Trani v Trani - [2018] VSC 274

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST

S CI 2015 05222

PATRIZIA TRANI	Plaintiff
v
MARCO TRANI	First Defendant
LUCIANO TRANI	Second Defendant

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JUDGE:	Daly AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	28, 29 November, 4 December 2017
DATE OF JUDGMENT:	21 June 2018
CASE MAY BE CITED AS:	Trani v Trani
MEDIUM NEUTRAL CITATION:	[2018] VSC 274 Revised 26 October 2018

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TRUSTS – Discretionary family trust – Defendants are the brothers of the plaintiff and were directors of trust in relevant period – Whether an earlier resolution resulted in an immediate vesting of the trust assets – Later resolution passed at directors’ meeting to distribute majority of trust proceeds in equal shares between the two defendants, to the exclusion of the plaintiff – Later resolution recorded in minute – Whether the later resolution constituted a valid distribution of the trust capital and income under the Deed – Whether the trustee exercised its discretion to pay the whole of the trust capital and income to the defendants in good faith, on a real and genuine consideration, and for proper purposes – Consideration of scope and criteria for a challenge to a trustee’s exercise of discretion – Attorney-General (Cth) v Breckler (1999) 197 CLR 83, referred to – Karger v Paul [1984] VR 161, referred to – Scope of a trustee’s immunity from disclosing reasons for the exercise of discretion – Mandie & Anor v Memart Nominees Pty Ltd (2014) 42 VR 325, referred to – Relevance of evidence of surrounding circumstances and subjective understanding of parties to assessing whether a trustee is acting in bad faith or for an improper purpose – Hindle v John Cotton Ltd (1919) 56 Sc LR 625, referred to – Finding that earlier resolution not effective to vest trust assets for the purposes of the Deed – Finding that later resolution had effect of distributing trust income to defendants with the effect that, in the absence of rectification, the balance of the trust assets ought to have been equally distributed to the parties – Finding that later resolution was made in bad faith and for an improper purpose.

EQUITY – Whether rectification available – Defendants had intended to wind up trust and distribute a specified sum being the trust account balance to themselves as beneficiaries in equal shares – Resolution failed to achieve that result – Defendants sought rectification to give effect to their actual intentions – Consideration of availability of remedy of rectification – Domazet v Jure Investments Pty Ltd [2016] ACTSC 33, referred to – The Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd (2001) 3 VR 526 – Finding that rectification is available to the defendants.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Hoyne	Baraka Lawyers
For the First and Second Defendants	Mr A Panna QC	Robert James Lawyers

TABLE OF CONTENTS

The parties and background to this proceeding...................................................................... 1

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Trani v Trani

Details

AGLC: Trani v Trani [2018] VSC 274
Case: [2018] VSC 274
Decision Date: 21 June 2018

CaseChat Overview and Summary

Trani v Trani involved a dispute over the administration of a discretionary family trust, with the plaintiff challenging resolutions made by the two defendants, who were also her brothers and the other directors of the trust during the relevant period. The plaintiff claimed that the defendants had improperly distributed the majority of the trust proceeds in equal shares between themselves, excluding her. The case was heard in the Supreme Court of Victoria.

The primary legal issues centred on whether an earlier resolution had resulted in an immediate vesting of the trust assets, and if a subsequent resolution, recorded in the trust's minute book, constituted a valid distribution of the trust capital and income under the trust deed. Additionally, the court had to determine whether the trustee exercised its discretion to distribute the trust assets to the defendants in good faith, on a real and genuine consideration, and for proper purposes. The court examined the criteria for challenging a trustee's exercise of discretion, referencing relevant case law such as Attorney-General (Cth) v Breckler and Karger v Paul. It also considered the scope of a trustee's immunity from disclosing reasons for the exercise of discretion, and the relevance of surrounding circumstances and subjective understanding of parties in assessing the trustee's actions.

The court found that the earlier resolution did not effectively vest the trust assets for the purposes of the trust deed. The later resolution had the effect of distributing the trust income to the defendants, such that, in the absence of rectification, the balance of the trust assets should have been equally distributed among the parties. However, the court held that the later resolution was made in bad faith and for an improper purpose. The court also found that the remedy of rectification was available to the defendants, as they intended to wind up the trust and distribute the specified sum, being the trust account balance, to themselves as beneficiaries in equal shares, but the resolution failed to achieve that result.

The court ordered that the trust be rectified to give effect to the defendants' actual intentions, subject to the plaintiff's entitlement to an equal share of the remaining trust assets. The court also ordered that the defendants provide an account of the trust's income and assets, and that any further distribution of the trust assets be made in accordance with the terms of the trust deed and the court's directions.

Orders