Elizabeth Jennifer Titterton v Ashley Clare Oates and Andrew Brian Titterton and Scott David William Oates [1998] ACTSC 183 (1 April 1998)

  
  
  
  

  
   

  

   IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

   CRISPIN J

  

  

   TRUSTS - application
to remove trustee - trust income for benefit of
trustee's brother and sister - trustee a residual beneficiary.

   TRUSTS - sole
trustee - whether serious breaches of the trustee's duty to
properly administer the trust - delay in provision of information and
accounts
and the distribution of income - duty to determine amounts appropriate not
only for beneficiary's needs but also to promote
welfare and happiness.

   INHERENT JURISDICTION OF COURT - exercised with a view to the interests of
beneficiaries, security of
trust property, efficient and satisfactory
execution of trusts and faithful and sound exercise of trustee powers -
relevance of conflict
of interest and other factors.

  

   Family Provision Act, 1969

   Trustee Act, 1957

   Trustee Act, 1925-1942 (New South Wales)

   Trustee Act, 1958 (Victoria)

   Trustee Act, 1925 (England)

  

   Re Wrightson [1908] 1 Ch 789, considered

   Nissen v Grunden [1912] HCA 35;  (1912) 14 CLR 297, considered

   Princess Anne of Hesse v Field [1963] NSWR 998, considered

   Monty Financial Services Ltd and
Anor v Delmo (unreported, Supreme Court of
Victoria, 11 September 1995), followed

   Re Blanchard (1861) 3 DeGF and J 131, considered

   In re Combs (1884) 51 LT 45, considered

   In re Hodson's Settlement (1851) 20 LJ Ch 551, considered

   In re Henderson [1940]
Ch 764 at 767, considered

   Letterstedt v Broers and Anor [1884] 9 AC 371, followed

   Miller v Cameron [1936] HCA 13;  (1936) 54 CLR 572, applied

   Jones v Dunkel [1959] HCA 8;  (1959) 101 CLR 298, applied

   Guazzini v Pateson (1918) 18 SR (NSW) 275, considered

   Re Roberts (1983) 70 FLR 158, considered

   Benzija v Adriatic Fisheries Pty Ltd (1984) 37 SASR 545, considered

   Re Brockbank [1948] Ch 206, considered

   McKenna v
Lowe [1878] 1 SCR (NS) (NSW) Eq 10, considered

   Hobkirk v Ritchie (1934) 29 Tas LR 14, considered

  

  

   CANBERRA, 9-11 and
27 March 1998 (hearing), 1 April 1998 (decision)

   #DATE 01:04:1998

  

   Appearances

   Counsel for the Plaintiff: Mr R Crowe

   Instructing Solicitors: Porter Pilkinton & Bradfield

  

   Counsel for the First Defendant: Mr J Brewster

   Instructing
Solicitors: Vandenberg Reid

  

   Appearing as Next Friend for the Ms H McGregor, Community Advocate

   Second Defendant:

  

   Solicitor for the Third Defendant: Mr C Bandarage

  

  

  

   Order:

   1. The first defendant be removed as trustee of
the estate of the late Sir
Ernest Titterton.

  

   2. The Public Trustee be appointed as trustee in her stead.

  

   3. The shares,
interest bearing deposits and other property of the trust
vest in the Public Trustee forthwith.

  

   4. The costs of the plaintiff
and any costs incurred by the second
defendant be paid by the trust, such payment to be effected by drawing upon
capital rather than
by deduction from any income otherwise available for
distribution to the first and/or second defendant. The first and third
defendants
are to pay their own costs.

  

  

  

  

   CRISPIN J

   1. This is an application for an order that the first defendant be
removed
as trustee of the estate of the late Sir Ernest Titterton (`the testator') who
died on 8 February 1990 leaving a will dated
31 May 1989. Probate was granted
on 17 April 1990 and a one third share in the estate was distributed to the
first defendant, who
was the youngest child of the testator, in accordance
with the will. The remaining two thirds were held upon trust for the other
two
children of the testator, the plaintiff and the second defendant respectively.
So far as the plaintiff was concerned the trust
provided that the whole of the
income on the one third share of the estate held in trust for her should be
paid to her during her
lifetime and upon her death the whole of that income
should be paid to the first defendant during her lifetime. It also provided
that upon the death of the first defendant the capital and income of that
share should be held in trust for those of her children
who survive both the
testator and the first defendant and attain the age of thirty five.

  

   2. The relevant portion of the provision
in the will relating to the second
defendant was in the following terms: "As to an equal part or share UPON TRUST
for my son ANDREW
BRIAN TITTERTON of 8 Somers Crescent, FORREST ACT 2603 to
use and apply the whole or such parts of the capital or income therefrom
as my
Trustees in their absolute and unfettered discretion deem fit for the
maintenance comfort and necessities in life or such other
benefits as my
Trustees in their discretion deem advisable for the welfare and happiness of
my said son during his lifetime AND ON
AND FROM the death of my said son and
myself whichever is the latter to hold such unexpended income and capital then
remaining (if
any) UPON TRUST for my daughter ASHLEY CLARE OATES to pay the
income on such capital to my daughter ASHLEY CLARE OATES during her
lifetime
AND AS AND FROM the death of my said daughter as to beoth [sic] capital and
income for such of the children of my said daughter
ASHLEY CLARE OATES that
shall survive my daughter and myself and shall attain the age of thirty five
years . . ."

  

  

   3.
There were initially two trustees, namely the first defendant and Burns
Philp Trustee Company (Canberra) Ltd ("BPT").

  

   4.
The second defendant is intellectually disabled. The extent of his
disability was not entirely clear from the evidence but it did
appear that he
is unemployed, unable to read well or write clearly and has difficulty in
calculating amounts. He is able to drive
a car, but has a restricted licence,
and mows lawns for close neighbours for which he receives a small amount of
money. He also does
odd jobs around the house such as watering the garden,
bringing in the mail, turning on the heater and putting out the garbage. Under
supervision he is able to do his own washing and hang it on the line and can
do grocery shopping with written instructions. Nonetheless,
it was common
ground that it was appropriate that he be represented by the Community
Advocate, Ms McGregor, who acted as his "next
friend". It was no doubt because
of his disability that the testator chose to provide for him by means of a
discretionary trust rather
than giving him an unfettered right to the income
from his share of the estate.

  

   5. Following the grant of probate BPT arranged
to pay the second defendant
an allowance of $1,350 per month and this arrangement was apparently subject
to the understanding that
he could seek additional sums of money should the
need arise.

  

   6. In 1992 the plaintiff borrowed the sum of $150,000. This
loan was
apparently facilitated by her mother borrowing that sum from BPT and secured
this loan by means of a mortgage over her property
in Forrest. That sum was
then made available to the plaintiff to purchase a unit in Deakin and she
arranged with BPT to have an amount
equal to the mortgage payments deducted
from her entitlement to income from her share in the estate. She also arranged
for payment
of the balance of any income due to her to be withheld.

  

   7. During 1993 certain difficulties arose in relation to BPT the
nature of
which are of no present relevance. In November 1993 payments from the trust to
the plaintiff and second defendant ceased.

  

   8. The plaintiff made no complaint as to the manner in which the estate was
administered during the time in which there were
two trustees other than in
relation to the problems which emerged with BPT during the last few months
prior to its removal as trustee.
That occurred on 15 December 1993.

