The recent case of Campbell & Anor v T.L. Clacher No. 2 Pty LTd & Ors  QSC 218 dealt with a application by two daughters as against the trustee of their family trust, the trustee of their sisters family trust and their father in respect of transactions that occurred between the parties following very sad situation of family disharmony.
At the heart of the case was claims of a breach of trust where the transactions were allegedly brought about by the unconscionable conduct of one daughter against her father and the exercise of the discretion by the trustees to make said transactions were not genuine and proper consideration of discretionary power. In addition to these claims the matter also had to address what remedy might be available for such a breach, if made out, in the grounds for removal of the trustee of the Clacher Family Trust.
In any such type of matter, the details are very fact specific. I offer my best summary of the facts as follows:
- Thomas Clacher (the third respondent) is the father of Susan, Wendy and Janine.
- Thomas is the sole director and shareholder of the company known as T. L. Clacher No 2 Pty Ltd, which acts as the trustee of the Clacher Family Trust (the first respondent);
- Janine, and her husband Glenn, are the directors and shareholders of a company known as Flowon 241 Pty Ltd, which acts as a trustee of the Blumke Family Trust (the second respondent).
- Suzanne and Wendy are the applicants in the case.
Up until approximately September 2014, the Suzanne and Wendy enjoyed a good relationship with their father, Thomas. It was the events after September 2014 that appeared to lead to the disowning of Suzanne and Wendy, by their father, and resulted in Suzanne and Wendy (along with their children, spouse and grandchildren) being expressly excluded as beneficiaries from the Clacher Family Trust by way of a number of resolutions made by the trustee of the trust.
Following September 2014, a number of transactions and exercises of power of the trustee of the Clacher Family Trust occurred which became the subject of question as to invalidity of these transactions. In particular, a number of real property units, shares and listed companies and all of the cash held in the Clacher Family Trust were all distributed to the Blumke Family Trust as a beneficiary of the Clacher Family Trust.
In their claim, the applicants alleged that the transactions between the Clacher Family Trust and Blumke Family Trust:
- were invalid by reason of undue influence or unconscionable conduct of Janine and Glenn (as the controllers of the Blumke Family Trust) over Thomas (as the controller of trustee of the Clacher Family Trust);
- were not made with a real and genuine consideration by the trustee or made independently by the trustee;
- that the resolutions to exclude Wendy and Suzanne, and their families, as beneficiaries of the Clacher Family Trust were made by the trustee by mistake as to their purpose or effect and as a result of the influence and unconscionable conduct of Janine and Glenn and not upon a real and genuine consideration by the trustee as trustee;
- that the resolutions that were made on 12 December 2014, were made without the benefit of legal advice, and inconsistently with the will made by Thomas on 4 December 2014, a special resolution to distribute the trust fund of the Clacher Family Trust, a deed of removal of trustee and appointment of a new trustee of the Clacher Family Trust, an option to purchase and a deed of variation of the Clacher Family Trust all made by the trustee of the Clacher Family Trust on 4 December 2014 in circumstances where there was no material change in the circumstances between 4 December 2014 and 12 December 2014;
In December 2014, a number of resolutions were made affecting the management of the Clacher Family Trust. In summary, the primary resolutions that were considered in the matter were:
- First set of resolutions made on 27 June 2014, which involved:
- a written record noting that Wendy and her husband Mark were no longer to have any involvement in Thomas’s personal tax affairs or his company or his family trust;
- a deed of variation that qualifies the definition of beneficiaries and inserted the words “unless specifically excluded from being a beneficiary by a decision of the trustee” at the end of the words “any child, grandchild or remoter issue or foster child of the said Thomas Laidlaw Clacher” and also included a like provision for the opportunity to exclude a spouse;
- a resolution that Wendy and Suzanne were no longer beneficiaries of the trust nor were any of their spouses, children or grandchildren a beneficiary any longer.
- Second set of resolutions made on 9 October 2014, which involved:
- confirmation that Wendy and Suzanne were not beneficiaries of the trust, along with any spouse, child or grandchild of them. It also confirmed that Wendy and Suzanne had no unpaid present entitlements other monies owing to them from the trust.
