Wood v Inglis - [2009] NSWSC 601

CITATION: Wood v Inglis [2009] NSWSC 601

HEARING DATE(S): 30, 31 March, 1 April, 4 May 2009

JUDGMENT DATE :
30 June 2009

JURISDICTION: Equity Division

JUDGMENT OF: Brereton J

DECISION: Trustee was entitled to treat movements in net value of investments on income account. Controlling director of trustee company had implied actual authority in respect of all affairs of the Trust, accepted accounts prepared on market revaluation basis, and thereby validly determined to treat increase in market value of investments as income for each relevant year. Trustee validly and effectively made irrevocable and absolute distribution of whole of income shown in annual accounts for each relevant year, by default if not expressly. Accordingly, trust was indebted to deceased on loan account at date of death for $1,242,640.20. Estate has not released debt. Trustee was not entitled retrospectively to revoke irrevocable and absolute distributions previously made and to extent that reconstruction of Trust accounts pursuant to resolutions had that effect, they were beyond Trustee’s power and void.
Cross-claimant is entitled to judgment against first cross-defendant for payment to executors of estate of $1,242,640.20, and interest. Cross-claimant is entitled to judgment against first cross-defendant for payment to herself of $215,327.72, and interest.

CATCHWORDS: TRUSTS AND TRUSTEES – Powers of trustees - Capital and income – whether trustee of discretionary trust entitled to treat as income unrealised capital gain on investments – whether trustee validly and effectively did so – whether trustee validly made distributions of such income to beneficiary – whether trustee entitled after beneficiary’s death to revisit treatment of unrealised capital gain so as to revoke distributions previously made – whether beneficiary’s estate released debt on beneficiary current account. - CORPORATIONS – Directors – authority – where other directors leave conduct of affairs of corporation entirely to controlling director – whether controlling director has implied actual authority in respect of all relevant affairs of company

CATEGORY: Principal judgment

CASES CITED: Equiticorp Finance Ltd v Bank of New Zealand (1993) 32 NSWLR 50
Permanent Trustee Co Ltd v Bernera Holdings Pty Ltd [2004] NSWSC 56
QBE Insurance Group v ASIC (1992) 38 FCR 270
Re Spanish Prospecting Co Limited [1911] 1 Ch 92
Wood v Inglis [2008] NSWSC 1147; (2003) 68 ACSR 420

PARTIES: First Cross Claim:
Helen Margaret Inglis (cross-claimant)
Inglis Research Trust P/L (first cross-defendant)
Kathryn Margaret Clark (second cross-defendant)
Michael William Inglis (third cross-defendant)
Pamela Ruth Wood (fourth cross-defendant)
Fiona Jane Narlini Inglis (fifth cross-defendant)
William Keith Inglis (sixth cross-defendant)

FILE NUMBER(S): SC 1595/08

COUNSEL: Mr J E Thomson w Mr H N Newton (cross-claimant)
Mr B J Burke (second cross-defendant)
Mr M B Evans w Mr C A Lambert (third cross-defendant)
Ms J A Needham SC w Mr R M Higgins (fourth cross-defendant)

SOLICITORS: Michael C Smith (cross-claimant)
Courtenay & Co (second cross-defendant)
Molloy & Schrader (third cross-defendant)
DSC Law (fourth cross-defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Tuesday 30 June 2009

1595/08 Pamela Ruth Wood v Helen Margaret Inglis

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 Wood v Inglis

Details

AGLC: Wood v Inglis [2009] NSWSC 601
Case: [2009] NSWSC 601
Decision Date: 30 June 2009

CaseChat Overview and Summary

In the matter of Wood v Inglis, the Federal Court of Australia was tasked with resolving several disputes arising from the administration of a discretionary trust and the conduct of a company's affairs. The primary parties involved were the executor of the estate of the deceased beneficiary, who brought the suit, and the trustees, who were the respondents. The crux of the matter was the trustees' handling of capital gains within the trust, and whether they were entitled to distribute these as income to the beneficiary. Additionally, the court had to determine the authority of the controlling director of a company over its affairs, particularly in relation to the trustees' conduct.

The legal issues that the court had to decide upon included whether the trustees of the discretionary trust were justified in treating unrealised capital gains on trust investments as income, and if they could validly distribute these to the beneficiary. Another key issue was whether the trustees could, after the beneficiary's death, reconsider and revoke the distributions of the capital gains previously made. The court also had to address the authority of the controlling director in a company where other directors had relinquished all control to the dominant director, and whether this director had implied actual authority to act in all matters pertaining to the company.

The court reasoned that the trustees did not have the power to treat unrealised capital gains as income, and therefore, any distributions made to the beneficiary on this basis were invalid. The court held that the trustees could not revisit their treatment of the capital gains post-beneficiary's death to revoke the distributions. As for the company's governance, the court found that the controlling director did not have implied actual authority to act on behalf of the company in all matters, as this would require an explicit delegation of authority by the other directors, which was not present in this case. The court ultimately ruled that the distributions made by the trustees were invalid, and the estate of the deceased beneficiary was not liable for the debt on the beneficiary's current account.

Orders