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24 July 2024

Dryandra Investments Pty Ltd v Hardie [2024] WASC 248: What happens when the guardian and appointor of a trust has lost capacity?

Case Updates, Legal Knowledge

Written by Despina Bouletos

The Western Australian Supreme Court recently published its decision of Dryandra Investments Pty Ltd as trustee of the Dryandra Trust v Hardie by her guardian ad litem Ian Torrington Blatchford. This judgment addressed two separate proceedings (heard together) relating to:

1. the Dryandra Trust (“the Trust”) of which Isobel Hardie (“Isobel”) was the appointor and guardian (“the Trust Proceedings”); and

2. Isobel’s will (“the Will Proceedings”).

Isobel suffers from dementia and was represented in the proceedings by her Guardian ad Litem.

In the Trust Proceedings, the trustee sought orders, pursuant to s90 of the Trustees Act 1962 (WA), that the Court approve and assent to variations to the Trust deed of the Trust. A similar power exists under Division 3A of the Trustee Act 1925 (NSW). The variations sought would allow:

1. Isobel’s enduring attorney, Timothy Ryan (“Attorney”) to exercise the powers of appointor and guardian in place of Isobel, so long as she lacked capacity; and

2. Isobel’s legal personal representative to exercise the powers of appointor and guardian in the event of a default of appointment (including upon Isobel’s death).

Alternatively, the trustee sought orders under the Court’s inherent jurisdiction, for the replacement of Isobel as appointor and guardian of the Trust.

In the Will Proceedings, Isobel’s Attorney, as plaintiff, sought an order pursuant to s40 of the Wills Act 1970 (WA) that the Court authorise the making of a codicil to Isobel’s last will dated 13 November 2006 (“2006 Will”), seeking to appoint the Attorney as Isobel’s successor as guardian of the Trust.

In both proceedings, the critical issue was the fact that Isobel did not have (and had not had since her appointment) capacity to act as appointor or guardian of the Trust. Accordingly, there was no guardian capable of consenting to the reserved and restricted powers set out in the Trust deed which, among other things, governed the trustee’s discretion in making distributions of Trust income.

Isobel also lacked capacity to appoint a replacement guardian to act in her stead, as there was no provision in the Trust deed for the appointment of a replacement guardian if Isobel lost capacity or died. As such, the Trust would be left without a guardian upon Isobel’s death.

The Court found that a lack of mental capacity did not, of itself, affect the validity of Isobel’s appointment as appointor and guardian (both as a general principle and on the basis of the terms of the Trust deed). However, the consequence of a lack of capacity was such that it prevented the valid exercise by Isobel of the powers conferred on her. That is, Isobel, by reason of her incapacity, was incapable of giving effective consent or of exercising such powers as conferred on her by her appointment.

Under the Trust deed, while there was a guardian appointed, the trustee was not able to exercise the reserved powers or restricted powers except with the consent of the guardian. The effect of this was that, while Isobel was the guardian but had no capacity to give her consent, none of those powers could be exercised by the trustee.

Practically, this meant that the trustee was confined to accumulating the Trust income or distributing it to Isobel only (which would have resulted in the income being taxed at the highest marginal tax rate).

In order for the Court to vary the Trust Deed under s90 of the Trustee Act, it was required to be satisfied that the person on whose behalf the variation was sought had an interest in the Trust. Although Isobel was a beneficiary under the Trust, the Court in this case was being asked to assent to the variation sought on behalf of Isobel in her capacity as a guardian, rather than as a beneficiary.

The Court was not persuaded that s90 extended to a power to approve a variation that required the consent of a guardian who lacked capacity to provide such consent. As such, the Court declined to approve the variations to the Trust deed as proposed.

However, the Court then considered whether it was able to exercise its inherent supervisory jurisdiction to appoint a replacement or substitute guardian and appointor. The Court considered that the effect of Isobel’s loss of capacity in this case meant that, despite there being a guardian of the Trust, the trustee could not consult the wishes of the guardian as contemplated by the Trust deed. Further, no one was capable of exercising the guardian’s power of consent to the trustee’s exercise of any of the reserved or restricted powers.

For those reasons, the Court was satisfied that it could exercise its inherent supervisory jurisdiction to replace Isobel as guardian and appointor of the Trust, in order to secure the proper administration and due execution of the Trust. Accordingly, the Court made orders to replace Isobel as guardian and appointor with her attorney. Upon making this order, the orders sought in the Will Proceedings were redundant.

This case has significant implications for the preparation of discretionary family trusts and testamentary trusts. When creating such a trust, it is imperative for clients and their lawyers to consider whether appropriate provisions have been put in place to replace an appointor, guardian or trustee in the event that they lose capacity and/or upon their death. Doing so is critical to avoid the potential for complex and costly Court proceedings.

The contents of this post are for informational purposes only. They do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

To discuss your estate planning matter, please contact our office for advice from our experienced estate planning team.

15 July 2024

A Thousand Miles From Care: Steve Johnson Publishes Memoir on Scott Johnson’s Death

Case Updates

On 17 July 2024, A Thousand Miles from Care, a memoir canvassing Steve Johnson’s thirty-year effort to uncover the truth about the murder of his brother, Scott Johnson, will be published in Australia by Harper Collins.

Vivian Evans (Vivian) of Uther Webster & Evans has worked closely with Steve and his US Legal team, and John Agius SC (John) over the last decade, in his attempt to obtain justice for Scott. Vivian and John assisted Steve to secure a third coronial inquest into Scott’s death, which resulted in a finding that Scott’s death was a homicide and led to a new police taskforce being appointed and the arrest and sentencing of Scott’s killer. Steve’s work also paved the way for the recent New South Wales inquiry into gay hate crimes.

In December 1988, Scott, who was a 27-year-old American PHD student living in Australia, was found dead at the bottom of a cliff at North Head, in the Manly area. Following an autopsy that concluded no foul play, Scott’s death was initially ruled a suicide.

Steve, who was unsatisfied with this finding, commenced what would ultimately be a three-decade-long investigation into uncovering the truth of what happened to Scott. Refusing to believe that Scott had any reason to end his life or that his death was the result of an accident, Steve lobbied police to continue the investigation into Scott’s death.

