Corbiere v Dulley[2016] QSC 134

SUPREME COURT OF QUEENSLAND

1. The applicants, Paul Corbiere and Andrew Monks, are the executors and trustees of the last will of Dudley Ernest Sandford Dulley who died on 17 December 1991. They seek judicial advice and directions pursuant to s 96 of the Trusts Act 1973 (Qld) or, alternatively, s 6 of the Succession Act 1981 (Qld) regarding a number of issues concerning the estate. In the main, these arise in connection with the question whether the trustees should continue with a proceeding in this court against the first to fourth respondents but there is also a subsidiary issue concerning the proper construction of the will.
2. An application for a direction from the court whether to commence or continue a proceeding is sometimes referred to as a Beddoe application.^[1] In contrast to the court’s usual function of deciding disputes between competing litigants, the jurisdiction permits the giving of “private advice”^[2] and directions to a trustee regarding the discharge of his or her duties and, once given, a trustee acting under any such direction will be deemed to have discharged those duties notwithstanding that the order giving the direction is subsequently “invalidated, overruled, set aside or otherwise rendered of no effect, or varied”.^[3] Indeed, the only circumstances where such a direction will not have that effect are where the trustee is guilty of fraud, wilful concealment or misrepresentation in “obtaining the direction or in acquiescing in the court making the order giving the direction”.^[4] Section 96 of the Trusts Act therefore offers a considerable safety net to trustees, but it also serves to protect the corpus of the trust from being wasted on proceedings that should not be prosecuted or defended and ensures that the interests of the trust will not be “subordinated to the trustees’ fear of personal liability for costs”.^[5]
3. Furthermore, an application pursuant to s 96 proceeds on a “written statement of facts to the court” which is prepared by the applicant,^[6] and those facts are then assumed to be correct for the purposes of deciding the application.^[7] Often, as was the case here, the stated facts are considered with the legal principles applying to the proposed or existing proceeding in a written opinion of counsel, which is provided to the court but not to the beneficiaries. As well, submissions may be received by the court from an applicant trustee in the absence of the beneficiaries and, again, that occurred in this case. Importantly, though, it is not the function of the court to decide disputed questions of fact any more than it is to decide the ultimate issues in the proceeding in question; the sole question is whether it would be proper for the applicant trustee to prosecute or defend that proceeding.^[8]
4. Accordingly, in much of what follows, particular reliance is placed on the accuracy of the two statements of facts provided by the trustees.^[9] The court proceeds with some assurance in that regard because a misstatement of the facts by the trustees would put at risk any indemnity arising under s 97 of the Trusts Act if a direction is given,^[10] but it would be wrong to assume that the stated facts will necessarily be established at trial. Here, a number of those facts, if made out, go in support of quite serious allegations against the first respondent who is a senior legal practitioner. Those allegations are, and will remain, in dispute. It should therefore be kept steadily in mind that the giving of advice or directions says nothing more than that it is, in all of the stated circumstances, appropriate for the trustees to continue with their proceeding against the first to fourth respondents so that a proper adjudication on the evidence of those allegations can be made.

Facts

5. The first respondent, Bruce Dulley, is the son of the deceased. The second respondent, Yas Yo Pty Ltd, is a company in respect of which Bruce Dulley is the sole director and a 50% owner. The third, fourth and fifth respondents – Yasmin Dulley, Yolande Dulley and Jacob Dulley – are the adult children of Bruce Dulley and Louise Baker. For ease of reference, each of these persons shall be referred to by their Christian names.
6. At the time of his death, the deceased was the registered proprietor of vacant beachfront land situated at Jefferson Lane, Palm Beach on the Gold Coast and a house property situated at Vista Avenue, Wellers Hill in Brisbane.
7. The deceased’s last will was executed on 28 February 1990. By its provisions:

1. the applicant trustees (together with another man who renounced his executorship on 21 October 1993) were appointed trustees and executors;
2. after the discharge of all due debts, a bequest of $80,000 as well as jewellery that had been owned by the deceased was made to Bruce’s sister;
3. separate trusts were to be created in respect of Jefferson Lane and Vista Avenue pursuant to which:

1. the applicant trustees (and the man who later renounced) were to be the trustees of each trust;
2. Bruce was to receive a life interest in Jefferson Lane and Vista Avenue and, during the period of his life tenancy;
3. Upon Bruce’s death, Louise was to be given a licence to reside at Vista Avenue for so long as she was caring for Yasmin, Yolande and Jacob;
4. Yasmin, Yolande and Jacob were to be the remaindermen with respect to Jefferson Lane; and
5. Jacob was to be the remainderman with respect to Vista Avenue.

8. Following the death of the deceased, and in conformity with the directions contained in the will, the trustees set up the Jefferson Lane Property Trust and the Vista Avenue Property Trust.
9. In 2007, and after consultation with the beneficiaries, the trustees decided to sell Jefferson Lane. For that purpose, the trustees appointed Bruce, in his capacity as a solicitor and principal of the firm, Bruce Dulley Family Lawyers, to act on behalf of the Jefferson Lane Property Trust in relation to the sale. A contract for sale was entered into on 30 November 2007 for a purchase price of $3,600,000, and a deposit of $100,000 was paid to the firm.  The contract settled on 20 December 2007 and, in consequence, net settlement proceeds of $3,515,080.52 were paid to the credit of the trust account maintained by Bruce Dulley Family Lawyers.
10. According to the trustees, Bruce thereafter dealt with the net proceeds of sale without their knowledge or approval. This was done, it is stated, by paying a number of expenses from the net sale proceeds^[11] and then, on 14 January 2008, investing the balance in two interest-bearing accounts at the Queensland Police Credit Union which had been opened by him in the names of the trustees as personal representatives of the estate. Furthermore, arrangements were put in place for the interest earned by both investments to be transferred to Bruce for “his sole use, benefit and enjoyment”.^[12]
11. The trustees then state that, again without their knowledge or approval, some of the funds held in the investment accounts were used to:

1. purchase a property at Yamba, New South Wales in the name of Yas Yo Pty Ltd for $450,000;

2. purchase a property at Ocean Shores, New South Wales in the names of Yasmin and Yolande for $520,000; and
3. encumber the Ocean Shores property with a registered mortgage given by Yasmin and Yolande in favour of Bruce to secure “repayment” of the purchase price.

