When the Trustee Does Not Consider: Campion v Mainray Nominees

The Talgarno Trust was a discretionary family trust established in 2004 by the late Mr John Stoate. It held all the issued shares in a company that operated a pastoral lease in regional Western Australia. Mr Stoate had three children and a number of grandchildren. The trust deed defined the grandchildren as "primary beneficiaries" and a wider class, including his children, as "general beneficiaries." The trustee, Mainray Nominees Pty Ltd, held an absolute discretion to distribute income to any of the general beneficiaries.

Mr Stoate died on 17 March 2022. By then, his son David had become the sole director and sole registered shareholder of the trustee company. David was also a general beneficiary of the trust and a director of the company whose shares constituted its principal asset. He occupied every position of control.

Between the financial years ended 30 June 2017 and 30 June 2023, the trustee distributed income to Mr Stoate (while he was alive) and to the Timjo Trust, a trust connected with David. The net operating profit during that period was $1,419,189. Of that amount, $1,161,970 went to the Timjo Trust and $72,109 went to Mr Stoate. No distributions were made to the two other children nor any of the grandchildren. In none of those financial years did the trustee make any request of the grandchildren or the two other children regarding their circumstances or needs.

The grandchildren and two of the three children brought proceedings in the Supreme Court of Western Australia in Campion v Mainray Nominees Pty Ltd [2026] WASC 120. They alleged that the trustee had failed to give real and genuine consideration to the exercise of its distribution power in their favour. They sought orders setting aside the distributions made to the Timjo Trust, a declaration that the primary beneficiaries were entitled to the net income in equal shares, and the removal of Mainray Nominees as trustee.

The defendants applied to strike out the statement of claim.

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The duty to consider

A trustee holding a discretionary power to distribute income is not required to make equal distributions, or any distributions at all, to every beneficiary in every year. That is the nature of a discretionary trust. The question, however, is whether the trustee's discretion was exercised at all, and if so, whether it was exercised after proper consideration.

The foundational authority is Karger v Paul [1984] VR 161, where McGarvie J held that a court will not examine how a trustee exercised its discretion, provided the essential components of that exercise are present. Those essential components are that the discretion is exercised in good faith, upon real and genuine consideration, and in accordance with the purposes for which the discretion was conferred.

What this means in practice was considered by the Victorian Court of Appeal in Owies v JJE Nominees Pty Ltd (in its capacity as trustee for the Owies Family Trust) [2022] VSCA 142. That case involved a family trust where the relationship between the beneficiaries and the person controlling the trustee had broken down. The Court of Appeal held that the trustee was expected to be informed about the differing circumstances, needs, and desires of each beneficiary as an incident of the familial bonds that underpin the trust and explain its purpose. The Court also held that when those familial bonds become strained or broken, the purpose of the trust to provide for the family as a whole does not change, and the trustee is not relieved of the obligation to inform itself properly.

The High Court in Finch v Telstra Super Pty Ltd (2010) 242 CLR 254 held that if the consideration is not properly informed, it is not genuine.

In Campion, Lemonis J applied these principles at the strike out stage. His Honour accepted that a case alleging failure to give real and genuine consideration is a circumstantial case. The critical questions are: what are the relevant circumstances, and do those circumstances found an inference that the trustee did not give genuine consideration in exercising its discretion?

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A distinction worth noting

At paragraph [63] of his reasons, Lemonis J drew a distinction that is significant for how these claims are framed.

The plaintiffs had pleaded that the trustee failed to give real and genuine consideration "to the exercise of the Distribution Power in favour of the plaintiffs." The authorities, however, frame the duty differently: they require a trustee to give real and genuine consideration in exercising their discretion. That is not the same thing as requiring the trustee to give consideration to exercising the power in favour of a particular beneficiary. The latter formulation, as Lemonis J observed, shades into an obligation to positively act in favour of that beneficiary, which is a different proposition.

The Court in Owies found that the trustee was required to give real and genuine consideration to the position of certain primary beneficiaries. Lemonis J accepted that principle; he noted, however, that it differs from requiring a trustee to positively act in favour of a beneficiary. His Honour invited the parties to reflect on whether the pleading correctly stated the subject matter to which genuine consideration must be directed.

The practical consequence was that paragraphs 24 to 26 of the re-amended statement of claim, which contained the core genuine consideration allegations, were struck out as embarrassing (in the pleading sense: insufficiently clear and particular to enable the defendants to know the case against them). The claim was not dismissed. The plaintiffs were given leave to replead. But the judgment signals that a beneficiary challenging a trustee's exercise of discretion must frame the claim with precision: the duty is to consider properly, not to decide in any particular direction.

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What this means for trustees and beneficiaries

The judgment confirms that a trustee with an absolute discretion is not insulated from challenge merely because the trust deed describes the power in broad terms. Where the person controlling the trustee is also a beneficiary who is competing with other family members for distributions, the circumstances call for particular scrutiny of the process by which the discretion was exercised. Did the trustee inform itself about the circumstances of the other beneficiaries? Did it turn its mind to the question at all?

The judgment also confirms that beneficiaries who wish to challenge a distribution decision must articulate, with reasonable particularity, the circumstances from which a failure to consider can be inferred. A bare allegation that the trustee "failed to give genuine consideration" is not sufficient. The pleading must identify what the trustee should have known, what inquiries it should have made, and why the absence of those inquiries supports the inference that genuine consideration was not given.

For a discussion of how structural defects in the trust deed itself can create a different category of problems, including lapsed appointor roles, narrowed beneficiary classes, and inoperative variation powers, see our article “The Trust Deed No One Reviewed: Three Structural Defects That Took 39 Years to Discover”.

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How Opportuna Legal can help

Opportuna Legal advises trustees, beneficiaries, and family groups on trust administration, distribution disputes, and the fiduciary obligations that apply to discretionary trusts. If you are a trustee uncertain about the process you should follow when exercising a distribution power, or a beneficiary concerned that a trustee has not given proper consideration to your position, contact Opportuna Legal.

Contact: reception@opportunalegal.com.au | +61 8 6110 3748

Anthony Jarvis | Director, Opportuna Legal

Anthony Jarvis is the Director of Opportuna Legal, a corporate and commercial law firm based in Perth, Australia. Anthony advises private companies, founders, and boards on M&A, capital markets, corporate governance, and commercial contracts. He has particular experience advising on trust structures, trustee obligations, and succession planning for family and private businesses.

This article is general information only and does not constitute legal advice. Readers should obtain professional advice specific to their circumstances before acting on any of the information contained in this article.