New South Wales Supreme Court CITATION : Lenyco Pty Ltd; In the matter of the Daquino Family Trust [2009] NSWSC 429 HEARING DATE(S) : 28 April 2009 JURISDICTION : Equity Division Duty Judge List JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 28 April 2009 DECISION : Trustees justified in filing defence but would not be justified in funding other defendants. Further considerations reserved until close of pleadings. CATCHWORDS : TRUSTS AND TRUSTEES - Judicial Advice - Application by trustee for judicial advice as to whether it would be justified in defending proceedings and in assisting other defendants in proceeding - Where proceedings at early stage and trustee does not tender counsel's advice but trustee's case appears not to be unarguable - Held: trustees would be justified in filing defence - Not appropriate for trustees to fund other defendants - Further considerations deferred until close of pleadings. (CTH) Trade Practices Act 1974, s 52 LEGISLATION CITED : (NSW) Family Provision Act 1982 (NSW) Trustee Act 1925, s 63 CATEGORY : Principal judgment CASES CITED : Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 249 ALR 250, (2008) 82 ALJR 1425, [2008] HCA 42 Re Beddoe; Downes v Cottam [1893] 1 Ch 547 PARTIES : Lenyco Pty Ltd (applicant) FILE NUMBER(S) : SC 2322/09 Mr M Hamwood (sol) (plaintiff) COUNSEL : Mr C Locke (amicus curiae – Ann Daquino) Mr C Birtles (sol) (amicus curiae – Lucille Daquino) SOLICITORS : Thomson Playford Cutlers (plaintiff) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST BRERETON J Tuesday 28 April 2009 2322/09 Lenyco Pty Ltd; In the matter of the Daquino Family Trust JUDGMENT (ex tempore) 1 HIS HONOUR: The plaintiff Lenyco Pty Limited is the Trustee of a private discretionary trust known as the Giuseppe Daquino Family Trust established by a deed made on 26 June 1992. It is the first defendant in proceedings 2090/09 in this Division, in which seven of the members of the class of objects of the discretionary trust claim a range of relief relating to the Trust and its inter-relationship with the Estate of Giuseppe Daquino who was until his death one of the potential beneficiaries, and the appointor, of the Trust. Essentially, the plaintiffs in those proceedings contend that the power of appointment formerly held by Giuseppe is now held by his executors and that the executors, are bound to exercise that power in accordance with wishes of the beneficiaries of the Estate, who include – though not exclusively – those plaintiffs. There are also claims that Lenyco holds the assets of the Trust on trust for the executors of the estate, and/or that Lenyco is bound to administer the Trust in accordance with the terms of Giuseppe's Will. Alternatively, an order is sought removing Lenyco as trustee and substituting another trustee; removing the second and third defendants as trustees of the trusts created by the Will and the appointment of replacement trustees of the Estate, and alternatively relief under the (NSW) Family Provision Act 1982, including a designating order in respect of assets of the Trust. There is also an allegation that Lenyco has engaged in misleading and deceptive conduct, in contravention of (CTH) Trade Practices Act 1974, s 52. 2 In the present proceedings, by Summons filed on 9 April 2009, Lenyco claims judicial advice, essentially as to whether it would be justified in defending the principal proceedings, and also whether it would be justified in assisting other defendants in those proceedings to obtain advice, and, if so advised, to defend those proceedings. 3 It is clear that an application by a trustee for the advice of the Court as to whether it ought to defend proceedings brought against it in its capacity or role as trustee is within (NSW) Trustee Act 1925, s 63 [Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 249 ALR 250, (2008) 82 ALJR 1425, [2008] HCA 42, especially at 70]. 4 This application has been brought before me as Duty Judge in circumstances that the first directions hearing in the principal proceedings is to take place, in three days time, on Friday 1 May 2009, and the plaintiffs in those proceedings are pressing Lenyco to file its defence. Lenyco has proposed, in correspondence, that the directions hearing might be adjourned to enable the present application to be placed in better order, but that suggestion has so far not been favourably recieved, and when raised again in the course of the hearing before me today, again was not accepted. Accordingly, one must accept that, on Friday, the plaintiffs in the substantive proceedings will seek directions for the filing of a defence, and indeed probably complain that one has not yet been filed. In any event, Lenyco will be required to appear on Friday. 5 Prima facie, on an overview of the Statement of Claim, and having regard to the letter from Lenyco's solicitors, Thomson Playford Cutlers, of 3 April 2009 to the plaintiff's lawyers, Argyle Lawyers, it seems that Lenyco is the natural and proper contradictor in respect of at least most of the relief claimed in the Statement of Claim; and that, even if other defendants might be the natural or proper contradictors in respect of some of the relief claimed, it is nonetheless relief which Lenyco would also be entitled to oppose. In particular, claim 7 in the Statement of Claims for relief under Family Provision Act includes a claim for an extension of time within which to commence the proceedings, a claim for an order for provision under s 7 of the Act, and a claim for a designating order in respect of the assets of the Trust. Lenyco is plainly entitled to resist the designating order in respect of assets of which it is the trustee, and in so doing to resist each prior step, including the extension of time, and the order for provision. 6 Similarly, claims 2 and 3 in the Statement of Claim prima facie depend on the allegations in claim 1 concerning the rights of the beneficiaries of the Estate in respect of the power of appointment under the Trust. If that prima facie view be correct, then Lenyco, which is obviously interested in the relief sought in claims 2 and 3, would be entitled to resist the relief sought in claim 1, as a step on the way to resisting claims 2 and 3. 7 Moreover, at least prima facie, Lenyco has outlined its defences to the allegations in the Statement of Claim in the letter of 3 April 2009 to which I have referred. It is inappropriate and unnecessary at this early stage to say any more than that the defences appear, at least, not unarguable. On the other hand, the primary proceedings are at a very early stage. No draft defence has yet been prepared; and no counsel's advice which is usually necessary evidence on an application of this kind has been obtained, let alone put before the Court. It may well be that the prima facie view I have reached, on a superficial reading of limited material, turns out to be quite wrong. In those circumstances, it would be quite inappropriate to make an order that would effectively sanction the Trustee's defence of the whole of the principal proceedings, to and including the final hearing. On the other hand, the Trustee quite reasonably seeks some advice from the Court, before the first directions hearing and before it incurs the costs of filing a defence, lest it ultimately be suggested that it has acted unreasonably in so doing. Cases such as Re Beddoe; Downes v Cottam [1893] 1 Ch 547, and more recently St Petka in the High Court, demonstrate the desirability and prudence of trustees acting promptly to obtain such advice, lest it otherwise be suggested that they have been gambling with money that is not theirs. 8 On the material presently before the Court, the Trustee would be justified in filing a defence and taking other appropriate steps in the proceedings to conduct its defence, until its application can be considered more fully, with the benefit of a formulated pleading and counsel's advice. The close of pleadings is an appropriate time for review of the matter. Given that the directions hearing will be before the Court later this week, it can be anticipated that, if the parties proceed substantially in accordance with the timetable provided by the rules of court, pleadings should have closed by the end of May. 9 For the reasons I have already given, at this stage Lenyco would be justified in resisting the claims for relief in paragraphs 1, 2 and 7 of the Statement of Claim, even to the extent that other defendants might be thought to be primary contradictors to those claims or some of them. However, I do not consider that Lenyco would be justified in funding the defences of other defendants out of the trust assets though, to the extent that others are beneficiaries, it is a matter for them how any distributions that might be made are applied. 10 My orders are: (1) The plaintiff Lenyco Pty Limited would be justified in doing all things necessary or reasonably incidental to conduct the defence of proceedings 2090/09 in which it is the first defendant, on the bases set out in the letter from Thomas Playford Cutlers to Argyle Lawyers dated 3 April 2009 and on such other bases as it may be advised from time to time, including without limiting the generality of the foregoing resisting the relief claimed in paragraphs 1, 2 and 7, up to and including the close of pleadings in those proceedings. (2) Adjourn the proceedings for further hearing before me on Friday 12 June 2009 at 9.30am. (3) Direct that the plaintiff file and serve any further evidence upon which it proposes to rely by 5 June 2009. (4) Direct that the plaintiff lodge with my Associate and serve on all parties in proceedings 2090/09 a written outline of submissions by close of business on 9 June 2009. (5) Direct that any other party wishing to make submissions on 12 June lodge with my Associate and serve on the other parties an outline of submissions by close of business on 11 June 2009. ********** 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.