However, at a coronial inquest held in March 1989, the coroner found that Scott’s death was the result of a suicide, despite acknowledging that there was no apparent reason for Scott to take his own life. Steve continued to campaign for further investigation into Scott’s death, particularly in light of a number of homophobic killings which occurred around Sydney beaches in the 1980s.

Despite repeated attempts to progress the matter, it was not until 2012 that a second coronial inquest was authorised, in which the coroner overturned the initial suicide verdict and replaced it with an open one. The coroner also called for further police investigation into Scott’s death.

In 2017, a third coronial inquest was held. Following the evidence of several key witnesses, who testified to regular assaults against gay men by gangs in the North Head area, the coroner reached a verdict that Scott fell from the clifftop as a result of actual or threatened violence by an unidentified person or persons who attacked him because they perceived him to be homosexual.

Following this finding, police launched a further investigation into Scott’s death and announced a $2 million reward for information on Scott’s killer, $1 million of which was contributed by Steve personally. Ultimately, the police investigation led to the arrest of Scott White, who was charged with the murder of Scott on 12 May 2020.

On 13 January 2022, White was found guilty of murdering Scott, after entering a plea of guilty. Despite an attempt by White’s lawyer to have his guilty plea withdrawn, on the basis that White was not fit to make an admission of guilt, White was sentenced to 12 years and 7 months imprisonment, with a non-parole period of 8 years and 3 months.

However, six months later, White appealed his conviction, and a re-trial was ordered. On 23 February 2023, following discussions, White pleaded guilty to manslaughter and was subsequently re-sentenced to 9 years in prison, with a non-parole period of 6 years. He will be eligible for parole in 2026.

Following White’s sentence, a special commission of inquiry into LGBTIQ hate crimes was commissioned, appointing Justice John Sackar as Commissioner. The inquiry looked into the unsolved deaths of LGBTIQ people that may have been hate crimes between 1970 and 2010, which were previously the subject of investigation by the NSW Police Force. Specifically, the inquiry was focus upon the deaths of 88 men, potentially motivated by gay hate bias.

On 21 December 2023, the inquiry published its final report comprising almost 3,500 pages. The report calls for an audit and review by NSW Police of all unsolved homicides for the period from 1970 to 2010, and for the implementation of mandatory and ongoing training for NSW Police officers concerning the LGBTIQ community.

UWE is pleased to have been able to work closely with Steve Johnson in achieving not only justice for Scott but also important and long overdue reform in relation to the approach taken by the NSW Police Force in regard to LGBTIQ hate crimes.

The contents of this post are for informational purposes only. They do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

To discuss your criminal law matter, please contact our office for advice from our experienced criminal law team

10 July 2024

Updating financial circumstances in Family Provision Claims

Case Updates, Legal Advice

Written by Hilary Monteith

“Don’t let the dough rest for too long” – Lessons learned from Baker v Baker – Updating financial circumstances for a family provision claim

Updating financial circumstances in Family Provision Claims

You have made a claim for family provision out of a deceased person’s estate. At the time of filing the Summons, the Court requires an Affidavit to be filed setting out various matters in accordance with a prescribed form of affidavit pursuant to Practice Note SC Eq 7 (the Practice Note). Importantly, as plaintiff, that affidavit will go into detail in relation to your financial resources (including earning capacity), including the financial circumstances of any person you cohabit with.

However, a hearing in the matter may not be listed for several months, if not over a year, after the proceedings being filed.

Do you need to update your circumstances or is the primary affidavit enough?

A recent decision of Hammerschlag CJ in Eq Baker v Baker [2024] NSWSC 559 makes clear that evidence as to financial resources must be updated prior to a hearing, reliance should not be placed on the primary affidavit as it will not be accurate at a final hearing.

Section 59(1)(c) of the Succession Act 2006 (NSW) requires the Court to be satisfied at the time the application is being considered that adequate provision has not been made by the Will. If it is satisfied that adequate provision has not been made, the Court may make such order for provision it thinks ought to be made having regard to the facts known to the Court at the time the order is made (s 59(2)).

The Succession and Probate Lists Practice Note SC Eq 7 (recently re-issued in June 2024) at Paragraph 35 now states:

If the matter does not settle, there will be a timetable to prepare the matter for final hearing, which may include provision for the filing and service of a costs affidavit and an updating affidavit by any party or beneficiary. Irrespective of whether provision is made for an updating affidavit, practitioners are reminded of the obligation on an applicant to place the relevant facts before the Court.

In Baker, heard before the amendment to the Practice Note, no order to file updating evidence was made by the Court, and no updating evidence was filed. During cross-examination evidence came to light as to a change in the financial resources of the Plaintiffs in the matter. The Court stated:

[48] [Denise’s] claim falls to be dismissed by reason of her non-disclosure alone. Whether the additional material, had it been disclosed, would have helped or hindered her application is unknown to the Court…

…

[53] Given the fundamental nature of the obligation to disclose and the impediment to success of a claim which such a failure may bring about, it is elementary that a legal practitioner appearing for an applicant ascertains from the applicant, at or about the time of the hearing, whether there has been any change in their financial circumstances necessitating disclosure. Plainly, that did not happen here.

Isn’t the obligation on my solicitor?

Yes, Baker makes clear that your legal representative should make the necessary enquiries to ascertain any change in your circumstances. Best practice might include inspecting documents produced on subpoena or by notice to produce to check instructions regarding a Plaintiff’s financial and material circumstances.

But what if I think there has been no change?

Well, you may think there has been no significant change, in that you may not have sold a house or won the lottery, but, if you have even just one bank account there will always be some change, however small, that must be updated so that the Court has your current financial circumstances at the date of the hearing.

As in Baker the change could be to living arrangements, to receiving a Centrelink payment, or to employment. A full update of your circumstances should be provided prior to the hearing. Whilst the primary affidavit is lengthy, an updating affidavit can be short as it is specifically directed to updating the Court as to any change (or indeed simply to confirm there has been no change).

While not specifically adverted to in Baker updating evidence should likely extend to any person with whom a Plaintiff is cohabiting and to beneficiaries who have raised their financial resources as competing claimants on the bounty of the deceased.

