ms Smorgon copies of the profit and loss statements and balance sheets for each of the respective trusts.  Ms Smorgon’s claims will otherwise be dismissed.

1. I shall hear the parties as to the precise form of order and as to the question of costs, including the costs of providing the information pursuant to my orders. 

SCHEDULE OF PARTIES

S ECI 2020 03496
BETWEEN:
SAMANTHA JANE SMORGON	Plaintiff
- and -
ES GROUP OPERATIONS PTY LTD (ACN 069 851 305) as Trustee of THE ES GROUP OPERATING TRUST NO. 1	First Defendant
ES GROUP HOLDINGS (OPS) Pty Ltd (ACN 069 851 314) as Trustee for THE ES GROUP OPERATING TRUST NO. 2	Second Defendant
ESCOR PROPERTY (YANCHEP) PTY LTD (ACN 108 438 731) as Trustee for THE ESCOR PROPERTY (YANCHEP) TRUST	Third Defendant
ESCOR OPPORTUNITY PTY LTD (ACN 106 395 322) as Trustee for THE ESCOR OPPORTUNITY TRUST NO. 1	Fourth Defendant
BAECKEA PTY LIMITED (ACN 005 304 610) as Trustee for THE E.S. (BAECKEA) TRUST	Fifth Defendant
ESCOR OPPORTUNITY PTY LTD (ACN 106 395 322) as Trustee for THE ESCOR RESERVE TRUST NO. 5	Sixth Defendant
ESCOR OPPORTUNITY PTY LTD (ACN 106 395 322) as Trustee for THE ESCOR RESERVE TRUST NO. 6	Seventh Defendant
ESCOR OPPORTUNITY PTY LTD (ACN 106 395 322) as Trustee for THE ES GROUP RESERVE TRUST 1	Eighth Defendant
ESCOR OPPORTUNITY PTY LTD (ACN 106 395 322) as Trustee for THE ES GROUP RESERVE TRUST 2	Ninth Defendant
ESCOR OPPORTUNITY PTY LTD (ACN 106 395 322) as Trustee for THE ES GROUP RESERVE TRUST 3	Tenth Defendant
ESCOR FAMILY ART PTY LTD (ACN 114 773 143)  as Trustee for THE ESCOR FAMILY ART TRUST	Eleventh Defendant
ESCOR PROPERTY INVESTMENTS PTY LTD (ACN 081 842 944) as Trustee for THE ES GROUP DEVELOPMENT TRUST	Twelfth Defendant
ES RESERVE SHELF NO. 2 PTY LTD (ACN 115 092 272) as Trustee for THE ESCOR RESERVE TRUST NO. 7	Thirteenth Defendant
ES RESERVE SHELF NO. 2 PTY LTD (ACN 115 092 272) as Trustee for THE ESCOR RESERVE TRUST NO. 8	Fourteenth Defendant
LEIBY PTY LTD (ACN 005 792 941) as Trustee for THE ERIC SMORGON (1977) FAMILY TRUST	Fifteenth Defendant
ES GROUP FINANCE PTY LTD (ACN 080 815 345) as Trustee for THE ES GROUP FINANCE TRUST	Sixteenth Defendant
ES GROUP INVESTMENTS PTY LTD (ACN 069 851 234) as Trustee for THE ES GROUP INVESTMENTS TRUST NO. 1	Seventeenth Defendant
ES GROUP HOLDINGS (INV) PTY LTD (ACN 069 851 252) as Trustee for THE ES GROUP INVESTMENTS TRUST NO. 2	Eighteenth Defendant

(a) The ES Group Operating Trust No. 1;

(b) The ES Group Operating Trust No. 2;

(c) The Escor Opportunity Trust No. 1;

(d) The Escor Property (Yanchep) Trust;

(e) The ES Group Development Trust;

(f) The Escor Reserve Trust No. 7;

(g) The Escor Reserve Trust No. 8;
(h) the ES Group Finance Trust;

(i) The ES Group Investments Trust No. 1; and
(j) The ES Group Investments Trust No 2;

have supplemental deeds of variation which amend clause 3. 

Of the 16 Trusts, the unamended clause 3 remains in:
            (a) The Escor Family Art Trust;
            

(b) The ES Group Reserve Trust 1;
(c) The ES Group Reserve Trust 2;

            

(d) The ES Group Reserve Trust 3;
            (e) The Escor Reserve Trust No. 5;
            (f) The Escor Reserve Trust No. 6.
The unamended clause 3 is broadly similar to the amended clause 3, providing a mechanism for classifying and distributing income.  The difference between the amended and unamended clauses is immaterial to these reasons; and the unamended clauses feature only in trusts classified by Mr Meehan as ‘dormant’, or in one instance ‘passive’.

‘employee’ in relation to a person (‘relevant person’) means:

(a) a person who has entered into or works under a contract of employment or service or consultancy or apprenticeship or otherwise with the relevant person, whether the contract is express or implied or is oral or written;
(b) a person who holds the office of director, secretary or executive officer of the relevant person,

and includes a former or past employee of the relevant person.