Gravamen

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P lodged a caveat on a property owned by D in Darling Point, Sydney. D sought its removal. P was the deceased’s son by an earlier marriage. After P’s birth, the deceased married D and they had another child together: [4] - [7] The deceased operated a cattle and macadamia business on land owned by an entity the deceased and D themselves owned and controlled: [9], [10] In 2011 the deceased made a will and a Memorandum of Wishes. D counter-signed the latter: [12] - [15] By the Will the deceased bequeathed the property to D. By the MoW, D agreed to bequeath the property (or its replacement if the property was sold and a new property was bought) to P and the other child in equal shares. Until then the deceased acknowledged D may need to use the proceeds of sale of the property for their upkeep, or for the cattle and macadamia business: [17] (Perhaps unhelpfully, the deceased wished for the MoW to remain confidential: [18]) P sued seeking a declaration D held half the property on trust for them and lodged a caveat on the basis of this alleged trust: [21], [22] D sought the removal of the caveat, including to allow them to deal with the property (possibly by refinancing) to help manage the farm and its business in the wake of flooding: [29], [30] P argued that their (and their half-sibling’s) interest in the property was held by D on trust created by the MoW: [32] P accepted D was free to sell the property: [33], [35] The Court found D accepted their obligation under the MoW to make a will bequeathing the property to the children equally. There was no suggestion D did not intend to do so: [36], [39] D’s “floating” obligation to bequeath the property to the children will only crystallise into a trust on D’s death, not before: [38] As such, P had no beneficial interest to support to caveat: [40] Even if a caveatable interest had been found, it was accepted that the caveat caused D inconvenience. However, P had the onus to show convenience favoured maintenance of the caveat and P failed to show that: [45], [46] P was ordered to remove the caveat and pay D’s legal costs: [47], [48]

In 2017, a Co was incorporated by 3 founders: P, D1 and D2. Each of P, D1 and D2 had holding entities that owned “their” shares in the Co: [1] The Co was formed to commercialise authentication and ID technology: [44] P was then CEO: [4], [150] A deed was entered into by P, D1, D2, and their interests: [5] P said the founders had agreed they (or their Cos) would always have an equal shareholding; a “communist model”: [44] The Ds, and the Court, disagreed: [46], [72] P gave no evidence of that understanding [73] - [77] and the deed expressly allowed for inequality: [78] Even if there had been such an equality it would not have survived the Deed because the deed included an “entire agreement” clause: [89] By July 2017 P was growing frustrated with D1, including about the amount of time D1 was (not) spending on the Co: [98] Some of the issues were set out in lengthy emails: [103], [150] P’s frustration became a “burning frustration” over time: [120] In early 2019 a CTO other than P’s preference was appointed by D1 and D2 and directed not to take instruction from P, which left P feeling undermined as CEO: [145], [150] Shortly after, P attempted to resign as CEO, which D2 did not accept, but which was eventually effective in 2019: [149], [164] P’s entity, as shareholder, brought a corporate oppression claim: [151] P’e entity failed on claims relating to P’s role as CEO: it was entitled to appoint a director and so participate in management that way, but had no direct rights in relation to the CEO role: [152], [153] Despite some elements of D1’s conduct being unimpressive, P was not “forced out” as P had resigned: [161] Later in 2019, D1 and D2 moved to fire the new acting CEO without P’s knowledge, on Christmas Eve: [179], [181] In January 2020 P objected to this and resigned in the following days: [183], [185] At the time the Co was in need of capital, had to retain staff, P had not contributed capital, and P had elected to quit the board: [218] D1 and D2 resolved to convert their and P’s “wage loans” (unpaid directors fees recorded in the books as loans) into equity in the Co: [227] Despite this, D1 and D2 made the conversion for their “wage loans” and not for P’s: [229], [231] This conduct was found to be unfair: [235] Options were granted to the new CEO. Granting options to the new CEO was not unfair noting the commercial circs and the Court’s reluctance to second guess commercial decisions of directors: [247], [249], [253], [254] Issuing options to fund-raise (thereby diluting P’s entity’s holdings) was not unfair: [308] The Court sent the parties to confer on the right form of relief: [330]