  

   9. However, the plaintiff did contend that there had been serious breaches
of the first
defendant's duty to properly administer the trust once she became
the sole trustee. In particular, she complained of lengthy delays
in the
provision of information and the distribution of income. She also complained
that some or all of the amounts shown in the
accounts of the trust as having
been distributed to her or the second defendant had not in fact been paid and
that they had incurred
a liability for taxation on income not received. Ms
McGregor also raised issues as to the adequacy of the payments made to the
second
defendant and submitted that the first defendant had failed to
discharge her duty to determine what amounts would be appropriate
not only to
meet his needs but to promote his welfare and happiness.

  

   10. Throughout 1994 there were delays occasioned by
difficulties which the
first defendant experienced in obtaining records from the receiver and manager
of BPT and in assuming sole
control of the trust. However the first defendant
arranged for the resumption of mortgage payments on behalf of the plaintiff by
writing a cheque for that purpose on 11 May 1994.

  

   11. Later that year the plaintiff decided to discharge the loan secured
by
that mortgage and advised the first defendant that she no longer wished to
have the payments made from the trust. The first defendant
gave evidence that
at that time she believed that the plaintiff did not want to receive any of
the income to which she was entitled.
Since the trust had not otherwise been
distributing any income to her it is understandable that an indication that
she no longer
wished to receive a distribution in the form of mortgage
payments might have led to some genuine confusion. I accept the first
defendant's
evidence that she did then believe that the plaintiff wished to
refrain from drawing any income from the trust at that stage and
to permit her
entitlements to accumulate.

  

   12. However the plaintiff's complaint of "being kept in the dark"
throughout 1994
and 1995 is well founded.

  

   13. The first defendant said that she had had a conversation with the
plaintiff, apparently about
November 1993 in which she advised her that BPT
had closed its doors and appeared to have gone into liquidation. She was then
attempting
to have BPT removed as co-trustee. The plaintiff asked her to keep
her informed. There was a subsequent conversation in which she
asked the first
defendant what was happening with the trust. The first defendant told her that
she did not have any control over
the funds and might not obtain that control
for a month or more. She said that when she did get control of the funds that
she hoped
to be able to start making payments. The plaintiff then told her
that she and her mother had decided that the second defendant would
have to
apply for an invalid pension. The first defendant replied that the plaintiff
and their mother should be able to look after
the second defendant for such a
short period of time and said that the trust funds should be available very
soon and that the first
defendant would then have all the trouble of having to
pay back any money he had received from the Department of Social Security.

  

   14. Despite these requests for information and the assurance of prompt
resumption of payments to the second defendant, the
removal of BPT as a
co-trustee was followed by a significant drought of information.

  

   15. However, on 19 April 1994 the first
defendant's accountant, Mr
Harrison, did write to the plaintiff and second defendant advising each of
them that his or her income
for tax purposes was $27,407 and respectively for
the year ended 30 June 1993.

  

   16. On 8 November 1994 Ms Cauchi, the plaintiff's
accountant wrote to Mr
Harrison seeking a copy of the income tax returns of the estate for the year
ended 30 June 1994 and a list
of assets. There was no reply until 8 December
1995.

  

   17. On 7 December 1994 the second defendant received a payment of $1,000,
apparently on the basis that he would receive that sum each fortnight. Shortly
thereafter this allowance was reduced to $1,000 per
month without explanation.

  

   18. On 10 February 1995 the plaintiff's solicitors wrote to Bates and
Pickering, the first defendant's
accountants, protesting that the first
defendant was failing to correctly exercise her discretion and fulfil her
duties in relation
to the distribution of the income to the plaintiff and the
second defendant. It was contended that the first defendant had distributed
money to the second defendant solely on the basis of necessities of life
without regard to the provisions in the relevant section
of the will enjoining
her to have regard for his happiness and comfort. Complaint was also made that
no direct accounting had been
provided to the plaintiff regarding the income
distribution of her share in the estate. The letter sought a detailed report
regarding
the estates of each of the three beneficiaries.

  

   19. On 16 May 1995 the plaintiff's solicitors again wrote to Bates and
Pickering
pointing out that they had not received a response to their letter
of 10 February 1995. They stated that the plaintiff was being
pressed to
provide information to the Australian Taxation Office concerning the filing of
a tax return and would be prosecuted unless
she did so. A final notice had
been issued. The letter concluded with a plea for the matter to be dealt with
urgently and indicated
that the information was required within 24 hours.

  

   20. On 18 May 1995 Bates and Pickering replied, informing the plaintiff's
solicitors that they had contacted their client and that she had advised them
that she was unable for medical reasons to attend to
the matter in the short
term. They conveyed her suggestion that the plaintiff should include as
assessable income whatever distributions
had been made to her during the year
in question and lodge an amendment request with the Australian Taxation Office
when the final
distribution had been determined.

  

   21. On 5 July 1995 Bates and Pickering again wrote to the plaintiff's
solicitors and informed
them that they no longer acted for the estate.

  

   22. On 17 July 1995 the plaintiff's solicitors wrote to Macphillamy Donald
& Co, the solicitors who then acted for the plaintiff, referring to their
letter of 10 February 1995 which had, of course, been
addressed not to that
firm but to Bates and Pickering, and complaining that they had still not
received detailed reports concerning
the estate from 30 November 1993 to the
date of the letter. The letter cautioned that if a response was not received
within 14 days
an application would be made to the court in order to protect
their client's interests under the will.

  

   23. On 5 September
1995 the plaintiff's solicitors wrote directly to the
first defendant expressing concern about the failure "despite numerous
requests"
to provide any details regarding the accounts of the estate
particularly those accounts prepared for the 1993/4 and 1994/5 tax returns.
The letter cautioned that if copies of those accounts were not supplied within
14 days an application would be made to the court.

  

   24. On 20 September 1995 the first defendant advised the plaintiff's
solicitors, by facsimile, that Mr Harrison of France
Harrison and Associates
had taken over from Bates and Pickering as accountants for the estate and that
the 1993/4 and 1994/5 taxation
returns and distribution statements were
currently being prepared. She said that she had been aware of only one request
for the information
in question and that had been in May. At that time she was
too unwell to deal with the difficulties she was having with Bates and
Pickering.

  

   25. On 22 September 1995 the first defendant provided Mr Harrison, by
facsimile, with details of the estate for
the financial year ended 30 June
1994.

  

   26. On 25 September 1995 she provided similar details to Mr Harrison, again
by facsimile,
for the year ended 30 June 1995. In each case she had personally
prepared the details apparently from her own records.

  

   27.
Lady Titterton, the mother of the parties, died tragically in a motor
vehicle accident on 14 October 1995.

  

   28. On 9 November
1995 Ms Cauchi received a letter from Mr Harrison dated 8
November 1995 enclosing copies of the accounts for the trust in respect
of the
1993/4 and 1994/5 financial years and a list of assets.

  

   29. On 21 November 1995 the plaintiff's solicitors again wrote
to the first
defendant reminding her of her assurance that the accounts were being prepared
and would be available within the next
couple of weeks. The accounts had not
been received. They indicated that they had delayed contacting her further due
to the unfortunate
death of her mother and expressed sympathy. Nonetheless,
the letter concluded with a request that the reports be delivered personally
within 7 days and commented that they otherwise saw no alternative to the
institution of proceedings. There was no reply.