12. The trustees maintain that these property transactions constituted a misuse of the property of the Jefferson Lane Property Trust as well as a breach of the retainer between the trustees and Bruce Dulley Family Lawyers.
13. Accordingly, on 5 December 2011 the trustees called on Bruce to account. Eight days later, at a conference held at the offices of Bruce Dulley Family Lawyers, Bruce acknowledged that he had used portions of the funds held in the investment accounts to acquire the Yamba property in the name of Yas Yo and the Ocean Shores property in the names of Yasmin and Yolande. On the same day (13 December 2011), Bruce complied with the trustees’ demand to transfer the balance of the funds held in the investment accounts to them. That balance was then invested by the trustees in their own names as trustees for the Jefferson Lane Property Trust.
14. In addition to the property transactions, the trustees also state that, between 27 May 2008 and 12 September 2011, Bruce withdrew funds from the investment accounts and applied them to his own use or to the use of Yas Yo or Yasmin. An acknowledgement that these withdrawals were made by Bruce is said to be contained in a letter from Bruce Dulley Family Lawyers to the solicitors for the trustees dated 1 February 2013. According to the trustees, the total funds withdrawn by Bruce amounted to $1,694,845.44 and each withdrawal is said to have been made without the knowledge or approval of the trustees. As such, the trustees maintain that these withdrawals also constituted a misuse of the property of the Jefferson Lane Property Trust as well as a breach of the retainer between the trustees and Bruce Dulley Family Lawyers. It is to be noted, however, that $984,597.60^[13] of the total withdrawn would appear to have been for the purpose of one or both of the property purchases to which I have referred.^[14]
15. On 18 June 2013, the trustees caused caveats to be lodged at the offices of the Registrar-General for the State of New South Wales with respect to the Yamba property and the Ocean Shores property.^[15] On the following day (19 June 2013), the principal proceeding was commenced.

The Principal Proceeding

16. In the principal proceeding, the trustees seek relief against Bruce, Yas Yo, Yasmin and Yolande. No relief is sought against Jacob who was included as a party on 30 May 2014 because, on the trustees’ case, he is a beneficiary of the will whose interest has been diminished by the conduct of the other beneficiaries.
17. That said, by the Claim and Statement of Claim, the following relief is sought:

1. against Bruce:

1. a declaration that the net proceeds of the sale of Jefferson Lane were to be held and applied in accordance with the will for the use and benefit of the beneficiaries of the Jefferson Lane Property Trust;
2. an order for the taking of an account of moneys applied by him from the investment accounts other than in accordance with the requirements of the Jefferson Lane Property Trust;
3. an order that the trustees are entitled to trace the moneys taken from the investment accounts by or on behalf of him;
4. a declaration that he holds on trust for the trustees any personal property or real property acquired by use of the moneys from the investment accounts or any part thereof other than in accordance with the requirements of the Jefferson Lane Property Trust;
5. an order for the taking of an account of any profits derived or benefit gained by him arising from any misuse of moneys from the investment accounts;
6. an order that the trustees are entitled to trace any such profits derived or benefit gained by him;
7. a declaration that he holds on trust for the trustees such personal property or real property as may have been gained from any misuse of moneys from the investment accounts;
8. an order that he take all steps necessary to:

1. discharge the mortgage registered in his favour over the Ocean Shores property; and
2. cause Yas Yo to transfer to the trustees such interest as is found by the court to be the trustees’ interest in Yamba property;

9. further, and in the alternative, damages as equitable compensation for breach of fiduciary duties and/or conversion in the sum of $1,500,000, or such other amount as the court may determine, arising from the use of moneys from the investment accounts other than in accordance with the requirements of the Jefferson Lane Property Trust;
10. an injunction restraining him, by himself and his servants and agents, from encumbering, mortgaging, charging, selling or otherwise disposing of the trustees’ interest in the Yamba and Ocean Shores properties;

2. against Yas Yo:

1. a declaration that it holds on trust for the trustees the whole of its interest in the Yamba property;
2. an order pursuant to s 71 of the Trustee Act 1925 (NSW) that the Yamba property vests in the trustees;^[16]
3. an order that it take all steps necessary to transfer to the trustees such interest as is found by the court to be the trustees’ interest in the Yamba property;
4. a direction to the Registrar-General for the State of New South Wales to execute any necessary documents to give effect to the transfer of title in the Yamba property to the trustees;
5. as to any profits derived or benefits gained by it arising from the use of the Yamba property:

1. an order for the taking of an account of any such profits derived or benefit gained;

2. an order that the trustees are entitled to trace any such profits derived or benefit gained; and
3. a declaration that it holds on trust for the trustees any personal property or real property as may have been gained from the use of the Yamba property and any profits so derived;

6. an injunction restraining it, by itself and its servants and agents, from encumbering, mortgaging, charging, selling or otherwise disposing of its interest in the Yamba property;

3. against Yasmin and Yolande:

1. a declaration that they hold on trust for the trustees the whole of their interest in the Ocean Shores property;
2. an order pursuant to s 71 of the Trustee Act 1925 (NSW) that their interest in the Ocean Shores property vests in the trustees;
3. a direction to the Registrar-General for the State of New South Wales to execute any necessary documents to give effect to the transfer of title in the Ocean Shores property to the trustees;
4. an order that they take all steps necessary to transfer to the trustees such interest as is found by the court to be the trustees’ interest in the Ocean Shores property;
5. as to any profits derived or benefit gained by them arising from the use of the Ocean Shores property:

1. an order for the taking of an account of any such profits derived or benefit gained to the trustees;

2. an order that the trustees are entitled to trace any such profits derived or benefit gained; and
3. a declaration that they hold on trust for the trustees any personal property or real property as may have been gained from the use of the Ocean Shores property and any profits so derived;

6. an injunction restraining them, by themselves and their servants and agents, from encumbering, mortgaging, charging, selling or otherwise disposing of their interest in the Ocean Shores property.

