In the matter of the C.E. Brenchley Family Trust

This matter concerns a claim for rectification of and in the alternative judicial advice with respect to, the trust deed which relates to the trust estate known as the “C.E. Brenchley Family Trust” (the Trust). The terms of the trust are evidence in a Deed made on 3 November 1981 as between the trustee and Arnold Vincent Milton (the settlor) (deed).

The plaintiff in this matter is the trustee of the trust estate.

The settlor was the long-time financial adviser and accountant for Colin Ernest. It is apparent that after obtaining advice from the settlor, Colin Ernest established a trust for the purchase of property and for the benefit of his family.

Broadly speaking, the proceedings relate to the definition of the term ‘distribution date’ in paragraph 21(b) of the deed, with the earliest date to be 1 January 2020. The trustee is ultimately seeking that the trust extend beyond 1 January 2020.

By summons filed 11 October 2019, the trustee seeks an order for rectification of the Deed to delete the words “….or the first day of January in the year two thousand and twenty whichever first occurs…” as contained in paragraph 21(b) of the Deed, being the definition of the term “distribution date”.

In the alternative, the trustee seeks judicial advice pursuant to s 63 of the Trustee Act as to the scope of the power to vary the deed contained in cl 17 of the Trust deed. In particular whether the power to vary can be used to extend the ‘distribution date’.

In support of the application the trustee relies on:

The evidence in this matter was entirely uncontroversial.

It was submitted that the subjective intentions of those involved in the establishment of the trust intended it to operate beyond January 2020 and the deed should therefore be rectified. Counsel for the trustee further stated that they considered the power to vary in cl 17 of the deed can be used to make the alterations as sought by rectification.

The matter was heard on 5 November 2019. After brief submissions from Counsel for the trustee and having carefully considered the written submissions and the other materials, I made orders rectifying the will and giving judicial advice.

I indicated I would in due course publish my reasons in full, these are they.

Colin Ernest ran a number of businesses with his family in various industries. From around the late 1970s to the early 1980s, Colin Ernest and his son Reginald carried on a car yard business in St Peters. Sometime in 1981, a car yard was listed for sale in the St Peters area. Colin Ernest then obtained advice as to the structure in which the property would be acquired.

The trust was then established for the purpose of acquiring and holding the St Peters property. The deed specifies that property will be held on trust and income distributed to various beneficiaries namely his sons, grandchildren and great-grandchildren.

Clause 17 provides the process which variations to the trust deed may be made:

Clause 21(b) provides that the distribution date shall mean:

Clause 21 further provides:

The trustee, Elorance Pty Ltd was incorporated on 26 June 1981 to act as trustee. The initial directors were Colin Ernest, his wife Neridah and his sons Reginald and Colin Russell. Colin Ernest was the initial secretary of the trustee.

In January 1993 Colin Ernest died and Colin Russell became the secretary for the trustee. Colin Russell retired as secretary and director in August 1993. Reginald was appointed secretary and continues to hold that role. In 1995 Neridah died. In 1999, Reginald’s wife Anna Brenchley was appointed as a director. In December 2012, Reginald’s son Anthony was appointed as a director.

Reginald and Colin Russel depose several conversations between themselves and Colin Ernest and others where Colin Ernest makes representations that the trust can then be used to generate income to be distributed to his children, grandchildren and great-grandchildren.

Reginald and Colin Russell were also directors of the plaintiff at the time the deed was executed. The understanding of Reginald and Colin Russell at the time of the establishment of the trust was that the trust would be forever or at least several generations after the death of their parents.

It was not until 2015 or 2016 that Reginald became aware that the trust would vest on 1 January 2020.

The settlor and the solicitor involved in drafting the original deed have no particular memory of the circumstances surrounding the trust.

As a preliminary question the Court must determine the proper law as applying to the trust in question. The proper law will then determine who has jurisdiction to hear the matter and further what relevant laws apply to the trust.

In this case there is no particular applicable law identified by the deed. In such circumstances it is a question of fact as to determining the proper law of the trust, factors such as where the trust is administrated and the location of the trustee will be relevant as will the objects and purpose of the trust (Re Dion Investments Pty Ltd [2013] NSWSC 1941 at [7]-[31]).

It is further clear however, that this Court can have jurisdiction to hear a case notwithstanding the proper law of the trust in question, on other bases. For example if a trustee has commenced proceedings in the NSW Supreme Court (see e.g. Dawson v Perpetual Trustee Co (Ltd) (1953) 89 CLR 138 at 151) or because the trust has been administered in NSW (see e.g Re BTA Institutional Services [2009] NSWSC 1294 at [5]).

