May 24, 2022

Campbell v Campbell [2022] NSWSC 554

8 minutes

“Does the trustee really own the farm, or it still in mum’s estate?”

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In the 1970s, Dad - a farm owner - planned to transfer his farm into a trust with TCo as trustee and his family as beneficiaries.

If it worked, his wife and 4 kids could take the benefit of the farm without paying death duties: [78]

At this time, rural families often faced death duties at “confiscatory levels” when farms passed to the next generation: [51]

Dad died in 1976. Mum died in 2017. A number of disputes arose between the siblings and executors. Sadly, the legal fees associated with those eventually required the sale of the farm: [3], [5], [6]

(For the child who worked the farm and hoped to go on, this loss was - understandably - sharply felt: [19], [20])

Mum’s executors, and the son who would inherit the farm from her estate [123], said the farm was held by TCo on a bare trust for Mum: [13]

The farm had been acquired by Dad, from his father, in the 1950s. Over time, various parcels were added to it and it was operated by various different partnerships: [25] - [29]

After Dad’s 1976 death, Mum and the kids continued to work the farm: [34]

Over the decades, Mum tried to discuss succession planning with the family, unsuccessfully: [40]

Mum died in 2017 with her estate valued at $12.5m - crucially, that valuation was based on the assumption she (and not beneficiaries of the 1975 trust) owned the farm: [43]

The Court’s understanding of the 1975 transaction was helped by the contemporaneous notes made by a young lawyer who was a family member (and who would go to the bar and take silk decades later): [44] - [46]

Their notes included a notation that it was likely that the scheme to avoid death duty would succeed. They were surprised to hear, decades later, that the effect of the transfer was in question: [56]

Various documents were executed and resolutions of TCo and related entities passed. Ownership of the farm passed to TCo: [82] - [103]

After Dad’s death, his executors entered into various transactions on the basis Dad’s beneficial interest in the land had been validly transferred: [104]

This conduct included a “well crafted, detailed and thoughtful” letter from Mum whose contents would not make sense unless Mum believed the transfer was effective: [110], [111]

In the following decades the parties proceeded as if the transaction had been effective including: Mum and others making a stat dec [113], swearing an affidavit [118], receiving legal and restructuring advice [115], [116] TCo giving guarantees [114], and TCo’s repeated mortgaging of the farm over decades [140]

The Court found TCo paid Dad valuable consideration for the transfer of the farm, and so the farm was part of the assets of the trust: [124]

The scheme was effective, in accordance with how it had been treated by all relevant parties until 2020: [128], [143]

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By James d'Apice

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