4. an order that the respondents and each of them:

1. pay interest pursuant to s 58(3) of the Civil Proceedings Act 2011 (Qld) or, alternatively, interest calculated on such other basis as the court considers appropriate, at the rate or rates provided for therein for the period or periods determined by the court; and
2. costs to be assessed on an indemnity basis.

18. In 2014, the parties participated in a formal mediation that was held over four days in August, September and October. In the end, the mediation was adjourned and has not reconvened. There have been, in addition, several other overtures about settlement including an informal mediation prior to the commencement of the proceeding but, thus far, the parties have failed to settle their differences save that it now appears that Yas Yo, Yasmin and Yolande are prepared to transfer ownership of the Yamba and Ocean Shores properties to the trustees (although not on terms that the trustees find acceptable). Suffice it to say that, short of the formal mediation reconvening and resulting in a compromise, it appears likely that the dispute will need to be determined by the court.

This application

19. The trustees commenced the present application on 8 September 2015, and filed an Amended Originating Application on 24 November 2015.
20. By the Amended Originating Application, the trustees seek directions under s 96 of the Trusts Act or, in the alternative, under s 6 of the Succession Act concerning the following:

1. whether the trustees “would be justified in continuing to prosecute”^[17] the principal proceeding;

2. as to any entitlement of Bruce pursuant to clause 3 of the will to be reimbursed from the capital of the Jefferson Lane Property Trust for outgoings paid by him in relation to either Jefferson Lane or Vista Avenue after the death of the deceased;^[18]
3. whether the trustees should be indemnified out of the estate in respect of their costs to date as well as the costs associated with the principal proceeding if they are advised to pursue it; and
4. whether Jacob’s costs including the costs associated with the principal proceeding should be paid from the capital of the estate. 

21. It can therefore be seen that the determination of the present application requires a consideration of two principal issues. First, whether the trustees are justified in continuing to prosecute the principal proceedings, and the answer to that question will then largely inform the determination whether the trustees are entitled to an indemnity under s 97 of the Trusts Act. Second, whether the true construction of the will allows for the reimbursement of outgoings paid by Bruce in relation to Jefferson Lane and/or Vista Avenue.
22. I will consider each of these issues in turn but, before I do, it is necessary to say something about the nature of the jurisdiction.

The jurisdiction to give advice and directions

23. Sections 96 and 97 of the Trusts Act are in the following terms:

“96Right of trustee to apply to court for directions

(1)Any trustee may apply upon a written statement of facts to the court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.

(2)Every application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the court thinks expedient.

97 Protection of trustees while acting under direction of court

1. Any trustee acting under any direction of the court shall be deemed, so far as regards the trustee’s own responsibility, to have discharged the trustee’s duty as trustee in the subject matter of the direction, notwithstanding that the order giving the direction is subsequently invalidated, overruled, set aside or otherwise rendered of no effect, or varied.
2. This section does not indemnify any trustee in respect of any act done in accordance with any direction of the court if the trustee has been guilty of any fraud or wilful concealment or misrepresentation in obtaining the direction or in acquiescing in the court making the order giving the direction.”^[19]

24. In Ban v Public Trustee of Queensland,^[20] Morrison JA (Holmes and Gotterson JJA agreeing) had this to say about the nature of the jurisdiction arising under ss 96 and 97 of the Trusts Act, as explained by the plurality of the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand^[21] with reference to the New South Wales statutory equivalent of those provisions and summarised by Atkinson J in Coore v Coore:^[22]

“[The] points relevant to the present discussion are:

(a)it is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words;

(b)there are no express words in the New South Wales equivalent to s 96, and no implications from the express words which are used, that automatically preclude a court from giving judicial advice; further there is nothing which limits the application of the section to ‘non-adversarial’ proceedings, or proceedings other than those in which the trustee is being sued for breach of trust, or proceedings other than those in which one remedy sought is the removal of the trustee from office;

(c)there is only one jurisdictional bar to the relief available under s 96 and its New South Wales equivalent, namely that the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument;

(d)the procedure under that section has a ‘summary’ character designed to assist the court’s administration of trusts by orders less extreme than a general administration order; …;

(e)the section operates as ‘an exception to the court’s ordinary function of deciding disputes between competing litigants’, and affords a facility for giving ‘private advice’; and

(f)the context in which Lord St Leonard’s Act was enacted, and the onerous obligations on trustees, meant that it was understandable that the legislature should enact provisions enabling trustees to take advice before embarking on any course which might carry a risk of incurring costs that might be outside the indemnity which normally applies, namely that trustees are entitled to an indemnity out of trust’s assets.

The High Court described the position in respect of the Trusts Act in this way:

‘[71]In short, provision is made for a trustee to obtain judicial advice about the prosecution or defence of litigation in recognition of both the fact that the office of trustee is ordinarily a gratuitous office and the fact that a trustee is entitled to an indemnity for all costs and expenses properly incurred in performance of the trustee’s duties. Obtaining judicial advice resolves doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. No less importantly, however, resolving those doubts means that the interests of the trust will be protected; the interests of the trust will not be subordinated to the trustee’s fear of personal liability for costs.

[72]It is, therefore, not right to see a trustee’s application for judicial advice about whether to sue or defend proceedings as directed only to the personal protection of the trustee. Proceedings for judicial advice have another and no less important purpose of protecting the interests of the trust.’”^[23] [References omitted]

25. After referring to supporting authority, Morrison JA continued:

“The right to approach the court in this way has been held to apply where the trustee is in genuine doubt as to the question to be answered. In my view this follows from the words of the statute themselves, requiring that the court’s opinion or advice be in relation to a ‘question, whether of law or of fact, arising under this Act or in the course of the Public Trustee’s duties’.”

