Robert Aitken successfully acted for the plaintiff in the Queensland Supreme Court case of Wallerstein v Bedington  QSC 71. In this civil litigation involving disputes around a trust created under a Will, the court found in favour of three beneficiaries under a Will after they had been denied their share of a trust by the sole trustee (the defendant). R, C and J Wallerstein were recipients under their grandmother’s Will of one-quarter each of a small parcel of shares in the Commonwealth Bank and a sum of money. These amounts were held on trust by the defendant as the sole trustee for each recipient until they turned 18. Two of the beneficiaries who had turned 18 were claiming the balance of their trust fund, while the remaining beneficiary was seeking to have the defendant removed as trustee and replaced, the action being brought by his litigation guardian.
In this litigation, the defendant disputed the two plaintiffs’ claims seeking payment of the balance, essentially arguing that each had already received full payment of what was owed to them under the trust. These payments were said to have been received by way of wages from a company under the defendant’s control, which he stated were in fact advances under the trust, as well as payments made to the defendants father as reimbursement for some of their school fees. An undisputed distribution from the trust made in 2011 was then said to have constituted the remainder of what was owed (this distribution argued by the plaintiffs as being the only payment so far received under the trust).
Various records provided at the trial showed that Mr Wallerstein (the plaintiffs’ father and son of the testatrix, who was employed by the company controlled by the defendant) set up an account in 1996 in the defendant’s name to deal with estate monies. The defendant later failed to keep the estate monies separate from those of his companies.
The Defendant argued that a journal provided as evidence was inaccurate in that it did not account for the wages paid to R and C, the school fees paid to Mr Wallerstein and that while interest accrued, it was not at a rate of 10%, but what he called the “market rate”. The trial judge was not satisfied that the wages paid were in fact advances under the trust, regardless of the fact that the plaintiffs were clearly never employees. This was particularly due to the fact that he failed to keep any record of them being payments under the trust, while their names appeared a number of times as employees when payments were made.
In regard to the school fees the trial judge rejected the defendant’s claims that they were paid out of the trust fund, as at the time they were paid by Mr Wallerstein, who was reimbursed from money in the company account, there was no agreement to this effect. This therefore meant that he did not exercise any discretion as trustee to make the payments for the benefit of R and C.
Finally in respect to the issue of interest, the trial judge noted that the defendant’s argument that the rate was the “market rate” would have been difficult to implement by Mr Wallerstein and that the only records of the interest rate were 10% and that would therefore be the applicable rate.
Having rejected the arguments by the defendant, the trial judge determined that outstanding amounts were owing to the plaintiffs under the trust. The trial judge applied a compound rate of interest as the defendant had employed trust funds for his own business.
The remaining trustee under the age of 18 sought to have the Defendant removed as trustee and replaced with the person named in his grandmother’s will if the Defendant were to default in his acting. the Defendant did not consent to being replaced as trustee
The trial judge found that there was a clear case for a new trustee as the Defendant had failed to provide a reliable set of accounts for these trusts and had mixed the trust funds with monies in his own personal bank account. The judge stated that this showed that there can be little confidence that the Defendant will now diligently apply himself to the trusteeship of the fund. Consequently the replacement trustee was appointed and the Defendant was removed as trustee.
The court also ordered that the Defendant pay the plaintiffs’ costs of the action on an indemnity basis, rather than the usual standard basis.
This case highlights the rights and possible remedies available to beneficiaries under a trust when the trustee fails to act diligently and appropriately in fulfilling their duty as trustee.
Aitken Whyte Lawyers Brisbane
2/414 Upper Roma Street
Brisbane QLD 4000