  

 
 30. On 14 December 1995 Mr Bradfield, who had the carriage of the matter
for the plaintiff's solicitors, made a telephone call to
the first defendant
to enquire as to the progress of the accounts. The first defendant told him
that she had been ill and unable
to do things and that the accounts would be
forwarded to the plaintiff.

  

   31. The tax returns for the two financial years were
apparently received by
the plaintiff on 21 December 1995.

  

   32. On 28 March 1996 Ms Cauchi wrote two letters to the first defendant
adverting, in each case, to the 1994 and 1995 financial statements of the
estate that had been provided by Mr Harrison and noting
that in each of the
financial years in question larger amounts had been added to the current
accounts than had been distributed in
drawings. Consequently, both the
plaintiff and the second defendant were faced with taxation bills due to the
distribution of income
in their names. She requested that cheques payable to
the Australian Taxation Office for amounts reflecting the difference between
income and drawings be forwarded to her within 7 days of the receipt of the
letter. There was no response.

  

   33. The accounts
revealed that as at 30 June 1994 the capital value of the
trust was approximately $1.2 million, the taxable income distributed was
shown
as $29,969 of which $14,985 had been distributed to each of the plaintiff and
the second defendant. The records for the Current
Account also suggested that
a cash profit of $4,483 had been distributed to each of those parties. In
fact, during the financial
year in question nothing had been paid to the
second defendant and only $1,563 had been paid to the plaintiff.

  

   34. Similarly,
in relation to the year ended 30 June 1995 the accounts
revealed that the capital value of the trust was almost $1.18 million, that
the income distributed had been $73,334 which had been divided equally between
the plaintiff and the second defendant so that each
had a taxable income of
$36,667 and that a cash profit of $27,741 had been distributed to each of
those parties. In fact, during
this financial year an amount of $8,000 had
been paid to the second defendant and an amount of $10,938 had been paid to
the plaintiff.

  

   35. On 17 May 1996 a telephone message was left on the first defendant's
answering machine requesting a response to the letters
of 28 March 1996.

  

   36. On 9 July 1996 the plaintiff's solicitors wrote to the first defendant
adverting to the fact that they
had been communicating with her or her
accountants since February 1995 seeking a satisfactory accounting for her
administration of
the trust. The only response had been the provision in
November 1995 of the trust tax returns for 1993/4 and 1994/5. The letter also
noted that less money had actually been paid to both the plaintiff and the
first defendant than had been shown as distributed and
that Ms Cauchi's
letters had not been answered. After complaining of a number of matters the
letter proposed that the first defendant
be removed as trustee and that Ms
Cauchi be appointed as trustee in her stead. In default of any response within
7 days it threatened
legal proceedings without further notice.

  

   37. The writ initiating the present proceedings was duly issued on 22 July
1996.

  

   38. A process server, Mr Paul Collins, attempted service on 17 occasions
between 12 August and 27 September 1996. He said
that on one occasion he heard
someone sneeze behind the window near the front door but there had been no
response to his repeated
knocking. He also said that he had previously had
trouble serving documents in other matters on the first defendant and believed
that she would do her utmost to avoid service of any document. However, the
first defendant gave evidence that she had been away
from her house for some
of the period in question and it is possible that it was one of her children
or some other person who sneezed.
In any event, despite Mr Collins' opinion
based on past experience, I am not prepared to find that she deliberately
evaded service
on this occasion.

  

   39. An order for substituted service was made on 25 October 1996 but
service was finally effected personally
on 18 December 1996.

  

   40. On 12 February 1997 a defence was filed. The defence denied, inter
alia, paragraph 11 of the statement
of claim which alleged a failure to pay
the amounts due to the plaintiff and second defendant for the 1993/4, 1994/5
and 1995/6 financial
years.

  

   41. On 7 March 1997 the first defendant commenced proceedings against the
plaintiff and Ms Cauchi as executrices of
the will of the late Lady Titterton
seeking relief under Family Provision Act 1969.

  

   42. On 10 September 1997 accounts were provided to Ms Cauchi for the 1995/6
financial year. Those accounts revealed that
the capital value of the fund as
at 30 June 1996 was about $1.24 million and that a taxable income of $76,221
had been distributed
equally between the plaintiff and the second defendant so
that each had a taxable income of $38,110. The accounts recorded that a
cash
profit of $31,816 had been distributed to each of those parties. In fact,
during the financial year in question the second defendant
received the sum of
$12,000 and the plaintiff had received nothing.

  

   43. On 11 November 1997 a cheque for the sum of $51,539
was sent to the
plaintiff in payment of the outstanding amounts which had been distributed to
the plaintiff in relation to the 1993/4,
1994/5 and 1995/6 financial years.

  

   44. It was submitted by Mr Crowe who appeared for the plaintiff that this
history revealed
serious breaches of trust. It had been incumbent upon the
trustee to keep the beneficiaries informed as to the state of the accounts
especially when the plaintiff at least had made repeated requests for
information. It had also been incumbent upon the trustee to
account promptly
to the plaintiff for the income to which she was entitled. Furthermore, it was
contended that the first defendant
had been derelict in her duty in failing to
pay to the second defendant the amounts which had been distributed to him in
the accounts.
That dereliction was compounded by the fact that he had been
left without any income from the trust for about 12 months and that
when
payments had been resumed they had been set at a lower rate than he had
previously received. Yet he had received no explanation
for the reduction and
no attempt had been made to reimburse him for the loss of income during the 12
months in which he was apparently
left to be supported by his mother and the
plaintiff. Nor had any apparent provision been made to enable him to repay any
amounts
he had received from the Department of Social Security.

  

   45. Ms McGregor, who appeared personally as the next friend of the
second
defendant, submitted that the first defendant had failed to conscientiously
discharge her obligations under the discretionary
trust created for him. In
support of this contention she also pointed to the fact that he had been left
without any income from the
estate for about 12 months. Even when reinstated
his allowance had been then fixed at a rate which was lower than that which he
had
previously received. The reason for that reduction had not been explained
and since the first defendant had apparently not had any
current information
as to his continuing wants and needs the level had obviously been chosen in an
arbitrary fashion.

  

   46.
Ms McGregor also complained that the first defendant had indicated that
she would require a list of his expenses before considering
any increase in
that reduced allowance. She submitted that it was demeaning to require a grown
man to prepare such a list and go
"cap in hand" to his younger sister in order
to obtain adequate provision from a trust created by his late father for his
benefit.
She also submitted that the approach demonstrated by this request
and, indeed by the overall tenor of the first defendant's evidence,
revealed
that she was prepared to provide only such funds as were strictly necessary
for his needs. This approach did not reflect
an adequate discharge of the duty
created by the trust which required the trustee to use and apply such parts of
the capital and
income as the trustee deemed fit not only for the maintenance,
comfort and necessities in life but for such other benefits as were
advisable
for his welfare and happiness. Ms McGregor maintained that it was obviously
not in the second defendant's interests that
his income from the trust be
limited to $12,000 per annum and submitted that he should not be forced to
subsist on an allowance which
provided adequate financial provision only for
his basic needs and left him unable to save for larger expenses such as a new
car
or an overseas trip.

