Gillespie v Gillespies Cranes Nominees Pty Ltd [2022] NSWSC 1184
In the early 1980s, a trust was established. Its assets came to be worth around $55 Million.
A parent established the trust for the principal benefit of their spouse and 4 children, with the trust company as trustee.
The trust company’s shareholders were 2 of the kids, who became the Defendants in the matter.
The trust deed gave the trust company a wide discretion to make resolutions on the distribution of income. If there was no resolution, the income was to go to the principal beneficiaries. From 2009 to 2020, the trust company made no distributions to principal beneficiaries, but to entities related to the Defendants.
The Plaintiff alleged there were no resolutions appropriately passed in some years, or no resolutions passed in good faith and for proper purpose, meaning that the income should have been paid to principal beneficiaries. Therefore there was a breach of trust.
The Plaintiff claimed one fifth of the distributions made, plus interest, and that trust company “make good” the trust fund.
The trust company purported to amend its trust deed and distribute approximately $58 Million received on compulsory acquisition of some real estate on an unequal basis between the beneficiaries. This included a disparate 44% to each of the Defendants, 3% to the Plaintiff.
The Plaintiff challenged this on two grounds: purporting that the trust company breached a restriction on amending the substratum of the trust, and that the amendment and later distribution was not for good faith or proper purpose.
The Plaintiff made various other claims, including for the removal of trust company as trustee and that their 3% had still not been paid.
The Plaintiff also complained about the Defendants causing the trust company to transfer its crane business to an entity associated with them.
Importantly, claims other than the Plaintiff’s claims for their own money were derivative – they were claims of the trust company which P was seeking leave to bring.
The Defendants and trust company suggested the right to bring this application had been abolished by s 235(2) of the Corporations Act 2001 (Cth).
The Court was forced to consider whether the derivative application was available in respect of the beneficiary of a trust, or an estate – the “derivative action in equity” – and found it was available in special circumstances.
The power of the Court to grant leave for this type of derivative action arises from its jurisdiction over the administration of trusts, which the Court considered at length in the matter.
The resemblances between company law and trust law derivative actions does not make them the same.
The s236(2) abolishment of common law derivative actions does not abolish trust law derivative actions. The Court has the power to grant leave to the Plaintiff.
There was extended consideration of the crafting of Plaintiff’s claim. Some claims would not be repaid into the corpus of the trust.
A further example of a question of whether equitable compensation would be available if leave to bring the derivative application is granted to Plaintiff arose.
The Court ordered an urgent hearing about whether Plaintiff should be granted leave to bring the derivative actions.
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