WHEATLAND HOLDINGS PTY LTD AS TRUSTEE FOR THE RODNEY MANUEL FAMILY TRUST
[2022] WASC 211
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WHEATLAND HOLDINGS PTY LTD AS TRUSTEE FOR THE RODNEY MANUEL FAMILY TRUST [2022] WASC 211
CORAM: STRK J
HEARD: 2 JUNE 2022 & ON THE PAPERS
DELIVERED : 24 JUNE 2022
FILE NO/S: TRU 2 of 2022
BETWEEN: WHEATLAND HOLDINGS PTY LTD AS TRUSTEE FOR THE RODNEY MANUEL FAMILY TRUST
Plaintiff
Catchwords:
Trusts - Application by trustee under s 92 of the Trustees Act 1962 (WA) - Power to amend the trust to include a corporate beneficiary in the category of 'Income Beneficiaries' - Whether costs should be paid out of trust property
Legislation:
Trustees Act 1962 (WA)
Result:
Application granted
Costs to be recovered out of the trust property on an indemnity basis
Category: B
Representation:
Counsel:
| Plaintiff | : | P G Donovan |
Solicitors:
| Plaintiff | : | MDS Legal |
Cases referred to in decision:
Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420
Herbert v Blenkinsop (No 2) [2019] WASC 389
Hill (Viscount) v Hill (Dowager Viscountess) [1897] 1 QB 483
International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151
Kearns v Hill (1990) 21 NSWLR 107
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
Mercanti v Mercanti [2015] WASC 297
Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45
Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 (S)
Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93
Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Wood v Wood (No 4) [2014] WASC 393
STRK J:
Introduction
The Rodney Manuel Family Trust (Trust) is a discretionary trust established by a deed of settlement made on 15 July 1977 (Trust Deed).[1] The Trust Deed established Mr Rodney Manuel as appointor during his lifetime and after his death the trustee named in his will. While the Trust Deed established Woagin Nominees Pty Ltd as the trustee, Wheatland Holdings Pty Ltd is now the validly appointed trustee of the Trust.[2]
[1] The Trust Deed of Settlement dated 15 July 1977 is annexure CDR-1 to the first affidavit of C Radenti.
[2] The standing of the Trustee is discussed at [21] ‑ [27] below.
The 'Primary Beneficiaries' under the Trust Deed are the children of Mr Rodney Manuel. The 'Income Beneficiaries' under the Trust Deed are Mr Rodney Manuel, his children, his wife, his grandchildren, and the husbands and wives of his children and grandchildren.[3]
[3] Trust Deed, cl 1(a) and cl 1(e).
The Trustee wishes to vary the Trust so as to include in the category of 'Income Beneficiaries' a corporate beneficiary, as the Trustee understands that there are significant taxation benefits for the Trust if it is able to make distributions to a corporate beneficiary.[4] The Trustee has sought legal advice and considers that it has the power to so vary the Trust by operation of cl 12 of the Trust Deed.
[4] First affidavit of C Radenti pars 3, 5 and 32.
By an originating motion filed on 17 May 2022, the Trustee seeks a direction from the court pursuant to s 92 of the Trustees Act 1962 (WA), that it is within the power of the Trustee to amend the Trust so as to include a corporate beneficiary in the category of 'Income Beneficiaries', as that term is defined in the Trust Deed of the Trust.
For the reasons that follow, I am satisfied that it is appropriate to give the direction sought by the Trustee.
Procedural history
The application first came before me on 2 June 2022, at which time I made orders in the following terms for the service of the application on persons interested in the application, namely the 'Primary Beneficiaries' and the 'Income Beneficiaries' of the Trust, and affording all persons interested in the application the opportunity to be heard:
1. A copy of these orders, together with the transcript of the hearing of 2 June 2022, be served by email or pre-paid ordinary post to each of the primary beneficiaries and income beneficiaries of the Rodney Manuel Family Trust (Trust).
2. By 4pm on Friday 10 June 2022, any primary beneficiary or income beneficiary of the Trust give notice in writing to the plaintiff and to the Court of an intention to be heard in relation to the proceedings.