  

   47. On the other hand, Mr Brewster, who appeared for the first defendant,
submitted that the delays
in making payments and/or providing information
during 1994 were entirely understandable given the difficulties of obtaining
the
necessary records from the receiver and manager of BPT, the need to become
familiar with those tasks which had formerly been discharged
by that company
and the time necessarily invested in preparing coherent accounts. He relied
upon the first defendant's evidence that
following the plaintiff's phone call
in December 1994 she had honestly believed that the plaintiff did not wish to
receive any distributions
of income until further notice. He conceded that the
plaintiff may have had a different expectation but submitted that the
circumstances
gave rise to a real potential for confusion and there was no
reason to discount his client's sworn evidence on that issue. He suggested
that this belief had been sustained throughout 1995 and perhaps early 1996. He
acknowledged that throughout the latter year there
had been various letters
complaining about the lack of "accounting" and the first defendant's failure
to provide certain information,
but pointed out that there had been no clear
request for payment of the income due to the plaintiff.

  

   48. Mr Brewster conceded
that the trust had not been properly administered
during 1996 and that his client had been in breach of her duties as a trustee
by
failing to provide information and distribute income to the plaintiff. Of
course, proof of the commission of a breach or breaches
of trust does not
necessarily require the court to order the trustee's removal: Re Wrightson
[1908] 1 Ch 789; Nissen v Grunden [1912] HCA 35;  (1912) 14 CLR 297; Princess Anne of Hesse v
Field [1963] NSWR 998. Mr Brewster submitted that these deficiencies in 1996
should
be seen in the context of what he described as an "annus horribilus".
The first defendant had experienced a series of family problems
including the
tragic death of her mother and had become very ill with clinical depression.
She had received Ms Cauchi's letter of
28 March 1996 and may have understood
that the plaintiff was asserting that she had been underpaid by some $19,000.
By then, however,
his client had been too ill to resolve the situation. The
first defendant gave evidence that she had consulted a psychiatrist, Dr
Cullen, in May 1996 and had taken medication for her depression between May
1996 and February 1997. She had been living with depression
all her adult life
which she said "comes and goes". She claimed that she had not known precisely
what amounts were due to the plaintiff
and needed to check with the accountant
whose offices were in Queanbeyan. She had been so unwell that it had been
difficult to make
trips of that nature. Whilst she conceded that she was over
the worst of the depression by February 1997 when she stopped taking
medication of her own volition, Mr Brewster contended that it had been
reasonable for her to refrain from making any payment to the
plaintiff once
the present proceedings had commenced. Her solicitors had not initially
advised her to make the payments and it was
not until October 1997 that, as a
result of their initiative, the accountant, Mr Harrison, produced the
necessary figures to enable
the outstanding amounts to be calculated. A cheque
was then drawn and the plaintiff paid what was due.

  

   49. So far as the
second defendant was concerned, Mr Brewster submitted
that the present proceedings should not be used as a pretext for reviewing
the
desirability rather than the propriety of decisions which the first defendant
had made in the exercise of an unfettered discretion.
He contended that the
evidence did not establish that she had acted other than in good faith. If the
court found that she was legally
bound to pay the second defendant amounts
which had been notionally distributed to him in the accounts then she would do
so. However,
she had not understood that that had been her obligation. He
maintained that it had been entirely reasonable for her to seek a list
of the
second defendant's needs since, having regard to the strained family
relationships and the circumstances in which the second
defendant was living,
it was the only way in which she could reasonably have obtained reliable
information upon which to make a judgment
in the exercise of her discretion.
He also relied upon her evidence of a family conference in which the plaintiff
told her of the
second defendant's needs and in effect itemised the relevant
costs of maintaining him. They had amounted in all to only a little
more than
$12,000 per annum.

  

   50. Section 70 of the Trustee Act, 1925-1942 (New South Wales) as applied
and modified in the
Australian Capital Territory by the Trustee Act, 1957
empowers the court to make orders for the appointment of new trustees. That
statutory power may be exercised "whenever it is expedient
to appoint a new
trustee or trustees, and it is inexpedient, difficult or impracticable so to
do without the assistance of the Court".
This provision is to the same effect
as section 48(1) of the Victorian Trustee Act, 1958 and in Monty Financial
Services Ltd and Anor v Delmo (unreported, Supreme Court of Victoria, 11
September 1995) Ashley J expressed
the view that where a trustee was able to
continue and opposed his or her removal the section would not ordinarily have
application.
His Honour adverted to a number of English authorities in support
of that view: Re Blanchard (1861) 3 DeGF and J 131, In re Combs
(1884) 51 LT
45, In re Hodson's Settlement (1851) 20 LJ Ch 551. He also adverted to the
later case of In re Henderson [1940] Ch 764
in which Bennett J at 767 had
considered section 41 of the Trustee Act, 1925 (Eng), which is also to the
same effect, and concluded
that the court had jurisdiction to displace a
trustee against his will and to appoint a new trustee in substitution for him.
However,
he had followed the judgment of Cotton LJ in the case of In re Combs
in holding that when there is a dispute as to some fact, "it
may be that the
court should not exercise the jurisdiction under section 41" against the will
of the trustee who wishes to continue.

  

   51. With all due respect, I am unable to accept that any such limitation
should be imported into the terms of section 70
of the enactment which is
operative within this territory. Whenever a power is conferred upon a court by
statute, that court must,
in my view, be taken to have the power to determine
all questions of law and of fact arising in relation to its exercise unless,
of course, the power is expressly limited by that or some other statutory
provision. It is true that sub-section (3) adverts specifically
to trustees
who have been convicted of felony or are bankrupt or, being a corporation, are
in liquidation or dissolved, and that
instances of that kind are unlikely to
give rise to disputed issues of fact. However, sub-section (4) provides that
in the case of
any trust for a charity the court may make an order for the
appointment for a new trustee on such evidence of the trust as the court
deems
sufficient. There is nothing in that sub-section to suggest that the evidence
must be undisputed or that the circumstances
referred to in the section are
unlikely to give rise to disputed questions of fact. I can see no logical
basis for any suggestion
that the apparently unqualified words of the section
give rise to some implied embargo on the resolution of disputed issues of
fact,
let alone one which is dependent upon the wishes of the trustee.

  

   52. On the other hand, sub-section (2) clearly constrains
the power
provided by sub-section (1), limiting its exercise to circumstances in which
it is expedient to appoint a new trustee or
trustees and "inexpedient,
difficult or impracticable so to do without the assistance of the court". The
latter phrase may provide
some support for the view that the section was
intended to authorise the court to make orders where there was an existing and
independent
right to have a new trustee or trustees appointed but it would be
expedient for the court to assist by making the appointment. Furthermore,
the
section contains no explicit power to remove a trustee and the power to
appoint in substitution for an existing trustee may be
intended to simply
authorise the court to replace a trustee who has resigned or is disqualified
from continuing in that role. In
my view the matter is far from clear and I
think it is appropriate that I follow the trend of previous authority and in
particular
the decision in Monty Financial Services Ltd. Consequently I find
that the jurisdiction conferred by section 70 does not extend to
an
application to remove a trustee against his or her will.

