Background
The proceeding concerns a dispute among five siblings over the administration of the Coorey Family Trust Fund and the J&J Coorey Trust. Two siblings, Fiona and Monique Coorey, sued the trustee, Moruben Nominees Pty Ltd, the other three siblings, and associated companies. They allege, among other things, mismanagement of trust property and company funds, breaches of duty, and oppressive conduct.
The defendants sought to strike out parts of the statement of claim concerning an alleged “Equal Sharing of Funds Arrangement” between the siblings. The plaintiffs separately sought to stop trust money being used to defend the proceeding and to require restoration, by payment into court, of an equivalent amount of trust funds already used for that purpose.
The Court’s Holding
Scruby J dismissed the defendants’ strike-out motion. The pleaded arrangement was capable of being relevant to recognised claims for breach of partnership obligations, fiduciary duty and oppression. Whether the arrangement existed or supported those claims was a matter for trial; the pleading was not embarrassing or improperly prolix.
The Court held that the litigation was, in substance, a beneficiary dispute: a contest between two groups of beneficiaries over control and management of the family trusts. The trustee therefore had no prima facie entitlement to use trust assets to fund its defence while the proceeding remained unresolved. The Court restrained the trustee from using either trust’s funds for that purpose and ordered the trustee and relevant sibling defendants to ensure that the amount previously used was paid into court within 28 days, pending final determination or any appeal. The balance of the plaintiffs’ motion was dismissed.
Key Takeaways
- A trustee generally cannot use trust assets during pending hostile litigation between beneficiaries where doing so advances only the trustee’s or one group of beneficiaries’ interests.
- Allegations concerning an informal family arrangement need not be struck out where they are capable of supporting pleaded fiduciary, partnership or oppression claims.
- Funds already used to defend such litigation may be restored by an order requiring payment of an equivalent amount into court.
Why It Matters
The decision applies the beneficiary-dispute principle to a family-trust conflict in which the trustee’s controlling directors were aligned with only some of the principal beneficiaries. It protects trust assets from being used to finance one side of an intra-beneficiary contest before the merits are determined.
It also illustrates the limited role of a strike-out application: a contested arrangement and its legal consequences ordinarily should be tested at trial where the pleading identifies viable causes of action.