Rockman v IPR Nominees & Ors [2015] VSC 623 (13 November 2015)

ZACHARY ROCKMAN and RACHEL ROCKMAN (who sue by their litigation guardian, LYNETTE ANNE ROCKMAN)	Plaintiffs

v

I.P.R. NOMINEES PTY LTD (which is sued as the trustee of The 1965 Irvin Peter Rockman Trust)	First Defendant

MATTHEW MYER ROCKMAN	Second Defendant

EDWARD JACOB ROCKMAN	Third Defendant

JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	21 September 2015
DATE OF JUDGMENT:	13 November 2015
CASE MAY BE CITED AS:	Rockman v IPR Nominees & ors
MEDIUM NEUTRAL CITATION:	[2015] VSC 623

PRACTICE AND PROCEDURE — Where trustee seeks removal of litigation guardian of infant plaintiffs — Whether removal of litigation guardian in the best interests of infant plaintiffs — Slaveski v Victoria [2009] VSC 423; (2009) 25 VR 160 — In re Taylor’s Application (1972) 2 QB 369 — Supreme Court (General Civil Procedure) Rules 2005, r 15.03(4).

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	K P Hanscombe QC A P Dickenson	Taussig Cherrie Fildes Lawyers


For the First Defendant	N O’Bryan SC	Kenna Teasdale Lawyers

For the Second and Third Defendants	R C Wells	Arnold Bloch Leibler

1 The first defendant (‘the trustee’) is the trustee of The 1965 Irvin Peter Rockman Trust (‘the trust’).[1] The infant plaintiffs are beneficiaries of the trust.

2 The first plaintiff was born on 19 February 1999 and the second plaintiff was born on 2 August 2003. Their litigation guardian is their mother, Lynette Anne Rockman (‘Mrs Rockman’ or ‘litigation guardian’).

3 The father of the plaintiffs is Irvin Peter Rockman (‘the deceased’), who died on 30 August 2010. As well as the plaintiffs, the deceased was survived by four adult children, three of whom are defendants in this proceeding.

4 The plaintiffs seek certain declarations and orders in respect of the trust as follows:

(a) a declaration that a deed of variation made in 2003 (‘the deed of extension’) in the trust is beyond the power provided to the trustee of the trust by the deed of settlement made 12 August 1965 (‘the trust deed’) and is void and of no effect;[2]

(b) a declaration that the trust vested on the death of the deceased on 30 August 2010;[3] and

(c) an order that the corpus of the trust be distributed to the children of the deceased in equal shares on each of them attaining the age of 21 years in accordance with cl 4 of the trust deed.[4]

5 By summons filed 13 August 2015, the trustee seeks to remove Mrs Rockman as the litigation guardian of the plaintiffs and substitute another person as litigation guardian in her place.[5]

6 The second and third defendants support the trustee’s application. The fourth defendant did not appear on the hearing of the application.

7 The trustee contends that by seeking the declarations and orders referred to above, the litigation guardian is not acting in the best interests of the plaintiffs. This is because the outcome sought by the plaintiffs is against their financial interests and they will suffer very substantial financial detriment.

(a) the trust deed provides that on the vesting date of the trust, being on the death of the deceased on 30 August 2010, the plaintiffs would have been entitled to one sixth of the trust upon attaining the age of 21 years;[6]

(b) by the deed of extension executed in 2003, the vesting day was extended to 30 June 2015;[7]

(c) by a deed of appointment executed on 28 July 2009 (‘the deed of appointment’), the trustee appointed that as and from the ‘operative date’, defined as the date of death of the deceased, the trustee would hold 59 per cent of the corpus of the trust for the infant plaintiffs until the vesting day, being 30 June 2045;[8]

(d) in a letter of wishes executed by the deceased dated 1 April 2010 (‘the letter of wishes’), the deceased expressed a wish that the 59 per cent corpus of the trust held on trust for the plaintiffs be distributed to them upon the eldest of them attaining the age of 25 years;[9]

(e) the trustee has stated that it intends to distribute the corpus of the trust to the plaintiffs upon the elder of them attaining the age of 25 years, in accordance with the deceased’s letter of wishes;[10] and

(f) it is in the interests of the plaintiffs to receive 59 per cent of the corpus of the trust upon the elder of them attaining the age of 25 years, rather than each receiving one sixth of the corpus of the trust upon them attaining 21 years.