  

   53. However it is clear that the Court of Chancery in England
had an
inherent jurisdiction to remove trustees and to appoint others in their stead
where this was considered expedient. I have
no doubt that this court possesses
similar inherent jurisdiction. In Letterstedt v Broers and Anor [1884] 9 AC
371 the Judicial Committee
of the Privy Council referred to this inherent
jurisdiction at 385-386 in the following terms: "Story says, s. 1289, `But in
cases
of positive misconduct, Courts of Equity have no difficulty in
interposing to remove trustees who have abused their trust; it is
not indeed
every mistake or neglect of duty, or inaccuracy of conduct of trustees, which
will induce Courts of Equity to adopt such
a course. But the acts or omissions
must be such as to endanger the trust property or to show a want of honesty,
or a want of proper
capacity to execute the duties or a want of reasonable
fidelity.' It seems to their Lordships that the jurisdiction which a Court
of
Equity has no difficulty in exercising under the circumstances indicated by
Story is merely ancillary to its principal duty, to
see that the trusts are
properly executed. This duty is constantly being performed by the substitution
of new trustees in the place
of original trustees for a variety of reasons in
non-contentious cases. And therefore, though it should appear that the charges
of
misconduct were either not made out, or were greatly exaggerated, so that
the trustee was justified in resisting them, and the Court
might consider that
in awarding costs, yet if satisfied that the continuance of the trustee would
prevent the trust being properly
executed, the trustee might be removed. It
must always be borne in mind that the trustees exist for the benefit of those
to whom
the creator of the trust has given the trust estate.

  

   The reason why there is so little to be found in the books on this subject
is probably that suggested by Mr Davey in his argument. As soon as all
questions of character are as far settled as the nature of
the case admits, if
it appears clear that the continuance of the trustee would be detrimental to
the execution of the trusts, even
if for no other reason than that human
infirmity would prevent those beneficially interested, or those who act for
them, from working
in harmony with the trustee, and if there is no reason to
the contrary from the intentions of the framer of the trust to give this
trustee a benefit or otherwise, the trustee is always advised by his own
counsel to resign, and does so. If, without any reasonable
ground, he refused
to do so, it seems to their Lordships that the court might think it proper to
remove him; but cases involving
the necessity of deciding this, if they ever
arise, do so without getting reported."

  

  

   Later in the judgment, at 387, their
Lordships said:

  

  

   "In exercising so delicate a jurisdiction as that of removing trustees,
their Lordships do not venture
to lay down any general rule beyond the very
broad principal above enunciated, that their main guide must be the welfare of
the beneficiaries."

  

  

   55. As Ashley J pointed out in Monty Financial Services, these statements
of principle have been adopted by the High
Court of Australia in Miller v
Cameron [1936] HCA 13;  (1936) 54 CLR 572. In that case Latham CJ at 575 made it clear that
misconduct need not necessarily be established. Starke J at
579 stated that
"the only guide is the welfare of the beneficiaries". Dixon J at 580-581 said
that "the jurisdiction to remove a
trustee is exercised with a view to the
interests of the beneficiaries, to the security of the trust property and to
an efficient
and satisfactory execution of the trusts and a faithful and sound
exercise of the powers conferred upon the trustee. In deciding
to remove a
trustee the court forms a judgment based upon considerations, possibly large
in number and varied in character, which
combine to show that the welfare of
the beneficiaries is opposed to his continued occupation of the office. Such a
judgment must
be largely discretionary. A trustee is not to be removed unless
circumstances exist which afford ground upon which the jurisdiction
may be
exercised."

  

   56. In the present case, of course, the plaintiff and second defendant are
not the only beneficiaries.
The first defendant is herself a residuary
beneficiary and her children are entitled to the residue upon her death.
Consequently,
the case cannot be approached upon the basis that it is only the
interests of the plaintiff and the first defendant that must guide
the
exercise of any discretion that the court may be called upon to exercise.

  

   57. Mr Brewster submitted that the testator's
decision to appoint the first
defendant as a trustee should be given significant weight especially in
circumstances such as the present
where the testator must have been aware of
the potential conflict of interest thereby created. He also adverted to the
fact that
the second defendant was intellectually disabled and stressed that
the testator had made an informed decision to appoint the first
defendant, who
was his sister, to administer a discretionary trust for his benefit. I accept
that these are important considerations
which must be given due weight. In my
view, it is appropriate to begin with the presumption that the testator made
his decision to
appoint the first defendant having regard to his knowledge of
her character and abilities and to the nature of the duties she would
be
called upon to discharge. In particular, I think it is appropriate to assume
that the testator made a considered judgment about
the wisdom of appointing
her to be trustee of a discretionary trust in favour of her intellectually
disabled brother and that he
was confident of her ability to carry out that
task fairly and competently. It is also appropriate to begin with the
presumption
that he had made a judgment that she would discharge her duties in
that manner notwithstanding the potential conflict of interest
which her
appointment occasioned.

  

   58. Nonetheless, whilst the testator's decision is entitled to be given due
weight, it
cannot be treated as limiting the court's jurisdiction to ensure
that the welfare of the beneficiaries is adequately protected and
the trust
properly administered. In the present case relevant circumstances have changed
in the years ensuing since his death. If
it is now clear that there are
adequate grounds for requiring the removal of the first defendant as trustee
then the court should
not shrink from taking that step.

  

   59. The evidence discloses at least a prolonged dereliction of duty in
failing to provide
adequate information and a repeated failure to make
distributions of income to the plaintiff as required by the terms of the
trust.

  

   60. In my view the explanations for these deficiencies in the
administration of the trust are not wholly reassuring.

  

   61. Mr Crowe submitted that I should not be satisfied that the first
defendant suffered from the depressive illness claimed,
or, at least, I should
not be satisfied that there was an incapacitating episode of that illness
between May 1996 and February 1997.
In support of that submission he pointed
out that no attempt had been made to adduce any evidence from the treating
psychiatrist
Dr Cullen or any other medical practitioner. He submitted that I
should infer that the evidence of Dr Cullen would not have assisted
her case:
vide Jones v Dunkel [1959] HCA 8;  (1959) 101 CLR 298. Notwithstanding this submission I
accept her evidence that she has suffered from clinical depression on and
off
throughout most of her adult life and that she had suffered from a particular
episode of that illness during the period in question.
In view of the events
which occurred in 1995 and 1996 it seems to me very likely that any person
with an underlying depressive illness
would have suffered such an episode at
that time. On the other hand, I am not satisfied that this illness was as
incapacitating as
she claimed or that it wholly explains the breaches of her
duty as a trustee.

  

   62. Furthermore, the absence of any evidence
from Dr Cullen or any other
appropriate medical expert precludes any confidence that further depressive
episodes may not occur or
that the efficient administration of the trust might
not be again disrupted.

  

   63. No attempt was made to explain why the payments
to the second defendant
were not resumed until December 1994 when the mortgage payments to the
plaintiff were reinstated in May of
that year. Nor was there any attempt to
explain why the first defendant did not arrange for some back payment of the
allowance when
she had known that he had been dependent upon Social Security
pension and/or support by his mother and sister throughout the twelve
months
in which he had been without income. The latter failure is of some
significance given the first defendant's prediction that
the Social Security
allowance would need to be repaid.

  

   64. Whilst as previously mentioned I am prepared to accept that the
first
defendant may have held the belief throughout 1995 that the plaintiff did not
wish to be paid income, I am not satisfied that
there was any valid reason for
her failure to provide the information sought. It may be noted that in
September 1995 she provided
to Mr Harrison the financial details necessary to
enable him to prepare the accounts for the 1993/94 and 1994/95 financial
years.
I am not satisfied that there was any valid reason why information of
this character could not have been provided to the plaintiff
as requested.

  

   65. Furthermore, whilst I accept that the first defendant did suffer from
depression at least during the latter
part of 1996 I am not satisfied that she
was unable to obtain information as to the amount due to the plaintiff or that
her failure
to respond to the request for payment in Ms Cauchi's letter of 28
March 1996 was occasioned by her depression.

