Phillip Allan Yates v John Norman Phillips Halliday

Phillip Allan Yates v John Norman Phillips Halliday [2006] NSWSC 1346

This case involved a failure to maintain proper trust accounts and a failure to produce trust documents for the beneficiaries.

Lloyd AJ stated:

“In the present case Mr Halliday has appropriated professional fees of some considerable sum “in connection with preparation of income tax return(s) and/or financial statements”. He has failed to produce trust documents that the beneficiaries have a right to see. In my opinion, the beneficiaries are entitled to the documents that they seek and, if not produced, are entitled to a proper and detailed explanation, on oath, as to what has happened to them and where they now are.”

Lloyd AJ continued providing a summation of a Trustee’s duty to account to the beneficiaries for the Trustee’s administration of the Trust:

“The plaintiffs rely upon the alleged failure of Mr Halliday to keep accounts and to keep the documents which form the basis for these accounts, coupled with the right of a beneficiary to see trust documents.

Mr D P Ash, appearing for the plaintiffs, relied upon the following statements of principle, which I accept. The classic statement of principle is found in Scott on Trusts, vol IIA, 4th ed (1987), Boston, Little, Brown and Co at 462–465, adopted by Kirby P in Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 422 and by Gummow J in Re Simersall; Blackwell v Bray [1992] FCA 221; (1992) 35 FCR 584 at 587:

The trustee is under a duty to the beneficiaries to give them on their request at reasonable times complete and accurate information as to the administration of the trust. The beneficiaries are entitled to know what the trust property is and how the trustee has dealt with it. They are entitled to examine the trust property and the accounts and vouchers and other documents relating to the trust and its administration

In Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 AC 709 at 729 , the Privy Council held that the right to seek disclosure of trust documents is one aspect of the court’s inherent jurisdiction to supervise and, if necessary to intervene in, the administration of trusts. Schmidt was referred to with approval by the Full Court of the High Court in CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 221 ALR 196 at 200 . In Simersall, Gummow J said (at 589) that a trustee has an obligation “to keep proper accounts and to allow inspection of them by the cestui que trust”.

Particular reliance is placed on the judgment of Gillard J in Re Fairbairn [1967] VR 633 Gillard J said, at 637:

A trustee is bound to preserve the estate. If he destroys any part of it, he does so at his own peril.

In Freeman v Fairlie [1817] EngR 620; (1812) 3 Mer 24, 36 ER 10 at 17-18, Eldon LC, after noting “the bounden duty of an executor, to keep clear and distinct accounts of the property which he himself is bound to administer”, held that where trust documents are not produced, an executor must show that he has done his utmost to supply his own defect.

Finally, in Spellson v George (1987) 11 NSWLR 300 at 316, Powell J held that it is not correct to say that the enforcement by the court of a trustee’s obligation to account is dependent upon the cestuis que trust first raising a question of fraud or some other like breach of trust (at 316):

On the contrary, so it seems to me, where the court’s assistance in enforcing the trustee’s obligation to account is invoked, the court should be concerned with only two questions, they being, first, whether the plaintiffs are, or the plaintiff is one of the, cestuis que trust, and, second, whether the defendant trustee has failed to observe his obligation to account”.

 

 

 

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