26. In Glassock v Trust Company (Australia) Pty Ltd,^[24] in a passage cited with approval by both Applegarth J in Re Public Trustee of Queensland^[25] and Martin J in Kordamentha Pty Ltd v LM Investment Management Ltd,^[26] Boddice J added these observations:

“Where an executor or trustee is in doubt as to the course of action to be adopted, the executor or trustee is entitled to seek the opinion of the Court as to what it should do (Re Atkinson (dec’d) [1971] VR 612 at 615). In determining such an application, it is not the function of the Court to investigate the evidence and make a finding whether or not the trustees will be successful in the litigation (Salmi & Anor v Sinivuori & Anor [2008] QSC 321 at [16]). The Court has merely to determine whether or not the proceedings should be taken (Fitzgerald v Smith (1889) 15 VLR 467). However, the matter should be sufficiently investigated to determine whether or not the proceedings would be fruitless (Re Atkinson (dec’d) at 615; adopted by Atkinson J in Loughnan v McConnel [2006] QSC 359 at [7]).”[27]

27. Boddice J then dealt with some considerations already covered by the extract from Ban above, before continuing:

“In Watson v Yore, ([2004] QSC 339 at [15]) Holmes J (as her Honour then was) held, in dealing with an application for directions under s 96 of the Trusts Act:

‘Essentially, what must be determined on this application is whether retention of funds to enable an action against the first respondent is in the interests of the beneficiaries of the estate as a whole. There are a number of competing considerations: the prospects of success, the potential for substantial depletion of the estate in costs should the action be unsuccessful, the proportions of what might be gained if it were to succeed, and, peculiar to this case, the fact that there is at present no cause of action …’

If the Court does advise that the trustees ought to defend or commence proceedings on behalf of the estate, the Court has a discretion as to whether the costs of those proceedings ought be borne out of the estate (Salmi & Anor v Sinivuori & Anor [2008] QSC 321 at [19]). In Application of Macedonian Orthodox Community Church St Petka Inc (No 3) ([2006] NSWSC 1247 at [62]), Palmer J observed:

‘I think that the development of the law in this area has now reached the point where I may state the following proposition. Where a trustee seeks an order that it is justified in defending a claim against the trust estate by recourse to the trust assets for the costs of the litigation, the question will be whether it is more practical, and fairer, to leave the competing claimants to the beneficial interest in the trust estate to fight the litigation out amongst themselves, at their own risk as to costs and leaving the trustee as a necessary but inactive party in the proceedings, or whether it is more practical, and fairer, that the trustee be the active litigant with recourse to the trust fund for the costs of the litigation. What is ‘practical and fair’ will depend on the particular circumstances of each case and will include:

-whether the beneficiaries of the trust estate have a substantial financial interest in defending the claim;

-what are the financial means of the beneficiaries to fund the defence;

-the merits and strengths of the claim against the trust estate;

-the extent to which recourse to the trust estate for defence costs would deprive the successful claimant of the fruits of the litigation;

-if the trust is a charitable trust rather than a private trust, what, if any, are the considerations of public interest.’”^[28]

28. As to the specific role of the court in a judicial advice application, the following summary observations by Atkinson J in Coore v Coore^[29] offer considerable assistance:

“To these principles, additional guidance can be gathered from the decision in Macedonian Church v Eminence Petar [(2008) 237 CLR 66] as to the role of the court under s 96 and s 97 of the Trusts Act:

(1)The court is entitled to act on the facts stated by the trustee even if they are contested and controversial. The trustee loses the protection afforded by s 97(1) if the trustee ‘has been guilty of any fraud or wilful concealment or misrepresentation’ to the court. It is therefore not necessary or appropriate to determine a challenge to those facts as if it were adversarial litigation (At 95-96 [80]-[81]).

(2)The court is not just concerned with whether it is in the interests of the trust estate for proceedings to be commenced, continue or defended but whether it is practical and fair for trust assets to be used for that purpose (At 96-97, [82]-[85]).

(3)As a general rule if the orders are later revoked, the effect would not operate retrospectively (At 97-99; [89]-[96]).

(4)Judicial advice proceedings should not be used to settle disputes between parties to a trust. The distinction is between deciding whether it would be proper for a trustee to sue or defend and deciding the issues tendered in the proceedings that it is proposed to institute or defend (At 104, [111]).

(5)Nothing warrants limiting the powers given to the court by reference to some proceedings as ‘adversarial’ and some as not (At 104-105, [112], [116]). Classification of the proceedings in which a trustee asks advice about the propriety of institute or defending, as ‘adversarial proceedings’ is not useful in deciding whether advice should be given by the court that instituting or defending the proceedings is proper.

(6)To adopt the words of the Privy Council in Marley v Mutual Security Merchant Bank and Trust Co Ltd ([1991] 3 All ER 198 at 201) in a judicial advice application, ‘the court is essentially engaged solely in determining what ought to be done in the best interests of the trust estate and not in determining the rights of adversarial parties.’ (Macedonian Church v Eminence Petar at 107, [125]).

(7)If all that is at stake in proceedings is the liability of a trustee personally to make good the consequences of what is alleged to be the trustee's breach of trust, that would be a powerful reason to make no order permitting such a trustee to defend the suit at the expense of the trust fund (At 120, [166]).’”[30]

29. Lastly, and as already mentioned, where advice is sought from the court as to whether a trustee is justified in prosecuting or defending proceedings, the court will often receive a written opinion of counsel on prospects.^[31] Such an opinion is not provided to the other parties and submissions in relation to the advice usually take place in the absence of the other parties.^[32] Again as already mentioned, an advice from counsel was provided to the court by the applicant trustees in this case, but not to the respondents. That advice has been considered by me and submissions were taken with respect to it in the absence of the respondents. The practice also has arisen of filing some affidavit evidence.^[33] This is because, in a particular case, it might be thought desirable by an applicant to verify some of the stated facts by affidavit or for a respondent to advance sworn evidence that might bear on the exercise of the court’s discretion whether to give directions and, in that regard, the court is of course not obliged to do so.^[34] Again, that is what occurred in this case when a considerable body of affidavit material was received from the applicants and the respondents alike.  Nevertheless, it should not be overlooked that the application is to be determined primarily “upon a written statement of facts” and that is the basis on which I have considered the matter.
30. I turn now to consider the substantive issues.

Should the trustees continue the principal proceeding?