3. If notice is received in accordance with order 2 the application be listed for directions at 9:45am on Tuesday 14 June 2022, or if no such notice is given in accordance with order 2 the application shall be determined on the papers before the Court prior to Friday 24 June 2022.
4. There be liberty to apply.
5. The costs of today be reserved.
Notice of this proceeding was given to the beneficiaries, including by satisfaction of the orders made on 7 June 2022,[5] and no beneficiary gave notice of an intention to be heard in relation to the proceedings.[6] Accordingly, the application is to be determined on the papers.
[5] Second affidavit of C Radenti, par 5; Third affidavit of C Radenti, par 7.
[6] Second affidavit of C Radenti, par 6; Third affidavit of C Radenti, par 8.
Evidence
The application is supported by three affidavits made by Camilla D'Angelo Radenti, a solicitor who is employed by MDS Legal and who assists in the conduct of the matter under the supervision of Mr Paul Donovan.
On 17 May 2022, Ms Radenti made her first affidavit, to which she attached documents marked CDR1 to CDR9. Among other things, Ms Radenti attached to her affidavit a copy of the Trust Deed; described various deeds of appointment made in 1989 and 1990; described purported variations of the Trust Deed by deeds made in 1994, 2005 and 2010; described the appointment in 2021 of MDS Legal to act as solicitors for Wheatland Holdings Pty Ltd; described the views formed by MDS Legal upon review of documentation relevant to the Trust, including the terms of the Trust Deed, the 1989 Deed of Appointment, the 1990 Deed of Appointment, the 1994 Deed of Variation, the 2005 Deed of Variation, and the 2010 Deed of Variation (copies of which were also attached to the affidavit); described the steps taken by Wheatland Holdings Pty Ltd to regularise its appointment as Trustee; and deposed to the view formed by Ms Radenti and Mr Donovan of MDS Legal that it is within the power of the Trustee to amend the Trust so as to include in the category of 'Income Beneficiaries' a corporate beneficiary.
On 1 June 2022, Ms Radenti made her second affidavit, to which she attached documents CDR1 to CDR3. Among other things, Ms Radenti deposed to the identity of each of the 'Primary Beneficiaries' and the 'Income Beneficiaries', as had been described to her by Mr Rodney Manuel; and described her communications sent to the 'Primary Beneficiaries' and the 'Income Beneficiaries', by which she gave notice of the application and the hearing then listed on 2 June 2022.
On 13 June 2022, Ms Radenti made her third affidavit, to which she attached documents CDR1 to CDR4. Among other things, Ms Radenti deposed to service of the documents referred to in order 1 of the orders made on 2 June 2022 by email or pre-paid ordinary post to each of the 'Primary Beneficiaries' and 'Income Beneficiaries' of the Trust. Ms Radenti further deposed that as at the date of her affidavit, she had not received notice from any 'Primary Beneficiary' and 'Income Beneficiary' that they intended to be heard in relation to this matter.
In support of the application, the Trustee also relies upon a written outline of submissions filed on 1 June 2022.
Applicable principles – the court's power to make directions with respect to trusts
Section 92 of the Trustees Act is headed 'Directions, trustee may ask Court for', and provides as follows:
(1) Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.
(2) Every application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the Court thinks expedient.
Section 92 and other provisions within pt VII div 3 of the Trustees Act bear a close textual similarity to equivalent New South Wales legislation, discussed by the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66.
It is well settled that applications for directions under the Trustees Act (or such legislative equivalents) amount to the giving of 'private advice'.[7] An application for judicial advice is founded upon facts stated to the court by the trustee, untested by adversarial procedure, and assumed by the court to be true for the purpose of the application. The advice is given on that basis.[8]
[7] Wood v Wood (No 4) [2014] WASC 393 [102] ‑ [103].
[8] Herbert v Blenkinsop (No 2) [2019] WASC 389 [56].