As to rectification, the Court has the power, in certain circumstances, to order rectification of a contract including a deed so as to make that document reflect the parties’ true intentions in entering it. Relevantly the author in Heydon on Contract notes:

Further, Mahoney AP in Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329, considered that for the Court to order rectification involved the following (at 331):

As to judicial advice, s 63 of the Trustee Act 1925 (NSW) provides:

The plurality of the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, at [59]-[60] described s 63 as a discretionary power that is confined only by the “subject matter, scope and purpose” of the Act. At [55], their Honours also explained that no implications should be read into s 63 and that the section must only be taken for its express words. The only “jurisdictional bar” to be satisfied is that the applicant must point to a “question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument” (at [56]-[58]).

The plurality also noted that, where a trustee seeks judicial advice as to the conduct of litigation, the stage that the litigation has reached may be a relevant consideration. Their Honours remarked at [106]:

In Macedonian Orthodox at [69], Gummow ACJ, Kirby, Hayne and Heydon JJ noted a purpose of s 63 is to enable trustees “to take advice before embarking on any course which might carry a risk of incurring costs that might be outside the indemnity”. Their Honours continued at [71] and [74]:

When amending the distribution date of a trust and changing when the trust will potentially vest it is essential to consider how the rule against perpetuities may apply. This trust predates the commencement of the Perpetuities Act 1984 (NSW), and therefore the general rule against perpetuities applies to the trust estate. The rule against perpetuities as stated in Cadell v Palmer (1833) 6 ER 956 is that any disposition is void for remoteness of vesting even if it is merely possible, when the matter is viewed from the time of the disposition or the property purportedly disposed of to vest in the intended disponee beyond the period of a human life or lives in being plus twenty-one years, such life or lives in being to include any actual period(s) of gestation.

Based on the authorities as outlined above, there were several discrete issues that had to be determined in this matter.

First, whether rectification was appropriate. This involves a determination is to the relevant intention behind the party creating the deed and whether or not the deed in fact reflects that intention. Here where the settlor is acting on instructions and has no independent intention with relation to the trust, it is the intention of the person who provides the instructions that is relevant.

Secondly in giving judicial advice several issues had to be considered. First, as made clear in the Macedonian Church Case, whether the jurisdictional hurdle had been met and whether the Court should exercise its discretion to give such advice.

Further in considering the content of the advice, the Court had to consider the proper law of the Trust to determine; first whether this Court had jurisdiction to grant the relief sought and second to determine the relevant rule against remoteness of vesting as applicable to the Trust.

The plaintiff primarily sought rectification of the deed extending the distribution date. During the hearing, I asked Counsel given that the primary relief sought was not judicial advice, was the suit properly constituted (T2/45). Counsel informed me that the default beneficiaries who could possibly be adversely affected by the changes had been notified and had all agreed on the proposed rectification (T5/20). Further there was no controversy about the subject intention of Colin Ernest amongst any of the witnesses.

On the point of rectification, I accept the evidence, although unchallenged, as both credible and plausible. I am satisfied that the relevant intention of those involved in the creation of the trust, was that the trust was not to be governed for a finite time but to make provision for the family on an ongoing basis. Importantly, two of the directors at the time of incorporation of the trustee, Colin Russell and Reginald, gave direct and clear evidence that at the time the trust was established it was intended that the trust would provide for them and their children long into the future. I would rectify the deed in the form sort.

Although strictly unnecessary to consider, I would also make the following orders for judicial advice as sought. As is clear from the High Court in Macedonian Orthodox, the Court may hear and give advice under s 63 only where there is a real question to be answered concerning the management or administration of the trust property or the proper interpretation of the trust instrument.

In this case, it is appropriate for the trustee to approach the Court. This is clear of course given that the trustee seeks substantial relief by the way of rectification of the deed as well as judicial advice.

In my view cl 17 does allow for changes to the deed to extend the distribution date if all of the provisos are met. Again in my view, it is clear in these circumstances that all the provisos have been met and therefore the trustee can and does have consent to make such amendments as it sees fit for the benefit of the trust. In particular, it is apparent that the changes to the distribution date will not in fact give a benefit to the settlor nor will it change the interest of a beneficiary in income in which they have become absolutely entitled. It is further quite obvious, that by removing the words “….or the first day of January in the year two thousand and twenty whichever first occurs…” will not extend the distribution date beyond the latest contemplated date. The distribution date will still be the later of 21 years from the last surviving descendant of King George VI at the date of the deed or 21 years of the last survivor of the first or second corpus beneficiaries living at the date of the deed.

In passing I note that it is clear to me, given the location of the settlor, beneficiaries and Colin Ernest that the proper law is that of NSW. I further note that the Perpetuities Act does not apply to this trust and the general law relating to perpetuities applies. It is clear that the amendments as sought would not make disposition so remote as to make the clause void.