- Third set of resolutions were made on 12 December 2014, which involved:
- special resolution to distribute that was made on 4 December was thereby revoked;
- result in confirmed that Wendy and Suzanne were not beneficiaries of the trust and nor any spouse child or grandchild of Wendy or Suzanne were beneficiaries of the trust.
To allow for some context in respect of the third set of resolutions, these resolutions refer to some steps that were taken by Thomas on 4 December 2014 whereby the trustee of the Clacher Family Trust (i.e. Thomas, as the controller of the trustee) resolved to vary the trust by including some powers to restrict the powers of the trustee and also passed a resolution to distribute all of the trust funds in the trust upon his death and distribute such assets within six months of his death as to 1/3 share to each of Wendy, Suzanne and Janine. This is referred to as a “Special Resolution to Distribute”. It was then further resolved on the same date, that the special resolution should become irrevocable on Thomas’s death, if not earlier revoked. The trustee also executed a deed of removal of trustee and appointment of a new trustee of the trust by which Thomas, as the appointer of the trust, appointed the Flowon 241 Pty Ltd as the new trustee of the Clacher Family Trust (i.e. Janine’s trust) from the date of Thomas’s death. The third set of resolutions sought to revoke the Special Resolution to Distribute.
In attempting to understand the circumstances that occurred from June through to December, the court commented on some of the features of these resolutions. In so doing, the court said, at paragraphs -:
There are some remarkable features of each of the 27 June 2014 resolutions, 9 October 2014 resolutions on 12 October 2014 resolutions. Looked at objectively, in the circumstances where the applicants and their husbands and children for many years had been in a continuing and close relationship with their father, father-in-law and grandfather, and were beneficiaries under his family trust, they were a means by which an ageing man apparently sought to disown them, without any prior communication to any of them of his intention to do so or, in the case of the 27 June 2014 resolutions any prior or contemporaneous expression of any dissatisfaction to any of them.
Second, during the period from September 2014 to December 2014 [Thomas] had two sets of lawyers and accountants as advisers, but there is no suggestion that he informed any of them of these resolutions at the time. In fact, his dealings with them were not consistent with the content of the resolutions in some respects.
Third, in giving evidence in this proceeding, the third respondent himself showed no real appreciation of circumstances in which, or reasons for which, he passed these resolutions, or of the extent of their effect.
Fourth, the only witness who claimed any knowledge of these resolutions at the time when they were made or to have been involved in their making was Glenn Blumke. He drafted them (and the two deeds of amendment of the trustee) even though he is not a lawyer, and did not obtain or seek any legal advice before doing so, or suggest to the third respondent that he obtain legal advice before doing so. Another remarkable suggestion is that neither [Thomas] nor Glenn Blumke informed Janine that the resolutions were to be male had been made.
Fifth, in between 9 October 2014 resolutions and 12 December 2014 resolutions, [Thomas], attended upon the solicitors who acted for him in connection with his estate, including the disposition of the assets and his family trust, and with their assistance (not that of Janine or Glenn Blumke) on 4 December 2014 made a Will that included dispositions and passed resolutions of the first respondent as trustee of the Clacher Family Trust (the special resolution to distribute in the irrevocable resolution) inconsistent with any intention to disown the applicants or their husbands or children at that time.
Sixth, the proceedings of 4 December 2014 were completely undone, in effect, by [Thomas] again with the assistance of Glenn Blumke, by the 12 December 2014 resolutions. Notwithstanding the double Volte-face involved over a period of eight days,[Thomas] did not seek any legal advice for the 12 December 2014 resolutions and neither Janine nor Glenn Blumke suggested that he should do so. At the trial, the circumstances that explain how all that came about when clearly elucidated by any evidence that I accept, except to say that [Thomas] changed his mind yet again, and I will deal with this question in greater detail later.
It is impossible to avoid the objective circumstances that many of the decisions embodied in these resolutions were made in secret, were not made with the assistance of legal advice, were made with the sole assistance of the husband of the principal remaining beneficiary, who was a beneficiary himself and, as will appear, were not made for reasons that were objectively apparent, despite the second respondent’s attempts to show that they were.