  

   66. Nor do
I accept Mr Brewster's submission that the institution of legal
proceedings which had been occasioned by the first defendant's prolonged
failure to pay the plaintiff the amounts due to the plaintiff provided some
excuse for her to maintain that failure thereafter. The
first defendant knew
that she had an obligation to pay the plaintiff and knew by then that she
wanted to be paid. It was not suggested
that her solicitors had advised her
not to pay the money. Nor was it suggested that there was any conceivable
right to withhold it.
In these circumstances I am quite unable to accept the
contention that it was reasonable for her to refrain from making payments
she
was legally and morally bound to make until, some eight months later, her
solicitors took the initiative to advise her to do
so.

  

   67. Furthermore, I do not accept that she had adequately discharged her
duty to the second defendant. I accept Mr Brewster's
submission that it would
be inappropriate for me to act upon my own impression that the allowance in
his favour was parsimonious.
However I am not satisfied that the first
defendant has properly exercised the discretionary power with which she had
been entrusted.
It was plainly not an adequate exercise of that power to leave
the second defendant without income for 12 months and, as previously
advised,
I am not satisfied that the whole of the delay in reinstating the payment of
that allowance was attributable to lack of
records or other accounting
difficulties occasioned by the removal of BPT as trustee and/or its
liquidation.

  

   68. I also accept
Ms McGregor's submission that the first defendant has
taken an unduly restrictive approach to the terms of the trust. Whilst I
accept
the first defendant's evidence that the testator did make statements to
her expressing concern that the second defendant not be exploited,
I am not
satisfied that he expressed any intention that the amount paid to him be
limited in the manner suggested. Furthermore, even
if he did make the
statement attributed to him by the first defendant, the reference to needs and
"small luxuries" should not, in
my view, be read as being inconsistent with
the terms of the trust as set out in his will. In any event, the first
defendant was
bound to administer the trust in accordance with its terms. Of
course, in the event of any ambiguity it may have been reasonable
for her to
have adverted to statements of intention made by the testator on other
occasions but she was not entitled to ignore its
terms on the basis of any
antecedent statements of intention which she believed to be inconsistent with
them.

  

   69. As previously
mentioned, I accept Mr Brewster's submission that the
testator must be taken to have understood the potential conflict of interest
arising from the creation of the trust. I also accept that the testator's
decision to appoint the first defendant as trustee notwithstanding
that
understanding is an important factor to be taken into account. However that
does not mean that the conflict of interest should
be ignored. Whatever the
testator's expectations, a number of events have occurred since his death
which have lent added significance
to that conflict. The first defendant is
now the sole trustee. Following the removal of the other trustee the second
defendant was
left without any monies from the trust for about twelve months
and when reinstated the allowance payable to him was reduced without
explanation. The family is divided into two camps with the first defendant on
one side and the second defendant on the other. She
has not had contact with
him other than in relation to their mother's death for about 12 months and has
commenced legal proceedings
against him and the plaintiff in relation to their
mother's estate.

  

   70. Furthermore, even if the conflict of interest were
to be ignored, the
interests of the second defendant would not be well served by permitting the
first defendant to remain as trustee
given the lack of recent contact,
continuing family tensions and the history of previous failures in the
administration of the trust.

  

   71. It is also clear that the plaintiff has lost faith in the first
defendant's ability and/or willingness to administer
the trust fairly and
efficiently.

  

   72. It is true, of course, that a trustee will not normally be removed
merely because certain
beneficiaries desire his or her removal: Guazzini v
Pateson (1918) 18 SR (NSW) 275; Re Roberts (1983) 70 FLR 158; Benzija v
Adriatic
Fisheries Pty Ltd (1984) 37 SASR 545. Indeed, it may be insufficient
to demonstrate that all of the beneficiaries require such removal:
Re
Brockbank [1948] Ch 206. A conflict of interest will not necessarily lead to
removal: McKenna v Lowe [1878] 1 SCR (NS) (NSW) Eq
10; Hobkirk v Ritchie
(1934) 29 Tas LR 14. Nor, as previously mentioned, will a breach of trust
necessarily lead to such an order.
To return to the formulation of Sir Owen
Dixon in Miller v Cameron, the jurisdiction must be exercised with a view to
the interests
of the beneficiaries, the security of the trust property, the
efficient and satisfactory execution of the trusts and a faithful and
sound
exercise of the trustee's powers.

  

   73. In the present case, I accept that the first defendant has administered
the trust
with due honesty, that she has generally kept accurate records and
that she has acted prudently in relation to the assets of the
trust. I am not
satisfied that her decision to maintain the second defendant's income at
$1,000 per month was due to any actual desire
to build up the trust assets for
her own benefit or that of her children.

  

   74. Nonetheless, in my view there are a number
of considerations which
create a persuasive case for ordering her removal as trustee.

  

   75. First, it is clear that the trusts
have not been executed by the first
defendant in an efficient and satisfactory manner in the past. Of course, past
failures do not
necessarily justify a prediction that similar failures will
occur in the future. One must examine all of the relevant circumstances
and
attempt to make an appropriate judgment based upon such factors as the reasons
for the earlier failures, any steps taken to address
the underlying causes and
the character and temperament of the trustee as assessed in the witness box.
As previously mentioned I
am satisfied that the deficiencies in the first
defendant's administration of the trust was partially attributable to an
episode
of a long standing depressive illness. This was no doubt precipitated
by events such as the tragic death of her mother and it is
perhaps unlikely
that she will encounter a comparable series of stressful events in the
immediate future. However, she gave evidence
of having experienced episodes of
depression on and off throughout her adult life and in the absence of any
medical evidence there
is no reason to suppose that they will not recur,
especially given the division in the family and the continuing strain of
litigation
over her mother's estate. I have also been forced to conclude that
the deficiencies were partially attributable to wilfulness occasioned
by
resentment or bitterness. It was not my role to make any judgment about the
issues which seem to have caused such division in
this family but even if the
first defendant's feelings could be regarded as adequately explained by past
events they should not have
been permitted to influence the manner in which
she administered the trust. Furthermore, there is no evidence that the
divisions
have now been healed and I am not satisfied that she would or could
now prevent them from having any effect on her duties as trustee.
Consequently, I am unable to discount the risk of further disruptions to the
administration of the trust.

  

   76. Secondly, I
am not satisfied that she fully appreciates that the trust
requires the trustee to make judgments about the extent to which the income
and capital should be applied not only to meet the second defendant's needs
but to promote his welfare and happiness. It follows
that I am unable to be
confident that there will be a sound exercise of her powers in this respect.

  

   77. Thirdly, even if
the first defendant were able to ensure the timely
provision of information and/or distribution of income notwithstanding any
distress
or bitterness arising from tensions in family relationships and her
mother's decision to exclude her from any benefit under her will,
I think it
would be almost impossible for her to avoid such emotions colouring
discretionary decisions as to the provision that should
be made for the second
defendant.

  

   78. Fourthly, even if the discretionary decisions required by the trust
were in fact sound,
in the light of the events which have occurred since the
testator's death and the potential conflict of interest inherent in her
trusteeship it seems to me that the second defendant might reasonably fear
that future decisions might be tainted by self interest
or concern for the
interests of the first defendant's children.

  

   79. Fifthly, I accept that the plaintiff is genuinely apprehensive
about
the risk of further breaches of trust involving the withholding of information
and/or failure to make timely payment of the
income due to her under the
trust. Having regard to the manner in which the trust was administered since
the first defendant became
the sole trustee, these apprehensions cannot be
dismissed as unreasonable.