The jurisdictional bar to a pursuit of relief under provisions like s 92 is simply that the applicant must point to an existence of a question respecting the management or administration of trust property, or a question respecting the interpretation of a trust instrument.[9]
[9] Wood v Wood (No 4) [103(b)]; Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 [58] (Gummow ACJ, Kirby, Hayne & Heydon JJ).
The court exercises a discretion when considering applications for advice brought by trustees under private advice provisions like s 92. Advice does not have to be provided.[10]
[10] Wood v Wood (No 4) [103(c)].
The procedure for seeking judicial advice pursuant to provisions like s 92 is summary in character.[11]
[11] Wood v Wood (No 4) [103(e)].
A trustee is provided with a level of personal protection when the trustee receives and acts upon the court's private advice.[12] The wider purpose of a private advice application is to protect the interests of the trust.[13]
[12] Wood v Wood (No 4) [103(g)]; Macedonian Church [64] (Gummow ACJ, Kirby, Hayne & Heydon JJ); Trustees Act s 95.
[13] Wood v Wood (No 4) [103(i)]; Macedonian Church [72] (Gummow ACJ, Kirby, Hayne & Heydon JJ).
The status of others in an application for private advice is that of 'participants', not 'parties' to the trustee's advice proceedings, albeit permitted to be heard and allowed to participate in the proceedings, to some extent.[14]
[14] Wood v Wood (No 4) [103(h)]; Macedonian Church [65] (Gummow ACJ, Kirby, Hayne & Heydon JJ).
Standing of the Trustee to bring the application
Only a validly appointed trustee has the power to seek the court's direction under s 92 of the Trustees Act. A preliminary issue arises in this matter as to whether Wheatland Holdings Pty Ltd is the validly appointed Trustee, which issue was squarely addressed in the first affidavit of Ms Radenti and at pars 13 to 17 of the outline of submissions.
As noted above, the Trust Deed established Woagin Nominees Pty Ltd as the trustee of the Trust.[15]
[15] First affidavit of C Radenti, par 8(a) and CDR-1, page 11.
Clause 15 of the Trust Deed provides that:
In the event of the retirement of the Trustee it shall be succeeded as Trustee by a person or company nominated by the appointor.
By cl 1(g) of the Trust Deed, the appointor is, and has at all material times has been Mr Rodney Manuel.
Ms Radenti in her first affidavit described a series of purported changes to the trustee of the Trust in 1989 and 1990, ending with the purported appointment of Wheatland Holdings Pty Ltd as the Trustee on 9 January 1990. Counsel acknowledged and I agree that the purported changes were not validly made. In short, Mr Rodney Manuel as appointor of the Trust purported to 'remove' the then-appointed trustee and appoint in its place a new trustee, when he did not have that power. By cl 15 of the Trust Deed, the power of the appointor is limited to the power of the appointor to nominate a replacement in the event of the retirement of the existing trustee. Further, as detailed below, the Trust Deed does not contain a power for the Trustee of the Trust to amend the terms and conditions of the Trust Deed.
On behalf of the Trustee it was submitted and I accept that the appointment of Wheatland Holdings Pty Ltd as Trustee has now been regularised in that:
(a)on 11 April 2022, Mr Peter Manuel, as a director of the original trustee, Woagin Nominees Pty Ltd, sent a letter to Mr Rodney Manuel, as appointor of the Trust, confirming that Woagin Nominees Pty Ltd did in fact resign as trustee of the Trust in or about 1989;[16] and
(b)on 12 April 2022, Mr Rodney Manuel, in his capacity as the appointor of the Trust, confirmed in writing that:
(i)Woagin Nominees Pty Ltd resigned as Trustee for the Trust in 1989; and
(ii)in accordance with cl 15 of the Trust Deed, Wheatland Holdings Pty Ltd had been nominated and appointed as the Trustee of the Trust.[17]
[16] First affidavit of C Radenti, CDR-8.
[17] First affidavit of C Radenti, CDR-9.
Consequently, Wheatland Holdings Pty Ltd is validly appointed and has standing to apply to the court for directions with respect to the Trust.
