Wales and ors v Wales and ors

[2012] VSC 409

Revised
IN THE SUPREME COURT OF VICTORIA		Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 1849 of 2012

GLADYS WALES, ROSLYN MATEAR & SUZANNE CASE (AS TRUSTEES FOR THE HN WALES 1954 TRUST, THE MEM WALES TRUST AND THE BMR HUTCHINSON TRUST	Plaintiffs
v
MURRAY WRIGHT WALES & ORS	Defendants

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JUDGE:	KAYE J
WHERE HELD:	Melbourne
DATE OF HEARING:	4 September 2012
DATE OF JUDGMENT:	4 September 2012
CASE MAY BE CITED AS:	Wales & ors v Wales & ors
MEDIUM NEUTRAL CITATION:	[2012] VSC 409

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PRACTICE – Discovery – Action by trustees for settling accounts of trusts.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J.S. Mereine	HWL Ebsworth Lawyers
For the first and second Defendants	Mr R.G. Wells	Tolhurst, Druce & Emmerson
For the third Defendant	In person

HIS HONOUR:

1. This is an appeal by the third defendant from orders made by Associate Justice Randall on 24 August 2012 on the return of a summons filed on behalf of the first and second defendants of 27 July.

1. The three plaintiffs are the trustees of four trusts, which are referred to as the Wales trusts.  The beneficiaries of those trusts are the children of the late Geoffrey Wales and of his brother, Murray Wales.  The first plaintiff, Gladys Wales, was married to Geoffrey Wales and the second and third plaintiffs are the children of Gladys and Geoffrey Wales.  Murray Wales is the first defendant to the proceeding and the second, third and fourth defendants are his children.

1. The first of the Wales trusts was established in about 1954 and the other three trusts, as I understand it, were established at various stages in the intervening years until the early 1960s.  For some years, until he was overtaken by ill health in 2004, Geoffrey Wales acted as a trustee of the trusts.  The first plaintiff, Gladys Wales, was appointed a trustee of them successively in 1978 and 1985.  In 2004, owing to his ill health, Geoffrey Wales retired as a trustee, and his two daughters, the second and third plaintiffs, were appointed as trustees in his stead.

1. It appears that Geoffrey Wales invested the assets of the trusts in shares and he was an interested share trader.  He did not use a share broker but rather carried out those investments on his own.  It was he who kept any records which were maintained on behalf of the trusts and for that purpose, he had the assistance of an accountant, Mr Bill Sumerville of Pro‑Act.  In 2004, the first plaintiff engaged Bell Potter Securities to act as a portfolio administration service provider to the trusts.  In early 2011, the defendants requested access to the records of the trust.  An inspection took place on 31 March 2011 at the premises of Pro‑Act Accountants, and at that inspection, documents relating to the last six years were produced.  Subsequent to that inspection, the third defendant, Julian Wales, made a request for further trust records going back to the inception of the trusts.

1. On 30 March 2012, the plaintiffs instituted the present proceeding by originating motion, by which they sought directions for the winding up of the trusts, an order that the court settle the accounts of the trusts, and an order that the court discharge the plaintiffs and trustees of the trusts.

1. On 13 April 2012, Associate Justice Mukhtar gave directions in the proceeding.  By those directions, his Honour ordered that the trust records be made available for inspection.  It would appear that the second and third defendants each inspected documents or trust records of the trusts from 30 April to 4 May between 14 and 15 May.

1. Subsequent to that inspection, the third defendant took issue with the documentation which had been made available by the trustees.  As I have stated earlier, on 27 July, the first and second defendants issued the summons on which this appeal lies, seeking general discovery and inspection of documents. 

1. At the return of the summons, His Honour Associate Justice Randall made a number of orders, but particularly two, by which he limited the scope of discovery to be made.  By his first order, His Honour directed that the plaintiffs provide to the defendants an authority directed to Bell Potter Securities authorising Bell Potter Securities to permit the defendants access to all documents within their possession relating to the four trusts.  Secondly, his Honour made orders directing that the plaintiffs make discovery on oath of documents falling within three specific categories of documents, which were limited to either the purchase of a property, a loan made to the husband of one of the plaintiffs, and to the transfer of real estate between the trusts.

1. It is from that order that the third defendant, Mr Julian Wales, appeals.  On the appeal, the first and second defendants, who did not appeal, were nevertheless represented by Mr R.G. Wells of counsel and he supported the submissions made by Mr Wells.  Mr Mereine appeared on behalf of the plaintiffs.

1. In essence, the third defendant, and supported by Mr Wells, submitted that instead of the limited orders made by Associate Justice Randall, there should have been made an order for general discovery.  There was a particular focus on the failure of the plaintiffs to discover a large amount of documents which they, as trustees, and their predecessors, might have been expected to maintain relating to the conduct of the trust prior to 2004.