13 April 2023

Personal Guarantees: Liability for Directors

Case Updates

Written by Holly Eastway

The recent case of Pugwall v Arthur McKenzie Investments Pty Ltd [2022] VSCA 272, in the Victorian Court of Appeal, serves as a reminder of the risks of personal guarantees for directors, revealing the dangers of personally guaranteeing the obligations of a company, especially where one may consider themselves safe under the corporate veil.

The Facts

A joint venture agreement (“JVA”) between two constructions companies, concerning the development of residential units in Seaford, Victoria turned sour following issues with funding.

Mr Clark, the sole director and secretary of one of the parties, and Mr McKenzie the sole director and secretary of the other, gave personal guarantees on behalf of their own respective companies.

The problem was that, despite being personally named as guarantors within the JVA, neither Mr Clark nor Mr McKenzie signed the JVA in their personal capacities.

First Instance Decision

The trial judge held, among other things, that McKenzie could not be held liable in his personal capacity pursuant to the guarantee.

On Appeal

The Court confirmed that the court will assess a party’s intention to be bound to the terms of a contract on the basis of an objective construction of the document as a whole, rather than the subjective, uncommunicated intentions of that party.  Upon assessing the JVA in its entirety, it was found that the JVA evidenced the intention for the guarantors to be personally liable and that the formal way in which a party signs a contractual document, will not be determinative of a party’s intention.

Mr McKenzie submitted that his signature to the JVA was only in his capacity as sole director/secretary, and that no signing clause was provided for him in his personal capacity as guarantor.  However, the Court found on appeal that the entirety of the JVA evidenced otherwise.

Key Takeaways

Pugwall v Arthur McKenzie Investments Pty Ltd is a potent reminder of the dangers of personal guarantees. It demonstrates the importance for lawyers to understand the wide ramifications of commercial relationships gone bad and the significance of good legal drafting skills. All in all, the Victorian Court of Appeal has set a precedent for ignoring the subjective intentions of parties to a contract in favour of an objective analysis of the contract itself.

Contact Us

If you’re thinking of entering into a contractual arrangement as a guarantor, seek legal advice in advance.  Uther Webster & Evans can provide you with advice and guidance, so contact our office here.

Disclaimer: the contents of this article are for informational purposes only and do not constitute legal advice, nor are the contents of this article intended to be a substitute for legal advice or to be relied upon as such.

23 November 2022

Mantovani v Vanta: Don’t Let a Lost Trust Deed become a Lost Cause

Case Updates

Background

This case involved a dispute between four adult siblings, Giovanni (the Plaintiff), Nicola, Salvatore and Carmine Mantovani, as to the terms of and entitlement to assets within a family trust and, consequently, the distribution of their mother, Teresa’s, estate.

In 1976,  the Mantovani Family Trust (the Trust) was established and a corporation known as Vanta Pty Ltd (Vanta) was appointed as the trustee. Teresa transferred her interest in a number of properties to Vanta, with the transfers treated as loans in the trust records. In 2015, Teresa died. Under her Will, she purported to gift the properties which had been transferred to Venta to each of her children in equal shares. Over the years, Vanta had been controlled by members of the Mantovani family. At the time of the proceedings, Nicola and Salvatore were Vanta’s directors and shareholders.

Despite extensive searches, the original Deed for the Trust was unable to be located and the parties agreed that it had been lost. However, a Trust Schedule existed, which included the date, name, settled sum, settlor, trustee, appointer and beneficiaries of the Trust. There were also financial statements and tax returns for the Trust from 2012 to 2020.

The Plaintiff sought a declaration that all assets held by Vanta were subject to a resulting trust in favour of Teresa’s estate and an order for the taking of accounts and payment of the amounts found to be due to Teresa’s estate. The key issue for determination by the Court was what, if any, legal consequences flowed from the loss of the Deed. In order to reach a conclusion on this issue, the Court was required to answer the following questions:

  1. Was the Deed Lost?

The Court held that the Deed was lost, in circumstances where reasonable searches and inquiries had been made by all parties.

  1. Could Secondary Evidence Prove the Deed’s Existence and Contents?

The Court referred to the standard of “clear and convincing proof” required to prove a Deed’s existence and contents by way of secondary evidence. Whilst the schedule and financial documents proved the existence of the Deed, they did not prove its contents. For example, the documents did not explain the basis on which distributions were to be made or how or when vesting was to occur.

  1. Did the Presumption of Regularity Apply?

The presumption of regularity says that, where a formal act is done which can only legally be done after the performance of some prior act, proof of the prior act is presumed. The Court held that the issues arising from the loss of the Deed extended beyond mere adherence to formal requirements, to substantive concerns as to the Deed’s contents. As such, the presumption could not be relied on to overcome the lack of evidence as to the Deed’s subject matter.

  1. Did the Trust fail for uncertainty?

The obligation to act in strict conformance with the terms of a trust is perhaps the most important duty of a trustee.  Where the contents of a trust deed cannot be ascertained, the trustee cannot discharge this obligation and the trust must fail. Accordingly, the Court held that Vanta had acted in breach of trust and the Trust failed for uncertainty.

  1. Should a Declaration of Resulting Trust be made?

The Court noted that, where an express trust fails, an automatic resulting trust arises by operation of law, such that the trustee holds the trust property on trust for the settlor. Under an automatic resulting trust, the settlor has transferred the legal interest in property, but not the beneficial interest.

In this case, Teresa’s (albeit invalid) devising of properties under her Will indicated that she did not wish for Vanta to retain the beneficial interest in those properties. Although Teresa’s father was the trust’s settlor, Teresa established the trust and transferred the property, so she was the provider of the trust property. As such, all assets held by Vanta were subject to a resulting trust in favour of Teresa’s estate.

  1. Should the Plaintiff’s Proposed Orders be made?

A claim for accounts in common form enforces a trustee’s obligation to account to the beneficiaries of the trust. As trustee, Vanta had an ongoing duty to account and pay amounts owed. The Court found that the Deed must have been lost since at least 2011, and that the $120,000 in distributions which Vanta made since that time to Nicola and Salvatore were a breach of trust. Accordingly, the orders sought by the Plaintiff were justified.

