[2024] SASC 82

First Applicant: JOSEPH BUCKLAND BROOKS In Person Second Applicant: JASON SAMUEL BROOKS In Person First Respondent: ANNA BROOKS Counsel: MS B SHINNICK - Solicitor: ADELTA LEGAL Second Respondent: SIMON BROOKS Counsel: MS B SHINNICK - Solicitor: ADELTA LEGAL Third Respondent: MELISSA YULE Counsel: MS B SHINNICK - Solicitor: ADELTA LEGAL Fourth Respondent: CHRISTOPHER BROOKS In Person Hearing Date/s: 04/12/2023 File No/s: CIV-23-001134 B SUPREME COURT OF SOUTH AUSTRALIA (Civil) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment 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 in which it was generated. BROOKS & ANOR v BROOKS & ORS [2024] SASC 82 Judgment of the Honourable Justice Stanley 25 June 2024 TRUSTS – BENEFICIERIES – DISTRIBUTION OF ASSETS Application pursuant to section 59C of the Trustee Act 1936 (SA) by the beneficiaries of a testamentary trust to wind it up, realise the trust assets and distribute them to the beneficiaries earlier than the terms of the trust allow. The two beneficiaries of the trust become absolutely entitled to an equal share of the trust property upon the younger of them attaining the age of 23 years. If neither reaches that age, the trust property vests in a contingent beneficiary. Whether the trust should vest now, applying the rule in Saunders v Vautier (1841) 41 ER 482, or continue until the younger of the applicants reaches 23 years as per the terms of the trust. If trust should vest now, whether the trust assets should be distributed to the applicants in specie or the trustees ought to liquidate the trust assets and distribute cash funds to the applicants. If the trust assets are liquidated, whether the trustees are justified in holding back sufficient funds from distribution to cover any anticipated capital gains tax liability. Held: 1. The trustees are, within a reasonable period of time, to liquidate the trust assets and distribute them to the applicants; 2. The trustees are permitted to retain sufficient funds from the liquidation of the trust assets to pay any CGT liability; -- 1 of 11 -- 3. The solicitors for the trustees are to bring into Court minutes of order reflecting the terms of this judgment; 4. The parties have liberty to apply. Inheritance (Family Provision) Act 1972 (SA); Trustee Act 1936 (SA) s 59C, referred to. Saunders v Vautier (1841) 41 ER 482; Custodian v Commissioner of State Revenue (2005) 224 CLR 98; The Estate of Murdoch Stanley McLeod Deceased: Re The Trusts of Will Julia Farr Centre v University of Adelaide; Adelaide Women's and Children's Hospital; Roy Frederick Rhodes Scragg; Henry Knoyle Cross and Donald Hugh Collier [1993] SASC 4574; Nikoloski v Goodall [2013] WASC 179; Phillips v Price [2007] WASC 54; Piper v Fraser [2020] SASC 239; Krstic v State Trustees Ltd [2012] VSC 344, applied. -- 2 of 11 -- BROOKS & ANOR v BROOKS & ORS [2024] SASC 82 Testamentary causes jurisdiction STANLEY J: Introduction 1 This is an application by the beneficiaries of a testamentary trust to wind it up, realise the trust assets and distribute them to the beneficiaries. 2 On 17 February 2013 Hector Buckland Brooks (the deceased) died leaving a substantial estate. His will provided variously for his children and grandchildren. One of the deceased’s children, Christopher Buckland Brooks (Christopher), made an Inheritance (Family Provision) Act 1972 (SA) claim against the deceased’s estate. That claim was resolved by way of terms of compromise (the compromise) entered into by the parties to that action and which were made a rule of Court. The compromise provided for a lump sum payment of $1,650,000.00 to Christopher in full and final satisfaction of his estate claim, and any claim or entitlements in relation to a trust set up in the deceased’s will called the “Christopher Trust”. The compromise varied the Christopher Trust by creating a sub-trust. The sub-trust is the subject of this amended application (the trust). 3 The applicants in this matter are Christopher’s children Joseph Buckland Brooks (Joseph) and Jason Samuel Brooks (Jason). Joseph and Jason are the beneficiaries of the trust, and become absolutely entitled to an equal share of the trust property “upon the younger of them attaining the age of 23 years”.1 At the time of trial, the first applicant, Joseph was 20 years of age having been born on 1 November 2003. The second applicant, Jason was 18 years of age having been born on 16 September 2005. 4 By an amended application filed by the applicants on 4 September 2023 they seek that the trust be wound up, and the assets distributed to the applicants as the primary beneficiaries. The applicants rely upon the rule in Saunders v Vautier.2 5 The trustees of the trust are Ms Anna Brooks, Mr Simon Brooks and Ms Melissa Yule (the trustees). They are represented in these proceedings as the first to third respondents. The rule in Saunders v Vautier 6 The rule in Saunders v Vautier is explained by the High Court in CPT Custodian v Commissioner of State Revenue,3 citing Thomas on Powers:4 1 Exhibit MMY-5 to the Affidavit of Melissa May Yule, 21 July 2023 (FDN 19). 