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5 July, 2022

Recently the New South Wales Supreme Court refused to make orders to remove the corporate trustee of a family discretionary trust in the decision of In the matter of Reserve Hotels Pty Limited [2021] NSWSC 376. In the proceedings, two daughters applied to the Court to have their father’s company removed as the trustee of the NBF Trust, alleging that the trustee was unfit to act in such position pursuant to the Trustee Act 1925 (NSW) (Trustee Act). This decision revisited the uncertain issue of whether discretionary beneficiaries have standing to bring an action for the removal of a trustee under the Trustee Act.

In facts we trust – the background to the dispute

In the proceedings, the Mary and Angeliki Balagiannis sought orders that the trustee of the NBF Trust, Reserve Hotels Pty Ltd (Reserve Hotels), be removed from office, that a new trustee of the NBF Trust be appointed and that all of the assets of the NBF Trust vest in that new trustee. Their father, Nicolas Balagiannis, is the sole director and shareholder of Reserve Hotels.

Mary and Angeliki claimed that Reserve Hotels was unfit to act as trustee of the NBF Trust for a number of reasons, including on the basis of allegations that transactions were made in breach of the trust deed, that the financial statements of Reserve Hotels were inaccurate, that Nicolas had acted improperly in exercising his power as appointor to change the trustee of the NBF Trust.

In the course of the hearing, it was questioned whether Mary and Angeliki had standing to bring that application under the Trustee Act.

The issue of standing

Standing refers to the right to invoke the court’s jurisdiction to hear a matter. Pursuant to s 92 of the Trustee Act, a person will have standing if they have an interest to bring an action for removal of a trustee under s 6(2)(e). Although it is difficult to determine the extent of a beneficiary’s interest under a discretionary trust, that does not mean that discretionary beneficiaries are entirely without rights; a beneficiary of a discretionary trust has an equitable interest in the trust property in a board sense. While discretionary beneficiaries do not have proprietary interests in trust assets they have ‘a right to be considered as a potential beneficiary and a right to have his [or her] interest protected by a court of equity’: Gartside v Inland Revenue Commissioners [1968] AC 553 at 617. This authority provides that discretionary beneficiaries do have rights against the trustee, even in instances where the trustee has not yet exercised their discretion. Crucially, beneficiaries of discretionary trusts have the right to the due administration of the trust in accordance with the trust deed. However, the authorities are undecided on whether these rights convey standing to bring an application for the removal of a trustee.

Without reaching a concluded view, in the decision of In the matter of Reserve Hotels Pty Limited [2021] NSWSC 376, Justice Black opined that there is sufficient authority for the proposition that beneficiaries of discretionary trusts do have standing to bring an application for removal of a trustee and assumed that was the case for the purpose of determining the issues in proceedings. The rationale for this position is that otherwise beneficiaries of discretionary trusts would have no recourse to enforce their rights to the due administration of the trust.

However, the right to be heard only gives an applicant a foot in the door. As explained below, in the decision of In the matter of Reserve Hotels Pty Limited [2021] NSWSC 376, his Honour held that there was no basis to order the removal of the trustee.

Removing a trustee – the who, how and why?

A trustee can be removed pursuant to an express power contained in the trust instrument or pursuant to the statutory powers for appointing a new trustee out of court. The court may also remove a trustee pursuant to statutory powers, or pursuant to the court’s inherent jurisdiction. The court of equity has inherent jurisdiction to remove a trustee and appoint a replacement trustee in accordance with the court’s primary duty to ensure that trusts are properly executed. Ancillary to that principal duty, the court has the jurisdiction to remove a trustee to where, generally speaking, the welfare of the beneficiaries and of the trust estate requires such a remedy.

A trustee may be removed in circumstances where they have acted in breach of trust, where the trustee has commenced a rival business, where the trustee has not acted in an impartial manner, where a trustee has prioritised their own interests (or is otherwise in a position of conflict), where the trustee has become a bankrupt, and in other instances of misconduct. This has recently been affirmed in the decision of Baba v Sheehan [2021] NSWCA 58. In that decision, the New South Wales Court of Appeal upheld the primary decision and found that, in circumstances where the appointer had genuine concerns regarding the manner in which the affairs of the trust was being conducted, the appointer’s removal of the trustee pursuant to the trust deed was done genuinely and in good faith.

However, as demonstrated by the decision of In the matter of Reserve Hotels Pty Limited [2021] NSWSC 376, the court will not order for the removal of a trustee without reasonable cause being shown. In that case, Mary and Angeliki were unsuccessful in their application to remove the trustee of the NBF Trust. Justice Black was not convinced that Reserve Hotels had acted improperly in the past – it had not acted inconsistently with the interests of the NBF Trust or without regard to the individual needs of the NBF Trust (in fact, his Honour held that Mary and Angelique had both benefited substantially from Reserve Hotels’ exercise of its discretion as trustee). Justice Black was also not convinced that there was any reason to think that Reserve Hotels would not continue to exercise its duties properly and in accordance with the trust deed in the future.

Key takeaways

Trustees may be removed pursuant to an express power in the trust instrument, or upon application to the court.

Beneficiaries of discretionary trusts will likely have standing to apply to the court for removal of the trustee. This derives from their rights to be considered as a potential objects of the trust and to the due administration of the trust.

However, such an application will only be successful if there is sufficient proof that the trustee has acted inconsistently with the purpose of the trust or has otherwise acted improperly.

McCabes acted for the Defendants in the proceedings who were wholly successful in defending the application for removal of the trustee, Reserve Hotels. McCabes has extensive experience in advising on and acting in trust disputes. If you have a potential dispute concerning a trust, get in contact with us today.

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Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract.   Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
29 August, 2023

Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty.  The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. 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Published by Leighton Hawkes
18 August, 2023
Litigation and Dispute Resolution

Expert evidence – The letter of instruction and involvement of lawyers

The recent decision in New Aim Pty Ltd v Leung [2023] FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.

Published by Justin Pennay
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