Costs

Given that these proceedings involved hostile litigation and allegations of breach of trust, the Court held that costs should be treated in the same way as ordinary litigation and follow the event. Although a trustee generally has an implied right of indemnity for expenses properly incurred in the administration of the trust, Vanta had not properly incurred the costs involved in these proceedings. The fact that Vanta breached its duties as trustee and adopted an adversarial approach to the proceedings warranted an order that the Plaintiff was entitled to costs on an indemnity basis.

Key Takeaways

These proceedings highlight the importance of trustees being familiar with the location of the trust deed and ensuring its safekeeping. If a trust deed cannot be found, it is crucial to seek directions from the Court as to how the trust should be administered going forward. Otherwise, trustees expose themselves to the risk of not only protracted litigation, but also an adverse costs order.

The contents of this post are for informational purposes only. They do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

To discuss your trust matter, please contact our office for advice from our experienced lawyers.

24 June 2022

Fairbairn v Radecki: High Court Considers Meaning of “Breakdown of De Facto Relationship”

Case Updates, Legal Knowledge

Written by Despina Bouletos

In its recent decision of Fairbairn v Radecki [2022] HCA 18, the High Court provided a useful commentary on the meaning of “breakdown of de facto relationship”, as per s90SM of the Family Law Act 1975 (Cth) (‘the Act’).

The Facts:

In approximately 2005, Ms Fairbairn and Mr Radecki entered into a de facto relationship. In 2010, they entered into a formal agreement to keep their assets separate. The agreement noted that, although Mr Radecki lived in Ms Fairbairn’s home, it was to remain owned absolutely by her. In 2015, the agreement was updated to include the quarantining of property since acquired by Ms Fairbairn and Mr Radecki.

By mid-2017, Ms Fairbairn had been diagnosed with dementia and, on the advice of her doctor, executed an enduring power of attorney in favour of her children from a previous relationship. At this stage, Ms Fairbairn’s decision-making capacity was largely, it not completely, absent. Shortly thereafter, Mr Radecki took Ms Fairbairn to a courthouse whereupon the existing power of attorney was revoked and replaced by one in favour of Mr Radecki and Ms Fairbairn’s brother. Mr Radecki also arranged for a solicitor to attend on Ms Fairbairn to execute a new will more favorable to him than Ms Fairbairn’s previous will.

In 2018, the NSW Civil and Administrative Tribunal (‘NCAT’) appointed the NSW Trustee and Guardian (‘the Trustee’) as Ms Fairbairn’s guardian and financial manager. NCAT also revoked the power of attorney in favour of Mr Radecki.

In March 2018, the Trustee moved Ms Fairbairn into an aged care home and sought to sell her home to fund her ongoing care. Mr Radecki opposed the sale and, subsequently, the Trustee sought a property settlement order from the Federal Circuit Court of Australia allowing for the sale of the home.

Procedural History:

Under s90SM of the Act, the Court only has jurisdiction to make property settlement orders in relation to a de facto relationship where there has been a “breakdown” of that relationship.

The primary judge held that Ms Fairbairn and Mr Radecki’s relationship had broken down by no later than 25 May 2018. The primary judge noted that Mr Radecki’s conduct during the demise of Ms Fairbairn’s mental capacity was inconsistent with a “fundamental premise” of their relationship, namely, the strict seperation of assets.  The primary judge pointed to the actions of Mr Radecki, including his facilitation of a new power of attorney and will and his refusal to allow Ms Fairbairn’s home to be sold.

The decision was appealed to the Full Court of the Family Court of Australia, which overturned the primary judge. The Full Court found that, although it could be classified as “bad behaviour”, none of Mr Radecki’s conduct was fundamentally inconsistent with a continuing de facto relationship.

Arguments:

On appeal to the High Court, Ms Fairbairn’s primary argument was that a de facto relationship breaks down when the parties stop “living together”, as required by s 4AA of the Act, whether voluntarily undertaken or involuntarily imposed. Ms Fairbairn sought to characterise cohabitation as the “irreducible minimum” of a de facto relationship. Accordingly, Ms Fairbairn argued that her relationship with Mr Radecki had broken down when she moved into an aged care home.

Alternatively, Ms Fairbairn argued that her de facto relationship with Mr Radecki had broken down by no later than 25 May 2018, due to Mr Radecki’s conduct.

Findings:

The High Court rejected Ms Fairbairn’s argument that a de facto relationship is considered to have broken down at the point when the parties are not cohabitating. The Court held that the phrase “living together”, as contained in s 4AA of the Act, means sharing a life together as a couple and must be “construed to take account of the many various ways in which two people may share their lives together in the modern world”: [33].

However, the Court reinforced the primary judge’s finding that, where one party in a de facto relationship acts fundamentally contrary to the interests of the other in relation to the property of the couple, it may be possible to conclude that the mutual commitment to a shared life has ended.

The Court held that it was an “essential feature” of the Ms Fairbairn and Mr Radecki’s relationship that they keep their assets separate from one another. However, by 2017, Mr Radecki had begun to act as if he were no longer bound by this agreement. This was evidenced by the conduct which the primary judge referred to.

On this basis, the Court upheld the primary judge’s finding that the relationship had broken down no later than 25 May 2018.

Contact Us:

The contents of this post are for informational purposes only. They do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

To discuss your family law matter, please contact our office for advice from our experienced family law team.

21 October 2013

Case update: King v The Queen [2012]HCA24

Case Updates
case update

In King v The Queen, the majority of the High Court held that dangerous driving is not a species of negligent driving and that prior decisions were erroneous. It was held that dangerous driving is based upon the risk of danger posed to other persons and not upon the degree to which the driving falls short of the standard of care owed to the other road users.

The joint judgment stated:

“The ordinary meaning of dangerous is fraught with or causing danger; involving risk; perilous; hazardous; unsafe”. It describes when applied to driving, a manner or speed of driving which gives rise to a risk to others, including motorists, cyclists, pedestrians and the driver’s own passengers. Negligence is not a necessary element of dangerous driving causing death or serious injury. Negligence may and, many if not most cases will, underline dangerous driving. But a person may drive with care and skill and yet drive dangerously. It is not appropriate to treat dangerousness as covering an interval in the range of negligent driving which is of lesser degree than driving which is grossly negligent.”