1. In support of the submissions, both Mr Wales and Mr Wells relied on the fundamental principles that trustees must maintain adequate records and accounts relating to the affairs of the trust and make such records and accounts available to any beneficiary who requests inspection of them.

1. Mr Mereine, who appeared for the plaintiffs, submitted that the type of discovery sought by the defendants would be of a fishing nature.  This is not a case in which the defendants have brought any proceeding alleging a breach of trust of any type.  In the absence of any allegation of fraud, and even where such a proceeding is brought, such a proceeding would be limited to a period of six years by the Limitation of Actions Act.  Mr Mereine submitted that no basis has been properly made for the provision of such wide‑ranging discovery in what, in essence, is an application by the plaintiffs for the passing of accounts.

1. The principles relating to this application are not in dispute.  Firstly, of course, by way of background, as I have already stated, the plaintiffs and their predecessors, as trustees of the four trusts, had duties to maintain adequate accounts and records relating to the affairs of the trusts and to make those documents available upon request by any beneficiary.

1. Nevertheless, it must be steadily borne in mind that this is not a proceeding in which the defendants have brought an application alleging that the trustees have failed to maintain such documents and seeking discovery in relation to a breach of trust by the trustees.  Rather, it must be borne in mind that this is an application for discovery in proceedings brought by the trustees for the passing of accounts.  In those proceedings, it is important that the plaintiffs make available to the defendants sufficient documents to enable the defendants to properly peruse and understand the accounts which are sought to be passed and, if they see fit, to contradict or argue against any of those accounts.  The documents, which the plaintiffs in that proceeding must produce, of course, can be defined by reference to the duties of the trustees in that it would ordinarily be expected that over a period of years, the trustees of trusts would maintain appropriate books and records and thus discharge their duties as trustees.

1. The originating motion in this case has not defined for what period the plaintiffs seek to have the court settle the trustee's accounts.  It may well be that ultimately the plaintiffs may seek to confine that period to a rather limited period, extending back no further than the time in which Bell Potter Securities have effectively handled the investments on behalf of the trusts.  Nevertheless, even if that period were so confined, it would seem to me that access to some of the earlier records of the trusts would be relevant to assist the beneficiaries to fully understand the documents which might be made available by Bell Potter Securities and thus to enable the defendants to act adequately as contradictors in relation to any accounts which are sought to be passed.

1. I am not satisfied that this is a case in which it would be appropriate to grant an application for general discovery of the type sought by the third defendant.  As I stated, such an application would not be relevant to the current proceeding brought by the plaintiffs, it would be too wide, and I agree with Mr Mereine that such an application would be fishing.  Indeed, it is noteworthy that the first and second defendants, who are represented, did not see fit to appeal from the order of Associate Justice Randall, by which his Honour made an order for limited discovery.

1. In considering this appeal, it is relevant that in his affidavit of 31 July 2012, Mr Julian Wales, the third defendant, did swear that the documents, which have been made available for inspection for the period after March 2004, are sufficient to enable an appropriate assessment to be made.  Indeed, it would seem that the complaint made by him and by Mr Wells, on behalf of the first and second defendants, primarily focused on the earlier period.

1. As I stated, in relation to that period, it would seem to me that some documentation, if it were maintained by the trustees, might be relevant to enable the defendants, as beneficiaries of the trusts, to fully understand whatever accounts are put forward for passing by the court and to enable them to act appropriately as contradictors, if they see fit.  Nevertheless, I do not consider that the documents which are necessary to be discovered for that purpose are as wide as those sought by Mr Julian Wales or as submitted by Mr Wells.  Instead, in addition to the documents directed by Associate Justice Randall, I would allow the appeal to further require that the following four categories of documents be discovered by the plaintiffs and that the plaintiffs, if those documents are not in their possession, make an appropriate affidavit explaining where they otherwise might be: firstly, the annual income and expenditure statements prepared by the trust accountants for the period before 30 June 2005; secondly, the annual balance sheets of the trusts prepared by the trust accountants for the period before 30 June 2005; thirdly, any cashbooks of the trusts before 30 June 2005; fourthly, any schedules of assets maintained by the trusts for the period before 30 June 2005.

1. Subject to hearing from counsel, I would suggest the following orders: firstly, the appeal by the third defendant from the orders of Associate Justice Randall be allowed in part, that to the orders made by his Honour, the following order be made, namely, that the plaintiffs make, file and serve an affidavit of discovery in relation to the following four categories of documents in respect of the trusts:

(1)The annual income and expenditure statements prepared by the trust accountants of the trust for the periods before 30 June 2005;

(2)The annual balance sheets of the trust prepared by the trust accountants before 30 June 2005;

(3)The cashbooks of the trusts before 30 June 2005; and

(4)Any schedules of assets of the trusts for the period before 30 June 2005.