2 (1841) 41 ER 482. 3 [2005] HCA 52 at [47], (2005) 224 CLR 98 at 119. 4 (1998) at 176. -- 3 of 11 -- [2024] SASC 82 Stanley J 2 Under the rule in Saunders v Vautier, an adult beneficiary (or a number of adult beneficiaries acting together) who has (or between them have) an absolute, vested and indefeasible interest in the capital and income of property may at any time require the transfer of the property to him (or them) and may terminate any accumulation. 7 In The Estate of Murdoch Stanley McLeod Deceased: Re The Trusts of Will Julia Farr Centre v University of Adelaide; Adelaide Women's and Children's Hospital; Roy Frederick Rhodes Scragg; Henry Knoyle Cross and Donald Hugh Collier.5 Millhouse J said: The rationale for the Rule is … “where no other person has an interest in the property given to a person in a will, the court will not in general permit the gift of that property to be delayed.” 8 The trustees do not oppose the winding up of the trust. Their position is informed by a concern to avoid the trust incurring significant costs in defending the proceedings. They indicated to the Court that they would abide the decision of the Court as to whether the rule in Saunders v Vautier should be applied in this case. On this basis the trustees, through their counsel, confined themselves to making submissions to assist the Court by way of an outline of the background facts, the applicable law, the issues to be decided by the Court, and their recent dealings with the applicants relevant to the matter. Issues to be considered by the Court 9 The issues arising from the amended application that need to be considered are: • whether the trust should vest now in the applicants as both have reached adulthood as per the rule in Saunders v Vautier; or continue until the younger of the applicants, Jason, has reached the age of 23 years as per the terms of the trust. • If the trust should vest now: o the time frame for vesting of the trust; o whether the trust assets should be distributed to the applicants in specie or the trustees should liquidate the trust assets to distribute cash funds to the applicants; and o if the trust assets are liquidated, whether the trustees are justified in holding back sufficient funds from distribution to cover any anticipated capital gains tax liability. 5 [1993] SASC 4574. -- 4 of 11 -- [2024] SASC 82 Stanley J 3 Outline of background facts 10 The trust created two contingencies. First, in the event that only one of the applicants attains 23 years of age, the survivor would become solely entitled to the trust property.6 Alternatively, in the event that neither of the applicants attains the age of 23 years, Christopher would become entitled to the whole of the trust property.7 11 The trust property has at times been applied for the maintenance, advancement and education of the applicants.8 12 The trust assets mainly comprise shares in established public companies and some cash. The trustees have taken advice from a competent financial advisor with respect to investments.9 13 The trust has almost doubled in value in eight years despite the application of trust funds for the benefit of the applicants from time to time. As at 30 June 2015 the trust had a capital value of $415,470.49.10 As at 30 June 2023 this figure was $799,664.41.11 14 If the trust assets are liquidated for distribution to the applicants there will be capital gains tax (CGT) payable by the trust that will reduce the funds available for distribution. That CGT liability is undeterminable until the event. If the trust assets are distributed in specie, there is no CGT event that would require the trust to pay CGT prior to distribution. While the trustees submit that if the Court determines that the trust should vest now, it may be that advice is given from the trust accountant as to the best form of distribution with respect to taxation consequences, I do not consider that is necessary. The applicants are clear in their wish that if the Court grants their application to wind up the trust, they want the trustees to liquidate the trust assets and proceed to distribute the proceeds after making due allowance for any CGT liability. 15 There are concerns that if the trustees sell the shares and make a cash distribution to each of the applicants, that the trust will be left with the CGT debt. The trustees submit that if the Court determines the trust should sell the shares and distribute by way of cash, it would be prudent for an order to be made which permits the trustees to retain sufficient funds from the sale of the shares to pay the CGT liability, with any balance thereafter being distributed to the applicants.12 6 Exhibit MMY-1 to the Affidavit of Melissa May Yule 21 July 2023, (FDN 19). 7 Exhibit MMY-1 to the Affidavit of Melissa May Yule 21 July 2023, (FDN 19). 8 Affidavit of Simon Rowley Brooks, 20 April 2023, (FDN 12) at [10] – [11]. 