31. At the outset, it should be made clear that it is not suggested that the trustees have acted in breach of either of the trusts created pursuant to the will. Rather, the principal proceeding has as its motivation a real concern on the part of the trustees that they may be left exposed to personal liability if they fail to get in all of the assets of the trusts. There is also a subsidiary, although I think now far less important, concern expressed by the trustees regarding a potential liability under the s 254 of the Income Tax Assessment Act 1936 (Cth) in respect of the capital gain on the sale of Jefferson Lane.
32. It cannot be doubted that the trustees had, and still have, a duty to get in all of the trust assets so that the title to it is, if not in their names, at least in their control.^[35] Nor can it be doubted that the trustees are entitled to resort to the trust funds for the discharge of liabilities and, in that sense, have a “preferred beneficial interest in the trust fund”.^[36] Further, during the continuance of a trust, the trustee must, in managing the trust affairs, take all those precautions that an ordinary prudent man of business would take in managing similar affairs of his own.^[37]
33. Here, on the stated facts, there is property of the Jefferson Lane Property Trust that is not in the control of the trustees. On those facts, the trust moneys that can be traced to Bruce will be held on a resulting trust for the trustees. Similarly, the Yamba property held by Yas Yo and the Ocean Shores property held by Yasmin and Yolande will be respectively held on a resulting trust for the trustees.^[38] I hasten to add that Bruce, as life tenant of the relevant trusts, was without doubt entitled to the income generated by the trusts. However, that is not to say that he had any entitlement, on the stated facts, to appropriate capital of the trusts to his own use or to the use of others. Any unauthorised appropriation of capital, if proved, will almost certainly constitute a breach of trust.^[39]
34. For Bruce and Yas Yo, it was argued on the hearing of this application by reference to their pleaded cases and the affidavit material on which reliance was placed that the court should decline to advise the trustees to continue the principal proceeding (or direct that they be indemnified for their costs because, it was submitted, that question ought to be reserved to the trial) for these reasons:

1. the trustees delayed in approaching the court, the principal proceeding having been commenced almost three years ago;

2. the conduct about which the trustees complain:

1. occurred with the knowledge, approval and authority of the trustees;

2. was authorised by Bruce as the life tenant of the estate; and
3. was either authorised or ratified by Yasmin, Yolande and Jacob as the residuary beneficiaries of the estate;

3. the trustees were informed at meetings held on 13 December 2011 and 11 December 2012 that the challenged conduct was authorised and/or ratified by Bruce as the life tenant and Yasmin, Yolande and Jacob as residuary beneficiaries; and
4. the trustees were well aware that they were not entitled to the relief sought prior to the commencement of the principal proceeding.

35. For Yasmin and Yolande, similar contentions to those advanced on behalf of Bruce were made. On the other hand, Jacob supported the application made by the trustees for directions and, to the point, submitted that the trustees should be advised to continue with the principal proceeding and be indemnified for their costs.^[40]
36. I deal first with the proposition that the application should have been brought at a much earlier point in time. Although such a course would have been desirable, it cannot be said that the trustees are precluded by their delay from making the application and, if the court sees fit, being provided with advice or directions. After all, a trustee who delays making such an application to the court runs the risk that the court will not direct that his or her costs be reimbursed from the trust funds. It follows that, when litigation is on foot, the longer a trustee postpones approaching the court for directions, the greater is the trustee’s potential personal exposure for costs. If, however, a trustee is prepared to run that risk, that does not seem to me to be a disqualifying circumstance.^[41] Of course, an application made on the verge of the trial of the litigation in question would be most unlikely to be entertained but where, as here, there is still some distance to go before the parties will be ready to proceed to trial, it is appropriate to deal with the application.
37. Turning to the submissions made to the effect that the challenged dealings were approved, authorised or ratified by the trustees, in the affidavit sworn by Bruce to oppose the application, he deposes to having discussed the acquisition of the Yamba and Ocean Shores properties with Mr Corbiere before they were acquired and that Mr Corbiere agreed to each being acquired using part of the funds held on investment. In his affidavit, Mr Corbiere flatly denies that he gave approval for either purchase. For Bruce, Yasim and Yolande, it was also submitted that each of the beneficiaries was either generally aware of the various transactions or at least, once they became aware, ratified the use of the capital from the Jefferson Lane Property Trust to pay the sums about which complaint is made by the trustees, including the sums required to acquire the Yamba and Ocean Shores properties. In this regard, reliance was placed on the meetings held on 13 December 2011 and 11 December 2012 and the terms of a Deed of Acknowledgement and Ratification which was delivered to the trustees’ solicitors on 18 August 2014. By that Deed, Bruce, Yas Yo, Yasmin, Yolande and Jacob purported to confirm and acknowledge that they:

1. had agreed to, or have since ratified, the transactions in question; and

2. acknowledged, as remainder beneficiaries, that they had not and did not require Bruce or Yasmin to account for, or repay, the amounts withdrawn from the Jefferson Lane Property Trust.

