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PILT Nominees v Baltarna [2009] NSWSC 656 (2 June 2009)

Last Updated: 13 July 2009

NEW SOUTH WALES SUPREME COURT

CITATION:
PILT Nominees v Baltarna [2009] NSWSC 656


JURISDICTION:
Equity

FILE NUMBER(S):
2909/09

HEARING DATE(S):
2 June 2009

JUDGMENT DATE:
2 June 2009

EX TEMPORE DATE:
2 June 2009

PARTIES:
PILT Nominees Pty Limited & Anor
v
Baltarna Pty Limited

JUDGMENT OF:
White J

LOWER COURT JURISDICTION:


LOWER COURT FILE NUMBER(S):


LOWER COURT JUDICIAL OFFICER:




COUNSEL:
Applicants: DKL Raphael
Baltarna: J B Spinak

SOLICITORS:
Plaintiffs: Johnson Winter & Slattery



CATCHWORDS:
TRUSTS AND TRUSTEES - Judicial advice as to propriety of trustees defending proceedings - no question of principle

LEGISLATION CITED:
Trustee Act 1925 (NSW)


CASES CITED:
Crossman v PILT Nominees [2008] NSWSC 557
Crossman v PILT Nominees [2009] NSWSC 393

TEXTS CITED:


DECISION:
Refer to para 9 of the judgment.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


WHITE J

Tuesday, 2 June 2009


2909/09 In the matter of PILT Nominees Pty Limited & Anor

JUDGMENT

1 HIS HONOUR: The plaintiffs are trustees of trusts known as the Primary Indexed List Trust ("PILT") and the Baltarna Trust. They seek judicial advice pursuant to s 63 of the Trustee Act 1925 (NSW) as to whether it is a proper exercise of their powers as trustees to defend proceedings instituted by Mr Philip Michael Crossman in proceedings number 2847 of 2008. They also seek judicial advice to the effect they are entitled to the use of the assets of the trust of which they are trustees to recoup their expenses in defending the proceedings.

2 The nature of the proceedings brought by Mr Crossman appears from the reasons for judgment of Hamilton J on an application brought by the plaintiff in those proceedings for interlocutory injunctive relief (Crossman v PILT Nominees [2008] NSWSC 557) and from my reasons for judgment on an application brought by Mr Crossman for further interlocutory injunctive relief (Crossman v PILT Nominees [2009] NSWSC 393). I will not repeat what appears there.

3 The proceedings are presently listed for hearing before the expedition judge on 15 June 2009 and are listed for directions before the judge later this week. There has been delay in the making of this application for judicial advice, but the delay is sufficiently explained in the affidavit of the current plaintiffs' solicitor, Mr Richard Gelski, affirmed on 1 June 2009.

4 Essentially, there are two questions on the present application. The first is whether it is proper for the trustees to defend Mr Crossman’s proceedings, and the second question, which is ancillary to the first, is whether the defence of the proceedings should be funded from the assets of the trusts. As I noted in my judgment of 23 April 2009 at [69] and following, Mr Crossman is likely to seek to amend his claim in the existing proceedings to deal with matters described in that judgment of which he became aware in comparatively recent times.

5 In considering the application for judicial advice I take into account not only the claims which are presently being pleaded by Mr Crossman, but the further claims of the kind I considered in that judgment. I said (at [70]):

“70 Whilst I accept that there is a serious question to be tried that the raising of funds from the ANZ Bank was a breach of trust, the question is not free from difficulty, either in terms of the construction of the trust deed or as to whether Baltarna, as the only beneficiary of the PILT, could properly consent to what might otherwise be a breach of trust. Nor has the plaintiff yet formulated grounds to challenge Baltarna's right to be paid approximately $3.34 million as commission. The strength of a plaintiff's claim for final relief is material to assessing where the balance of convenience lies or, to put it another way, in assessing what is the lower risk of doing injustice by granting or withholding interlocutory relief. However, I am not able to assess the strength of the plaintiff's case to compel repayment of the moneys paid to Baltarna.“

6 I am satisfied that there are reasonable grounds for each trustee to defend the proceedings brought by Mr Crossman. In particular, the question of Mr Crossman’s locus standi is not free from difficulty. It is also reasonably arguable that clause 6.1 of the trust deed of the PILT does not confer the only power on the trustee to raise finance. I accept that each trustee would be acting properly in defending the proceedings brought by Mr Crossman.

7 Under the terms of each trust deed the trustee is entitled to be indemnified out of the trust property for expenses incurred in performing the trusts, including expenses properly incurred in defending proceedings. In the case of the PILT there is express provision by which the trustee may be required to repay the trust amounts previously paid to the trustee as an indemnity for expenses incurred in defending a suit, if the trustee has been proved to have committed fraud, negligence or wilful default. Prima facie each trustee is entitled to be recouped its expenses incurred when acting bona fide in the execution of the trusts in defending the proceedings.

8 The materials before me do not show that either trustee is acting otherwise than in good faith. I am satisfied that each trustee is entitled to relief substantially as sought.

9 I make the following orders:

1. I advise each of the first plaintiff and the second plaintiff that it would be justified in defending Supreme Court proceedings 2847/08 brought by Mr Philip Crossman against them and others;

2. I advise that the first plaintiff is entitled to have recourse to the assets of the PILT for the purpose of paying its reasonable costs of defending those proceedings;

3. I advise that the second plaintiff is entitled to have recourse to the assets of the Baltarna Trust for the purpose of paying its reasonable costs of defending those proceedings;

4. In these orders “PILT” means the trust known as the Prime Indexed Lease Trust established by a deed dated 5 December 1995, a copy of which is at tab 1 to exhibit RAG1 to the affidavit of Richard Arthur Gelski affirmed 20 May 2009 and the expression "the Baltarna Trust” means the trust by that name established by deed dated 5 December 1995, a copy of which is at tab 5 of that exhibit.

5. I make an order in terms of para 2 of the summons.

6. The exhibit should remain with the file.

******

LAST UPDATED:
10 July 2009