9 On the assumption that the deed of appointment is valid and operative, the trustee calculates the interests of the plaintiffs would be 59 percent (or 29.5 per cent each) of the corpus of the trust. If the deed of appointment were not operative and the trust vested on 30 August 2010, the trustee calculates the interests of the plaintiffs would be 33.32 per cent (or 16.66 per cent each) of the corpus of the trust.[11]

10 If the deed of appointment is set aside, the amounts already allocated by the trustee to the plaintiffs from the trust assets may have to reversed or ordered to be repaid.[12]

11 The outcome sought by the plaintiffs in the proceeding is very much against the financial interests of the plaintiffs as it will reduce their beneficial interests in the trust by a substantial percentage. Such a significant decline in the interests of the plaintiffs in the corpus of the trust that would occur if the relief sought by the litigation guardian were achieved would be very detrimental to their financial interests in circumstances where their interests are to be distributed upon the eldest of them reaching the age of 25 years.

12 The concern of the litigation guardian that the plaintiffs will not receive their entitlements until 2045 ignores three factors: the deceased’s letter of wishes to distribute the entitlements to the plaintiffs when the eldest reaches the age of 25 years; the fact that the directors of the trustee have consistently acted in accordance with the letter of wishes; and that there is no reason to suspect they will not do so in the future.

13 It is inappropriate, if not improper, for a litigation guardian to seek to raise controversies about matters that can only be detrimental to the interests of those whom they represent. If not for the actions of the litigation guardian, there would be no litigants agitating to declare the relevant documents invalid or inoperative, there would be no questions needing to be answered and there would be no need for a trial.

14 The second and third defendants are the adult children of the deceased. They made short oral submissions supporting the trustee’s position. They also noted the plaintiffs have not sought a declaration that the deed of appointment be declared invalid, although they conceded this could be remedied by amendment. They stated that while review of the deed of extension may be in the interests of the plaintiffs, the review of the deed of appointment is clearly not in their interests for the same reasons as advanced by the trustee.

15 In a letter to the trustee’s solicitors dated 11 June 2015, the plaintiff’s solicitors set out their issues concerning the deed of appointment as follows:

16 The litigation guardian contends that the deed of appointment purports to be executed pursuant to cl 4 of the trust deed. Clause 4 empowers the trustee to make an appointment as to which of the beneficiaries, and in what proportions, the trustee shall hold the trust fund ‘as from the vesting day’ as follows:

17 The deed of appointment purports to make an appointment as from the ‘Operative Date’, which is earlier than the vesting day, with such appointment to operate until the vesting day, however there is no express power in the trust deed for the trustee to make such an appointment.

18 The litigation guardian points out that the trustee’s position assumes the validity of the deed of appointment whereas the litigation guardian contends there are several issues concerning the validity of the deed of appointment that will require determination at trial. To make a determination on what is in the best interests of the plaintiffs would be pre-judging what is to be determined at trial and this should be avoided. The validity of the deed of appointment is a trial issue, particularly for the fourth defendant, whose interest is apparently completely extinguished by the deed of appointment.[13]

19 The conduct of the proceeding is in fact in the interests of the plaintiffs as the effect of the deed of extension delays the entitlement of:

(a) the first plaintiff to a share in the corpus of the trust for 25 years, from 21 February 2010 when he will be 21 years, to 30 June 2045, when he will be 46 years; and

(b) the second plaintiff to a share in the corpus of the trust for almost 21 years, from 2 August 2024 when she will be 21 years, to 30 June 2045, when he will be 41 years.

20 It is in the interests of the plaintiffs to have autonomy over their financial affairs as soon as is reasonable rather than have their financial affairs controlled by the trustee until their middle age. This would enable them to invest in a wider range of investments from an earlier age, such as a residential property that can be used as a primary place of residence and the ability to finance self employment business opportunities.

21 It is not possible to predict what might become of the corpus of the trust between 2020 and 2045 with no attempt to provide any evidence on which to make any comparisons. The trustee has not provided any evidence to support his assertion that the corpus of the trust will maintain its size or grow in this period of time and it is not possible for the Court to determine that the plaintiffs will receive a larger sum if the deed of appointment is determined to be valid and effective, with the entitlements of the plaintiff being paid in 2045.

