Stromovka Pty Ltd as Trustee of the Stromovka Trust

By summons filed on 2 September 2016, Stromovka Pty Ltd (the "Trustee"), as Trustee of what is now called the Stromovka Trust (the "Trust"), Michael Patrick Kantor and Ian Leonard Evans apply for judicial advice under s 63 of the Trustee Act 1925 (NSW) (the "Act").

Mr D Barlin of Counsel appeared for the plaintiffs. The evidence included a compendious opinion from Mr Barlin and the Court acknowledges the assistance it has derived from both that opinion and Counsel's thorough presentation of the issues today.

The Court is satisfied that the plaintiffs are entitled to the advice set out in paragraph [24] below.

The Trust was created by a deed made on 15 November 1994 (the “Deed”). Martin Keith Arthur Kantor ("Mr Kantor") was described in that Deed as the "Principal" of the Trust.

The terms of the Trust include:

At various times Mr Kantor had a close personal relationship with Ms Bernadette Maree Keys ("Ms Keys"). The existence of that relationship is not a matter for doubt, although the times during which it subsisted are not entirely clear. The best evidence before the Court today is contained in a document entitled "Deed Of Compromise/Family Arrangement" made on 8 February 2000 between, among others, Mr Kantor and Ms Keys. That document includes these recitals:

Mr Kantor made a will (the "Will") on 6 August 2015. The Will included:

Mr Kantor died on 16 August 2015. Mr Michael Kantor and Mr Ian Evans are the executors appointed under the Will.

By summons filed on 9 April 2016 in this Court, Ms Keys has sought provision from the estate or the notional estate of Mr Kantor pursuant to Chapter 3 of the Succession Act 2006 (NSW). It is apparent that at the time her summons was filed, discussions about the settlement of her claim were well advanced. On 11 August 2016, Ms Keys, through her solicitors, accepted an offer from Messrs Evans and Kantor as executors to settle her claim by the payment of an amount from the Trust. That agreement was subject to certain provisos, including that the Trustee obtain judicial advice which allows it to make that payment.

This application is brought to satisfy that proviso. However, the Court notes in passing, that none of the plaintiffs have sought judicial advice in this application as to the desirability of the settlement which has been entered into, including the payment to Ms Keys. In making that observation, the Court is not to be taken as expressing any view as to whether such advice should or should not have been sought. It is made solely for the purposes of clarity in understanding the issues which the Court has had to resolve in the present application.

The primary question posed by this application is whether or not Ms Keys is a "Discretionary Beneficiary" as defined in the Ninth Schedule of the Deed which includes a reference to:

It was urged upon the Court that the question should be answered in the negative. Without disrespect to the careful way in which the arguments in support of that proposition were put by Mr Barlin, it is not necessary for the Court to come to a concluded view. It is sufficient for present purposes to note that the answer is not entirely clear. One consequence, which may be thought troubling, of the argument put on behalf of the plaintiffs is that a person who was the spouse of Mr Kantor, perhaps even for many years, would cease to be a spouse under the Deed for the purposes of a distribution from the Trust after Mr Kantor's death. That is but one example of the complications which would need to be grappled with to resolve the question of whether or not, for the purposes of a distribution in the near future to satisfy the settlement of her family provision proceedings, Ms Keys is a “Discretionary Beneficiary” of the Trust.

A simpler and more certain solution to the problem is presented by clause (f) of the Ninth Schedule, which (with unnecessary words omitted) provides:

The Trust has not vested. There can be no doubt that, provided it is done in good faith and for a proper purpose, the Trustee is entitled to exercise the power conferred by clause (f) to nominate Ms Keys as a “Discretionary Beneficiary” of the Trust. There is no reason why that should not be done, for more abundant caution, in circumstances where there is some doubt as to whether or not Ms Keys is already a “Discretionary Beneficiary”. Once that has been done, the Trustee will be entitled under clause 3 of the Trust to appoint or distribute from income or capital the amount of the settlement with Ms Keys, provided again that is done in good faith and for a proper purpose. The Court will make orders reflecting advice consistent with the conclusions which I have just expressed.

