Brother Appointed as Trustee for Testamentary Trust

The Court considered an application to appoint a new trustee for a testamentary trust. After evaluating the modest size of the trust estate and the family dynamics, the Court appointed the claimant's brother as the new trustee, rejecting the appointment of an independent trustee.

Supreme Court New South Wales

Medium Neutral Citation: [NAME] v [NAME] [2022] NSWSC 721 Hearing dates: On the papers; final submissions received 14 April 2022 Date of orders: 1 June 2022 Decision date: 01 June 2022 Jurisdiction: Equity Before: Parker J Decision: See [35] Catchwords: EQUITY – trusts and trustees – court's power to appoint new trustee – testamentary trust – plaintiff with disability – plaintiff has life beneficial interest in fund – plaintiff's sister appointed by will as trustee – falling-out between plaintiff and sister – whether to appoint plaintiff's brother or public trustee – general desirability of independent trustee – modest trust estate – public trustee to charge fees – no position taken by residuary charitable beneficiary – plaintiff's brother appointed as trustee Cases Cited: Kanjian Holdings No 1 Pty Ltd v Kanjian [2021] NSWSC 839 [NAME] v [NAME] (No 2) (2004) 60 NSWLR 275 Category: Principal judgment Parties: [NAME] (Plaintiff) [NAME] (First Defendant) [NAME] (Second Defendant) Representation: Counsel: [redacted] M Meek SC (Second Defendant)

Solicitors: [redacted] [NAME] (Second Defendant) File Number(s): 2020/359326 Publication restriction: Nil

Judgment 1. These proceedings concern a testamentary trust. There is an application before the Court to appoint a new trustee for the trust. Removal of the existing trustee is not opposed; the issue is who should be appointed as the replacement trustee.

2. The trust was established under the will of the late [NAME]. Without intending any disrespect, I will refer to the members of the deceased's family who come into this judgment by their given names.

3. The deceased died in March 2020 at the age of 91. His wife, [NAME] ("[NAME]") had predeceased him, dying in 2015. The deceased was survived by their four children: [NAME] ("[NAME]", also known as Steve); [NAME] ("[NAME]"; she herself now uses her middle name, [NAME]); [NAME], née [NAME] ("[NAME]"); and [NAME] ("[NAME]").

4. The deceased's will was made in November 2015. [NAME] was the executor and probate was granted to him in August 2020. The value of the estate is $1.12 million and consists primarily of the proceeds of sale of the former family home at Menai.

5. The will gave each of [NAME] and [NAME] a one-quarter share of the estate (value $280,000). The remaining quarter was given to [NAME] as trustee for [NAME] during her lifetime and after her death for the benefit of [NAME]. Clause 3(d) provided: one quarter of the sale proceeds to my daughter [NAME] for [NAME] for her life to apply the whole or any part of the capital or income therefrom for the maintenance, comforts and necessities in life and such other benefits as the trustee of this trust in her absolute discretion shall deem advisable for the welfare and happiness of [NAME] and from and after the death of [NAME] to hold the unexpended portion of this share for [NAME] IN AUSTRALIA PROPERTY TRUST (NSW) for the benefit of Uniting Care NSW ACT based in Sydney NSW and I DECLARE that the receipt of the treasurer or other authorized officer of the said property trust shall be a sufficient discharge to my trustee who shall not be obliged to see the application thereof.

1. The reason for the differential treatment of [NAME] was that she is disabled. She suffers from both intellectual and physical disabilities. For most of her adult life she lived with her parents. She left school at the age of 15 and worked in a sheltered workshop from 1981 to 2015. Since 2015 she has lived in nursing home accommodation, first at Peakhurst in Sydney and more recently at Lowood in Queensland.

2. There has unfortunately been a split in the family. [NAME] has fallen out with [NAME] and [NAME]. She remains close to [NAME].

3. These proceedings were begun in December 2020. They have been brought in [NAME]' name as plaintiff by [NAME] as her tutor. Initially, claim was made on [NAME]' part for further provision from the deceased's estate. [NAME], as executor, was joined as first defendant. An order was also sought removing [NAME] as the trustee of [NAME]' trust. [NAME] was joined as the second defendant.

4. The proceedings were allocated for hearing before me in May this year. I convened a pre-trial directions hearing in March. At that hearing, it seemed to me that the application to remove [NAME] gave rise to separate issues, and involved separate parties, from the family provision application. I thought that it should be heard in advance of the family provision hearing.