In the 1950s 3 brothers started a business which became successful. It was run as a group of Cos and trusts that grew in value and complexity. The group was run informally by the 3 brothers (and later their kids) and structured pursuant to tax advice: [20] In 2018 P sued seeking to divide the business into 3 equal parts; each part passing to each brother’s family or estate. The Court accepted the relationships broke down for “unclear and complicated” reasons including issues with a parcel of land allegedly owned by P and issues with the new generation running the group: [41] - [50], [126], [154] P said the group was operated by an “overarching” partnership; saying the group had many of the attributes of a partnership (run by 3 bros, profit share etc.): [82], [101] However, the group’s underlying assets were held on trust. A partnership can be a beneficiary of a trust, but not a legal owner of assets held on trust: [95] Fatal to P’s claim: if a receiver was appointed to the “partnership” what could that receiver do about the assets held on trust? Nothing outside of the trust deeds’ bounds: [97] P alleged parts of the group was a “sub-partnership” between the brothers’ spouses. However, the spouses were trustees, not partners: [98], [99] The group was found to be an “overarching” partnership: [101] P then said the group should be wound up on the just and equitable grounds: [103] In 2017 one brother died, his child then representing his interests. Negotiations to divide the group were conducted and failed. This litigation was commenced. Together this showed the group could not return to its state when run by all 3 brothers: [115] However the appropriate question re s461 is whether each company (many of which were trustees) should be wound up. Ps did not make submissions on each company: [119] No suggestion was made that each Tee company was failing in its obligations with no suggestions trust assets were in jeopardy: [120], [121], [132] In the absence of this evidence and submissions, it was not for the Court to try to find a basis for a s461 order: [124] P sought the dissolution of the trusts in the group, but the only basis for that would be bringing forward each one’s vesting date. In the absence of hearing from the beneficiaries the falling out between the brothers was not a basis for the Court to direct the trustees to so exercise their powers: [139] P was not itself a party to the partnerships in the group and so could not dissolve them: [146] The Court considered its conclusions “could not be regarded as a satisfactory resolution of the case”: [154] The Court found that the brothers, having chosen this structure in large part for tax effectiveness, must now live with the consequences and sought submissions on next steps: [155], [158]

Long-running litigation was on foot relating to, among other things, land with a value of around $40m. By NoM, a receiver appointed by the Court to the relevant Ds in the litigation sought the Court’s advice about whether they would be justified entering into a Deed settling all the pieces of litigation: [12], [15] The receiver relied on evidence, including confidential advice from counsel on the nature of the settlement: [17] Some earlier claims, being a portion of the matters in dispute, were settled in a deed 2019: [23] Some orders in the proceedings were made in May 2023. The Ps filed a Notice of Appeal in respect of them: [30] Various negotiations followed by correspondence leading to a proposed draft Deed: [31] - [36] That was the question before the Court in this matter: whether the receiver would be justified in settling the dispute on the proposed terms. There is settled law that a Court can give advice and direction to a Court-appointed receiver in a manner analogous to judicial advice given to a trustee: [37] The law relating to judicial advice to trustees was relevant with the question of whether a claim can be settled on certain terms being a well-recognised area for the giving of advice: [41] The Court noted the complexity of the dispute: originating in 1948, proceedings commenced in 2013, 4 years of mediation leading to only partial settlement in 2019, a valuable underlying asset: [43] The Court said the giving of its advice required a comparison of the position if the deed was entered into versus the position if it was not: [47] The draft Deed contemplated that all proceedings would be dismissed, mutual releases provided, and all parties bearing their own costs - a “walk away”: [48] The 2019 deed included releases for costs related to the litigation, but not "additional costs": [49] Considerable attention was paid to the implication of the releases if the draft Deed was entered into including a claim the “additional costs” outside the bounds of the 2019 Deed: [50] - [58] The draft Deed would also see the receiver releasing any rights to enforce a damages undertaking made by the Ps in relation to a 2013 interoloctory injunction: [60] - [63] Ultimately, providing releases of the “additional costs” claim and the damages undertaking were commercial considerations for the receiver: [59], [64] If the Deed was rejected outstanding risks would remain, including the outcome of the impending appeal, and the difficulty recovering costs in the face of the 2019 Deed: [65] - [68] The Court considered it would be reasonable for the receiver to enter into the Deed, giving the judicial advice sought: [69], [70]

