Bailey v Bailey

[2009] NSWSC 1018

CITATION:	Bailey v Bailey [2009] NSWSC 1018
HEARING DATE(S):	25 September 2009
JUDGMENT OF:	Gzell J
EX TEMPORE JUDGMENT DATE:	25 September 2009
DECISION:	Defendant removed as trustee and appointee appointed in her stead.
CATCHWORDS:	PROCEDURE - Supreme Court Procedure - Removal of Trustees - Trustee Act 1925, s 70 - inherent jurisdiction - trustee mortgaged and remortgaged trust property and utilised substantial part of proceeds for personal benefit - defendant does not appear but served with documents - consent of proposed appointee
LEGISLATION CITED:	Trustee Act 1925
CATEGORY:	Principal judgment
CASES CITED:	Letterstedt v Broers (1884) 9 App Cas 371 Guazzini v Pateson (1918) 18 SR (NSW) 275
PARTIES:	Arnold Neil Bailey (Plaintiff) Jenny Lee Bailey (Defendant)
FILE NUMBER(S):	SC 3342/09
COUNSEL:	R Graham (Plaintiff)
SOLICITORS:	Emery Partners (Plaintiff)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

FRIDAY 25 SEPTEMBER 2009

3342/09 ARNOLD NEIL BAILEY v JENNY LEE BAILEY

EX TEMPORE JUDGMENT

1 The Bailey Family Trust was established under a trust deed dated 8 November 2004. It was established to develop land in Tamworth to be known as Regal Park. Jenny Lee Bailey was appointed sole trustee. The land was sold to the Trust by Arnold Neil Bailey granting vendor finance.

2 Jenny Lee Bailey borrowed $170,000 on security of the land. She engaged a surveyor to work on the land and Arnold Neil Bailey saw one invoice from the surveyor for $35,000. She refinanced by borrowing $270,000, paying out the first loan for $163,250. She told Mr Bailey that the first loan was all spent and she needed the additional $100,000 to buy a window cleaning business. When Mr Bailey remonstrated with her she told him she could please herself.

3 Section 70 of the Trustee Act 1925, so far as is material, provides as follows:

”(1) The Court may make an order for the appointment of a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.”
“(2) The appointment may be made whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient difficult or impracticable so to do without the assistance of the Court.”

4 There is also power in the Court to remove a trustee as part of its inherent jurisdiction.

5 In Letterstedt v Broers (1884) 9 App Cas 371 at 385-386, Lord Blackburn cited with approval a passage from Story in Equity Jurisprudence as follows:

“But in cases of positive misconduct, Courts of Equity have no difficulty in interposing to remove trustees who have abused their trust; it is not indeed every mistake or neglect of duty, or inaccuracy of conduct of trustees, which will induce Courts of Equity to adopt such a course. But the acts or omissions must be such as to endanger the trust property or to shew a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.”

His Lordship went on to say at 386:

“It seems to their Lordships that the jurisdiction that a Court of Equity has no difficulty in exercising under the circumstances indicated by Story is merely ancillary to its principal duty, to see that the trusts are properly executed. This duty is constantly being performed by the substitution of new trustees in the place of original trustees for a variety of reasons in non-contentious cases. And therefore, though it should appear that the charges of misconduct were either not made out, or were greatly exaggerated, so that the trustees were justified in resisting them, and the court might consider that in awarding costs, yet it satisfied that the continuance of the trustee would prevent the trust being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.”

6 These passages were endorsed by Street CJ in Eq in Guazzini v Pateson (1918) 18 SR (NSW) 275 at 292-293.

7 In this case the evidence establishes that Jenny Lee Bailey has mortgaged and remortgaged the trust property and used a substantial part of the proceeds for her personal benefit. She has endangered the trust property. Her continued trusteeship will prevent the trust being properly executed. In terms of s 70(2) of the Trustee Act it would be expedient to remove Jenny Lee Bailey as it is inexpedient to attempt to remove her in terms of the trust deed.

8 Mrs Bailey does not appear before the Court but the papers have been served upon her and she has not objected to their contents. On 29 June 2009 she executed a deed appointing Mr Bailey an additional trustee. Mr Bailey has said he will retire if Daniel Neil Bailey is appointed trustee in substitution for Jenny Lee Bailey. Mr Daniel Bailey consents to the appointment.

9 I close the ECM court in this matter. The Court orders that Jenny Lee Bailey be removed as a trustee of the Bailey Family Trust and that Daniel Neil Bailey be appointed a trustee in her stead.

10 The Court makes orders in terms of paragraphs 2, 3 and 4 of the short minutes of order initialled by me, dated and placed with the papers.

**********