24 July 2024

Dryandra Investments Pty Ltd v Hardie [2024] WASC 248: What happens when the guardian and appointor of a trust has lost capacity?

uwe
Case Updates, Legal Knowledge

0

Written by Despina Bouletos

The Western Australian Supreme Court recently published its decision of Dryandra Investments Pty Ltd as trustee of the Dryandra Trust v Hardie by her guardian ad litem Ian Torrington Blatchford. This judgment addressed two separate proceedings (heard together) relating to:

1. the Dryandra Trust (“the Trust”) of which Isobel Hardie (“Isobel”) was the appointor and guardian (“the Trust Proceedings”); and

2. Isobel’s will (“the Will Proceedings”).

Isobel suffers from dementia and was represented in the proceedings by her Guardian ad Litem.

In the Trust Proceedings, the trustee sought orders, pursuant to s90 of the Trustees Act 1962 (WA), that the Court approve and assent to variations to the Trust deed of the Trust. A similar power exists under Division 3A of the Trustee Act 1925 (NSW). The variations sought would allow:

1. Isobel’s enduring attorney, Timothy Ryan (“Attorney”) to exercise the powers of appointor and guardian in place of Isobel, so long as she lacked capacity; and

2. Isobel’s legal personal representative to exercise the powers of appointor and guardian in the event of a default of appointment (including upon Isobel’s death).

Alternatively, the trustee sought orders under the Court’s inherent jurisdiction, for the replacement of Isobel as appointor and guardian of the Trust.

In the Will Proceedings, Isobel’s Attorney, as plaintiff, sought an order pursuant to s40 of the Wills Act 1970 (WA) that the Court authorise the making of a codicil to Isobel’s last will dated 13 November 2006 (“2006 Will”), seeking to appoint the Attorney as Isobel’s successor as guardian of the Trust.

In both proceedings, the critical issue was the fact that Isobel did not have (and had not had since her appointment) capacity to act as appointor or guardian of the Trust. Accordingly, there was no guardian capable of consenting to the reserved and restricted powers set out in the Trust deed which, among other things, governed the trustee’s discretion in making distributions of Trust income.

Isobel also lacked capacity to appoint a replacement guardian to act in her stead, as there was no provision in the Trust deed for the appointment of a replacement guardian if Isobel lost capacity or died. As such, the Trust would be left without a guardian upon Isobel’s death.

The Court found that a lack of mental capacity did not, of itself, affect the validity of Isobel’s appointment as appointor and guardian (both as a general principle and on the basis of the terms of the Trust deed). However, the consequence of a lack of capacity was such that it prevented the valid exercise by Isobel of the powers conferred on her. That is, Isobel, by reason of her incapacity, was incapable of giving effective consent or of exercising such powers as conferred on her by her appointment.

Under the Trust deed, while there was a guardian appointed, the trustee was not able to exercise the reserved powers or restricted powers except with the consent of the guardian. The effect of this was that, while Isobel was the guardian but had no capacity to give her consent, none of those powers could be exercised by the trustee.

Practically, this meant that the trustee was confined to accumulating the Trust income or distributing it to Isobel only (which would have resulted in the income being taxed at the highest marginal tax rate).

In order for the Court to vary the Trust Deed under s90 of the Trustee Act, it was required to be satisfied that the person on whose behalf the variation was sought had an interest in the Trust. Although Isobel was a beneficiary under the Trust, the Court in this case was being asked to assent to the variation sought on behalf of Isobel in her capacity as a guardian, rather than as a beneficiary.

The Court was not persuaded that s90 extended to a power to approve a variation that required the consent of a guardian who lacked capacity to provide such consent. As such, the Court declined to approve the variations to the Trust deed as proposed.

However, the Court then considered whether it was able to exercise its inherent supervisory jurisdiction to appoint a replacement or substitute guardian and appointor. The Court considered that the effect of Isobel’s loss of capacity in this case meant that, despite there being a guardian of the Trust, the trustee could not consult the wishes of the guardian as contemplated by the Trust deed. Further, no one was capable of exercising the guardian’s power of consent to the trustee’s exercise of any of the reserved or restricted powers.

For those reasons, the Court was satisfied that it could exercise its inherent supervisory jurisdiction to replace Isobel as guardian and appointor of the Trust, in order to secure the proper administration and due execution of the Trust. Accordingly, the Court made orders to replace Isobel as guardian and appointor with her attorney. Upon making this order, the orders sought in the Will Proceedings were redundant.

This case has significant implications for the preparation of discretionary family trusts and testamentary trusts. When creating such a trust, it is imperative for clients and their lawyers to consider whether appropriate provisions have been put in place to replace an appointor, guardian or trustee in the event that they lose capacity and/or upon their death. Doing so is critical to avoid the potential for complex and costly Court proceedings.

The contents of this post are for informational purposes only. They do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

To discuss your estate planning matter, please contact our office for advice from our experienced estate planning team.

15 July 2024

A Thousand Miles From Care: Steve Johnson Publishes Memoir on Scott Johnson’s Death

uwe
Case Updates

0

On 17 July 2024, A Thousand Miles from Care, a memoir canvassing Steve Johnson’s thirty-year effort to uncover the truth about the murder of his brother, Scott Johnson, will be published in Australia by Harper Collins.

Vivian Evans (Vivian) of Uther Webster & Evans has worked closely with Steve and his US Legal team, and John Agius SC (John) over the last decade, in his attempt to obtain justice for Scott. Vivian and John assisted Steve to secure a third coronial inquest into Scott’s death, which resulted in a finding that Scott’s death was a homicide and led to a new police taskforce being appointed and the arrest and sentencing of Scott’s killer. Steve’s work also paved the way for the recent New South Wales inquiry into gay hate crimes.

In December 1988, Scott, who was a 27-year-old American PHD student living in Australia, was found dead at the bottom of a cliff at North Head, in the Manly area. Following an autopsy that concluded no foul play, Scott’s death was initially ruled a suicide.

Steve, who was unsatisfied with this finding, commenced what would ultimately be a three-decade-long investigation into uncovering the truth of what happened to Scott. Refusing to believe that Scott had any reason to end his life or that his death was the result of an accident, Steve lobbied police to continue the investigation into Scott’s death.