  

   80. Sixthly, it seems clear that the family relationships
are now attended
with such bitterness and suspicion that a significant barrier to
communications has been erected. The first defendant
herself has recognised
this and has previously nominated her accountant or solicitor as neutral
arbiters because she anticipated
that the second defendant would not feel able
to approach her directly about his entitlement under the trust. I accept that
her decision
to nominate these people was well motivated but find it difficult
to accept that a person in the position of the second defendant
would perceive
either her accountant or her solicitor to be a neutral arbiter. In my view the
difficulties in communications that
have arisen as a result of the present
circumstances are not likely to be substantially overcome in this manner. I
think it is likely
that the second defendant would continue to feel that there
was a substantial emotional barrier to any contact with the trustee,
whether
directly or indirectly, in relation to his rights under the trust.

  

   81. I have considered the first defendant's objections
to the appointment
of Ms Cauchi as trustee. However Mr Crowe no longer presses for her
appointment and I do not need to consider
whether these objections should be
upheld.

  

   82. I have also considered her objection to the appointment of the Public
Trustee
on the ground of the additional expense that would undoubtedly be
involved. Her enquiries have revealed that there is likely to be
a commission
of some $38,000. Whilst that is a substantial sum of money, it must be viewed
in the context of the administration of
a trust, with assets in excess of
$1,000,000, which is likely to need to be maintained for several decades.
Furthermore, Mr Crowe
pointed out that the parties have probably spent that
much already on the present litigation. He submitted that the expense
occasioned
by this commission could easily be overshadowed by the cost of
further litigation should the first defendant remain as trustee and
further
disputes arise. This risk cannot be considered remote or fanciful. In all the
circumstances I think that the cost is outweighed
by the other considerations
to which I have referred.

  

   83. I have also given due consideration to Mr Brewster's submission
that if
I were to come to the conclusion that the first defendant should not remain as
sole trustee then I should simply add the
Public Trustee as a co-trustee
rather than ordering her removal. Mr Brewster pointed out that as a residuary
beneficiary she has
real interests to protect and that her evidence of having
acted promptly and efficiently in relation to the protection of the assets
of
the trust had not been challenged. He also maintained that there was nothing
to suggest that she would not be able to work in
harmony with a co-trustee and
reach agreement on any contentious issues. He also he pointed out that the
appointment of a co-trustee
would in substance restore the situation that had
existed prior to the removal of BPT. That situation had been brought about as
a
result of an informed decision on the part of the testator.

  

   84. These are all cogent considerations and I have ultimately
concluded
that I should reject this submission only with some reluctance. However I have
been driven to conclude that such an arrangement
would not overcome all of the
concerns that have led me to conclude that the first defendant should not
remain as sole trustee and
that it might well give rise to further
difficulties.

  

   85. Mr Crowe adverted to part of the first defendant's evidence in
which
she expressed some resentment at what she perceived to be a somewhat high
handed attitude on the part of BPT which she said
sometimes acted as if it
were sole trustee. Of course, her complaint may have been entirely justified
and any resentment may have
been engendered by the frustration of her
conscientious attempts to fulfil her responsibilities as a co-trustee. Whilst
Mr Brewster's
contention that the previous arrangements were not attended by
any lack of harmony may have been somewhat overstated, I do not think
that the
first defendant's expressed concern about the conduct of the previous
corporate trustee provides any basis for concluding
that a relationship of
co-trustee between herself and the Public Trustee would be attended by similar
difficulties.

  

   86. Nonetheless,
I am unable to accept that it would be appropriate to
proceed in this manner. It seems to me that the considerations to which I have
previously referred demonstrate that it is inappropriate that the first
defendant continue as a trustee. Had the concerns about her
administration of
the trusts been limited to her failure to provide adequate information and her
failure to promptly account to the
plaintiff then I would have been inclined
to have acceded to Mr Brewster's submissions since difficulties of that kind
could presumably
be overcome by the addition of a corporate trustee which
would ensure due compliance. However, whilst the concerns which I hold about
the potential conflict of interest might be ameliorated in this manner they
would not be entirely removed. Nor do I think that such
a course would
entirely restore the confidence of the plaintiff and second defendant in the
fair and efficient administration of
the trust. Furthermore, it might place
the relevant officer of the Public Trustee in a very difficult position in
relation to the
discretionary trust in favour of the second defendant.
Decisions as to the amounts which should be paid to him would have to be made
jointly. The relevant officer would be obliged to take into account the views
of the first defendant though ultimately, of course,
he or she would be bound
to make an independent judgment on behalf of the co-trustee. In considering
the weight which should be attached
to her views it seems to me that such an
officer might well be influenced by the first defendant's long involvement as
trustee and,
perhaps more importantly, by her knowledge of the second
defendant and the fact that she is his sister. There is, I think, a real
risk
that the joint decisions of the co-trustees might be tainted by the first
defendant's own emotional reaction to the continuing
family alienation and by
her apparent conviction that the second defendant should receive nothing more
than that necessary to meet
his actual needs. Alternatively, there may be
disagreements between them which would give rise to further proceedings.

  

   87.
I see no reason to doubt the competence of the Public Trustee to
adequately discharge the obligations that would be imposed by these
trusts
and, in all the circumstances, it seems to me that it would be preferable if
it were to be sole trustee. Accordingly, I propose
to order that the first
defendant be removed as trustee and that the Public Trustee be appointed in
her stead.

  

   88. So far
as costs are concerned, Mr Crowe submitted that if I were
satisfied that the need to remove the trustee had arisen as a result of
deliberate breaches of trust by the first defendant I should order her to pay
the costs personally. Alternatively, if I were satisfied
that the breaches of
trust had occurred as a result of the first defendant's depressive illness I
should order that the costs be
paid out of the estate. In the latter event,
however, he urged me to make an order that they be paid from the capital of
the estate
rather than from the income, since the amount involved might
otherwise mean that neither the plaintiff or the second defendant received
any
distribution for some time. On the other hand, Mr Brewster submitted that I
would not find that the first defendant had been
guilty of any wilful default
and that there was no basis for any order other than that the costs be paid
out of the estate.

  

   89. In my view the genesis of the problems which have led to the present
decision lies in the alienation of family relationships.
The cause of this
alienation was not explored in evidence before me though there are some hints
that this may be a case of the parents
`eating sour grapes and the children's
teeth being set on edge'. In any event, it seems to me that the alienation has
itself created
significant impediments to the continuance of the present
arrangement in which the first defendant acts as the sole trustee for her
brother and sister. It is true that the first defendant has been guilty of a
number of breaches of trust and, as previously mentioned,
I am not satisfied
that those breaches were wholly explained by her depressive illness. On the
contrary, I think there was an element
of wilfulness involved and that she was
motivated to some extent by bitterness arising from the family alienation and
the fact that
she had been excluded from her mother's will. Those breaches
were the catalyst for the present action and served to demonstrate the
potential risk posed by an ongoing conflict of interest and the emotional
response to the alienation between the first defendant
and the other parties.
Nonetheless, I accept that the defendant did suffer from an episode of a long
standing depressive illness
and that this should be viewed as mitigating the
extent of her responsibility for some of the delay in providing information
and/or
making payments of income to the plaintiff. More importantly, my
decision to order her removal is not ultimately based upon the commission
of
those breaches of trust but upon the conviction that the maintenance of the
present arrangement would be inimical to the interests
of all concerned.