5. When I put this view to the parties' representatives, none of them objected. I made directions so as to allow the summons to be amended and the application for removal of [NAME] as trustee to proceed as a separate application between [NAME] as applicant and [NAME] as respondent. It was agreed that the hearing would take place on the papers. Later, the family provision claim was abandoned, so the removal application is the only live claim in the proceedings.

6. According to [NAME]' affidavit, from childhood onwards she was treated in a harsh and overbearing fashion by the deceased. [NAME] and [NAME] were uncaring and dismissive. In 2015, she went to Queensland to stay with a cousin of her mother's, [NAME] ("[NAME]"). [NAME]'s son, [NAME] ("[NAME]") encouraged [NAME] to stay in Queensland to try to improve her health. This was resented by the deceased, but [NAME] continued to live with [NAME].

7. In February 2016 and again in April 2016 [NAME] wrote to [NAME] and [NAME] saying that she wanted no contact with them or with the deceased. According to [NAME]' affidavit, however, [NAME] and her husband, [NAME] ("Ian"), continued to try to make contact with her. She found this unwelcome and upsetting.

8. Some sort of AVO proceedings appear to have been begun and on 30 August 2018 an undertaking was given (without admission) by [NAME], Ian, [NAME] and his wife Maria not to commit any domestic violence against [NAME] and not to contact her. That undertaking was to last for five years, and so will not expire until August next year.

9. At some point, [NAME] found it too difficult to continue to live with [NAME] but she continues to live in Queensland in a nursing home. According to her affidavit she continues to want nothing to do with [NAME] and [NAME].

10. An affidavit was filed for [NAME] in response. [NAME] denied that most of the incidents described by [NAME] had even occurred. She said that she had a long and close relationship with [NAME], extending over decades, until [NAME] went to Queensland and decided not to return.

11. According to [NAME], the trip to Queensland was organised by [NAME] ("[NAME]"). The deceased had previously given a power of attorney to [NAME] and later revoked it. According to [NAME], the rift in the family arose when, shortly before [NAME] went to Queensland, [NAME] tried to have the revocation set aside in NCAT but failed. 12. [NAME] stated that the language used in the letters emanating from [NAME] (and in her affidavit) was far more sophisticated than [NAME] was, on her own, capable of. The suggestion was that [NAME] was being manipulated.

13. In his submissions in support of [NAME]' application to have [NAME] removed as trustee and replaced by [NAME], counsel submitted that [NAME]'s conduct, as disclosed by [NAME]' affidavit, made her unsuitable as [NAME]' trustee. But it is impossible to go this far. Without a full hearing involving cross-examination (which neither party sought) it is impossible to resolve the factual dispute about the breakdown in the relationship and its cause.

14. This is a sad case and it is hard to understand why [NAME] found it necessary to turn her back so suddenly and completely upon [NAME] (and [NAME]). Nevertheless, it is clear that, whatever prompted the decision, [NAME] is committed to it. Furthermore, the undertaking which [NAME] has given not to contact [NAME] on its own makes it practically impossible for her to act as trustee.

15. Counsel for [NAME] acknowledged this difficulty. Without admission, he did not oppose an order for [NAME]'s removal. But he did oppose the appointment of [NAME] as the new trustee. Counsel submitted that the new trustee should be an independent governmental trustee, either the NSW Trustee and Guardian or the [NAME].

16. The evidence shows that [NAME] is the oldest of the deceased's children. He and [NAME]' mother were granted co-powers of attorney and appointed as co-enduring guardians under New South Wales law by [NAME] in May 2014. [NAME] also appointed [NAME], together with [NAME], as co-enduring guardians for the purposes of Queensland law in November 2015. 17. [NAME] is 69 years old. His background is in mechanical engineering. From 1980 to 1998 he ran a business reconditioning cars. Since then, he has worked as an employee or contractor in various engineering and mechanical jobs. Attached to his affidavit were testimonials concerning his work as supervisor of the Biological Sciences Workshop at the University of NSW in about 2007.

18. If appointed as [NAME]' trustee, [NAME] will not charge. In each case, there would be an initial fee based on the size of the trust estate together with per hour fees for work done. Both of these governmental trustees have indicated that they are prepared to act. 19. [NAME] has been consulted about the application. But it has taken no position and has not asked to be heard.

20. Counsel for [NAME] mainly relied on the general principle that the Court is reluctant to appoint a beneficiary's relative as trustee and prefers to appoint an independent trustee. In addition, counsel raised four other points:

1. Counsel submitted that there was a potential conflict of interest for [NAME]. That arose because the will contained a power of appointment of income and capital and [NAME] had the potential to benefit from [NAME]' estate if he survived her (he would receive a one-third share of her estate on intestacy, or she might make a will giving him a larger share).