Here we have our principal, James d'Apice, discussing a recent decision where the question was raised: what property is subject to the terms of a trust, the asset itself or merely the benefits that flow from owning it? https://lnkd.in/gydWtFbA

The Ps brought an application to windup various entities on the s461(1)(k) just and equitable basis, and to appoint receivers to the assets of the associated trusts: [1], [2], [6] The various entities were variously incorporated and settled to develop a marina. That development did not progress as hoped: [3], [13] The relationship between Dir1 and Dir2, the 50-50 controlling minds and shareholders of the relevant entities, irrevocably broke down: [1], [4], [5] The Court found it was just and equitable that the various companies be placed into liquidation on the just and equitable basis, and receivers appointed to the associated trusts: [10] The sole area of dispute was the identity of the liquidator(s) to be appointed: [14] Generally, a Court will appoint a plaintiff’s choice of liquidator, though will bear in mind partiality, fitness, qualification, cost, perceived independence etc. It is for a defendant to argue for a departure from that course: [15] - [18] The different hourly rates of the parties proposed IPs were found to be likely to lead to significantly different cost outcomes: [19] An argument that one IP had previous experience with marinas was “very thin” - especially noting that this venture did not proceed and that the Court was not provided with evidence of how this previous experience might assist: [20] The difference in the price of flights from Sydney or from Brisbane (to the venture’s Bundaberg location) was a “minor consideration”, especially noting the Sydney IPs had offices in Brisbane staffed by employees who could assist: [21] The Court was troubled by the perception (*perception* only - no finding or criticism was made) of possible conflict where the Ds’ proposed IP would likely use the advisory services of a firm who was the major shareholder in a proposed purchaser of the marina: [22] The Cos were wound up on the J and E basis, and relevant trust assets placed in receivership, with the Ps’ preferred IPs appointed: [24], [25]

In 2018, 4 Cos entered into a partnership agreement. The business related to growing and selling tea: [1], [5] P retired from the partnership. The agreement provided that the partnership would not be dissolved on a partner’s retirement: [2] The question was: what value should P receive for its partnership stake? P argued for, in essence, a pro rata distribution according to its 19% stake: [3] The Ds, who were the remaining partners, argued for a market value approach i.e. including discounts for P’s lack of control and the lack of marketability of P’s stake: [4] The partnership agreement provided that the partners were entitled to the property and goodwill of the partnership in their respective shares: [8] P sued, and initially applied for the appointment of a receiver to the partnership’s assets without pressing this application: [21] By consent, the parties sought orders appointing a referee, a valuer, to value P’s interest in the partnership including goodwill at the date of retirement: [22] - [24] The valuer sought further instruction on the basis of the valuation; fair value, market value, equitable value etc: [25] Following an informal conference with the parties and the valuer the details of which were not in evidence, the valuer prepared their report on the market value basis: [27] P’s view of what a market valuation entailed differed from the D’s views in that P resisted the suggestion that a discount ought to be applied for lack of control and a lack of marketability; or if those discounts were to be applied they ought to be reduced: [27] The Ds said P had “agreed” to the more traditional market value approach: [28] P said it was entitled to recover its share from the partnership as a debt due: [33] The Ds denied P was entitled to an account and instead considered the valuation as a “stepping stone” to a potential transaction or (if their valuation position was accepted) grounds for a Syers order requiring P to sell to the Ds at the relevant value: [34] The Court was receptive to P’s suggestion that if P were forced into a minority discount, and the Ds then sold the partnership’s business the Ds would enjoy a windfall: [50] The Court accepted P’s entitlement to an account noting the parties could have agreed on a different outcome if they wished: [51] The Court found the P did not “agree” to the minority discount as part of the market valuation process, having openly argued against it through the valuation process: [52] -[57] The Court accepted P’s view on valuation of its interest and considered as a preliminary matter that legal costs be paid from the assets of the partnership: [65], [68] The parties were invited to provide SMOs reflecting the outcome: [74]