38. Whether the transactions in question, or any of them, were approved in advance by Mr Corbiere is a question of fact and, as will be apparent from what I have just set out, very much in issue. The same position obtains with respect to any questions of ratification, including the contended effect of the Deed delivered on 18 August 2014. These are not questions that the court should or could determine on an application such as this, and I did not understand counsel for Bruce and Yas Yo (or counsel for Yasmin and Yolande) to submit otherwise.^[42]
39. Instead, the submission was made that there was never any utility in the principal proceeding given the attitude of each of the beneficiaries and that this is to be discerned from the evidence about ratification. The point was made that over $650,000 had been expended for the costs associated with the principal proceeding to the end of May 2015^[43] and that a significant further outlay would be required to bring the litigation to finality, which sum was estimated to be $280,000.^[44] It was submitted that all of this expense could have been avoided had the trustees taken notice of the attitude of the beneficiaries and that, for this reason, there could be no proper justification for continuing it.
40. The immediate problem with those submissions is that the beneficiaries are not as one on the question whether the trustees ought to continue the principal proceeding; whatever his position may have been in the past, Jacob supports its continuance. Indeed, even if all beneficiaries were opposed to the further prosecution of the trustees’ claims, it does not follow that the trustees would thereby be absolved from getting in all of the trust property or that such a circumstance would be enough alone to persuade the court to adopt the same view. Although the level of costs incurred by all parties to this dispute to date is most concerning, my impression is that this says more about the entrenched nature of the dispute than it does about any lack of utility in the principal proceeding. In any event, I do not accept that the principal proceeding lacked utility. For example, absent the proceeding, it is most unlikely that the position could have been reached whereby there is now an offer at least to transfer the Yamba and Ocean Shores properties to the trustees, even if it is on terms that are not acceptable to the trustees. Nor would Bruce have been likely to account to the trustees to the extent that he now has^[45] for the sums withdrawn from the investment accounts. Shortly stated, I do not think the trustees had any alternative than to commence the principal proceeding and to prosecute it to the point it has now reached. Expressed by reference to their duties as trustees, they were obliged to do so in the interests of the trust and the beneficiaries as a whole, one of whom (Jacob) stands to benefit the most from the estate and supports the continuance of the proceeding. In contrast, the other beneficiaries, each of whom joined with Yas Yo to oppose the trustees’ application, all gained from one or more of the questioned transactions.
41. It also seems to me that there are a number of difficulties with the arguments advanced on behalf of Bruce, Yas Yo, Yasmin and Yolande to the effect that the relevant transactions were approved, authorised or subsequently ratified. Nowhere is it sworn or even suggested that Mr Corbiere’s co-trustee, Mr Monks, approved anything. Further, even if the transactions were capable of being ratified (a proposition that is attended by considerable doubt in the absence of prior approval by each beneficiary^[46]), it would have been for the trustees, and not the beneficiaries, to do so. There is no suggestion that any such thing ever occurred.
42. That is not to say that the trustees’ case is without complication. For example, although it is denied by the trustees that they approved the purchase of the Yamba property by Yas Yo, that particular property was purchased from a company of which Mr Corbiere was a director. That is not to say that Mr Corbiere was actually aware that it was proposed that Yas Yo would use trust capital to make the acquisition but it does add a layer of complication to what might otherwise have been a straight-forward case for the trustees to pursue. In the same vein is the feature that the trustees took no immediate steps to take control of the proceeds of sale that were received on the sale of Jefferson Lane. On their behalf, it was submitted that they proceeded in the knowledge that Bruce was entitled to the interest on the proceeds that were invested but wrongly assumed he would not have recourse to the capital. As was observed during the course of argument, there was an “air of informality” about the arrangements in place between the trustees and the beneficiaries including Bruce and, in addition, because the estate was “asset rich but cash poor”, it fell to Bruce to pay various estate liabilities from his own pocket, including payment of the whole of the monetary bequest due to his sister.^[47]
43. As to the concern expressed by the trustees regarding their potential liability under s 254 of the Income Tax Assessment Act 1936 (Cth) in respect of any capital gain on the sale of Jefferson Lane, that has been largely allayed by the handing down (after this application was argued) of the decision of the High Court in Commissioner of Taxation v Australian Building Systems Pty Ltd (In liq).^[48] There, the Court determined that the obligation of a trustee to retain sufficient funds to pay a liability of the kind referred to in s 254 only arises when an assessment has been issued by the Commissioner. Here, at least so far as the trustees are aware, no tax return disclosing a capital gain was lodged by the Jefferson Lane Property Trust or Bruce for the 2008 financial year and no assessment has issued. Although a ruling that the trustees sought from the Commissioner as to their liability, if any, to retain funds to make good any capital gains tax has not issued, it would now seem unlikely that the trustees will have any exposure on this front. Nevertheless, until the ruling issues, their actual position has not been finally determined.
44. In the opinion I have formed on the stated facts, it was reasonable for the trustees to have commenced and then prosecuted the principal proceeding. It is also my opinion that it is in the interests of the estate, the Jefferson Lane Property Trust and the beneficiaries as a whole to continue to prosecute that proceeding. There is sufficient merit in the trustees’ claims to justify that course despite the very high costs the principal proceeding has, and will, impose on the trust fund.
45. The trustees will be advised that they ought to continue to prosecute the principal proceeding.

Should the trustees be indemnified for their costs?

46. As discussed earlier, if the court advises a trustee to defend or commence a proceeding on behalf of an estate, the court has a discretion as to whether the costs of that proceeding ought be borne out of the estate.^[49] As Palmer J observed in Application of Macedonian Orthodox Community Church St Petka Inc (No 3),^[50] sometimes it is “more practical, and fairer, to leave the competing claimants to the beneficial interest in the trust estate to fight the litigation out amongst themselves, at their own risk as to costs” rather than the trustee being an active litigant with recourse to the trust fund for the costs of the litigation.^[51] I do not think this is such a case.
47. In the first place, the trustees are entitled to indemnity from the trust fund for costs properly incurred, and I am of the opinion that it was, and will be, proper to prosecute the principal proceeding. As the plurality observed in Macedonian Orthodox Community Church, obtaining judicial advice “resolves doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation”^[52] and I have now resolved that doubt. Secondly, and with reference to the submission made on behalf of Bruce, Yas Yo, Yasmin and Yolande that the question of indemnity should be left until the trial, the trustees are acting gratuitously and they should not be left in a state of uncertainty about their entitlement to recourse against the trust fund for their costs in circumstances where I have advised them to proceed. Thirdly, unless the trustees are indemnified from the trust fund, it would not appear that the further prosecution of their claims can be funded in any other way and, if that becomes the position, it is unlikely that the trust property in question will be returned to the trust.
48. There will therefore be a direction that the trustees be indemnified in respect of their costs to date (including those of and incidental to this application) as well as the costs to be incurred on their behalf in the continuance of the principal proceeding. In this regard, the Amended Originating Application seeks a direction that such costs be paid from the estate. However, even though part of the claim and the relief sought on this application relates to Vista Avenue, the appropriate direction is that the trustees be entitled to indemnity for their costs from the Jefferson Lane Property Trust,^[53] and the trustees will be directed accordingly.

What is the proper construction of clauses 3(b) and 3(c) of the will?