2. Counsel criticised the quality of the evidence in support of [NAME]'s candidature. It came from [NAME] and his wife [NAME] and thus was not independent. The testimonials were also historical.

3. Counsel acknowledged that use of a governmental trustee would incur fees. But counsel submitted that it was an overstatement to say, as counsel for [NAME] had submitted, that those fees would "rapidly diminish" the trust estate.

4. The [NAME] is located in Queensland where [NAME] now lives. This would likely be more convenient than having [NAME] as trustee when he continues to live in Sydney.

1. The principles which apply in an application of this sort are not in doubt. They were recently summarised by Henry J in Kanjian Holdings No 1 Pty Ltd v Kanjian [2021] NSWSC 839 at [1037]-[1043]. [ADDRESS]'s selection of a new trustee should be guided, above all, by promoting the interests of the trust estate, both now and in future. This involves taking account of the current and future beneficiaries' interests.

2. It is not necessary to go into the scale of charges of the government trustees, or to make an estimate of the likely costs. Undoubtedly there would be upfront and ongoing costs. It is reasonable to suppose that [NAME]' disability would make the ongoing costs higher than they would otherwise be.

3. The trust estate is relatively modest in amount. It may be going too far to say that fees charged by the governmental trustees would "rapidly diminish" the trust estate. But they undoubtedly will be a significant burden on a trust estate which is a modest one and will require careful husbandry.

4. The fact that the [NAME] is located where [NAME] lives is in my view of little significance. The estate does not contain any real property, or any other asset which would require the trustee to be located nearby. It consists of liquid investments which can be managed as readily from Sydney as they could be from Brisbane. 5. [ADDRESS] will generally not appoint a person who has close family ties with the beneficiary. In [NAME] v [NAME] (No 2) (2004) 60 NSWLR 275, Palmer J stated: 9 In my opinion, the general rule that the court will not appoint as new trustees persons who have close family ties to the beneficiaries is applied as carefully today as it ever was in the old cases. The reason is obvious — Sir [NAME] MR put it in a nutshell in Wilding v Bolder (1855) 21 Beav 222; 52 ER 845: "I have always observed that the worst breaches of trust are committed by relatives who are unable to resist the importunities of their cestuis que trust, when they are nearly related to them". Human nature has not changed since those words were uttered. … 11 In my opinion, the general rule that the court prefers not to appoint relatives of beneficiaries as new trustees is not confined to the appointment of relatives of any particular degree of propinquity to the beneficiaries. It is a commonsense rule and it is to be applied in a commonsense way whenever it is apparent that the proposed new trustees have such family connections with the beneficiaries as to be susceptible to the influences and partialities which almost inevitably pervade family histories and family affairs, particularly where money is concerned.

1. This principle must be acknowledged. But its force in the present case is undermined by the circumstance that the deceased appointed [NAME], another member of the family, as the original trustee for [NAME]' trust. Given the unfortunate split in the family, [NAME] is the obvious, and indeed the only practicable, family member to replace [NAME]. There is no evidence which actually suggests he would be unsuitable as trustee, and I have no reason to think that he will do otherwise than act conscientiously in her interests and those of [NAME]. I think that the shortcomings in the evidence about his suitability are a small factor in the scheme of things.

2. Because of the power of appointment, it is true that the possibility exists of [NAME] exercising that power and indirectly benefiting from [NAME]' estate. But it seems to me that the possibility is rather remote. There is no reason to think that [NAME] will necessarily survive [NAME]. There is no evidence to suggest that he is likely to exercise the power. There is no evidence that [NAME] has made a will, so at present any benefit that [NAME] might derive from the power would be shared equally with [NAME] and [NAME].

3. In my view the attitude of [NAME] is a significant factor. The main advantage of the appointment of an independent trustee is that it would better protect the Church's interests. In circumstances where the Church does not oppose [NAME]'s appointment, I think the argument for an independent but renumerated trustee presented on behalf of [NAME], who has no ongoing interest herself as a beneficiary, is unconvincing.

4. Taking all of these factors into account, I have decided that [NAME] should be appointed as the new trustee in place of [NAME], as [NAME] seeks. I will adjourn the proceedings for the parties to bring in a minute of order giving effect to my conclusion. That order should also provide for costs if that can be agreed. If there is any disagreement, I will hear the parties further.

5. The orders of the Court are:

1. Adjourn the proceedings to 9:30 am on 7 June 2022 or such other time as may be arranged with my Associate.

2. Direct that the parties confer on the form of orders to be made to give effect to this judgment and to deal with costs, and, no later than 24 hours before the adjourned hearing, submit proposed orders for this purpose.

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