22 The trustee’s statement that it intends to act in accordance with the deceased’s letter of wishes is no guarantee that it will distribute 59 per cent of the corpus of the trust to the infant plaintiffs upon the elder of them attaining 25 years. The letter of wishes is not binding on the trustee, and the letter itself says as much. The letter of wishes does not bind any successor directors of the trustee. The deceased had no interest in the corpus of the trust and no power to direct the trustee as to its administration of the trust.

23 In any event, the trustee has previously failed to act in accordance with the letter of wishes, and it would not be in the interests of the plaintiffs to assert a construction that is dependent upon the letter of wishes. The letter of wishes requests that the trustee pay the bequests in the deceased’s will to the extent that the assets of the estate are insufficient to do so. In separate proceedings issued by the fourth defendant and the adult daughter of the deceased seeking provision from the deceased’s estate, there is an issue concerning abatement of certain bequests. The directors of the trustee are the executors of the deceased’s estate and in that capacity, they issued a proceeding seeking rectification of the deceased’s will so that the bequests would abate.

24 There is real doubt as to whether the trustee could distribute at any time prior to 2045, when there are remainder beneficiaries of the trust who would take an interest in the corpus of the trust if the infant plaintiffs are not alive in 2045.

25 Finally, if a new litigation guardian were appointed for the plaintiffs, there would probably be delay and significant costs that would arise as a result of that appointment.

26 Unless there is some statutory provision to the contrary, a minor must sue by a litigation guardian.[14] Prima facie, a parent has the natural right to look after the interests of his or her children.[15]

27 In Slaveski v Victoria, Kryou J (as he then was) described the duties of a litigation guardian as follows:

28 The Court has a discretion to remove a litigation guardian or substitute another person as a litigation guardian where the interests of a party who is a person under disability so require.[17]

29 The trustee contended that the test to be applied was whether or not the removal of the litigation guardian was for the benefit of the plaintiffs, citing the paragraph above from Slaveski v Victoria, and said to be approved by the Court of Appeal in Ahmet v Jardine.[18] It should be noted, however, that the two cases do not deal specifically with an application for removal of a litigation guardian.

30 The written submissions of the litigation guardian provided an overview of the circumstances where a litigation guardian would be removed and another person substituted in his or her place as follows:

(a) where the litigation guardian is not an appropriate person to conduct the litigation where, for example, they have an interest contrary to the person under a disability;[19]

31 The litigation guardian also referred to the decision of In re Taylor’s Application [22] where it was determined that the removal of a parent as a litigation guardian required establishing that the parent’s position was so unreasonable as to demand removal,[23] contending that this approach should be followed in relation to the rigour of the test to be applied to the trustee’s application in this proceeding.

32 The trustee submitted that the test in In re Taylor’s Application is not contrary to whether or not the litigation guardian is acting in the best interests of the plaintiffs because if something is against the best interests of the plaintiffs, it would also be considered to be unreasonable.

33 In re Taylor’s Application concerned a settlement of proceedings of children born with deformities as a result of their mothers having taken thalidomide during their pregnancy. A deed for the settlement of the 374 cases stipulated that unless all 374 parents accepted the deed, the whole scheme would go. Six of the parents as next friends (litigation guardians) of their children objected to the deed on the ground that his or her child may not qualify for funds under the proposed deed. They asserted that the deed was not in the particular child’s best interests who might do better pursuing the action for damages. An application by an assenting parent seeking the removal of the dissenting parents was granted. On appeal, it was held that the parent was prima facie the best next friend of his or her own child and was entitled to examine the proposed compromise to see how it would affect their own child, without regard to any of the other children. It was also held that unless the applicant seeking to remove the dissenting parents as next friend could satisfy the court that the compromise was in the best interests of the particular child and that, on that ground, the parent was being unreasonable, he or she should not be removed.

34 Lord Denning MR stated that the burden fell ‘clearly’ on those who seek to remove a parent to show that the parent is not acting in the interest of his or her child as its next friend. His Lordship referred to the legal position as stated by Sir George Jessel MR in In re Birchall:

35 Lord Denning then framed the decision of the five next friends as one made by reference to reasonableness:

36 Lord Justice Edmund Davies described an order for removal of a next friend as a ‘grave thing’ and that it is for those seeking to remove the next friend to establish that the result of applying that test is that such removal is called for in the child’s interest and, if the matter is left in doubt, the parent’s vested right prevails and he must be left to act on his child’s behalf. [26]

37 I did not understand the litigation guardian to be contending that there is an added requirement of unreasonableness to the test espoused by the trustee, but rather that the same rigorous approach as taken in In re Taylor’s Application should be applied in the consideration of whether the litigation guardian is not acting in the interests of the plaintiffs.

