Supreme Court New South Wales Medium Neutral Citation: Sutton v NRS(J) Pty Ltd [2020] NSWSC 826 Hearing dates: 26 June 2020 Date of orders: 26 June 2020 Decision date: 26 June 2020 Jurisdiction: Equity - Duty List Before: Parker J Decision: See [25] Catchwords: Equity – trusts and trustees – original trust deed lost – trust administered in accordance with copy – presumption of regularity – declaratory relief inapplicable – judicial advice given Legislation Cited: Trustee Act 1925 (NSW), s 63 Cases Cited: Harris v Knight (1890) 15 PD 170 Re Thomson [2015] VSC 370 Category: Principal judgment Parties: Neil Raymond Sutton (Plaintiff) NRS (J) Pty Limited (First Defendant) NRS (S) Pty Limited (Second Defendant) NRS (B) Pty Limited (Third Defendant) Representation: Counsel: D Robertson (Plaintiff) Solicitors: McConnell Jaffray Lawyers (Plaintiff) File Number(s): 2020/171761 Publication restriction: Nil Judgment – EX TEMPORE Revised from transcript; issued 1 July 2020 1. In evidence before the Court is a photocopy of a Deed of Trust dated 17 August 1972. The terms of the Deed, as they appear from the photocopy, provided for the establishment of a trust for the family of the plaintiff, Neil Raymond Sutton. 2. For many years Mr Sutton and his advisors have acted on the basis that a trust, to which I will refer as the "Presumed Trust", was constituted, and subsists, in accordance with an original deed, of which the photocopy deed in evidence is a copy. These actions have included the acquisition of a valuable portfolio of properties and businesses as assets of the Presumed Trust. 3. The present proceedings have arisen because the original Trust Deed cannot now be found. The Court is asked to make orders to regularise the continued administration of the assets on the terms of the Presumed Trust. 4. The parties to the Trust Deed were Frederick Walter Sutton as settlor and Laurie Frederick Sutton, David Bruce Sutton and Neil Raymond Sutton (the plaintiff) as trustees. The terms of the Deed provided in conventional form for the establishment of a discretionary trust with classes of beneficiaries to whom income and assets might be appointed. The principal beneficiaries were Mr Sutton's children, and the other beneficiaries included their descendants and the descendants of Mr Sutton's brothers. 5. The settlor, (Sir) Frederick Walter Sutton, was Mr Sutton's father. He owned and operated a well-known Sydney car dealership known as "Suttons Motors". He died in 2004. 6. The other two trustees were Mr Sutton's brothers. They are both still alive. 7. The Trust Deed provided in the usual way for the trust fund to consist of a relatively small settlement sum (in this case $100) together with property subsequently transferred to the trustees to be held under the terms of the Deed. 8. The Presumed Trust appears to have been practically dormant for over thirty years. Then in about 2007 Mr Sutton decided to re-activate it. He took this step in anticipation of, or as a consequence of, being bought out of the Suttons Motors business. 9. In June 2007, in accordance with the terms of the Trust Deed, Mr Sutton executed a deed poll removing himself and his brothers as trustees and appointing in their place three companies. Those companies are NRS (J) Pty Ltd, NRS (S) Pty Ltd and NRS (B) Pty Ltd. They are named as defendants in these proceedings. Thereafter the asset portfolio I have mentioned was acquired by the companies, acting as trustees of the Presumed Trust. 10. The portfolio generates substantial income which has been distributed to beneficiaries in accordance with the terms of the Presumed Trust. Since 2009 independent accountants have been retained to prepare the Presumed Trust's accounts and tax returns. 11. The problem which led to these proceedings arises because the Presumed Trust's banks (as with, apparently, all Australian trading banks) operate under what is known as a "know your customer" or "KYC" policy. As this policy is interpreted by the banks, it requires them, in the case of a trust, to be satisfied that the trust's constituent documents are in order, and in particular to sight the constituting trust deed. Because this is not possible in the case of the Presumed Trust there is a risk of its facilities being withdrawn or of it being unable to open new bank accounts. One bank account of the Trust has been frozen until the Trust Deed is produced. 12. I say nothing about whether the banks' actions are or are not a correct interpretation of the KYC policy. But they certainly justify the making of this application. They are also the reason why the Court has dealt with the matter urgently. 13. In the affidavit he made in support of this application Mr Sutton stated that he did not have a specific recollection of signing the original Trust Deed. But he did have a recollection of his father giving him documents to sign at the time and being told that the documents had been prepared for his "protection". 