The Family Trust was founded in 1970 by the late Dr. John and Dr. Eva Owies. Dr. John and Eva Owees and their three children, Michael, Deborah and Paul, were beneficiaries of the family trust. JJE Nominees Pty Ltd was the trustee.
The trust deed, the traditional form of family trusts of the time, gave the trustee discretion over the distribution of the trust’s net income in each accounting period.
In the event of failure to specify income or fund resolutions, the trust deed provided that net income would be distributed equally to each child’s trust.
The trust’s assets and income generated were substantial, with an estimated value of $23 million and annual income in the hundreds of thousands of dollars.
For each fiscal year ending June 30, 2011 through 2019, the Trustees distributed all net income. With one exception, the distribution showed 40% of the income going to John and Michael and the remaining 20% to Eva.
The exception was 2019, when 100% of the income was shared with John. There was never a year when the income was split between Paul and Deborah. In April 2019, Deborah was given a share of capital in the form of the residential unit in which Deborah lived.
Deborah and Paul Trial Board of the Supreme Court of Victoria against the TrusteeMichael later joined.
They contested several changes in trust deeds that allegedly changed the identities of guardians and appointees under the deeds.
They are also responsible for distributing income under the trust deed for the purpose of demonstrating that the income was held in a fixed trust, reflecting the default position of the trust deed in the event of a failure to distribute the income for accounting purposes. I asked for a declaration that there was no distribution. period.
Third, they sought a declaration that the distribution, if any, was made against trust because the trustee failed to give bona fide consideration to the subject matter under the trust.
The petition ran from 2010 to 2019. Among other things, Deborah and Paul sought the removal of the trustees based on the alleged violations they had petitioned and the declaration that the appointment of Neville Sampson as director was void.
The trail division judge accepted the limited defense put forward by the trustee. This meant that the income years in question were limited to 2015 through 2019.
The judge ruled that the proposed modification of the trust deed was invalid.
He also alleges that the Trustees failed to give due consideration to Paul and Deborah’s positions in 2015 and 2016, and Deborah’s position in 2018. He dismissed this ground with respect to 2017 and 2019, as to both plaintiff and his 2018. relationship with Paul.
However, the judge refused to remove the trustee.
Deborah and Paul sought permission to appeal on four main issues.
With respect to 2017, the Applicant argued that the Judge was erroneous in concluding that the Trustee gave genuine and genuine consideration to the Applicant’s position and that the Trustee had sufficient information about the Applicant’s situation. claimed to have been. They are bona fide considerations when making decisions about trust income.
The applicant makes the same complaint for the second issue, 2019. Further, the Applicant argued that her 2019 distribution to John, in which his 100% of the income is paid to John, was so “grotesque” as to show that the trustee’s discretion was erred.
A third issue concerned appropriate remedies when a court determines that a trustee failed to give due consideration to the status of a potential beneficiary. Applicant agrees that, assuming that the Applicant prevailed in the Court of Appeals in respect of the three years in which the Judge found breach of duty, and he in 2017 and she in 2019, for all five years, the appropriate relief would be: submit that it is Withhold a distribution because the distribution is void or void.
In that case, they sought an order to pay the Trustees a related amount reflecting one-third of each year’s net income, which was found not to give true compensation.
The final question was whether the judge had erred in refusing to remove the trustee.Applicant alleges that the judge was erroneous in failing to remove the trustee and committed the type of error identified in the decision house vs kingThey asked the court for an order removing the trustee and appointing an independent professional trustee in its place.
In relation to the first question, the court found that while the terms of the trust deed gave the trustee broad discretion over the distribution of net income for each accounting period, the discretion was not without limitations. pointed out.
Justices Kyrou, Niall, and Walker stated that the nature of the trust and the terms under which powers are expressed are important in determining what the trustee must consider in exercising powers.
“When considering the nature of the power to distribute annual income, the starting point must be the nature and purpose of the trust taking into account the terms of the trust deed. As such, the settlers “want to make provisions for primary and general beneficiaries,” the court noted.
Given the terms of the deed, the judge said the class of beneficiaries was expected to revolve primarily around Owies’ three children.
“The obvious but unstated assumptions under which the trustee is expected to perform its duties are generally made of the various circumstances, needs, and desires of each beneficiary as an event of the familial ties underpinning the trust. To be informed. Please explain the purpose,” the judge said.
“If these family ties were strained or broken, it is unlikely that the trust’s purpose of providing for the entire family would change or relieve the trustee of the duty to give proper notice.”
The court noted that the extreme nature of the 2019 distribution made it all the more apparent that Paul and Deborah had failed to give practical and good faith considerations.
“In 2019, the decision to leave 100% of the income to John after Eva’s death was notable. He had a loan account with millions of dollars in trust generated from previous distributions to him,” it said.
“In our view, the distribution in 2019 was so extreme and without clear justification that the Trustees exercised their discretion under Clause 3 without genuine consideration of Paul and Deborah’s position. It provides an additional factor to show that you have done so,” the judge said. said.
“Overall, we are satisfied that the Trustees have failed to give genuine and diligent consideration to Paul and Deborah’s position in any of the years involved. agrees with the judges’ conclusions in 2015, 2016 and 2018 (only with respect to Deborah), we will go ahead of the judges and make the 2017 and 2019 challenges for Deborah and Paul. support.”
However, the Supreme Court found breach of trust by failing to exercise genuine care in exercising power to render the distribution to John, Eva, and Michael void rather than void.
Since no order rescinding these distributions was sought, and no appeal was filed against the judge’s decision to deny leave to amend the petition for such relief, the court decided that the trustee would give them one-third. could not give an order to pay. About the annual income of the year in which there was a betrayal.
The court decides to remove the trustee and appoint an independent trustee.
“In our view, over the years the Trustees have failed to act impartially and to give real and genuine consideration to the interests of two of their primary beneficiaries and The relationship between the trustee and those involved in the management of the trustee has, at least from this point of view, been irreconcilably damaged, and it is in the best interests of the beneficiaries that the trustee continue to hold office. It’s not profitable,” the court said.