  

   90. In the circumstances I have decided, in the exercise of my discretion,
to order that the costs of the
plaintiff and any legal costs incurred by the
second defendant should be paid out of the funds of the trust. I accept Mr
Crowe's
submission that they should be paid out of the capital of the trust
rather than from income. The first and third defendants should
bear her own
costs of the proceedings.

  

   91. Finally, it may be appropriate to record the circumstances in which the
third
defendant came to be joined as a party and the reasons for certain
orders following that joinder. On the second day of the hearing
a Mr Morton
sought leave to be heard on behalf of Scott David William Oates, a son of the
first defendant. Mr Morton is not a legal
practitioner but he informed me that
neither Mr Oates nor his solicitor had been able to attend court personally.
He said that Mr
Oates wished to be joined as a party to the proceedings and
handed up a letter from him to that effect. It was pointed out that the
hearing of the action had commenced and most of the evidence had already been
adduced. Some discussion then ensued during the course
of which Mr Morton
pointed out that Mr Oates was a beneficiary of the trust and had a substantial
interest in the residue. He maintained
that it was important for him to be
heard. He also stated that Mr Oates had engaged a solicitor, Mr Chanaka
Bandarage and that he
would undertake to file a Notice of Appearance.

  

   92. When asked whether there were any additional matters which he wished
to
raise which might warrant the additional delay and expense associated with now
joining him as a party, Mr Morton informed the
court that Mr Oates wished to
contend that the plaintiff's application had been resolved by an agreement
concluded at a family conference
some time prior to the commencement of the
trial. However, Mr Morton did not provide any details of this agreement or of
any facts
relied upon to support the proposition that such an agreement had
been made. Furthermore, he indicated that Mr Oates was content
to make written
submissions. It was not clear how the issue of any agreement could have been
raised without reliance upon evidence
but at that stage of the hearing the
oral evidence had not been completed and it was conceivable that some support
for it might emerge.
I also anticipated that a further application might be
made to file an affidavit supporting the allegation should Mr Bandarage
consider
it necessary but warned Mr Morton that any such application would
need to be made within the 14 days allowed for submissions.

 


   93. I ultimately decided to order that Mr Oates be added as a party to the
proceedings and he became the third defendant. I
also granted leave for him to
file written submissions on or before 25 March 1998 and for the other parties
to file written submissions
in reply within a further seven days.

  

   94. In the end result no such submissions were filed. However, on 25 March
1998 the
third defendant filed a Notice of Motion seeking further time in
which to file written submissions. The Notice of Motion was supported
by an
affidavit sworn by the third defendant on 25 March 1998 explaining the delay
by reference to his health, stress, limited financial
resources and competing
commitments. He also explained that Mr Bandarage had been in Sydney for four
days.

  

   95. The matter
came before me on 27 March 1998. Mr Bandarage then indicated
that what I had previously been told about the conclusion of an agreement
at
the family conference was not, in fact, true. On the contrary, he maintained
that his client had believed that the proceedings
would be settled by
mediation and that it was only at the conference in question that he realised
that there would be no agreement.
Indeed, this was put forward by Mr Bandarage
explaining the third defendant's failure to intervene in the proceedings at an
earlier
date. When the matter resumed after the morning adjournment Mr
Bandarage raised a different explanation for this delay. He contended
that
until 10 March 1998 his client had been under the impression that the
plaintiff was seeking to have Ms Cauchi appointed as trustee
and that he had
been confident that the court would not make such an appointment. It was only
then that he had discovered that the
plaintiff was seeking the appointment of
the Public Trustee. In fact, the statement of claim had always sought an order
that Ms Cauchi
"or some other fit and proper person" be appointed as trustee.
Furthermore, the third defendant's affidavit asserted that the plaintiff
had
sought the appointment of "an unknown third party" as trustee. I was not
impressed by either assertion and not satisfied that
there had been any
adequate explanation for the third defendant's failure to intervene in the
proceedings earlier.

  

   96. Furthermore,
whilst the Notice of Motion did not refer to any
application to re-open the evidence in the case, it was clear from the third
defendant's
affidavit and Mr Bandarage's submissions that this was
contemplated. The third defendant's affidavit adverted to the fact that
affidavits
filed in the proceedings had related to him and that it was of
"paramount importance" that he be given an opportunity of responding
to them.
In fact, the affidavits contained little reference to him and, when I asked Mr
Bandarage what parts of the affidavits were
referred to and what evidence his
client wished to adduce in response, he informed me that he had no
instructions as to those matters.
When, after being given the opportunity to
take instructions, he was pressed about the matter, he could only say that the
third defendant
disputed some of the evidence which had been given by Mr
Collins concerning the attempts to serve the first defendant with the
initiating
process. For the reasons previously explained, I regarded this
issue as of little significance. Mr Bandarage was unable to indicate
any other
issue about which his client wished to adduce evidence. I gained the
impression that no real thought had been given to
this matter and that he was
hoping that something might occur to counsel. Counsel had not, however, been
briefed.

  

   97. Similarly,
he was unable to identify any issue about which his client
wished to make submissions other than to indicate, in general terms, that
his
client was concerned about his rights under the trust, that he felt that the
first defendant had done a good job as trustee and
that he supported the
continuance of her trusteeship. What was apparently sought was the opportunity
to further review all of the
evidence in the case and to make whatever
submissions counsel not yet briefed might think appropriate.

  

   98. Mr Bandarage did
seek to impugn the right of Ms McGregor to appear as
next friend for the second defendant. He adduced no evidence in support of his
criticism of her and in my view it was inappropriate for the third defendant
to permit the proceedings to progress to trial and then
seek to challenge her
entitlement to represent the second defendant as next friend only after
judgment had been reserved. I rejected
his criticism.

  

   99. I accept that the third defendant did suffer from health and stress
related problems during the 14 day
period fixed for the filing of submissions
and that he had competing commitments during that period. Had there been a
clear need
for him to be heard in the matter I would have been inclined to
have acceded to his application. However, in all the circumstances
I did not
consider that course to be appropriate. I would not have ordered the third
defendant to be joined as a party to the proceedings
had the position
explained by Mr Bandarage been conveyed to me by Mr Morton on 10 March 1998.
The case for retention of the first
defendant as trustee was fully and
competently argued by Mr Brewster and I would have taken the view that it was
inappropriate to
allow a beneficiary to intervene at that late stage of the
proceedings merely to offer general support and to have the opportunity
to
make submissions the nature of which could not be foreshadowed. Mr Bandarage
conceded that the third defendant had been aware
of the proceedings since
their inception. Yet he allowed them to proceed to go to trial without seeking
to be joined as a party and
even then did not attempt to intervene until the
second day of the hearing. I was not satisfied that there was any relevant
evidence
he could give or that any new and persuasive arguments could be
advanced on his behalf. Nor was I persuaded that the proceedings
should be
further delayed for no better reason than that some concrete ground for
opposing the orders sought by the plaintiff might
be suggested by counsel.

  

   100. In all the circumstances I decided that it would be inappropriate to
accede to the third defendant's
application for further time to file
submissions. However, I have taken into account the rights which he and his
brother enjoy under
the trust, his belief that the first defendant has
executed her duties diligently and competently and in the best interests of
all
the beneficiaries and his desire that she be permitted to continued in
that role.