Further, the family home along with a number of real property units were transferred from Thomas’s sole name to the name of Thomas and Janine, as joint tenants, by way of a gift. Although grounds of invalidity were also alleged in respect of these transactions, no relief was sought regarding the transfer.
Some discussion was raised in respect of Thomas’s cognitive abilities and general capacity in respect of the steps that he had taken, the breakdown in the relationship between he and his daughters Suzanne and Wendy and his evidence given during this matter.
In response of the evidence given by Thomas, the court said, at paragraphs -:
I do not accept any of that evidence from [Thomas]. All nearly all of the objective evidence points against it, in my view. I bear in mind that the affidavit was made within a couple of weeks of his giving oral evidence before me. When he gave oral evidence, [Thomas] was apparently cognitively impaired. He was argumentative and suspicious. He challenged documents that bore his signature (for example the authorities he signed address to his accountant and stockbroker for Jon Campbell to make inquiries of them to prepare a report on the 27 June 2014 resolutions excluding the applicants and their children as beneficiaries of Clacher Family Trust) around that he did not recognise them and it did not look to him like his signature, when the signatures look just like that on his affidavit. Tellingly, he did not seem to comprehend that by the 27 June 2014 resolutions and 9 October 2014 resolutions he (as sole director of the first respondent) excluded the applicants and their children as beneficiaries or remember why he had done so.
In forming those views I have not overlooked the report of Dr Anthony French. He saw [Thomas] on 9 November 2017 for geriatric medicine review of his cognition and function and spent about 1.5 hours speaking with him. [Thomas] was accompanied by Janine, who provided unidentified information about “background context… Including regarding [Thomas’s] involvement in a court action”. There is no evidence that Dr French had any awareness of the actual events of this case. Some of the matters addressed in Dr French’s affidavit and report go to the question of capacity, which is not in issue in this proceeding and may be put to one side. Of greater relevance is the opinion expressed by Dr French that [Thomas] is “at a very significant disadvantage in his cognition and function in relation to matters concerning the court case given its emotional impact on him and his reaction to the subject matter. He is therefore far less likely willing or able to defend himself when he is challenged regarding these matters because he becomes overwhelmed, distressed and pressured.”
Whatever may be the basis for Dr French’s opinion, that opinion does not reflect how [Thomas] behaved in the witness box. He was not unwilling to defend himself. He was suspicious of the questions he was asked and at times combative. He was not unable to ‘defend’ himself, assuming that means able to give evidence in his case, other than by his reduced cognitive capacity. That reduction was not confined to giving oral evidence. It is evident from the terms of his affidavit, prepared the assistance of his lawyers presumably without any time pressures or constraints. It is also consistent with his behaviour during the contested events of the case. Some of his accusations of wrongdoing against the applicants and Jon Campbell were the product of him having forgotten things he had done.
The court attempted to appreciate what had occurred between the parties between 2014 and 2016 as the resolutions were made, and the property transfers registered.
In respect of the reasons for the transfers and the alleged unconscionable conduct, the Court reflected upon the reasons from what evidence the court could gather from the parties, including Thomas’s evidence. Reflecting on this information, the Court said, at paragraphs -:
Because of the range and number of [Thomas]’s accusations against Wendy, Suzanne and Jon Campbell, and because of encouragement of Janine and Glenn Blumke of some or all of the accusations, it is difficult to form an accurate view as to [Thomas’s] precise reasons for making the challenged transfers. The difficulty is added to by my rejection of much of the evidence of Janine and Glenn Blumke as to what the facts surrounding what [Thomas] said and did were.
Even so, some broad generalisations are possible. First, [Thomas] formed the view that Wendy, Suzanne and Jon Campbell were trying to put him into a home. Second, he formed the view that they had mounted some case against him. Third, he formed the view that the way to protect himself from the threat he believed they presented was to transfer all of the property of the Clacher Family Trust and all or most of his property to Janine and Glenn Blumke’s family trust or to Janine as a joint tenant, where he considered it would be safe from any claim by the applicants. Of course, in doing so, [Thomas] placed himself completely at the mercy of Janine and Glenn Blumke. They would have it that he did so because he trusted them completely. It seems likely that he did. But, in my view, [Thomas] was also acting in retaliation against the applicants because of his delusional beliefs about their actions and intentions. As well, in doing so, he seems to have been incapable of distinguishing between the applicants and Jon Campbell on the one hand and the other family members on the other hand, particularly his grandchildren by them, or to have been insensitive to that distinction.
