THURLSTANE (AUST) PTY LTD and ORS v ANDCO NOMINEES PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MEAGHER, POWELL and COLE JJA 27 October 1997, 27 October 1997 [1997] NSWCA 317 Equity — breach of fiduciary duty — trustee company. Meagher JA These are two appeals from a judgment of Santow J brought by Mr Davidson and his cohorts. Mr & Mrs Davidson were divorced in 1989. That divorce involved a flurry of litigation, twice at first instance in the Family Court before Cook J and Ellis J; twice on appeal to the Full Family Court and once on a special leave application to the High Court. Broadly speaking, two things can be said about this litigation: (i) That at every stage Mrs Davidson was the victor; and (ii) Mr Davidson has consistently fought against the implementation of the Family Court's orders. The Family Court ordered Mr Davidson to transfer the matrimonial home to Mrs Davidson and to pay her the amount of $700,000. He has done the former, but not the latter. Mr Davidson was first an employee, and eventually the owner, of a company called Thurlstane (Aust) Pty Ltd, in which he owns 13,247 shares. These shares were transferred in October 1977 by him to a trust called the MAVK Trust. The trustee of that trust was originally a company called MAVK Pty Ltd and later became Lestato Pty Ltd. Mr Davidson was originally the appointor of the trust. Mr Smith later became an appointor and he terminated the trusteeship of Lestato and replaced it by Andco Nominees, which now becomes the trustee of the MAVK Trust. Still Mrs Davidson came no closer to obtaining her $700,000. It was within these circumstances that she commenced litigation before Young J, who made the following order in her favour: "Make orders pursuant to s71 of the Trustee Act 1925, vesting in the plaintiff the 13,247 ordinary shares in Thurlstane (Aust) Pty Ltd, now registered in the name of the defendant." No sooner was that order made, than a further argument developed as to whether the order of Young J could be obeyed in view of the company's presumptive rights provisions contained in the Articles of Association. This, if anything, was a non-issue. If Young J ordered an immediate vesting of the shares in Thurlstane (Aust) Pty Ltd in Andco, the provisions of the Articles of Association become irrelevant. His Honour Santow J, from whom this appeal comes, displayed almost angelic patience in rebutting all arguments to the contrary, but his decision on this aspect of the case is no longer attacked. The second issue in the proceedings before Santow J, and apparently the only one before us, concerns alleged breach, or possible breach, of fiduciary duty by Andco. It is common ground that the MAVK Trust was a discretionary trust of the normal kind and it is also common ground that it is not a sham. In this regard it is a little difficult, as Mr Grieve QC pointed out, to know what to make of the Family Court's findings that the Trust's assets were de facto Mr Davidson's 2 UNREPORTED JUDGMENTS assets. Nor is the task of discovering what is, made any easier by the fact that the Family Court apparently thought that the payment of $700,000 from the assets of the trust would be perfectly proper and would discharge the obligation which arose under the Family Court order. Nor is the fact made any easier by the fact that the High Court seemed to have endorsed this argument. In the present case the argument for Mr George presented by Mr Grieve in this regard was that Andco Pty Ltd accepted the trusteeship of the trust under an agreement to sell the Thurlstane shares, which constitute almost the entire capital of the trust, in order to pay Mrs Davidson her $700,000 and such an agreement would be in breach of trust. It is important in this regard to note exactly what findings of fact Santow J made after hearing all the evidence. They are as follows: 1. That there was no such prior agreement. 2. That Andco had no intention of blindly following any direction from anyone. 3. That Andco's present disposition, which his Honour found no reason to challenge, was to act in all situations according to the law. In light of those circumstances, the present appeal must, in my view, be dismissed. The orders which I therefore propose are that, in each appeal, the appeal be dismissed with costs. Powell JA I agree. Cole JA I also agree, but would add only this: On the appeal, Mr Grieve has argued that it is open to this Court, in accordance with the principles enunciated in Devries, to attack the findings of the trial judge and to disturb them. In particular, ground 8 of the grounds of appeal asserts: "The trial judge erred in the inferences he drew or conclusions he drew from the evidence, in holding that he was not satisfied that there was any evidence that the appointor and the respondent had any antecedent agreement or arrangement that the respondent would exercise its trust powers simply to benefit Mrs Miriam Davidson, without regard to the proper consideration to the claims of all beneficiaries." I do not think that this Court is entitled to disturb that finding of fact. There was plain evidence from Mr Vella that he would act in his capacity as a director of the trustee company in accordance with law. He said: "If I received that advice, I would seek advice as to what it was that it was appropriate for me to do, but I would assume it was inconsistent with my role as trustee, then I would have a problem. I could not simply act in breach of those duties." In those circumstances, it seems to me that there is no basis upon which this Court would be entitled to disregard the trial judge's finding of fact that the existing trustee, Andco Nominees, would act otherwise than in accordance with the law. I agree with the orders proposed. MEAGHER JA: The orders of the Court therefore are that in the case of each appeal, the appeal is dismissed with costs. (Mr Ashhurst stated that the respondents sought to withdraw undertaking 4 given to the Court on 26 October 1995; no objection.) The Court will note that the fourth undertaking given by the plaintiff Andco Nominees Pty Ltd on 1 June 1995 is withdrawn. URHURLSTANE (AUST) PTY LTD and ORS v ANDCO NOMINEES PTY LTD (Cole JA) 3 Counsel for the appellant: D E Grieve QC Solicitors for the plaintiff: Boskovitz & Assoc Counsel for the respondent: M Ashhurst Solicitors for the respondent: Laurence & Laurence