Direction sought – the Trustee's ability to amend the Trust to include corporate beneficiaries
As noted above, the Trustee wishes to vary the Trust so as to include in the category of 'Income Beneficiaries' a corporate beneficiary. The Trustee has sought legal advice and considers that it has the power to so vary the Trust by operation of cl 12 of the Trust Deed.
Clause 12 of the Trust Deed provides as follows:
12.The Trustee for the time being may at any time and from time to time by deeds revoke, add to or vary all or any of the trusts hereinbefore created by any variation or alteration or addition made thereto from time to time and may by the same or any other deed or deeds declare any new or other trusts or powers concerning the Trust Fund or any part or parts thereof the trusts whereof shall have been so revoked, added to or varied but so that the law against perpetuities is not thereby infringed and so that such new or other trust powers, discretions, alterations or variations -
(i)may relate to the management or control of the Trust Fund or the investment thereof or to the Trustee's powers or discretions in these presents contained
(ii)shall not be in favour of or for the benefit of the Settlor or the Trustee or result in any benefit to the Settlor or the Trustee but shall otherwise be for the benefit of any one or more of the Primary Beneficiaries named or referred to herein
(iii)shall not affect the beneficial entitlement to any amount vested in and set aside for any Beneficiary prior to the date of the variation alteration or addition
The Trustee's position
Counsel for the Trustee acknowledged that there is no power in the Trust Deed, by operation of cl 12 or otherwise, to amend the terms and conditions of the Trust Deed. Counsel submitted that the power to amend is limited to the power 'by deeds [to] revoke, add to or vary all or any of the trusts hereinbefore created by any variation or alteration or addition made thereto from time to time'.
It is the Trustee's position that the amendment the subject of the direction sought in this proceeding is not an amendment to the Trust's 'powers and provisions' prescribed in the Trust Deed, but a variation to the Trust itself, namely the ability to make distributions of income to corporate beneficiaries.
Counsel submitted that the Trustee has an express power under cl 12 to vary the trusts created; and a variation by the Trustee to the trusts created to enable the addition of a corporation to the Income Beneficiaries so as to achieve taxation benefits would seem to be a clear exercise of such an ability to vary a trust.
Applicable principles
Construing a trust deed
As was observed by counsel for the Trustee, Buss P in Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 comprehensively outlined the principles to be applied when construing a trust deed which I summarise as follows.
First, the construction of a written agreement involves ascertaining what a reasonable person would have understood the parties to the agreement to mean. The rights and liabilities of the parties under a clause in the agreement are to be determined objectively. Consideration should ordinarily be given not only to the language of the agreement, but also to the apparent purpose and object of any transaction created by or evidenced in the agreement.[18]
[18] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [68] (Buss P), citing Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ); International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 [8] (Gleeson CJ), [53] (Gummow, Hayne, Heydon, Crennan & Kiefel JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] (French CJ, Nettle & Gordon JJ).
Secondly, it is necessary, in determining the meaning of the provisions of a commercial contract, to ask what a reasonable businessperson would have understood those provisions to mean. That inquiry will require consideration of the language of the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.[19]
[19] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [69] (Buss P), citing Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] (French CJ, Hayne, Crennan & Kiefel JJ); Mount Bruce Mining v Wright Prospecting Pty Ltd [47].
Thirdly, a written agreement must be construed as a whole. The words of a clause in the agreement are to be given the most appropriate meaning which they can legitimately bear. A court must have regard to all of the provisions of the agreement with a view to achieving harmony among them.[20]
[20] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [70] (Buss P), citing Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 - 110 (Gibbs J).
In this regard, Buss P noted that in Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420, 426 - 427, Dixon CJ and Fullagar J said, '[w]ords may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency'.[21]
[21] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [70] (Buss P), also referencing Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409 [21] (Gleeson CJ, Gummow, Kirby, Hayne, Callinan, Heydon & Crennan JJ).