9 Affidavit of Simon Rowley Brooks, 20 April 2023, (FDN 12), at [8]; Affidavit of Melissa May Yule, 21 July 2023, (FDN 19), at [12]. 10 Exhibit MMY-3 to the Affidavit of Melissa May Yule, 21 July 2023, (FDN 19). 11 Exhibit MMY-4 to the Affidavit of Melissa May Yule, 21 July 2023, (FDN 19). 12 Nikoloski v Goodall [2013] WASC 179 at [12]. -- 5 of 11 -- [2024] SASC 82 Stanley J 4 The Applicants 16 Joseph reached 18 years of age on 1 November 2021. Jason reached 18 years of age on 16 September 2023, prior to which Jason was represented in these proceedings by Joseph acting as his litigation guardian. Both of the applicants are now adults. If the application is not granted, the trust will vest when Jason reaches the age of 23 unless he or his brother die before their 23rd birthdays. Jason will turn 23 on 16 September 2028. 17 The applicants are both sui juris. 18 The applicants are litigants in person. At trial they appeared for themselves. 19 The applicants have evinced their desire for the early vesting of the trust so as to purchase rural land in New South Wales which they intend to farm.13 20 The trustees have identified a number of considerations relevant to whether it is appropriate to wind the trust up and distribute its corpus to the applicants earlier than provided for by the terms of the trust. Considerations for the Court to take into account 21 The trustees are concerned by the extent of the influence exerted over the applicants by their father Christopher. Christopher gave evidence in the course of the hearing of the application, much of which was argumentative and designed to advocate for the making of the orders sought on the application. In addition, the affidavit evidence demonstrated the exertion of his forceful personality in favour of the achievement of that objective. I am satisfied Christopher has and does exercise considerable influence over his sons. That might be thought unsurprising, at least in the context of this application, given their relative youth. Nonetheless, having heard from Joseph and Jason, I am satisfied they are genuine in wishing to have the trust wound up and the trust property realised so as to enable them to purchase a farming property in New South Wales. I am satisfied that this is their wish regardless of the influence exerted over them by their father. 22 The trustees are also concerned by what they perceive to have been an attempt to force their hand by the production of what purported to be evidence of a contract to purchase rural land in New South Wales. 23 An undated document purporting to evidence that the applicants had entered into a contract to purchase rural land in New South Wales for the price of $745,000.00 was sent by Christopher to one of the trustees, the first respondent Anna Brooks, on 13 February 2023.14 This document caused the trustees significant concerns as: 13 Affidavit of Joseph Buckland Brooks, 29 August 2023, (FDN 22), Affidavit of Jason Samuel Brooks, 26 April 2023, (FDN 8). 14 Exhibit SB-5 to the Second Affidavit of Simon Rowley Brooks, 25 May 2023, (FDN 13). -- 6 of 11 -- [2024] SASC 82 Stanley J 5 • the vendor details were unnecessarily redacted; • the document was brought into existence while Jason was still a minor and the contract may not have been enforceable against him; • the document did not contain the signatures of any party to the alleged sale; • the document was not in the form of a standard real estate contract; and; • no valuation had been obtained to ascertain the value of the land said to be purchased given it was proposed to pay for it using trust assets. 24 Subsequently, a more formal contract was provided to the trustees.15 25 Despite the provision of a more formal contract the trustees still held some concerns, as: • the document was not signed by the vendors; • the document was signed by the applicants on 30 March 2023 at which time Jason was still a minor; • the applicants had entered into an unconditional contract to purchase land despite the trust being in place and without any access to other funds to complete the contract; • the sale price for the land corresponded very closely to the whole value of the trust assets; and • the applicants appeared to have entered into the contract in an attempt to force the trustees to wind up the trust and distribute some five years earlier than permitted under its terms. 26 I am satisfied that these documents reflect steps taken by Christopher. However, assuming this was an attempt on his part to force the hand of the trustees on behalf of the applicants contrary to Nikoloski v Goodall,16 I do not consider that this is a sufficient reason to deny the applicants the relief they seek. This conduct was orchestrated by Christopher, rather than the applicants, and it has come to nothing.17 15 Exhibit-1, Affidavit of Joseph Buckland Brooks, 29 August 2023, (FDN 22). 16 [2013] WASC 179 at [7]; citing Phillips v Price [2007] WASC 54 at [129]-[130]. 