However, at a coronial inquest held in March 1989, the coroner found that Scott’s death was the result of a suicide, despite acknowledging that there was no apparent reason for Scott to take his own life. Steve continued to campaign for further investigation into Scott’s death, particularly in light of a number of homophobic killings which occurred around Sydney beaches in the 1980s.

Despite repeated attempts to progress the matter, it was not until 2012 that a second coronial inquest was authorised, in which the coroner overturned the initial suicide verdict and replaced it with an open one. The coroner also called for further police investigation into Scott’s death.

In 2017, a third coronial inquest was held. Following the evidence of several key witnesses, who testified to regular assaults against gay men by gangs in the North Head area, the coroner reached a verdict that Scott fell from the clifftop as a result of actual or threatened violence by an unidentified person or persons who attacked him because they perceived him to be homosexual.

Following this finding, police launched a further investigation into Scott’s death and announced a $2 million reward for information on Scott’s killer, $1 million of which was contributed by Steve personally. Ultimately, the police investigation led to the arrest of Scott White, who was charged with the murder of Scott on 12 May 2020.

On 13 January 2022, White was found guilty of murdering Scott, after entering a plea of guilty. Despite an attempt by White’s lawyer to have his guilty plea withdrawn, on the basis that White was not fit to make an admission of guilt, White was sentenced to 12 years and 7 months imprisonment, with a non-parole period of 8 years and 3 months.

However, six months later, White appealed his conviction, and a re-trial was ordered. On 23 February 2023, following discussions, White pleaded guilty to manslaughter and was subsequently re-sentenced to 9 years in prison, with a non-parole period of 6 years. He will be eligible for parole in 2026.

Following White’s sentence, a special commission of inquiry into LGBTIQ hate crimes was commissioned, appointing Justice John Sackar as Commissioner. The inquiry looked into the unsolved deaths of LGBTIQ people that may have been hate crimes between 1970 and 2010, which were previously the subject of investigation by the NSW Police Force. Specifically, the inquiry was focus upon the deaths of 88 men, potentially motivated by gay hate bias.

On 21 December 2023, the inquiry published its final report comprising almost 3,500 pages. The report calls for an audit and review by NSW Police of all unsolved homicides for the period from 1970 to 2010, and for the implementation of mandatory and ongoing training for NSW Police officers concerning the LGBTIQ community.

UWE is pleased to have been able to work closely with Steve Johnson in achieving not only justice for Scott but also important and long overdue reform in relation to the approach taken by the NSW Police Force in regard to LGBTIQ hate crimes.

The contents of this post are for informational purposes only. They do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

To discuss your criminal law matter, please contact our office for advice from our experienced criminal law team

10 July 2024

Updating financial circumstances in Family Provision Claims

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Written by Hilary Monteith

“Don’t let the dough rest for too long” – Lessons learned from Baker v Baker – Updating financial circumstances for a family provision claim

Updating financial circumstances in Family Provision Claims

You have made a claim for family provision out of a deceased person’s estate. At the time of filing the Summons, the Court requires an Affidavit to be filed setting out various matters in accordance with a prescribed form of affidavit pursuant to Practice Note SC Eq 7 (the Practice Note). Importantly, as plaintiff, that affidavit will go into detail in relation to your financial resources (including earning capacity), including the financial circumstances of any person you cohabit with.

However, a hearing in the matter may not be listed for several months, if not over a year, after the proceedings being filed.

Do you need to update your circumstances or is the primary affidavit enough?

A recent decision of Hammerschlag CJ in Eq Baker v Baker [2024] NSWSC 559 makes clear that evidence as to financial resources must be updated prior to a hearing, reliance should not be placed on the primary affidavit as it will not be accurate at a final hearing.

Section 59(1)(c) of the Succession Act 2006 (NSW) requires the Court to be satisfied at the time the application is being considered that adequate provision has not been made by the Will. If it is satisfied that adequate provision has not been made, the Court may make such order for provision it thinks ought to be made having regard to the facts known to the Court at the time the order is made (s 59(2)).

The Succession and Probate Lists Practice Note SC Eq 7 (recently re-issued in June 2024) at Paragraph 35 now states:

If the matter does not settle, there will be a timetable to prepare the matter for final hearing, which may include provision for the filing and service of a costs affidavit and an updating affidavit by any party or beneficiary. Irrespective of whether provision is made for an updating affidavit, practitioners are reminded of the obligation on an applicant to place the relevant facts before the Court.

In Baker, heard before the amendment to the Practice Note, no order to file updating evidence was made by the Court, and no updating evidence was filed. During cross-examination evidence came to light as to a change in the financial resources of the Plaintiffs in the matter. The Court stated:

[48] [Denise’s] claim falls to be dismissed by reason of her non-disclosure alone. Whether the additional material, had it been disclosed, would have helped or hindered her application is unknown to the Court…

…

[53] Given the fundamental nature of the obligation to disclose and the impediment to success of a claim which such a failure may bring about, it is elementary that a legal practitioner appearing for an applicant ascertains from the applicant, at or about the time of the hearing, whether there has been any change in their financial circumstances necessitating disclosure. Plainly, that did not happen here.

Isn’t the obligation on my solicitor?

Yes, Baker makes clear that your legal representative should make the necessary enquiries to ascertain any change in your circumstances. Best practice might include inspecting documents produced on subpoena or by notice to produce to check instructions regarding a Plaintiff’s financial and material circumstances.

But what if I think there has been no change?

Well, you may think there has been no significant change, in that you may not have sold a house or won the lottery, but, if you have even just one bank account there will always be some change, however small, that must be updated so that the Court has your current financial circumstances at the date of the hearing.

As in Baker the change could be to living arrangements, to receiving a Centrelink payment, or to employment. A full update of your circumstances should be provided prior to the hearing. Whilst the primary affidavit is lengthy, an updating affidavit can be short as it is specifically directed to updating the Court as to any change (or indeed simply to confirm there has been no change).

While not specifically adverted to in Baker updating evidence should likely extend to any person with whom a Plaintiff is cohabiting and to beneficiaries who have raised their financial resources as competing claimants on the bounty of the deceased.