Fourthly, the rules that apply to the construction of contracts apply to the construction of deeds.[22]
[22] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [72] (Buss P), citing Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 [9] - [10] (Gleeson CJ, Gaudron, McHugh, Gummow & Hayne JJ).
Fifthly, the rules applicable to the construction of contracts apply also to trusts.[23]
[23] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [73] (Buss P).
In this regard, Buss P accepted that the words of a clause in a trust deed are to be given their ordinary and natural meaning, read in the context of the trust deed as a whole, unless the words have a special or technical meaning.[24]
The power to vary
[24] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [80] (Buss P), citing in addition to the High Court authorities referenced above, Hill (Viscount) v Hill (Dowager Viscountess) [1897] 1 QB 483, 486 (Lord Esher MR); Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93 [21] (Kyrou, Ferguson & McLeish JJA).
At [81] to [112] of the Court of Appeal's reasons for decision in Mercanti, Buss P also made a number of observations in relation to a trustee's power of variation by reference to various authorities. While I have had regard to the Court of Appeal's reasons as a whole, it is helpful to extract from the reasons of Buss P the following.
As to the power to vary, his Honour noted that:
[81]It is the duty, '[p]erhaps the most important duty', of a trustee to adhere to and carry out the terms of the trust. See Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 [32] - [33] (Gleeson CJ, McHugh, Gummow, Kirby & Hayne JJ). A trustee's function is 'to take the trusts as it finds them and to administer them as they stand'. See Re Dion Investments Pty Ltd [2014] NSWCA 367; (2014) 87 NSWLR 753 [94] (Barrett JA; Beazley P & Gleeson JA agreeing). A trustee does not have an implied power to vary the trust deed.
[82]However, a trust deed may contain an express power of variation. Most modern trust deeds contain an express power which enables the trusts and the provisions of the trust deed to be varied, but the nature, form and extent of the permitted variations depend, in general, upon the language and apparent purpose of the variation clause in the context of the trust deed as a whole.
While acknowledging that there are previous authorities in which various courts have read down powers to vary trust deeds, his Honour noted that in Kearns v Hill (1990) 21 NSWLR 107, the Court of Appeal of New South Wales held that a power to vary a trust deed (including a power of variation given to a trustee) which, in its ordinary and natural meaning, included a power to vary the identity of the beneficiaries of a trust, by the addition of beneficiaries, could not be limited by reference to historical presumptions against variations which alter the main structure of, or beneficial entitlements under, trusts.[25]
[25] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [94] (Buss P).
As to the ambit of the power, his Honour observed that:
[97]An express power to vary a trust deed may contain, within the language of the power, express or implied limitations in relation to its exercise; for example, as to the manner and form of the variation or the obtaining of specified consents to the variation.
[98]The rules that are applicable to the construction of an express power to vary a trust deed (and trust deeds generally) are separate and distinct from limitations which may apply, independently of the language of the power, to its exercise. Limitations of that kind include, for example, the equitable doctrine of fraud on a power.
The construction of the trust deeds in Mercanti at first instance
As was observed by counsel for the Trustee, an example of the application of the principles set out above can be found in the construction of two trust deeds by Le Miere J in Mercanti v Mercanti [2015] WASC 297.
At first instance, Le Miere J was required to construe the power to amend in two trust deeds in circumstances where the wording differed in each trust deed. The matter in issue was whether the purported change to the appointors of each trust by amendment was valid.
In the first deed considered by Le Miere J, the crucial words in the clause permitting amendment were 'the Trustees … may … vary … the trusts terms and conditions hereinbefore contained'.[26] In construing the first deed, Le Miere J concluded that:[27]
In my opinion the natural and ordinary meaning of the words of cl 28 are that the trustees may amend the provisions of the trust deed, including the items in the Schedule naming or describing the Appointor and the Guardian. In my opinion there is nothing in the remaining provisions of the trust deed that necessarily imply that the trustees cannot amend the deed by removing the Appointor or Guardian and replacing them.
[26] Mercanti v Mercanti [2015] WASC 297 [87].
[27] Mercanti v Mercanti [2015] WASC 297 [91].
