Bergade v La Provence Developments

The Supreme Court of Queensland was presented with an application by the Court-appointed trustees of the La Provence Unit Trust No.2 to be removed and for Daniel Bergade to be appointed as the substitute trustee, with the property of the trust vesting in him as trustee. The trust was established to acquire and develop 34 residential units on land at Runaway Bay, with all units having been sold. The application was made due to the trustees' view that the trust was insolvent, and they proposed to reduce the debts owed to certain unit holders on a pro rata basis to make the trust solvent. The Bergades, Mr Perrett, and the corporate debtor consented to the application, and the Official Trustee in Bankruptcy remained neutral. However, Mr and Mrs Gras, who had solicitors on record, did not respond to communications regarding the application. The Trust Deed clause 14(2) prohibited the appointment of any person who had been a unit holder as a trustee.

The legal issues before the court were whether the court could appoint a unit holder as a trustee despite the Trust Deed clause prohibiting such an appointment, and whether there was a conflict of interest in appointing Daniel Bergade, a unit holder, as the trustee. The court considered the discretion provided by Section 80 of the Trusts Act 1973, which allows the court to appoint a new trustee if it is found inexpedient, difficult, or impracticable to do so without the court's assistance. The court also considered the arguments of the applicant trustees and the respondents, represented by Mr Sweeney.

In deciding the application, the court acknowledged that the Trust Deed clause did not prevent a court from appointing a person who had been a unit holder if a sufficient case was made out. The court accepted that the disputes between the unit holders had been finalised, and the remaining duties of the trustee were largely matters of winding up the trust. However, the court was concerned about the significant defects claim raised by the body corporate, which was still in dispute. The court was worried that if the body corporate were successful, a debt would be owed by the trust, and Daniel Bergade, as a debtor of the trust, might pay his debts and leave the body corporate with a worthless remedy.

The court relisted the matter for further argument after the nature of their concern was brought to the attention of the parties. Mr Sweeney submitted an affidavit by Mr Bergade, offering an undertaking to pay to the trust account of his solicitors the sum of $160,000, which was the sum suggested by the solicitors for the body corporate as an appropriate sum to be quarantined pending the determination of the dispute between the body corporate and the Trust. Mr Sweeney was also prepared to offer an undertaking substantially in accordance with the agreement concerning the foregoing of a proportion of the debts owed to his clients so that the trust might remain solvent. The court found these undertakings sufficient to remove their concerns.

The court made an order in terms that incorporated the undertakings and the terms of an order handed up to the court in draft form at the first hearing. The court also gave leave for Stephen Comino and Cominos, solicitors on the record for Michel Fernand Gaston Gras and Ann-Marie Terese Gras, to withdraw as solicitors on the record as from the date of the judgment.