Gillespie Cranes Nominees [2022] NSWSC 1184

Coffee and a Case Note

“A trust law derivative action, or a common law one?”
___
In the early 80s, a trust was established. Its assets came to be worth around $55m: [5]
A parent established the trust for the principal benefit of their spouse and 4 children, with TCo as trustee: [6], [10]
TCo’s shareholders were 2 of the kids - the Ds: [7]
The trust deed gave TCo a wide discretion to make resolutions on the distribution of income. If there was no resolution, the income was to go to the principal beneficiaries. From 2009 to 2020, TCo made no distributions to principal beneficiaries, but to entities related to the Ds: [12], [13]
P alleges there were no resolutions appropriately passed in some years, or no resolutions passed in good faith and for proper purpose, meaning that the income should have been paid to principal beneficiaries - a breach of trust: [14]
P claimed one fifth of the distributions made, plus interest, and that TCo “make good” the trust fund: [16]
TCo purported to amend its trust deed and distribute ~$58m received on compulsory acquisition of some real estate on an unequal basis between the beneficiaries (including 44% to each of the Ds (!) and 3% to P): [18]
P attacked this on two grounds: saying TCo breached a restriction on amending the substratum of the trust, and that the amendment and later distribution was not for good faith or proper purpose: [19]
P made various other claims, including for the removal of TCo as trustee and that their 3% had still not been paid: [21] - [24]
P also complained about the Ds causing TCo to transfer TCo’s crane business to an entity associated with them: [22]
Importantly, claims other than P’s claims for their own money were derivative - they were claims of TCo’s which P was seeking leave to bring: [26]
The Ds and TCo suggested the right to bring this application had been abolished by s236(2): [31]
The Court was forced to consider whether the derivative application was available in respect of the beneficiary of a trust, or an estate - the “derivative action in equity” - and found it was available in special circumstances: [32] - [41]
The power of the Court to grant leave for this type of derivative action arises from its jurisdiction over the administration of trusts, which the Court considered at length: [45] - [54]
The resemblances between company law and trust law derivative actions does not make them the same: [62]
The s236(2) abolishment of common law derivative actions does not abolish trust law derivative actions. The Court has the power to grant leave to the P: [69], [71]
There was extended consideration of the crafting of P’s claim. Some claims would not be repaid into the corpus of the trust: [106] - [108]
A further e.g. a question of whether equitable compensation would be available if leave to bring the derivative application is granted to P arose: [115]
The Court ordered an urgent hearing about whether P should be granted leave to bring the derivative actions: [129]

_

If you'd like to contact me please look for James d'Apice or Coffee and a Case Note on your favourite social media spot - I should pop up right away! #coffeeandacasenote​​​​​​​​ #auslaw​​​​​​​​