Grounds 1 and 2 of the appeal of the decision of Le Miere J, which grounds concerned the proper construction of cl 28, were dismissed.[28]
[28] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [113] - [154] (Buss P), [348] - [359] (Newnes & Murphy JJA).
In the second deed, the power to amend was found in cl 14, which provided as follows:[29]
[29] Mercanti v Mercanti [2015] WASC 297 [98].
14.1The Trustee may at any time and from time to time (but whilst there shall be an Appointor only after having given not less than 30 days written notice to the Appointor of his intention so to do) by deeds revoke add to or vary all or any of the trusts hereinbefore provided or the trusts provided by any variation alteration or addition made thereto from time to time and may by the same or any other deed declare any new or other trusts or powers concerning the Trust Fund or any part thereof the trusts whereof shall have been so revoked added to or varied.
14.2 The powers specified in clause 13.1 shall not be exercised so that:
14.2.1 any interest under the trusts as so revoked added to or varied may vest after the expiry of the perpetuity period;
14.2.2 any member of the Excluded Class is becomes or may become entitled to any interest or benefit under the trusts as so revoked added to or varied; or
14.2.3 the beneficial entitlement to any amount set aside for any Beneficiary prior to the date of the variation alteration or addition is affected.
14.3 Save as provided in clauses 14.1 and 14.2 these presents shall not be capable of being revoked added to or varied.
In construing the second deed, Le Miere J concluded that in his opinion:[30]
[T]he natural and ordinary meaning of the words 'the Trustee may … vary … the trusts hereinbefore provided' does not extend to varying the terms and conditions of the trust deed dealing with the office of Appointor as distinct from the trusts created by the trust deed. The FW Trust Deed distinguishes between 'the trusts' and 'the trusts powers and provisions' of the trust deed.
[30] Mercanti v Mercanti [2015] WASC 297 [101].
The analysis of Le Miere J makes plain that cl 14.1 was construed having regard to the language and apparent purpose of the variation clause in the context of the trust deed as a whole. His Honour's construction of the second deed was not the subject of appeal.
Disposition
Section 92(2) of the Trustees Act requires that every application made under the section be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the court thinks expedient. I am satisfied that the notice requirement has been met. As noted above, notice of this proceeding was given to all persons interested,[31] and no beneficiary gave notice of an intention to be heard in relation to the proceedings.[32]
[31] Second affidavit of C Radenti, par 5; Third affidavit of C Radenti, par 7.
[32] Second affidavit of C Radenti, par 6; Third affidavit of C Radenti, par 8.
As to the requested direction, I am satisfied that the jurisdictional bar to the pursuit of relief under s 92 of the Trustees Act has been met. The question posed concerns the interpretation of a trust instrument. Further, there are no circumstances revealed on the evidence which are a cause for reticence in the exercise of the discretion by the court.
As to the question of whether it is within the power of the Trustee to amend the Trust so as to include a corporate beneficiary in the category of 'Income Beneficiaries' as that term is defined in the Trust Deed of the Trust, I find as follows.
The Trustee's question concerns the nature, form and extent of the variation permitted under the Trust Deed. Clause 12 of the Trust Deed concerns variation and must be construed having regard to the language and apparent purpose of the clause in the context of the Trust Deed as a whole.
The crucial words of cl 12 are '[the] Trustee … may … by deeds … vary all or any of the trusts hereinbefore created'.
In my opinion, the natural and ordinary meaning of these words would empower a variation of the Trust itself. The language of cl 12 does not include language that extends to a power to vary the terms and conditions of the Trust Deed. In this regard, cl 12 is similar in its terms to cl 14.1 of the second deed considered by Le Miere J in Mercanti.
Such construction is consistent with cl 2, by which the Settlor declared that the Trustee shall, and the Trustee declared that it would 'henceforth hold the Trust Fund and the income thereof upon the trusts and with and subject to the powers and provisions hereinafter expressed concerning the same'. There is a distinction drawn in cl 2 between the 'trusts' and the 'powers and provisions hereinafter expressed concerning the same'.