13 April 2023

Personal Guarantees: Liability for Directors

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Written by Holly Eastway

The recent case of Pugwall v Arthur McKenzie Investments Pty Ltd [2022] VSCA 272, in the Victorian Court of Appeal, serves as a reminder of the risks of personal guarantees for directors, revealing the dangers of personally guaranteeing the obligations of a company, especially where one may consider themselves safe under the corporate veil.

The Facts

A joint venture agreement (“JVA”) between two constructions companies, concerning the development of residential units in Seaford, Victoria turned sour following issues with funding.

Mr Clark, the sole director and secretary of one of the parties, and Mr McKenzie the sole director and secretary of the other, gave personal guarantees on behalf of their own respective companies.

The problem was that, despite being personally named as guarantors within the JVA, neither Mr Clark nor Mr McKenzie signed the JVA in their personal capacities.

First Instance Decision

The trial judge held, among other things, that McKenzie could not be held liable in his personal capacity pursuant to the guarantee.

On Appeal

The Court confirmed that the court will assess a party’s intention to be bound to the terms of a contract on the basis of an objective construction of the document as a whole, rather than the subjective, uncommunicated intentions of that party.  Upon assessing the JVA in its entirety, it was found that the JVA evidenced the intention for the guarantors to be personally liable and that the formal way in which a party signs a contractual document, will not be determinative of a party’s intention.

Mr McKenzie submitted that his signature to the JVA was only in his capacity as sole director/secretary, and that no signing clause was provided for him in his personal capacity as guarantor.  However, the Court found on appeal that the entirety of the JVA evidenced otherwise.

Key Takeaways

Pugwall v Arthur McKenzie Investments Pty Ltd is a potent reminder of the dangers of personal guarantees. It demonstrates the importance for lawyers to understand the wide ramifications of commercial relationships gone bad and the significance of good legal drafting skills. All in all, the Victorian Court of Appeal has set a precedent for ignoring the subjective intentions of parties to a contract in favour of an objective analysis of the contract itself.

Contact Us

If you’re thinking of entering into a contractual arrangement as a guarantor, seek legal advice in advance.  Uther Webster & Evans can provide you with advice and guidance, so contact our office here.

Disclaimer: the contents of this article are for informational purposes only and do not constitute legal advice, nor are the contents of this article intended to be a substitute for legal advice or to be relied upon as such.

23 November 2022

Mantovani v Vanta: Don’t Let a Lost Trust Deed become a Lost Cause

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Background

This case involved a dispute between four adult siblings, Giovanni (the Plaintiff), Nicola, Salvatore and Carmine Mantovani, as to the terms of and entitlement to assets within a family trust and, consequently, the distribution of their mother, Teresa’s, estate.

In 1976,  the Mantovani Family Trust (the Trust) was established and a corporation known as Vanta Pty Ltd (Vanta) was appointed as the trustee. Teresa transferred her interest in a number of properties to Vanta, with the transfers treated as loans in the trust records. In 2015, Teresa died. Under her Will, she purported to gift the properties which had been transferred to Venta to each of her children in equal shares. Over the years, Vanta had been controlled by members of the Mantovani family. At the time of the proceedings, Nicola and Salvatore were Vanta’s directors and shareholders.

Despite extensive searches, the original Deed for the Trust was unable to be located and the parties agreed that it had been lost. However, a Trust Schedule existed, which included the date, name, settled sum, settlor, trustee, appointer and beneficiaries of the Trust. There were also financial statements and tax returns for the Trust from 2012 to 2020.

The Plaintiff sought a declaration that all assets held by Vanta were subject to a resulting trust in favour of Teresa’s estate and an order for the taking of accounts and payment of the amounts found to be due to Teresa’s estate. The key issue for determination by the Court was what, if any, legal consequences flowed from the loss of the Deed. In order to reach a conclusion on this issue, the Court was required to answer the following questions:

  1. Was the Deed Lost?

The Court held that the Deed was lost, in circumstances where reasonable searches and inquiries had been made by all parties.

  1. Could Secondary Evidence Prove the Deed’s Existence and Contents?

The Court referred to the standard of “clear and convincing proof” required to prove a Deed’s existence and contents by way of secondary evidence. Whilst the schedule and financial documents proved the existence of the Deed, they did not prove its contents. For example, the documents did not explain the basis on which distributions were to be made or how or when vesting was to occur.

  1. Did the Presumption of Regularity Apply?

The presumption of regularity says that, where a formal act is done which can only legally be done after the performance of some prior act, proof of the prior act is presumed. The Court held that the issues arising from the loss of the Deed extended beyond mere adherence to formal requirements, to substantive concerns as to the Deed’s contents. As such, the presumption could not be relied on to overcome the lack of evidence as to the Deed’s subject matter.

  1. Did the Trust fail for uncertainty?

The obligation to act in strict conformance with the terms of a trust is perhaps the most important duty of a trustee.  Where the contents of a trust deed cannot be ascertained, the trustee cannot discharge this obligation and the trust must fail. Accordingly, the Court held that Vanta had acted in breach of trust and the Trust failed for uncertainty.

  1. Should a Declaration of Resulting Trust be made?

The Court noted that, where an express trust fails, an automatic resulting trust arises by operation of law, such that the trustee holds the trust property on trust for the settlor. Under an automatic resulting trust, the settlor has transferred the legal interest in property, but not the beneficial interest.

In this case, Teresa’s (albeit invalid) devising of properties under her Will indicated that she did not wish for Vanta to retain the beneficial interest in those properties. Although Teresa’s father was the trust’s settlor, Teresa established the trust and transferred the property, so she was the provider of the trust property. As such, all assets held by Vanta were subject to a resulting trust in favour of Teresa’s estate.

  1. Should the Plaintiff’s Proposed Orders be made?

A claim for accounts in common form enforces a trustee’s obligation to account to the beneficiaries of the trust. As trustee, Vanta had an ongoing duty to account and pay amounts owed. The Court found that the Deed must have been lost since at least 2011, and that the $120,000 in distributions which Vanta made since that time to Nicola and Salvatore were a breach of trust. Accordingly, the orders sought by the Plaintiff were justified.

