In the Application of Nyasa No. 19 Pty Ltd

This proceeding began as an application pursuant to s 63 of the Trustee Act 1925 (NSW) (the Act) for judicial advice that the plaintiff trustee, Nyasa No. 19 Pty Ltd (the Trustee), is justified in managing and administering a trust estate known as the “R.J. Canfield Family Trust” (the Trust) on particular terms in circumstances where, despite extensive searches, the original trust deed (or copies) settling the Trust have not been able to be found.

As with a similar case that has come before me (In the application of Brailey Holdings Pty Ltd ACN 001 190 441 [2018] NSWSC 1493), the basis of the application is that, at the time the original trust deed was settled, at least one other trust (the terms of which are in evidence) was settled for the benefit of another member of the same family. The Court is satisfied that the Trustee has brought clear and convincing proof not only of the existence, but also of the contents, of the missing trust deed – namely that they are relevantly in the same terms as the other trust deed which is in evidence. However, that is not the end of the matter.

The Court has been considerably assisted by the detailed opinion and oral submissions of Mr D Barlin of Counsel, who appeared for the Trustee, together with further written submissions provided in response to issues raised by the Court in subsequent email correspondence. During the course of the hearing, Mr Barlin sought an opportunity to amend the summons to seek, in the alternative, relief under s 86A of the Act in an endeavour to bring about a binding and final outcome otherwise to substantially the same result as the judicial advice application. This involved the Court approving an arrangement including variation of the original trust deed (in this case by modernising some of its provisions) so as to produce a definitive form of the trust deed by reference to which all interested parties accepted the Trust would be administered into the future. For the reasons advanced by Mr Barlin, and substantially reflected in these reasons, the Court is satisfied that can and should be done.

Mrs Rosemary Canfield is a director of the Trustee, having been such since 1980. The other director was her late husband, Mr John Canfield. He was succeeded as a director of the Trustee by his and Mrs Rosemary Canfield’s daughter, Ms Cassandra Canfield.

Mrs Rosemary Canfield has a brother, Mr Walter Eilbeck. Mr Eilbeck is a director of Labode Pty Ltd (Labode) which is the trustee of the Labode Pty Ltd Trust (the Labode Trust).

Mrs Canfield’s and Mr Eilbeck’s father was the late Mr George Eilbeck.

The essential evidence is given by Mr Walter Eilbeck in his affidavit:

The deed of settlement for the Labode Trust was in evidence before me. Its front page identifies the solicitors who prepared it as “Abbott Tout Creer & Wilkinson” (Abbott Tout). Without wishing to minimise the skill and care that went into the preparation of the Labode Trust’s deed of settlement, it is, with respect, clearly a standard form of family discretionary trust, drawn by Abbott Tout in such a way that most of the variable or individual features can be included by changes to a schedule to the deed rather than by alteration to its substantive provisions.

The balance of the extensive evidence, drawn from sources such as tax returns and other records of both the Trustee and Mrs Rosemary Canfield, satisfies the Court on the balance of probabilities, and it finds, that:

Furthermore, in support of the application under s 86A of the Act, Ms Cassandra Canfield swore an affidavit which establishes, and the Court finds, that:

I accept Mr Barlin’s submission that the present case is on all fours with the circumstances considered by Pembroke J in Barp Nominees Pty Ltd [2016] NSWSC 990 (Barp Nominees) in which two trust estates were established at the same time for two children. His Honour said:

I am indebted to Pembroke J’s consideration of the relevant authorities in Barp Nominees, which I respectfully adopt. His Honour concluded (at paragraph [6]) that a party in the position of the Trustee had to satisfy the burden of demonstrating “clear and convincing proof not only of the existence but also of the relevant contents” of the missing trust deed.

The trust deed for the Labode Trust was in evidence and is dated 27 June 1979. On the basis of Mr Walter Eilbeck’s evidence (see [7] above), the Court has no hesitation in concluding that on the same day the Trust was settled for the benefit of Mrs Rosemary Canfield and her side of the Eilbeck family and that the terms of the Trust were in identical terms to those of the Labode Trust, save for the identity of the particular beneficiaries (the Lost Trust Deed). In my respectful view, that conclusion is almost irresistible given the use of the same professional advisors and the “standard form” appearance of the Labode Trust deed. There is no evidence that would suggest there was anything particular about the circumstances of Mrs Rosemary Canfield’s side of the family that would have necessitated any material difference between the terms of the Labode Trust and the Lost Trust Deed.