In coming to a conclusion, the Court found that the trustee of the Clacher Family Trust exercised the power to make a distribution of the trust property to the Blumke Family Trust without real and proper consideration of the discretionary power because the controller of the trustee, being Thomas himself, as the sole director of the trustee, was subject to unconscionable conduct by Janine and Glenn. Accordingly, the Court set aside those transactions.
Whilst Janine and Glenn raised some defences in an attempt to uphold these transactions, including an allegation that the applicants had no standing to bring the proceedings as they had been removed as beneficiaries from of the trust, the Court was not persuaded by these defences.
As to the Court’s determination as to whether the trustee of the Clacher Family Trust should be removed and replaced with the Public Trustee, the Court noted that the court has both statutory and inherent jurisdiction to remove a trustee of a trust and the Court was of the view that “there can be no doubt that it is expedient” to replace T. L. Clacher No 2 Pty Ltd, as the trustee of the Clacher Family Trust(at paragraph 362)
The Court subsequently invited the parties with an opportunity to agree on an individual, rather than the Public Trustee, to replace the trustee of the Clacher Family Trust.
In considering what relief to order against the Blumke Family Trust, the court said, at paragraphs -:
The applicants claim orders that the second respondent transfer back to the trustee of the Clacher Family Trust each of the trust properties in the shares transfer to the second respondent under the challenge transfer still held by the second respondent free from all encumbrances, and that the second respondent pay in equal amounts the challenge cash transfer to the trustee of the Clacher Family Trust.
Further, the applicants claim in order that the second respondent transfer all shares obtained directly or indirectly from the property of the Clacher Family Trust to the trustee of the Clacher Family Trust and an order that the second respondent encounters constructive trustee in respect of all benefits obtained by reason of the challenge transfer to the trustee of the Clacher Family Trust.
Neither of the parties made submissions as to the legal basis of the liability of second respondent, if any, to those orders. On the one view, the second respondent is a beneficiary of the Clacher Family Trust that has received distributions that the trustee was not authorised to make because the invalid exercises of power by the trustee. That is a basis for it to restore account for the trust property received. On the other possible view, is to received property by way of gift as a volunteer unavoidable transfers in the persisting equitable title of the trustee and beneficiaries of the Clacher Family Trust for the beneficiaries of that trust takes priority to the second respondent’s title and may be vindicated by orders following the trust property received by the second respondent and still held by the second respondent and by tracing into any property acquired by use of the original trust property…
The court further said, at paragraphs -:
In any event, in the present case, in my view, Janine and Glenn Blumke as directors of the second respondent were aware of the infirmities of [Thomas] in making the resolutions and decisions of first respondent upon the challenge transfer the properties, shares and cash to the second respondent as trustee of the Blumke Family Trust, so as to repel any legal analysis on the basis of second respondent is to be treated in equity as an innocent volunteer without knowledge or notice.
In my view, orders should be made the second respondent re-transfer the property which still holds that was the subject of the challenge transfer. As well, the second respondent should account for any dealings by it with the property subject to those transfers that it no longer holds. Depending on the result of the account, it may be appropriate to grant further relief against the second respondent of either a proprietary or personal nature, including relief as against the assets of the Blumke Family Trust. The second respondent is, in my view, an accounting party. Question of in what form any further order for an account is required should be deferred until the new trustee is appointed and has obtained the records of the Clacher Family Trust. In particular, it does not presently appear whether the applicants or the new trustee would seek to press a tracing claim twenty property into which the property the subject of the charge transfers has been converted and whether they would claim on account of profits in respect of any dealings with or income earned from the property or a claim for equitable compensation as an alternative there too.
You can read the case here.