17 Exhibit MMY-6 to the Affidavit of Melissa May Yule, 21 July 2023, (FDN 19). -- 7 of 11 -- [2024] SASC 82 Stanley J 6 27 Jason indicated in an affidavit in support of the original application to remove the trustees, that the trust property should be invested in rural land in New South Wales.18 He provided this affidavit when he was a minor. 28 I am satisfied Jason subsequently changed his mind and prefers that rather than the trust purchasing rural land for his brother and him that the trust should be wound up, its assets distributed, and the proceeds used by the applicants to purchase farming property in New South Wales which they can cultivate. 29 As a result of their concerns the trustees sought affidavits from both applicants confirming they had each received independent legal advice, together with a letter from their solicitor indicating the advice had been provided to each independently and without the other, or Christopher, being present. The trustees did not seek disclosure of the content of the advice. 30 The trustees also requested an affidavit from Christopher, as the contingent beneficiary of the trust, that he consented to the trust being distributed to the applicants earlier than permitted by the terms of the trust. 31 Draft affidavits were sent to the applicants to assist in that process by the trustees’ solicitors. None of the affidavits were filed by the applicants or their father. I was informed by the applicants that while attempts were made to obtain legal advice, they were unable to find solicitors prepared to act. On questioning by me, it was apparent that the applicants’ belief in this regard was the result of information given to them by their father. I have real doubt as to whether what they said occurred is true but, in the end, it does not matter. I am satisfied from what was put to me by each of the applicants in the course of the hearing that they understand the nature and basis of the orders they seek, and those orders accurately reflect their own wishes. Likewise, I am satisfied that Christopher agrees to the Court making the orders sought by his sons on the amended application. The power of the Court 32 The Court has very broad, but not entirely unfettered powers to vary or revoke a trust pursuant to section 59C of the Trustee Act 1936 (SA).19 Section 59C provides: (1) The Supreme Court may, on the application of a trustee, or of any person who has a vested, future, or contingent interest in property held on trust— (a) vary or revoke all or any of the trusts; or (b) where trusts are revoked— (i) distribute the trust property in such manner as the Court considers just; or 18 Affidavit of Jason Samuel Brooks 26 April 2023 (FDN 8). 19 Piper v Fraser [2020] SASC 239 at [136]-[137]. -- 8 of 11 -- [2024] SASC 82 Stanley J 7 (ii) resettle the trust property upon such trusts as the Court thinks fit; or (c) enlarge or otherwise vary the powers of the trustees to manage or administer the trust property. (2) In any proceedings under this section the interests of all actual and potential beneficiaries of the trust must be represented, and the Court may appoint counsel to represent the interests of any class of beneficiaries who are at the date of the proceedings unborn or unascertained. (3) Before the Court exercises its powers under this section, the Court must be satisfied— (a) that the application to the court is not substantially motivated by a desire to avoid, or reduce the incidence of tax; and (b) that the proposed exercise of powers would be in the interests of beneficiaries of the trust and would not result in one class of beneficiaries being unfairly advantaged to the prejudice of some other class; and (c) that the proposed exercise of powers would not disturb the trusts beyond what is necessary to give effect to the reasons justifying the exercise of the powers; and (d) that the proposed exercise of powers accords as far as reasonably practicable with the spirit of the trust. (4) An order made by the Supreme Court in the exercise of powers conferred by this section is binding upon all present and future trustees and beneficiaries of the trust. (5) This section does not apply to— (a) a trust affecting property settled by an Act; or (b) a charitable trust. (6) This section does not derogate from any other power of the Supreme Court to vary or revoke a trust, or to enlarge or otherwise vary the powers of trustees. 33 Section 59C(2) requires that the interests of all actual and potential beneficiaries be represented. 34 The applicants have chosen to represent themselves in these proceedings. However the need for representation does not require legal representation, rather the requirement is that they be heard before the Court makes any order affecting their interests. As I have indicated I am satisfied they seek the trust to be vested in them sooner than the terms of the trust permit. 35 At the conclusion of the hearing Christopher was joined as the fourth respondent to the application by consent so that an order could be made affecting his interest as the contingent beneficiary. Christopher had no legal representation in his capacity as a contingent beneficiary. However, Christopher provided sufficient assurance to the Court that he does not object to the trust vesting in the applicants now. -- 9 of 11 -- [2024] SASC 82 Stanley J 8 36 In the circumstances I am satisfied that he does not need to be legally represented. 37 Otherwise, the Court is satisfied pursuant to section 59C(3): • That the applicants’ purpose in seeking the application of the rule in Saunders v Vautier is not substantially motivated by a desire to reduce taxation liabilities. The substantial motivation of the applicants is not related to taxation, but rather the purchase of rural land. • That the application of the rule in Saunders v Vautier is in the best interests of the applicants and would not unfairly advantage them over other potential beneficiaries. • That the proposed exercise of powers by the Court accord with, as far as practicable, the spirit of the trust. The application of the rule in Saunders v Vautier to distribute the corpus of the trust to the applicants is within the spirit of the trust given that the applicants are the primary beneficiaries for whose benefit the trust was established, and that the application truly reflects their own wishes. The application of the rule in Saunders v Vautier 38 The Saunders v Vautier rule applies to override the intentions of a testator, or settlor. It operates to allow a beneficiary to attain their interest in a trust upon reaching adulthood, rather than requiring them to attain an age beyond that of 18 years. The rule has no operation unless all the persons who have any present or contingent interest are ascertained, sui juris and consent.20 It may be applied in circumstances where there is more than one beneficiary, or where there are contingent interests, with the proviso that all beneficiaries and contingent beneficiaries are unanimous in seeking to wind up a trust and distribute its corpus.21 39 The application of the rule requires the following: that a beneficiary has reached adulthood and is sui juris; that where there are multiple beneficiaries that they consent or are unanimous in seeking that the trust be distributed; and that where there is a contingent beneficiary they have provided their irrevocable consent to the trust being distributed early, noting that such distribution will result in them ceasing to have any interest in the Trust or in the distributed corpus. Lack of unanimity between a beneficiary and a contingent beneficiary is a reason for not applying the rule in Saunders v Vautier.22 40 Both Joseph and Jason are now adults, and accordingly satisfy the first criteria. Also, they appear to be unanimous in seeking to vest the trust early, 20 Krstic v State Trustees Ltd [2012] VSC 344 at [15]. 21 Krstic v State Trustees Ltd [2012] VSC 344 at [15]. 22 Piper v Fraser [2020] SASC 239 at [135]. -- 10 of 11 -- [2024] SASC 82 Stanley J 9 thereby satisfying the second criteria. Christopher is a contingent beneficiary to the trust. In the event that neither Jospeh, nor Jason, reaches the age of 23 years, Christopher becomes the object of the trust. Thus, the early vesting of the trust will have the result that his interest as the contingent beneficiary will be adversely affected. However, I am satisfied that Christopher irrevocably consents to the vesting in Joseph and Jason earlier than provided for in the terms of the trust. Accordingly, I am satisfied the third criteria is established. Conclusion 41 In all the circumstances I am satisfied that the rule in Saunders v Vautier should be applied and the trust should vest now in the applicants, who are both adults. 42 Given the attitude of the applicants, I consider that the appropriate order is that the property of the trust should be realised and the proceeds distributed equally to the applicants, rather than the trust assets being distributed in specie. As the liquidation of the trust assets, which are predominantly shares in public companies, will create a liability for CGT payable by the trustees in an amount undeterminable until the event, I order that the trustees are permitted to retain sufficient funds from the sale of the shares to pay the CGT liability, with any balance thereafter being distributed to the applicants. The trustees have a fiduciary duty to make an honest and prudent estimate of the maximum amount needed to be retained.23 43 Accordingly, I make the following orders: 1. The trustees are, within a reasonable period of time, to liquidate the trust assets and distribute them to the applicants; 2. The trustees are permitted to retain sufficient funds from the liquidation of the trust assets to pay any CGT liability; 3. The solicitors for the trustees are to bring into Court minutes of order reflecting the terms of this judgment; 4. The parties have liberty to apply. 44 I will hear the parties as to costs. 23 Nikoloski v Goodall [2013] WASC 179 at [12]. -- 11 of 11 --