Costs

Given that these proceedings involved hostile litigation and allegations of breach of trust, the Court held that costs should be treated in the same way as ordinary litigation and follow the event. Although a trustee generally has an implied right of indemnity for expenses properly incurred in the administration of the trust, Vanta had not properly incurred the costs involved in these proceedings. The fact that Vanta breached its duties as trustee and adopted an adversarial approach to the proceedings warranted an order that the Plaintiff was entitled to costs on an indemnity basis.

Key Takeaways

These proceedings highlight the importance of trustees being familiar with the location of the trust deed and ensuring its safekeeping. If a trust deed cannot be found, it is crucial to seek directions from the Court as to how the trust should be administered going forward. Otherwise, trustees expose themselves to the risk of not only protracted litigation, but also an adverse costs order.

The contents of this post are for informational purposes only. They do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

To discuss your trust matter, please contact our office for advice from our experienced lawyers.

24 June 2022

Fairbairn v Radecki: High Court Considers Meaning of “Breakdown of De Facto Relationship”

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Written by Despina Bouletos

In its recent decision of Fairbairn v Radecki [2022] HCA 18, the High Court provided a useful commentary on the meaning of “breakdown of de facto relationship”, as per s90SM of the Family Law Act 1975 (Cth) (‘the Act’).

The Facts:

In approximately 2005, Ms Fairbairn and Mr Radecki entered into a de facto relationship. In 2010, they entered into a formal agreement to keep their assets separate. The agreement noted that, although Mr Radecki lived in Ms Fairbairn’s home, it was to remain owned absolutely by her. In 2015, the agreement was updated to include the quarantining of property since acquired by Ms Fairbairn and Mr Radecki.

By mid-2017, Ms Fairbairn had been diagnosed with dementia and, on the advice of her doctor, executed an enduring power of attorney in favour of her children from a previous relationship. At this stage, Ms Fairbairn’s decision-making capacity was largely, it not completely, absent. Shortly thereafter, Mr Radecki took Ms Fairbairn to a courthouse whereupon the existing power of attorney was revoked and replaced by one in favour of Mr Radecki and Ms Fairbairn’s brother. Mr Radecki also arranged for a solicitor to attend on Ms Fairbairn to execute a new will more favorable to him than Ms Fairbairn’s previous will.

In 2018, the NSW Civil and Administrative Tribunal (‘NCAT’) appointed the NSW Trustee and Guardian (‘the Trustee’) as Ms Fairbairn’s guardian and financial manager. NCAT also revoked the power of attorney in favour of Mr Radecki.

In March 2018, the Trustee moved Ms Fairbairn into an aged care home and sought to sell her home to fund her ongoing care. Mr Radecki opposed the sale and, subsequently, the Trustee sought a property settlement order from the Federal Circuit Court of Australia allowing for the sale of the home.

Procedural History:

Under s90SM of the Act, the Court only has jurisdiction to make property settlement orders in relation to a de facto relationship where there has been a “breakdown” of that relationship.

The primary judge held that Ms Fairbairn and Mr Radecki’s relationship had broken down by no later than 25 May 2018. The primary judge noted that Mr Radecki’s conduct during the demise of Ms Fairbairn’s mental capacity was inconsistent with a “fundamental premise” of their relationship, namely, the strict seperation of assets.  The primary judge pointed to the actions of Mr Radecki, including his facilitation of a new power of attorney and will and his refusal to allow Ms Fairbairn’s home to be sold.

The decision was appealed to the Full Court of the Family Court of Australia, which overturned the primary judge. The Full Court found that, although it could be classified as “bad behaviour”, none of Mr Radecki’s conduct was fundamentally inconsistent with a continuing de facto relationship.

Arguments:

On appeal to the High Court, Ms Fairbairn’s primary argument was that a de facto relationship breaks down when the parties stop “living together”, as required by s 4AA of the Act, whether voluntarily undertaken or involuntarily imposed. Ms Fairbairn sought to characterise cohabitation as the “irreducible minimum” of a de facto relationship. Accordingly, Ms Fairbairn argued that her relationship with Mr Radecki had broken down when she moved into an aged care home.

Alternatively, Ms Fairbairn argued that her de facto relationship with Mr Radecki had broken down by no later than 25 May 2018, due to Mr Radecki’s conduct.

Findings:

The High Court rejected Ms Fairbairn’s argument that a de facto relationship is considered to have broken down at the point when the parties are not cohabitating. The Court held that the phrase “living together”, as contained in s 4AA of the Act, means sharing a life together as a couple and must be “construed to take account of the many various ways in which two people may share their lives together in the modern world”: [33].

However, the Court reinforced the primary judge’s finding that, where one party in a de facto relationship acts fundamentally contrary to the interests of the other in relation to the property of the couple, it may be possible to conclude that the mutual commitment to a shared life has ended.

The Court held that it was an “essential feature” of the Ms Fairbairn and Mr Radecki’s relationship that they keep their assets separate from one another. However, by 2017, Mr Radecki had begun to act as if he were no longer bound by this agreement. This was evidenced by the conduct which the primary judge referred to.

On this basis, the Court upheld the primary judge’s finding that the relationship had broken down no later than 25 May 2018.

Contact Us:

The contents of this post are for informational purposes only. They do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

To discuss your family law matter, please contact our office for advice from our experienced family law team.

21 October 2013

Case update: King v The Queen [2012]HCA24

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In King v The Queen, the majority of the High Court held that dangerous driving is not a species of negligent driving and that prior decisions were erroneous. It was held that dangerous driving is based upon the risk of danger posed to other persons and not upon the degree to which the driving falls short of the standard of care owed to the other road users.

The joint judgment stated:

“The ordinary meaning of dangerous is fraught with or causing danger; involving risk; perilous; hazardous; unsafe”. It describes when applied to driving, a manner or speed of driving which gives rise to a risk to others, including motorists, cyclists, pedestrians and the driver’s own passengers. Negligence is not a necessary element of dangerous driving causing death or serious injury. Negligence may and, many if not most cases will, underline dangerous driving. But a person may drive with care and skill and yet drive dangerously. It is not appropriate to treat dangerousness as covering an interval in the range of negligent driving which is of lesser degree than driving which is grossly negligent.”