Given the ex parte nature of the application, I should record one matter which Mr Barlin quite properly raised. That was that while Labode Pty Ltd was incorporated on 16 May 1979, with the Labode Trust being settled on 27 June 1979, the Trustee was not incorporated until 30 April 1980 notwithstanding that it appears the Trust was also settled on 27 June 1979. Furthermore, Mrs Rosemary Canfield and her late husband were not, according to ASIC records, appointed as directors of the Trustee until 1 December 1980. However, there is also in evidence a registered transfer of real property from Benvista Pty Ltd to the Trustee dated 30 May 1980 (and registered on 11 July 1980) with the affixation of the Trustee’s common seal witnessed by Mrs Rosemary Canfield, who is described as its director. The transfer is for the property described as the “factory complex in Warrane Road” referred to in [7] above.

Nothing in the evidence casts any light on these matters, but I do not regard them as sufficient to displace the conclusions I have reached in [9] and [13] above. There is no doubt that the Trustee has held property and administered the Trust since at least 30 May 1980. I accept Mr Barlin’s submission that it may be there was a different inaugural trustee of the Trust, but that is no more than plausible speculation.

If my primary conclusion as to the date of settlement of the Trust is incorrect, I would in any event have found on the evidence that the Trust was settled in relevantly the same terms as the Labode Trust by no later than 30 May 1980. Even if they had been settled some months apart, there is no basis in the evidence to conclude that the operative terms of the Lost Trust Deed would have been different to those governing the Labode Trust.

There is in evidence a form of trust deed for the Trust which is in identical terms to that of the Labode Trust, save for the requisite changes to reflect the fact that there is a different trustee and that Mrs Rosemary Canfield and her family are the objects of the Trust. I find that document reproduces the terms of the Lost Trust Deed. The Court would, subject to the outcome of the application under s 86A, give advice that the Trustee is justified in managing and administering the Trust in accordance with that document.

As I observed in In the application of NSW Trustee and Guardian [2014] NSWSC 423 at [24], an order giving judicial advice “is permissive and not mandatory, hence it is usually in the form that the trustee “is justified” in acting in a particular way”. In addition to its permissive character, Mr Barlin submitted, correctly in my respectful view, that an order pursuant to s 63 of the Act:

During the course of submissions, Mr Barlin and I discussed the possibility of whether a more conclusive and binding outcome was possible in the case of a lost trust deed. As Mr Barlin submitted, while a trustee would have the protection of administering the relevant trust in accordance with the document identified in the Court’s order (including exercising the trustee’s express power to amend the trust deed), it remained theoretically possible that if the original trust deed was found and contained other provisions, the trustee would have to revert to administering the trust in accordance with the rediscovered deed.

While such an outcome was unlikely in a case such as the present, where there had been very thorough searches, it remained the fact that the trustee would not be able to point to a document identified in the Court’s order and say that it was in fact the actual trust deed. This could, for example, lead to inconvenience when dealing with financial and similar institutions, who would probably require further explanations about what had occurred and the fact of the Court’s advice.

Mr Barlin sought the opportunity to bring in an amended summons which would seek, as an alternative, relief under s 86A of the Act. I granted that leave and the amended summons sought this alternative relief:

Division 3A was introduced into the Act in 2020:

As I understand the theory of what was proposed, it was that in the absence of all beneficiaries being ascertained, sui juris and having a vested interest (such that the rule in Saunders v Vautier (1841) 41 ER 482 could apply), the Court could supply all necessary consents under s 86A to an arrangement whereby all interested parties agreed that the Trust would be administered on specified terms.

The starting point of Mr Barlin’s submissions in relation to the application of s 86A was that if the Court was satisfied to the requisite standard of “clear and convincing proof not only of the existence but also of the relevant contents” of the missing trust deed (Barp Nominees at [6]), then the Court would be satisfied (assuming there was proof of property held by the trustee) for the purposes of s 86A(1) that there was property “held in trust under any instrument creating the trust”. This, he submitted, opened up the possibility of the Court approving an “arrangement” that the Trust be administered in accordance with amended terms of the trust deed as contemplated in either of the subsections of section 86A(1). It would have the practical effect of the Court identifying a definitive form of the trust deed by reference to which the trust would be administered into the future. The result would be a more certain, final and binding outcome as to the terms of the Trust than the trustee acting in accordance with judicial advice.

I have no difficulty with the argument to that point. I also accept that the trustee is a person who could bring the application (especially in a case such as the present where the trustee is controlled by beneficiaries in what is a closely held family trust) and that an agreement as to how a trust would be administered, for example, modernising the terms of an old form of trust deed and, if thought appropriate in the best interests of the beneficiaries, expanding the classes of possible investment to take account of recent developments, could constitute an “arrangement” for the purposes of s 86A(1).