14. Mr Sutton also stated that over time he has had thorough searches made of his business and personal records for the original Trust Deed. It has not been found. According to Mr Sutton's evidence, his solicitor at the time that the Presumed Trust was reactivated in about 2007, Mr John Barbouttis, obtained documents from the Sydney law firm Clayton Utz who had previously acted both for Mr Sutton and his father, but those documents did not contain the original Trust Deed. 15. Mr Sutton's solicitor for the purpose of this application, Mr Keith McConnell, also gave evidence of inquiries he has made to find the original Trust Deed. These included further inquiries of Clayton Utz. On 17 June Mr McConnell visited the office of Clayton Utz and met the Clayton Utz partner responsible for the records of the firm. He obtained a packet of documents which Clayton Utz had retained in connection with work done for Mr Sutton. The packet contained an original will of Mr Sutton prepared for him by Clayton Utz and signed on 17 August 1972, about two months before the date of the Trust Deed. The packet also contained a photocopy of the Trust Deed. That photocopy has been compared with the photocopy which Mr Sutton has in his possession and it is the same. 16. Counsel for Mr Sutton relied in his submissions on the presumption of regularity. That presumption applies where some action has been taken which depends for its validity on the completion of prior formalities. In the absence of evidence to the contrary, it can be presumed from the taking of the action that the formalities have been complied with: Harris v Knight (1890) 15 PD 170 at 179-180. Counsel relied on the decision of the Victorian Supreme Court in Re Thomson [2015] VSC 370, where the presumption was applied in a case concerning a missing superannuation trust deed. 17. In my view, it is not necessary to rely on the presumption in these proceedings. In Re Thomson the missing trust deed was evidenced only by an unsigned copy, but in the present case there is no particular need to prove by inference that any formality has been complied with. The photocopy Trust Deed is signed and the evidence establishes directly that the parties concerned have always acted on the basis that it sets out the terms of the Presumed Trust. 18. In my opinion, the evidence makes it overwhelmingly likely that the photocopy Trust Deed is indeed a copy of an original which now cannot be found. This conclusion is supported in particular, by the recent discovery of an identical copy of the Trust Deed in the records of Clayton Utz dated from 1972. 19. In these circumstances, the Court should assist those responsible for the administration of the presumed trust by ensuring that they can continue to administer it as if the photocopied Trust Deed were the trust's constituting document. 20. The question is how to achieve this. The Summons sought a declaration in the following form: An order that the photocopy of a Deed made the 23rd day of October 1972 BETWEEN Frederick Walter Sutton (the Settlor) of the one part AND Laurie Frederick Sutton, David Bruce Sutton and Neil Raymond Sutton of the other part identified in the Affidavit of Neil Raymond Sutton filed in these proceedings is a true copy of the original Deed made the 23rd day of October 1972 BETWEEN Frederick Walter Sutton (the Settlor) of the one part AND Laurie Frederick Sutton, David Bruce Sutton and Neil Raymond Sutton of the other part identified in the Affidavit of Neil Raymond Sutton filed in these proceedings. 1. I think there are two difficulties with the grant of declaratory relief of this type. The first is that the Court makes a declaration so as to determine formally a legal state of affairs. A declaration should not be made as to a mere matter of fact. 2. The second, and wider, difficulty is with the constitution of the proceedings. The Court should not make a declaration which may affect the status of property unless all interested parties have had an opportunity, at least, to be heard. Although, as I have stated, the trustees were named as defendants, when the matter came on before me for hearing they had not been formally served. Perhaps more importantly, other parties, apart from the present trustees, might have an interest in any declaration about the status of the original Trust Deed. This would appear to include at least Mr Sutton's brothers, the other two original trustees. Others with a potential interest in the property, such as the banks which I have mentioned, might also need to be given the opportunity to be heard. 3. Fortunately, there is an alternative to declaratory relief. The Court can give advice under the Trustee Act 1925 (NSW), s 63, as to the administration of the Presumed Trust. In my view, an appropriately worded advice which will enable the trustees to treat the photocopy Trust Deed (unless the original ever turns up) as the Trust's constituting document would be an entirely apt use of the s 63 power. 4. Ordinarily, it is the trustee who makes an application for advice under s 63. But I see nothing wrong with the Court giving advice to the trustees of the Presumed Trust at the instance of Mr Sutton as plaintiff. When I raised this possibility with Mr Sutton's legal representatives, they were able, during an adjournment of the proceedings, to obtain the passage of resolutions by the directors of each of the trustee companies to the effect that they consented to orders giving that advice. 5. The orders of the Court are: 1. The trustees of the trust settled by Frederick Walter Sutton by Deed of Trust dated 23 October 1972 are justified in administering the trust on the basis that the document annexed to this order and marked "A" is a true copy of that Deed. 2. The costs of all parties to these proceedings be paid out of the assets of the trust. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 July 2020