49. The directions sought as to the proper construction of clauses 3(b) and 3(c) of the will go to establishing what entitlement Bruce has to be reimbursed for outgoings in the nature of land tax, Council rates and insurance that have been paid by him in relation to Vista Avenue and Jefferson Lane since the death of the deceased. As earlier mentioned, such directions are sought pursuant to s 96 of the Trusts Act 1973 (Qld) or, in the alternative, s 6 of the Succession Act 1981 (Qld).
50. Clause 3(b) concerns Vista Avenue and clause 3(c) concerns Jefferson Lane. Although the way in which the directions sought are framed in the Amended Originating Application suggests that the source of reimbursement, if applicable, will be the Jefferson Lane Property Trust, it is more accurate to state that any such reimbursement should come from the estate.
51. Be that as it may, all parties agree that the determination of this construction issue is essential to the conduct of an accurate accounting of the dealings with the net proceeds from the sale of Jefferson Lane. In this regard, Bruce has sought to set off various items of expenditure that he contends he was not liable to pay by reason of clauses 3(b) and 3(c) of the will.^[54] Instead, he maintains that those clauses provide for such expenses to be paid from the estate.
52. The following outgoings have been paid in respect of Vista Avenue since the death of the deceased (17 December 1991):

1. land tax;

2. Council rates; and
3. insurance.^[55]

53. The following outgoings have been paid with respect to Jefferson Lane between the date the deceased died and the date on which that property was sold (30 November 2007):

1. land tax; and

2. Council rates.^[56]

54. The principles of construction to be applied in construing the testator’s intention are well established. They were summarised in my reasons in Suthers & Anor v Suthers & Ors^[57] as follows:

“The object is to discover the testator’s intention through examination of the words used in the will. To do so, regard is had to the rules of construction traditionally applied by the courts and the aids to construction contained in s 33C of the Succession Act 1981 (Qld).

At the heart of this interpretative exercise is the consideration of the usual meaning of the language used in the testamentary provision in question, and this is to be done in light of the will read as a whole.  If the meaning of the provision is clear, the will shall be given that construction.  However, in determining what a testator meant by the words used in the will, the court may receive evidence under the ‘armchair rule’ so as to place itself in the position of the testator at the time when the will was made. In this way, the court can take account of the material circumstances which were known (or ought to have been known) by the testator at the time when he or she used the words contained in the will. The rationale for the rule is to be found in the proposition that “the meaning of words varies according to the circumstances of and concerning which they are used” and, because of that, the court is often assisted by establishing the context in which the testamentary intentions were expressed. Importantly, such a rule applies where those intentions appear, on a plain reading of the will, to be clear as well as in circumstances where s 33C of the Act applies.

Section 33C applies where the language used in the will, or part of it, is: (1) meaningless; (2) ambiguous on the face of the will; or (3) ambiguous in the light of surrounding circumstances. The provision does not prevent the admission of evidence that would otherwise be admissible in a proceeding to interpret a will, but it makes clear that the court may have regard to extrinsic evidence to help in the interpretation of language which may be characterised in one of the three ways to which I have just referred. Where the language is meaningless or ambiguous on the face of the will, such extrinsic evidence can include evidence of the testator’s intention but, where the language is considered to be ambiguous in the light of surrounding circumstances, evidence of the testator’s intention is not admissible to establish any of those circumstances.

The court is bound to construe the will ‘as trained legal minds would do’. That, however, is not to say that the will must be construed in a strictly technical or legalistic sense; its construction should be ‘sensitive to the factual context of ordinary life and circumstances’. Further, the court should lean towards a construction which preserves, rather than destroys, its effect. If the will shows that the testator must necessarily have intended that an interest be given but there are no words in the will which expressly have that effect, the court is to ‘supply the defect by implication, and thus to mould the language of the testator, so as to carry into effect, as far as possible, the intention which it is of opinion that the testator has on the whole will, sufficiently declared’. But, as to this, the court will not give effect to any intention which is ‘not expressed or plainly implied’ in the language of the will; there is no room for ‘gratuitous, groundless, fanciful implication’. On the other hand, if the contents of a will show that a word has been ‘undesignedly omitted or undesignedly inserted, and demonstrate what addition by construction or what rejection by construction will fulfil the intention with which the document was written, the addition or rejection will by construction be made’.”[58] [References omitted]

55. It was not submitted by any party that recourse to the “armchair rule” was necessary or that, save for the admission of a copy of the deceased’s previous will,^[59] extrinsic evidence was required to aid the interpretation of the will. To the contrary, apart from taking cognizance of the terms of similar provisions in the previous will, the parties urged the court to construe clauses 3(b) and 3(c) within the four corners of the testamentary instrument in which they were contained.

Clause 3(b) – Vista Avenue

56. Clause 3(b) was in these terms:

“AS to all my right, title and interest in my freehold property situate at 34 Vista Avenue, Wellers Hill aforesaid together with all improvements erected thereon and all contents of such property including but not limited to all furniture, furnishings, articles of household use and ornaments, chattels and personal belongings, wearing apparel, antiques of any description to permit my son to reside therein and have full use and enjoyment thereof during his lifetime and upon his death to permit LOUISE MAREE BAKER to reside therein for such period as the children of the union of my son the said BRUCE SANDFORD DULLEY and the said LOUISE MAREE BAKER remain dependent upon the said LOUISE MAREE BAKER and she provides to them all the usual and necessary comforts and incidents of a maternal parent and generally ensures their welfare and then for my grandson JACOB SANDFORD CHARLES DULLEY absolutely if he attains the age of twenty-one (21) years and in default of his so doing then for such of the children of my said son the said BRUCE SANDFORD DULLEY and LOUISE MAREE BAKER who survive to attain the age of twenty-one (21) years and if more then as tenants in common in equal shares absolutely AND I DECLARE that during the life tenancy given to my son the said BRUCE SANDFORD DULLEY pursuant to this sub-clause that the said BRUCE SANDFORD DULLEY shall be responsible personally for the maintenance and upkeep of my said property and without limiting the generality of the foregoing such maintenance and upkeep shall include payment of all outgoings such as insurance rates and land tax if any on the said property PROVIDED HOWEVER that during the period of residence of the said LOUISE MAREE BAKER in my said property all such maintenance and upkeep as aforesaid in relation to the said property shall be borne by and paid from the rest residue and remainder of my estate.”