38 The trustee’s position on this removal application assumes that the deed of appointment is valid. The plaintiff challenges that assumption. The validity of the deed of appointment is integral to the resolution of the removal application. The very substantial financial detriment said to affect the plaintiffs is based on the validity issue, that is, in the event that the plaintiffs are successful in the proceeding, the outcome for the plaintiffs is that they will suffer financial detriment.

39 The challenge to the validity of the deed of appointment is a real and legitimate issue and, in my view, requires determination at trial, rather than in a superficial manner on an application for removal of the litigation guardian. The validity issue affects not only the entitlements of the plaintiffs to the corpus of the trust, but also the entitlement of the second, third and fourth defendants. Whilst the second and third defendants do not wish to agitate the issue, the fourth defendant is a party to the proceeding and has a legitimate interest in agitating the issue. It should also not be assumed that if the litigation guardian is removed that a replacement litigation guardian would not agitate the validity issue.

40 It is in the interests of the plaintiffs and the second to fourth defendants to have the validity issue determined. It is also in the interests of the trustee. That determination will ensure that the trust is administered in accordance with its provisions, rather than there being a question left open as to the validity of the deed of appointment. This will also ensure that the trustee can give effect to the terms of the trust, hold the trust assets for the benefit of the beneficiaries, pay them the correct amounts and, if necessary, recover any overpayment from an overpaid beneficiary or from future receipts of income to which the beneficiary would otherwise be entitled.

41 The trustee’s contention that the outcome sought by the plaintiffs in the proceeding will cause ‘very substantial financial detriment’ lacks force as it relies on the assumption that the deed of appointment is valid. That assumption cannot be made and the validity of the deed of appointment should be determined at trial. It is the interests of the plaintiffs to have the validity of the deed of appointment determined so that they have certainty as to their entitlements to the corpus of the trust.

42 Insofar as the trustee says that it will act in accordance with the deceased’s letter of wishes, I accept the submissions of the litigation guardian as to the problems with it. That statement or, indeed, the letter of wishes does not provide the plaintiffs with any certainty or comfort that they will be paid their entitlements upon the elder of the plaintiffs attaining 25 years. It also leaves open what that entitlement might be because of the validity issue.

43 I am satisfied that the litigation guardian is acting in the best interests of the plaintiffs and that her removal as their litigation guardian would not in their best interests.

44 Accordingly, I dismiss the trustee’s application to remove Mrs Rockman as the litigation guardian of the plaintiffs.

^[11] Affidavit of Arthur Topalidis sworn 15 September 2015, [9]. A similar calculation would be required for the second and third defendants with their respective percentages. Counsel for the trustee and Mr Topalidis explained that this meant the plaintiffs’ interests would be reduced by 43 per cent, being the percentage difference between 59 per cent and 33.32 per cent.

^[13] The trial of proceeding S CI 2013 01852 being the fourth defendant’s application for provision from the deceased’s estate, pursuant to s 91 of the Administration and Probate Act 1958, is part heard, having been adjourned on 15 October 2014 pending the determination of proceeding S PRB 2012 7166 (being an application by the executors of the estate of the deceased rectify the deceased’s will) and now the determination of this proceeding.

^[15] In re Taylor’s Application (1972) 2 QB 369, 382 citing with approval Woolf v Pemberton [1877] 6 Ch 19, 23.

^[20] Re Corsellis; Lawton v Elwes (1884) LTR 703, 704 (CA); See also Allregal Enterprises Pty Ltd v Carpaolo Nominees Pty Ltd (No 3) [2009] WASCA 118, [4].

[21] Rhodes v Swithenbank (1889) 22 QB 577 (CA); M’Laughlin &Ors v Moore (1884) 5 NSWR 111, 112 (Full Ct, NSWSC).

Supreme Court of Victoria

Rockman v IPR Nominees & Ors [2015] VSC 623 (13 November 2015)