Further, in my opinion, there is nothing in the remaining provisions of the Trust Deed that necessarily imply that the Trustee cannot vary the Trust as is proposed.
To the extent that cl 12 does empower the Trustee to 'declare … new … powers concerning the Trust Fund', those powers appear to be limited to the management or control of the Trust Fund or the investment thereof or to the Trustees' powers or discretions in 'these presents contained'. The power does not extend to the variation proposed by the Trustee.
The variation the subject of the direction sought in this proceeding is not a variation to the Trust's 'powers and provisions' set out in the Trust Deed. I accept counsel's submission that the Trustee is not seeking to effect a variation that is akin to the amendment of provisions in the Trust Deed dealing with the way in which appointors are selected. Rather, the direction pertains to a variation to the Trust itself, namely the ability to make distributions of income to a corporate beneficiary.
While cl 12 also contains a number of express limitations on the power conferred by cl 12, none apply to the variation proposed by the Trustee.
In this case, on a proper construction of the Trust Deed, I accept that the Trustee has an express power to vary the trusts created. I accept that a variation by the Trustee to the trusts created by the Trust Deed to enable the addition of a corporation to the 'Income Beneficiaries' so as to achieve taxation benefits is an exercise of such an ability to vary a trust. Further, the limits in cl 12 do not prohibit the variation proposed. I therefore conclude that in all of the circumstances presented, it is appropriate to make the direction sought.
Costs
At the first return of the application on 2 June 2022, counsel for the Trustee addressed the court on the question of costs and submitted that it would be appropriate for the Trustee's costs to met by the Trust Fund on an indemnity basis.[33] Counsel referred to and relied upon the principles concerning costs in matters involving trust disputes found in Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 (S) and Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119.
[33] ts 10 (2 June 2022).
As to the question of costs, I am satisfied that under s 37(1) of the Supreme Court Act 1935 (WA) the court has full power to determine by whom or out of what estate, fund, or property, and to what extent costs are to be paid.
Under O 66 r 4(1) of the Rules of the Supreme Court 1971 (WA):
Where property is the subject of any action or matter, or where any question arising therein will affect any right or claim to property, the court may make an order that the costs of any party may be recovered out of the property with or without recourse against any other party: provided that no such order shall be made unless the court is satisfied that the party seeking the order had a genuine interest to protect, or that it was reasonable in the circumstances that he should appear.
Section 97 of the Trustees Act also confers a wide discretion on the court to order that the costs and expenses of and incidental to any application for any order under the Trustees Act 'be raised and paid out of the property in respect of which any of them is made, or out of the income of the property, or to be borne and paid in such manner and by such persons as the Court thinks fit'.
In all of the circumstances, I am satisfied that the Trustee is entitled to its costs of this proceeding.
First, I accept that this proceeding falls into the 'first type' of trusts dispute, whereby an action is brought by a trustee relating to the construction of the trust instrument or some other question arising in the course of an administration.
Counsel submitted and I accept that these are not circumstances where the Trustee might be criticised for being overly timid in bringing an application for directions from the court. The application to the court was one that was reasonably made in all of the circumstances.
Secondly, I accept that the Trustee has brought the proceeding and incurred the costs for the benefit of the trust generally. As noted above, the Trustee understands there to be significant taxation benefits for the Trust if it is able to make distributions to a corporate beneficiary.
Thirdly, there is no suggestion that the Trustee has incurred unnecessary expense in the prosecution of the proceeding.
Finally, there is nothing that disentitles the Trustee from claiming the costs incurred on an indemnity basis.
Conclusions and orders
For the reasons set out above, I am satisfied that it is appropriate to give the direction sought by the Trustee pursuant to s 92 of the Trustees Act. It is also appropriate that the Trustee's costs of the application made by originating motion filed on 17 May 2022, which includes the costs reserved on 2 June 2022, be recovered out of the property of the Rodney Manuel Family Trust on an indemnity basis.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AI
Associate to the Honourable Justice Strk
24 JUNE 2022
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