As a practical matter for the administration of trusts, this would seem a highly desirable outcome. In this case, the document in relation to which approval of the arrangement is sought is in the terms of the Lost Trust Deed (which the Court has found are the terms of the Trust), but then with the arrangement to be approved being its administration in accordance with variations, being the addition of terms familiar in more modern trust deeds giving greater flexibility of management and investment, together with provisions tailored to the present family circumstances in relation to what is to occur upon vesting of the Trust.

The next issue is on whose behalf the Court is giving consent to the proposed arrangement. In this case, as Mr Barlin submitted, it was on behalf of all of the discretionary objects of the Trust, such that there were persons who fell within each of the categories of s 86A(2).

As a child of Mr John Canfield, Ms Cassandra Canfield (and Ms Wendy Canfield) is a “Primary Beneficiary” under the Lost Trust Deed, and her own children are “General Beneficiaries”. General Beneficiaries are discretionary objects for the appointment of both income and capital. While they have no interest in the trust property, their status as potential recipients would be protected in equity and, in my respectful opinion, gives them an indirect interest in the Trust for the purposes of s 86A(2)(a). Hugh is not yet 18 years old and is therefore a minor for the purposes of the Act (see s 5) who by reason of that status cannot assent to the arrangement. The approval order may therefore be made on behalf of Hugh.

Second, the General Beneficiaries (which includes the Primary Beneficiaries) other than Hugh are also discretionary objects of income and capital with no interest in the Trust property and only a right to due administration. They have an interest in the property only when and to the extent that a discretion will be exercised in their favour by the trustee on a future occasion. This brings them within s 86A(2)(b).

Third, there is the question of unborn persons (see s 86A(2)(c)), in this case future General Beneficiaries, including children of the Primary Beneficiaries. For example, Ms Cassandra Canfield is a Primary Beneficiary (and therefore also a General Beneficiary) and any future grandchildren of hers are also General Beneficiaries. Given that her sons are aged between 17 and 25 years old, the Court is prepared to infer as matter of ordinary human experience that there is a likelihood she will have grandchildren who will be General Beneficiaries.

Even in the cases of Ms Wendy Canfield and Ms Cassandra Canfield (see [10(1)] above), I accept Mr Barlin’s submission that the Court cannot completely exclude the possibility that one of them may adopt an as yet unborn child who would then have all the rights of a child born to her (see Adoption Act 2000 (NSW), s 95 and like categories identified by Kearney J in Bullas v Public Trustee [1981] 1 NSWLR 641).

I therefore accept Mr Barlin’s submission that the Court can give consent to the proposed arrangement on behalf of all relevant persons, being all of the discretionary objects, including Hugh as a minor and any unborn General Beneficiaries.

The final issue is whether the Court is satisfied that the carrying out of the order approving the arrangement would be for the benefit of the persons referred to in the preceding paragraph. Whether something is for the benefit of a particular person is a fact sensitive exercise to be approached in a practical way having regard to the beneficial nature of s 86A. I am satisfied that that the proposed variations to the terms of the Lost Trust Deed are in themselves beneficial to Hugh and all of the other putative beneficiaries by giving the Trustee more modern, flexible powers of investment and administration.

In addition, and critically in the present case, I accept this submission made by Mr Barlin:

Approval of the arrangement will leave Hugh, the other discretionary beneficiaries and the Trustee a definitive form of trust deed, being a more certain outcome than the Trustee proceeding in accordance with judicial advice. In my respectful opinion, it follows from this that carrying out an order which achieves that result is for the benefit of all of the relevant persons within the meaning of s 86B(1).

Finally, I should record that because it is apparent from the various affidavits that this application has been brought with the knowledge of all relevant members of Mrs Rosemary Canfield’s family, and the proposed variations would not have any adverse impact on third parties such as current creditors of the Trust (assuming there are any), I have not considered it necessary to direct that notice of the application under s 86A be given to any person under s 86C of the Act.

The issues which led the plaintiff in this case to make an alternative application under s 86A in preference to seeking judicial advice, are real. There is a potential, genuine practical benefit to trustees in cases of lost trust deeds to be able to approach the Court to be able to obtain a generally binding and conclusive determination as to the terms of a trust deed which would govern the future administration of the trust.

While the Court has accepted the submission that s 86A is available in this case, that may not always be so. In any event, a simpler and more straightforward solution would be desirable. This would require an amendment to the Act. I will refer these reasons to the Attorney-General as the responsible minister with the recommendation that consideration be given to conferring such a power on the Court, being to declare on a final and binding basis what are the terms of a particular trust where the trust deed has been lost.

However, because the Court is satisfied that s 86A is available in this case, the final orders are: