Bruxner [2010] NSWSC 718

New South Wales Supreme Court

CITATION : Bruxner [2010] NSWSC 718

HEARING DATE(S) : 30 April 2010 JUDGMENT OF : Gzell J

EX TEMPORE JUDGMENT DATE : 30 April 2010

DECISION : Upon the filing of affidavits containing the undertakings, advice that the trustees would be justified in winding up the trust and distributing the assets to the children following the mother's renunciation of her life interest.

CATCHWORDS : PROCEDURE - Supreme Court Procedure - Court advice to trustees - Trustee Act 1925, s 63 - residuary estate in adult children of elderly mother with life interest she willing to renounce - whether class closed - undertakings proffered by children to account for a requisite share if mother had or adopted a further child or children

LEGISLATION CITED : Trustee Act 1925

CASES CITED : Bullas v Public Trustee [1981] 1 NSWLR 641

Angus James Bruxner (First Plaintiff) Christopher John Morgan-Hunn (Second Plaintiff) Rosemary Pratten (Third Plaintiff) PARTIES : Anne Sinclair Hunter (Fourth Plaintiff) Belinda Morgan Pratten (Fifth Plaintiff) John Samuel Pratten (Sixth Plaintiff) Nicola Palmer Pratten (Seventh Plaintiff)

FILE NUMBER(S) : SC 2010/107282

COUNSEL : M Richmond SC (Plaintiffs)

SOLICITORS : Angus J Bruxner (Plaintiffs)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

GZELL J

FRIDAY 30 APRIL 2010

2010/107282 ANGUS JAMES BRUXNER & ORS EX TEMPORE JUDGMENT 1 An application is made to the court for its advice under the Trustee Act 1925, s 63. 2 The advice is sought with respect to the question whether it is appropriate in the circumstances set out in the statement of facts and the supporting affidavit of Rosemary Pratten to wind up and distribute a trust estate. 3 The beneficiaries are parties to the application. That is not a usual course but I see no reason to exclude them and there is a benefit in the court being apprised of their consent to what is proposed. 4 A trust was established in 1966 called the Rosemary Pratten Trust. Donald Wallace Powell and Richard Hugh Macready were the original trustees. Mr Macready retired and Angus James Bruxner was appointed in his place under a deed of retirement and new appointment in July 1979. Mr Powell died in October 1987. 5 In accordance with the power under the trust deed, John Morgan-Hunn was appointed an additional trustee in March 1988. Mr Bruxner and Mr Morgan-Hunn are the current trustees of the trust. The trust deed has not been amended. 6 Under cl 1(a) of the trust deed, the trustees are given power to pay the income to Mrs Pratten during her life and so long as she remains unmarried after the death of Mr Pratten, or until the dissolution of her marriage to Mr Pratten. As part of the arrangement that is sought to be put into effect, Mrs Pratten proposes to forego her life interest. 7 Clause 1(b) of the trust deed provides that from and after the dissolution of Mrs Pratten's marriage, or her remarriage following the death of Mr Pratten, or upon her death the trustees will stand possessed of the corpus and all future income upon trust for such of the children of Mr and Mrs Pratten as shall then be living and if more than one as tenants in common in equal shares with a per stirpes provision. 8 There is a power of advancement as is usual in such documents. Clause 3(a) confers on the trustees a power to pay or apply the whole or part of the income or capital of the share, whether vested or contingent and whether subject to divestment, of any person in the trust fund. 9 Clause 3(m) confers on the trustees a power of appropriation of any part of the trust fund in or towards the share of any beneficiary. 10 Clause 9 confers on the trustees a power during the life of Mr Pratten to vary the provisions of the trust deed provided that any variation is in favour of relatives by blood, marriage or adoption of Mr Pratten or any charitable organisation. 11 Mrs Pratten is now 69 years of age, as is Mr Pratten. They have four children, all of whom are over the age of 18 years. The assets of the trust, principally shares in listed companies, were valued in June 2009 at approximately $1.6 million. 12 Mrs Pratten has informed the trustees that she wishes to renounce her life interest and wishes that the trust should be wound up with the assets distributed to her four children in equal shares. She has discussed the proposed winding up of the trust with her four children and they consent to this course of action. She and the four children have been advised and recognise that capital gains tax will be payable on the sale or transfer of the trust assets on a winding up. The trust's accountants have provided an estimate of this liability. 13 In her affidavit Mrs Pratten says that she has been informed by her doctor that she is post-menapausal and beyond childbearing age. She has not adopted any children and does not intend to adopt and will not adopt children. 14 There is, nonetheless, a possibility that Mr and Mrs Pratten might have a further child or children or that they might adopt a child or children such that the class of those beneficiaries who would take on her death may not yet be closed. 15 A similar problem arose in Bullas v Public Trustee [1981] 1 NSWLR 641. Kearney J took the view that it was appropriate that the persons receiving the benefit of the distribution of the estate give an undertaking to the court to account for a due proportion of that part of the fund received by them to any further children. 16 Such an undertaking is offered in this case by the 4th to 7th plaintiffs. The trustees are the 1st and 2nd plaintiffs and Mrs Pratten is the 3rd plaintiff. The 4th to 7th plaintiffs are the four adult children of Mr and Mrs Pratten. 17 It seems to me that the risk of Mrs Pratten bearing another child or the risk of her adopting a child when she has sworn that she will not do so are highly remote. Further, the risks are covered by the proffered undertakings. 18 In those circumstances it seems to me to be appropriate to allow the renunciation of the life interest, the closing of the class of residuary beneficiaries and the winding up of the trust. 19 The question upon which the court's advice is sought is whether upon the true construction of the trust deed and the events which have happened, the trustees would be justified in winding up the trust and then distributing the assets of the trust to the four children of the 3rd plaintiff, the life tenant, in equal shares, following the 3rd plaintiff's renunciation of her interest under the trust. 20 Upon the 4th to 7th plaintiffs filing affidavits undertaking to the court to account for a due proportion of that part of the trust fund received by each of them to any further children of the 3rd plaintiff in the event of the 3rd plaintiff having any such children, I am of the view that the 1st and 2nd plaintiffs would be justified in winding up the trust and then distributing the assets to the 4th to 7th plaintiffs in equal shares following the 3rd plaintiff's renunciation of her life interest. Advice is given accordingly. I order that the costs of the plaintiffs be paid out of the trust fund.