• October 20, 2020

An issue of trust – can the District court dissolve an existing trust

An issue of trust – can the District court dissolve an existing trust

An issue of trust – can the District court dissolve an existing trust 900 577 aelegal


The plaintiff was injured in a car accident in 2008 when he was 9 years old. His injuries were severe and included an acquired brain injury. In 2014 the District Court approved the compromise of the plaintiff’s claim in the amount of $7,000,000 plus trustees’ fees in the sum of $1,268,813 and costs to be taxed if not agreed.

The Judgment placed the judgment sum in a trust (Court Trust) the trustee of which was a private trust company (Trust Company).

In order to maximise the tax efficiency of the trust it was necessary for the Trust Company to apply to the State Administrative Tribunal (SAT) of Western Australia pursuant to the provisions of the Guardianship and Administration Act 1990 to be appointed as an administrator of the plaintiff’s estate. This enabled them to place the funds in a superannuation fund. A Guardian was also later appointed to the plaintiff.

Following a breakdown in the relationship between the Trust Company and the plaintiff’s mother there were a number of applications brought to SAT but the position of the Trust Company as the limited (and amended) administrator of the plaintiff’s estate in relation to his superannuation investment remained until 9 April 2019. SAT then set the administration order aside because there was no evidence to rebut the presumption of the plaintiff’s capacity. The guardianship order had been revoked at an earlier date.

The $7,000,000 was still in the superannuation fund but not under the supervision of a SAT administrator, nor under the supervision of the District Court as part of the Trust Fund.

Nonetheless, the plaintiff applied to court to set the Trust Fund aside. The question which arose was whether the District court has the jurisdiction to set aside a trust which it had created and if so, what factors should it consider.

The court stated that it had the power create a trust of monies recovered by a person under a disability pursuant to O 70 r 12 Rules of the Supreme Court 1971 (WA) but there is no corresponding express power to terminate the trust. The question thus arose whether there was an implied power to terminate the trust. The court looked at several decisions that had considered the matter but found a relevant old case where it was the held that:

If such an action had been brought in the Supreme Court, this Court would have all the powers conferred by s 16 and s 23 to make provision for the representation and protection of the interests of infants and disabled persons. Indeed, that is the purpose which authorises the rules contained in O 70, including the provisions obliging a disabled person to sue by a guardian ad litem, requiring prior approval of any compromise of a disabled person’s claim before it will be binding, and then stipulating for the control of moneys recovered by payment to a trustee appointed by, and subject to the direction of the court. This jurisdiction and these powers are, therefore, all ancillary to a claim directly within the civil jurisdiction of the District Court and no issue can possibly arise that, not being ancillary to the principal claim, they are outside the scope of that court’s equity jurisdiction such as led to the decision in Commercial Developments Pty Ltd (t/as Don Rogers Motors Pty Ltd) v Mercantile Mutual Insurance (Workers Compensation) Ltd (1991) 5 WAR 208.”

It is debatable whether that decision was binding on the District Court since that matter was heard in the Supreme Court and its remarks about the District Court were in passing.

The court went on to find that the findings of SAT regarding the plaintiff’s disability were not relevant to an application to terminate the trust. The court again relied upon the old case and found that it was obliged to decide the controversy in accordance with equitable principles to do justice in a particular case. The court then heard evidence from the plaintiff himself and from experts and concluded that the court should exercise its power to terminate the Court Trust.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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