Advice was also sought in relation to the effect of clause 5.2 of the Will (see paragraph [7] above). That advice was sought both by the Trustee and by Messrs Evans and Kantor in their capacity as executors under the Will. The question for advice was, in effect, whether the plaintiffs would be justified in proceeding on the basis that clause 5.2 of the Will does not compel the trustee to appoint income or capital out of the Trust in any particular manner.

It is clear that clause 5.2 does not compel any such result. That conclusion follows from the words in clause 5.2 (emphasis added):

The emphasised words in parenthesis put beyond doubt the proposition that neither the executors nor the Trustee are legally obliged to give effect to the wish expressed in clause 5.2. Mr Barlin was unable to point to any authority which would suggest that such express words making clear that no legal obligation was being imposed should be interpreted in any other way. The plaintiffs are entitled to advice in accordance with this conclusion.

The final issue is a matter which I raised with Mr Barlin in the course of argument. That was whether notice should be given to any persons in accordance with s 63(8) of the Act, which provides:

As I have set out above, the fundamental question which gave rise to this application was whether or not Ms Keys is a "Discretionary Beneficiary" of the Trust. I do not, with respect, accept Mr Barlin's submission that at best what was being debated was whether Ms Keys was a discretionary object of the Trust. It is clear from the words of the Deed itself that the debate was about whether or not she was a beneficiary, albeit a discretionary beneficiary, of the Trust. For that reason, I am satisfied that s 63(8) of the Act is enlivened.

Mr Barlin then submitted that, if the Court considered s 63(8) applied, the Court should otherwise direct in accordance with the power conferred by s 63(8). His submission, put shortly, was that all of those persons who are "eligible persons" under s 57 of the Succession Act 2006 (NSW) had been given notice of Ms Keys’ family provision proceedings. All of those persons were “Discretionary Beneficiaries” within the meaning of the Ninth Schedule of the Deed, or residuary beneficiaries within the meaning of the Tenth Schedule of the Deed. The difficulty was that there would undoubtedly be a much larger class of persons who would have to be notified by reason of the expansive definition of "relative" in the Deed (see paragraph [5] above). That result was further complicated by the potentially infelicitous reference in both of those schedules to "any present or future” relative. Those words themselves gave rise to further doubt as to who might have to be included. Mr Barlin's submission was that as the proposed payment which had given rise to the need for the present advice was to be made in connection with the settlement of Ms Keys’ family provision proceedings, the purpose or the public policy underlying s 63(8) had been satisfied in the circumstances of this case. In practical terms, what Mr Barlin has submitted makes sense.

However, all those persons currently know about is the claim being made by Ms Keys. There is no evidence that they know of the impending settlement and payment. It is clear that they have a real and present interest in the settlement of those proceedings and, equally, a real and present interest as discretionary beneficiaries or residuary beneficiaries in the payment of funds out of the Trust. The payment will necessarily reduce the amount available for distribution to others.

The language of s 63(8) of the Act poses a difficulty in the present circumstances. It gives the Court a power to direct whether or not notice should be given, but it does not give power to the Court to limit the class of persons to whom that notice should be given. I am satisfied on the basis of Mr Barlin's submissions that it would be impractical and give rise to further delay if notice had to be given to everybody who might presently be a discretionary or residuary beneficiary (and therefore someone "whose rights as beneficiary may be prejudiced by the conveyance or distribution"). The Court will "otherwise direct" so that a notice to the entire class does not have to be given.

However, it seems to me that the underlying public policy of notification to parties who may be prejudiced by the distribution expressed in s 63(8) should be observed, at least in relation to the limited class of persons who have been given notice as eligible persons of Ms Keys' family provision proceedings. Accordingly, I propose to fashion the terms of the advice which the Court will give to the plaintiffs to include a provision for those persons to be given notice of the proposed distribution as part of the settlement and, if they wish, an opportunity to be heard in relation to the advice which the Court has given.

The Court orders: