Bradley, Re [1994] QSC 68

... _·-~~-(/::. ~· ;• -~ ..... / ~- . -~:~ ··.:· ) ~". State Reporting Bureau -·-~:---------------------------------------- TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION MACKENZIE J os No 789 of 1992 os No 723 of 1993 os No 896 of 1993 IN THE MATTER OF THE SUCCESSION IN THE MATTER OF THE TRUSTS ACT ACT 1991 1973 : ·i~'Ji~[iJ C-:JP:Es i·~~~L~ED Gt;;:~a R3pori;:~g Eures.u ' Date :.J.o I ~ I q · , . ....t IN THE MATTER OF THE RULES OF THIS HONOURABLE COURT IN THE MATTER OF THE TRUSTS OF THE WILL OF WILLIAM FRANCIS BRADLEY, LATE OF DAYBORO IN THE STATE OF QUEENSLAND IN THE MATTER OF THE TRUSTS ACT 1973 IN THE MATTER OF THE TRUSTS OF THE WILL OF WILLIAM FRANCIS BRADLEY, LATE OF DAYBORO IN THE STATE OF QUEENSLAND BRISBANE .. DATE 25/03/94 JUDGMENT 4th Floor. The_ Law Courts. Genrcre StrPPt. Rri<:hnHI> n 4.000 To1a+<l.n .. o• 107\ ??7 A'lJ::Il r:~~~;~;I~. Ill""!\,,..,.,.,. .. ~ -- 1 of 18 -- 250394 HIS HONOUR: The formal orders will be the following: In OS No 789 of 1992 directions are made in terms of paragraphs to 11 on pages 9 to 11 of the reasons for judgment; 10 In OS No. 723 of 1993 the declaration is made that the sum for distribution for beneficiaries is the proportion to which she or he is entitled under the Will of the net income, provided that the trustees may exercise their 20 u'· discretion to retain portions of the income under the powers given to the trustees under the Will; In OS No. 896 of 1993 the summons is adjourned sine die. I give liberty to apply on seven days' notice to the . 30 other parties to have the matter re-listed. I authorise the party seeking to have the matter re-listed to approach the Senior Judge Administrator with a view of having the matter re-listed before me, if that party so desires. In each case I order the costs of each of the parties to be paid out of the trust estate. Those are the orders, ladies and gentlemen. 50 I publish my reasons. JUDGMENT 60 2 ) -- 2 of 18 -- / \ I IN THE SUPREME COURT OF QUEENSLAND Brisbane O.S. No. 789 of 1992 O.S. No. 723 of 1993 Before Mr Justice Mackenzie [William Francis Bradley] IN THE MATTER OF the Succession Act 1981 - and - IN THE MATTER of the Trusts Act 1973 - and - IN THE MATTER of the Rules of this Honourable Court - and - IN THE MATTER of the Trusts of the William of WILLIAM FRANCIS BRADLEY, late of Dayboro in the State of Queensland O.S. No. 896 of 1993 IN THE MATTER of the Trusts Act 1973 - and - IN THE MATTER of The Trusts of the Will of WILLIAM FRANCIS BRADLEY late of Dayboro in the State of Queensland REASONS FOR JUDGMENT -MACKENZIE J. Judgment delivered 25/03/1994 Counsel: Solicitors: Hearing Dates: L Stephens for Garry Wayne Bradley C Newton for Joseph Henry Bradley K Holmes for William Francis Bradley Trilby Misso & Co for G W Bradley Greg Casey for J H Bradley Walker Smith Breen for W F Bradley 1-4 March, 1994 -- 3 of 18 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane Before Mr Justice Mackenzie [William Francis Bradley] No. 789 of 1992 No. 723 of 1993 IN THE MATTER OF the Succession Act 1981 - and - IN THE MATTER of the Trusts Act 1973 - and - IN THE MATTER of the Rules of this Honourable Court - and - IN THE MATTER of the Trusts of the William of WILLIAM FRANCIS BRADLEY, late of Dayboro in the State of Queensland No. 896 of 1993 IN THE MATTER of the Trusts Act 1973 - and - IN THE MATTER of The Trusts of the Will of WILLIAM FRANCIS BRADLEY late of Dayboro in the State of Queensland REASONS FOR JUDGMENT -MACKENZIE J. Judgment delivered 25/03/1994 These are three related applications concerning the administration of the trusts of the will of William Francis Bradley deceased ("the testator"). The issues before me are the following:- -- 4 of 18 -- 2 (a} O.S. 789 of 1992 - an application by Garry Wayne Bradley for a number of directions with respect to the manner of administration of the trust; (b) O.S. 723 of 1993 - an application by Garry William Bradley for a declaration that "under the true construction of the said Will the income derived by the Trustees under provision (B) on page. 2 of the said Will is to be distributed as and when such income is derived to the persons beneficially entitled thereto"; and (c) O.S. 896 of 1993 - an application by William Francis Bradley (a son of the testator} for removal and replacement of Garry William Bradley as trustee or alternatively for the appointment of a third trustee. The testator who was a dairy farmer executed his will on 17 June, 1982 and died on 17 July, 1989. He left his farm upon trust to trustees, his sons Garry Wayne Bradley and Joseph Henry Bradley, to permit his widow to reside in a dwelling house on the 0 0 property until her death or re-marriage (neither of which events (~ have yet happened} ano "to carry on the business conducted by me thereon at the date of my death or such other form other (sic} 0of business as they shall think fit and to stand possessed of the income arising therefrom upon the following trusts:- 1. To pay to my wife Dulcie ~lorence Bradley until her death or re-marriage, one-half thereof free of death duties and testamentary expenses payable in respect thereof and interest thereon. 2. To divide the remaining one-half equally between such of my sons, Garry Wayne Bradley, Joseph Henry Bradley and William ---~~ ~~- ~~--- -- 5 of 18 -- ) 3 Francis Bradley as shall survive me.'' This is the provision (B) in respect of which the declaration in O.S. 723 of 1993 is sought. A brief history of the matter is desirable. After a disagreement with the testator, Garry Wayne Bradley left the farm in February, 1985. He returned in 1989 after his father's death. Each of the three sons currently performs duties in respect of the farm. There is an employee who is employed in various capacities from time to time. Joseph Henry Bradley is currently an elected member of the Local Authority in the area and is standing for re-election in the forthcoming Local Government elections. According to his evidence he is able to devote little time to the day to day working of the farm although he attends sales because of his expertise and interest in cattle breeding and is involved in the financial affairs of the business. Garry Wayne Bradley does much of the hard physical work on the farm including milking, spraying and fencing. William Francis Bradley is concerned with lot feeding the cattle, ordering and collecting fodder and monitoring the diet of the stock to ensure that appropriate milk quality standards are maintained. Affidavits filed in the applicationi and cross-examination of each of the brothers covered a . wide range of topics and explored their relationship in detail. I am satisfied that Garry Wayne Bradley harbours a deep seated suspicion and distrust of Joseph Henry Bradley and that notwithstanding his maintaining that he is prepared to be cooperative in performing the duties of joint trustee and to act in the decision making processes of the farm business, he has been uncooperative over a period of -- 6 of 18 -- 4 time. One of the complaints made against him was that he would acquiesce in decisions and then deny such acquiescence later. I am satisfied that if there were misunderstandings as to the precise proposal on some such occasions, as seems to be implicit in Garry Wayne Bradley's evidence, they were largely the product of his unpreparedness to conduct discussions in sufficient depth to enable him to gain a full appreciation of what was involved. Another illustration of the nature of the relationship is to be found in a complaint by Garry Wayne Bradley about exclusion from participation in the financial affairs of the business. The evidence is that some time ago an agreement had been reached between Joseph Henry Bradley and Garry Wayne Bradley that the existing practice of their mother keeping the books would continue. There was an agreement between them that she, in the first instance, and if she was unable to do so, Joseph Henry Bradley would sign cheques on the relevant bank account. This arrangement·was duly implemented. Later, after discussions in September 1992 the agreement was altered so that in the event that Mrs Bradley was unavailable to sign cheques both Joseph Henry Bradley and Garry Wayne Bradley would sign the cheques. Joseph Henry Bradley said that notwithstanding this variation to the agreement Garry William Bradley had not been to the bank to implement the arrangement. That was not denied. One of the directions now sought is that cheques only be eo-signed by both trustees. In the ordinary course of events that should have been achievable without difficulty by the parties themselves. The nature of the deep seated problem in the 0 0 C) C) -- 7 of 18 -- 5 relationship between the trustees is illustrated by the following passage in Garry Wayne Bradley's cross-examination:- "HIS HONOUR: Just so I understand this, Mr Bradley, who has authority to sign the cheques now?-- Mum signs the cheques and Joe has authority, too. That was only so if, like, mum broke her arm someone would be able to sign the cheques. How did all that come about?-- Mum approached me at the time of dao~s death when the will was being done up and I agreed, and at that time I had complete faith and trust in mum to inform myself and everybody else what was happening at the time. Was there a written authority or not?-- Yes, to the bank. I did sign a written authority, Your Honour. Well, I just wondered why you haven't considered revoking the authority?-- I have. I have, and it was after I started these legal proceedings and it was quite obvious if I did that at the time Joe would obviously try and use that against me in Court that I have run down the farm or whatever, you know, try to discredit myself. In connection with the alleged exclusion from the financial management of the business, one of Garry William Bradley' s specific complaints was that he was denied access to the accounts of the business, particularly the cash book. This was denied by Joseph Henry Bradley who said amongst other things that opportunities were given but not availed of by Garry William Bradley. One.would have thought that as the books were kept at the house occupied by Mrs Bradley on the farm it would have been easy enough to simply go there and request access as a trustee. A particular incident of a specific offer to allow Garry Wayne Bradley to see the books on Easter Eve, 1993 was presented, on the one hand, as an offer of which due notice was given but rejected and on the other as an offer made on short notice at a time when it was inconvenient to take it up. This is referred to as an illustration of the nature of the relationship rather -- 8 of 18 -- 6 than to resolve the particular conflict of evidence. The significant thing is that there is very little evidence of any attempt by Garry Wayne Bradley to take steps that one would expect a joint trustee acting responsibly to employ to familiarise himself with the details of the business by recourse to the books . As a general observation on the quality of evidence, cross-examination on several occasions dem6nstrated that claims made in Garry Wayne Bradley's affidavits proved to be more restricted in scope than appeared on the face of the affidavits. The impression created in the affidavits, by using the plural, that more than one incident of the kind described had occurred proved, on occasions, to be exaggerated. Despite this adverse view of the reliability as a witness of Garry Wayne Bradley I should also say that I am not entirely satisfied that there has not been a degree of resistance to him having any role in the financial affairs of the business. I should also say that despite having been given every opportunity to resolve the matter within the family the parties have failed to do so. There was mediation prior to the hearing and, during () 0 () the hearing, an adjournment to allow further discussions with a ~ strong intimation that the parties' interests lay in resolving the issues among themselves. I am unable to draw any conclusion about the cause of such failures on the material before me. The principle applicable to removal of a trustee is stated in the following passage from the judgment of Dixon J. in Miller v. Cameron (1936) 54 C.L.R. 572, 580:- "The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a -- 9 of 18 -- ( 7 faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. · Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction rriay be exercised." In Letterstedt v. Broers ( 1884) 9 A. C. 371 , 386-7, the following is said:- "if satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given. the trust estate. In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyond the very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries. Probably it is not possible to lay down any more definite rule in a matter so essentially dependent on details often of great nicety. But they proce~d to look carefully into the circumstances of the case." These passages emphasise that there must be substantial reasons for removing a trustee and it is not something to be done lightly. However the interests of beneficiaries and the proper execution of the trusts are of great importance in deciding whether to exercise the jurisdiction. The present case is one where the trustee is also a beneficiary. It is apparent that the beneficiaries see their interests in different ways but what must be done in the end is to look objectively at the facts and come to a judgment whether the welfare of the beneficiaries in the broad sense requires the jurisdiction to be exercised at this time. -- 10 of 18 -- 8 In Re Whitehouse (1982} Qd.R. 196, Macrossan J. was concerned with _an application by beneficiaries to remove two trustees. However, immediately before the hearing one of those trustees was removed and replaced by another person appointed by the continuing trustee. There was then an application for removal of the new trustee as well. In considering whether to remove the continuing trustee, Macrossan J. balanced a number of factors which are, no doubt, not exhaustive but are illustrative of relevant factors; He said (206-7}:- "In the present case, while giving full credit .... for his part in building up the assets of the trust and while acknowledging that his disputes with the two beneficiaries may be due, in part, to unavoidable clashes of personality, I think, nevertheless, that the disputes and the state of animosity which exists have been attributable to him to an extent sufficient to make me apprehensive as to his future administration of the trust. I think that he has carried over his attitude as dictatorial controller of the companies to his character as trustee and on the material before me I do not think he is capable of remedying the situation in the future. I have not been given the advantage of hearing him and so must decide ·on what has been placed before me. I do no.t say that I would have removed him as trustee if all that I had were the disputes and the animosity between trustee and beneficiaries and if the trust were otherwise being satisfactorily administered. Nor do I say that I would have acted on the basis of such deficiencies as have existed to date in the administration of the trusts, if the personal relationship were perfectly satisfactory and there appeared reasonable prospects that the course of administration of the trusts would be improved for the future. l am, however, moved to act by his obstructive attitude and by his general unwillingness to attend promptly to the beneficiaries' rights and by the deficiencies which have been permitted to exist in the keeping of proper accounts and in the general administration of the trusts, all of which have accompanied the animosity which has existed in the past and which with it will, in my estimation, if uncorrected, continue in the future." The matter is not without difficulty. Despite the factors to which I have referred, both trustees at the end of the day 0 0 () CJ -- 11 of 18 -- 9 professed an ability to work together. There are real advantages in having persons connected with the operation of the farm as trustees. One factor is the expense involved in an independent trustee. No one was enthusiastic about the appointment of an outside trustee, but Mr stephens, an accountant, was proposed as a possible appointee jointly with Joseph Henry Bradley if I should decide to remove Garry Wayne Bradley. It is plain from his evidence that he had not been fully informed of the situation and thought that he would be sole trustee, with a manager running the farm on a day to day basis. As the authorities demonstrate, it is a serious step to remove a trustee and even more so where the trustee is one of the beneficiaries. After some fluctuation of opinion I have decided that the proper course to adopt at this point is to give the trustees one last chance to work together. I propose to enable, if it becomes necessary, a revival of the application for removal if the opportunity is not taken by the parties to work harmoniously. I propose to give directions which include some not asked for by the parties but which I consider to be necessary to define clearly the obligations of the trustees towards one another. 1. The following directions are given:- Subject to any agreement to the trustees and subject to Direction contrary between the 2, Dulcie Florence Bradley is permitted to carry out the functions in respect of the business which she was carrying out at the time of the hearing before me. -- 12 of 18 -- 10 2. Subject to any agreement to the contrary between the trustees, all cheques are to be counter-signed by both trustees. 3. A trustee shall not without good and valid reason refuse or fail to sign a cheque as co-signatory when requested to do so by the other trustee. 4. A trustee shall take all reasonable steps to familiarise himself with the records of transactions to which the request to eo-sign a cheque relates. 5. A trustee shall not without good and valid reason do or omit to do anything to prevent the other trustee from having, upon reasonable notice, the opportunity to inspect such records. 6. The trustees shall once in every calendar month at a time to be mutually agreed between them meet to review the previous month's trading and any major issues concerning the administration of the trust or the carrying on ·.of the business of the trust. 7. The trustees shall take reasonable steps to fix a mutually convenient time for such meeting. In the event of a failure to agree upon a time for the meeting the obligation to hold the meeting during that calendar month shall be taken to have been dispensed with. 8. Notwithstanding Direction 7, the trustees shall whenever it is desirable to do so, discuss any major issue arising in the administration of the trust or the carrying on of the business of the trust. No trustee shall ·unreasonably ' () CJ () -- 13 of 18 -- 1 1 refuse or fail to engage in discussion of the issue with the other trustee. 9. The trustees shall meet with the accountant for the trust each year prior to completion of the annual accounts to discuss matters arising in relation to them. Without limiting the generality of the foregoing, the trustees shall give due consideration to the exercise of the powers in paras. 3 and 4 on the sixth and seventh sheets of the testator's will in such discussions. Each trustee shall be entitled to a copy of the annual accounts, upon co"mpletion. 10. Each trustee, upon reasonable notice to the person in possession or control of the books or other records of the trust, shall be at liberty to inspect such books or other records. 11. No trustee may engage or dismiss staff without the consent of the other trustee. A number of matters in respect of which directions were sought are not included above. I do not consider that it is necessary to order a formal annual general meeting if the processes for exchange of information in the directions are implemented. I am not satisfied that it is necessary to hold formal weekly meetings on Monday mornings to plan the week and discuss current issues. The provision for discussion of major issues should be sufficient in that respect. I am not persuaded that the applicant has made out a case for sale of farm vehicles or the alternatives in para.(d) of the points of claim. I am not satisfied that there is any ground established for a change of accountants. I do not consider that it is appropriate for me to -- 14 of 18 -- 12 attempt to determine leave entitlements of the beneficiaries. So far as paras.(j) and (k) of the points of claim are concerned the evidence is insufficient to allow me to form a conclusion whether there is anything objectionable about the practices complained of. The direction sought in para.(j) is directed towards the fact that cheques are made out in the name of Joseph Bradley and his wife. The direction sought in para.(k) is that wages be paid fortnightly with group tax deducted. The proper approach to these issues would be for the trustees to take advice from appropriate sources and, provided the law is not contravened 0 by what is revealed upon closer examination, to take into account the individual preferences of the beneficiaries in deciding the 0 . way in which payments are made. The directions that have been given are not intended to be exhaustive. They are intended to address particular matters of concern raised in the proceedings before me. They must be seen against the ·general backgroun~ of duties of trustees which the trustees must, o~ course, observe. By way of general comment the (J Court expects each trustee to act in good faith to put into effect his expression, given on oath in evidence, of a willingness to try to work together for the benefit of the estate. If the matter comes back before the Court and there is evidence that there has been conduct that does not conform to these objectives, the Court will view such conduct seriously. If the matter comes back to the Court in such circumstances any party proven to be at fault will be at risk of having an order for costs made against him personally. It is difficult to see in such circumstances why remaining beneficiaries should be 0 ---·------- ··--· -- 15 of 18 -- ) ./ 13 penalised by costs being awarded out of the trust estate.· The same may be said in the event that any application is brought frivolously. I turn now to the construction point. Clause (B) gives devises and bequeaths the real estate farm property, livestock, plant and other equipment and moveable chattels used in connection therewith to the trustees upon trust to, inter alia, carry on the business conducted by the testator thereon at his death and to stand possessed of the income arising therefrom upon trust to pay one-half to the widow (subject to certain irrelevant occurrences) and to divide the remaining one-half equally between his three sons. What is available for distribution is potentially affected by the powers given to the trustees by clauses on sheets 5 to 8 of the Will. The major issue focused upon in this hearing was the alleged failure to distribute income as and when such income was derived to the persons beneficially entitled thereto. Clause 4 is the most relevant of the clauses conferring power in this connection. It empowers the trustees to allocate the income arising from the assets or investments of ) the testator's estate among the beneficiaries in the proportions to which they are entitled in his estate:- "With full power in my trustees to retain out of such income such portion thereof as they in their absolute and uncontrolled discretion shall think fit to carry on any. business or . undertaking in which I may be interested at the date of my death ... 11 This confers a discretion on the trustees to retain portion of the income to carry on the business. According to the evidence certain moneys out of the income in previous years have been retained for the purpose of doing capital works and other I.· -- 16 of 18 -- 14 kinds of things associated with the business. So far as the construction of the will is concerned, which is the point upon . ·- which a declaration is sought, the discretion given· to the trustees is in the widest terms but the trustees must exercise it in the interests of all beneficiaries. The personal interests of an individual trustee must not be allowed to dominate his consideration, as a trustee,_ of whether and in what way the discretion to retain income should be exercised. Ideally a decision should be ~ade as to the most beneficial amount to be retained for the purpose of ensuring that the business can be carried on as efficiently and profitably as possible. That should be uppermost in the minds of the trustees. Any attempt to place private interest ahead of this obligation would be inappropriate. If it was apparent that a trustee took an unreasonable position on this issue and a deadlock occurred as a result, that would be capable of providing evidence of the inability of. that trustee to work with the other trustee. The true construction of the will is that when the net income (Re Redding (1897} 1 Ch.876} has been ascertained, subject to any decision by the trustees .under cl.4 to retain income to carry on the business, such income is to be divided equally between each of the testator's sons, Garry Wayne Bradley, Joseph Henry Bradley and William Francis Bradley. The amount actually coming into the hands of a beneficiary wiil be his or her proportion of the net income, less any portions retained by the trustees under their powers under the will. The formal orders will be the following.:- 0 0 (J 0 -- 17 of 18 -- 15 (a) In O.S. 789 of 1992 directions are made in terms of paras.1 to 11 on pp.9 to 11 of the reasons for judgment. (b) In O.S. 723 of 1993 a declaration that the sum for distribution to a beneficiary is the proportion to which he or she is entitled under the will of the net income, provided that the trustees may exercise their discretion to retain portions of the income under the powers given to the trustees under the will. (c) In O.S. 896 of 1993 the summons is adjourned sine die. I give liberty to apply, upon seven days notice to the other parties, to have the matter re-listed. I authorise the party seeking to have the matter re-listed to approach the Senior Judge Administrator with a view to having the matter re-listed before me if that party so desires. In each case I order the costs of each of the parties to be paid out of the trust estate. -- 18 of 18 --