57. The previous will was executed by the deceased on 7 July 1987. Clause 3(b) provided as follows:

“AS to all my right, title and interest in my freehold property situate at 84 Vista Avenue, Wellers Hill aforesaid together with all improvements erected thereon and all contents of such property including but not limited to all furniture, furnishings, articles of household use and ornaments, chattels and personal belongings, wearing apparel, antiques of any description to permit my son to reside therein and have full use and enjoyment thereof during his lifetime and upon his death for the said LOUISE MARIE BAKER for such period as the children of their union remain dependent on her and then for my grandson JACOB SANDFORD CHARLES DULLEY absolutely if he attains the age of twentyone (21) years and in default of his so doing then for such of the children of my said son and LOUISE MARIE BAKER who survive to attain the age of twentyone (21) years and if more then as tenants in common in equal shares absolutely”

58. It will be seen that clause 3(b) of the operative will makes express provision regarding the payment of outgoings whereas the previous will was silent on that topic. Where there is a life tenancy, it will usually be presumed that the testator intended for the life tenant to be obliged to pay any outgoings with respect to the property over which the life tenancy is granted in the absence of a contrary intention to be discerned from the will.^[60] The previous clause 3(b) is likely to have attracted that presumption, but the operative clause 3(b) makes express provision and, for that reason, it is to the terms there used that attention must be given.
59. For Bruce, the court’s attention was drawn to the proviso to clause 3(b), which was submitted to operate in three circumstances: when Louise resides at Vista Avenue with Bruce during his lifetime, when Louise resides at Vista Avenue without Bruce during his lifetime and when Louise resides at Vista Avenue following Bruce’s death. It was argued that, in any one of those three circumstances, the outgoings must be paid by the estate. Further, it was submitted that the only circumstances under which Bruce could become obliged to pay outgoings and maintenance under clause 3(b) would be if he resided in Vista Avenue without Louise or where neither he nor Louise resided in Vista Avenue during his lifetime. It was contended that such a construction does not conflict with the passage appearing above the proviso that requires Bruce to pay outgoings and maintenance during his life tenancy. The same arguments, in effect, were advanced on behalf of Yasmin and Yolande.
60. I cannot agree with this construction. It is tolerably clear from the terms of clause 3(b) that the deceased intended to grant to Bruce a life tenancy during which he would be personally responsible for the maintenance and upkeep of Vista Avenue including payment of all outgoings such as insurance, rates and land tax. It is equally clear that the deceased intended to permit Louise to reside at Vista Avenue (on conditions) but only upon Bruce’s death. To the point, the construction advanced on behalf of Bruce ignores the words “upon his death”. They must be given meaning, and when they are, it is quite apparent that what the deceased meant in clause (3)(b) when he referred to the “period of residence” in the proviso was the period during which Louise would be permitted to reside in Vista Avenue upon Bruce’s death. That period of residence has never come into operation because Bruce is still alive. Nor will it ever come into operation because the conditions of the “permit” can never now be fulfilled.
61. It follows that, since the death of the deceased, Bruce has been personally responsible for the maintenance and upkeep of Vista Avenue including the payment of all outgoings such as insurance, rates and land tax with respect to that property. He is not entitled to reimbursement from the estate (or either of the trusts) for the insurance, Council rates and land tax that he has already paid.

Clause 3(c) – Jefferson Lane

62. Clause 3(c) of the will was in these terms:

“AS to all my right title and interest in my freehold property situate in Jefferson Lane, Palm Beach, Gold Coast in the State of Queensland together with the improvements thereon and contents thereof for my son BRUCE SANDFORD DULLEY for life and upon his death for such of the children of he and the said LOUISE MAREE BAKER who live to attain the age of twenty-one (21) years and if more than one then as tenants in common in equal shares absolutely.”

63. In the previous will executed on 7 July 1987, clause 3(c) was in identical terms. Thus, when the operative will was made, the deceased did not make any provision about payment of the outgoings during the period of Bruce’s life tenancy. Such an approach is in stark contrast to the approach taken by the deceased so far as clause 3(b) and Vista Avenue were concerned. When that feature is taken into consideration and then combined with the fact that, at the date of the will, Jefferson Lane was vacant land, any presumption that the deceased intended for Bruce to be obliged to pay any outgoings with respect to Jefferson Lane was effectively overridden. For these reasons, I do not consider that the deceased intended for Bruce to be liable for the outgoings with respect to Jefferson Lane; rather, it was intended that those outgoings be paid from the estate.
64. It follows that, between the death of the deceased and the date on which Jefferson Lane was sold, the estate has been responsible for the outgoings payable with respect to that property. Bruce is entitled to be reimbursed for the land tax and Council rates he has already paid.

Other matters

The cross-application

65. On 10 September 2015, Yasmin brought a cross-application under s 80 of the Trusts Act, seeking the removal of the trustees and the appointment of substitute trustees. In written submissions made on behalf of herself and Yolande, Yasmin sought an order pursuant to r 304(3) of the Uniform Civil Procedure Rules 1999 (Qld) to discontinue her cross-application,^[61] and an order that the costs of the parties to the cross-application be paid out of the Jefferson Lane Trust Fund and adjusted against the entitlement of Yasmin as a beneficiary. As no other party to the proceedings opposed the orders sought, these were made by consent on 24 November 2015.^[62]

Costs of the Fifth Respondent

66. As to the order sought by the trustees under s 62 of the Trusts Act that Jacob’s past and any future costs of the principal proceedings be paid from the estate, I have considered whether it is appropriate to make such an order in circumstances where his position is closely aligned to that of the trustees. However, although their respective positions may be similar, if not identical, it does not follow that their interests are the same. For that reason, and as Jacob is an innocent albeit necessary party to the principal proceedings, it is appropriate that an order be made in the terms sought by the trustees for Jacob’s benefit.

Disposition

67. The parties will be directed to bring in minutes of orders to reflect these reasons.