Two siblings in partnership, P and D, ran a citrus farming business, having received it from their parents in the 2000s: [1] (P, the parents’ exec, sought access to the parents’ privileged documents after death. As exec, P could waive privilege, however doing so was for themselves and not in the interests of the estate or benefs. Noting an exec’s duty to avoid conflict, access was denied: [4] - [10]) In the 1990s the parents gifted D the “Lot”, a part of the citrus farm: [29] - [31], [45], [50], [268] In 1999, P bought a nearby farm with the parents providing both deposit and guarantee. P rented the house on the nearby farm out and continued to live with the parents at the citrus farm: [54], [60] The orchards on the nearby farm were deployed in the parents’ business but there was no suggestion P’s nearby farm was a partnership asset: [55], [149] In 2001, the parents gifted P and D the citrus farm and the business: [61], [62] The farm was transferred before the commencement of P and D’s partnership and, being a gift, was not paid for with partnership funds: [142] From around 2018 relations between D and P soured: [104] - [107] As P’s nearby farm was not providing fruit for the partnership (and even though P continued to work for the partnership) payments to P were reduced: [121], [122] Valuations were obtained as part of a potentially unwinding process. During this, P’s lawyer shared comments on a Deed (apparently made on P’s instructions) acknowledging P’s ownership of the Lot: [123] P said that, in 2022, they attended D’s home to demand their share of partnership profits and were rebuffed. Police became involved and an AVO was obtained: [125], [126] From around this time P was not paid by the partnership and did no further work for it: [129] Shortly after this, P’s lawyer asserted the farm, including the Lot, was an asset of the partnership: [131] The Court found the partnership ended on the date of the altercation, noting that from that time, P did no work and received no payment: [140] P sought a declaration that the citrus farm, including the Lot, was a partnership asset: [141] Although the evidence was imperfect, the Court was not convinced by P’s argument that the citrus farm was a partnership asset. This was based in part on its tax treatment via instructions given by P and D to an accountant over the years: [153] P was found to have an equitable interest in the farm, namely in the Lot: [155] - [223] The Court declined to make an s66G order and instead made a Woodson order, requiring P to offer their remaining interest in the farm to D at market value. If D was not willing or able to buy, a sale should proceed: [249]

A liquidator, P, was appointed to the Co: [1] P approached the Court seeking advice as to whether (i) the benefs with a less than $100 balance could be treated as having no right to participate in the dist'n of funds, and (ii) the balance could be distributed to the remaining 74 pro rata: [4] Advice was sought pursuant to both s90-15 and s63: [6] None of the notified less than $100 beneficiaries raised objections or appeared at the hearing: [8] When operational, the Co engaged in various foreign currency related financial dealings. In 2019 it was placed into liquidation. As part of the liquidation, an investigation found that around $50K was held by the Co on trust for the Co’s (former) clients: [9] - [29] The liquidator did not have banking details of the benefs: [31] In order to make payment to each benef the liquidator (by their staff) would have to find and confirm payment details of each of them. Costs would arise from this process: [32] A proportionality issue. By way of example, the liquidator pointed to 48 benefs whose shared claim was $26.10; the highest individual claim from that group being $1.34: [33] The Court traversed the relevant law relating to s90-15 and s63 applications noting the breadth of the Court’s power to give advice: [38] - [43] P drew particular attention to authority that suggested Courts in such proceedings (which are, of course, ex parte) sometimes had to do “rough justice” with benefs’ rights which might be affected on the basis of evidence that would not necessarily sustain a claim in contested litigation: [44] The Court gave the P the advice they sought I.e. that they would be justified in distributing only to the greater than $100 benefs. This was because (i) the very small sums held for the other benefs, (ii) the practical steps required to distribute to all benefs, and (iii) the cost of distributing to all benefs: [53] The Court found it was significant that P had notified all creditors whose details they had, and that having done so there were no objections: [59] P applied to have their costs paid from the outstanding balances. The Court acceded, ordering that this was justified in part because what P was doing was essentially administering a trust i.e. the order having been made, P would be indemnified from the property of the trust they were acting as trustee of: [64]