Clarke v Stella Jane Clarke as Executrix and Trustee of the estate of William John Clarke (Dec)
[2002] WASC 73
CLARKE -v- STELLA JANE CLARKE as Executrix and Trustee of the estate of WILLIAM JOHN CLARKE (DEC) & ORS [2002] WASC 73
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 73 | |
| Case No: | CIV:2254/2000 | 11 FEBRUARY 2002 | |
| Coram: | WHITE AUJ | 10/04/02 | |
| 20 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff's claims dismissed | ||
| A | |||
| PDF Version |
| Parties: | DAVID CLARKE STELLA JANE CLARKE as Executrix and Trustee of the estate of WILLIAM JOHN CLARKE (DEC) STELLA JANE CLARKE CAROLYN CHOMLEY JOHN MARSDEN CLARKE |
Catchwords: | Trust Trustee selling trust property in breach of trust Whether defence of laches available Whether the trustee acted honestly and reasonably and should fairly be excused for the breach of trust, pursuant to s 75 of the Trustees Act 1962 |
Legislation: | Trustees Act 1962, s 5(2) and s 75 |
Case References: | Orr v Ford & Anor (1988-1989) 167 CLR 316 Palmer v McAllister (1991) 4 WAR 206 Perpetual Trustees WA v Attorney General for Western Australia (1992) 8 WAR 441 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
BETWEEN : DAVID CLARKE
- Plaintiff
AND
STELLA JANE CLARKE as Executrix and Trustee of the estate of WILLIAM JOHN CLARKE (DEC)
First Defendant
STELLA JANE CLARKE
Second Defendant
CAROLYN CHOMLEY
Third Defendant
JOHN MARSDEN CLARKE
Fourth Defendant
(Page 2)
Catchwords:
Trust - Trustee selling trust property in breach of trust - Whether defence of laches available - Whether the trustee acted honestly and reasonably and should fairly be excused for the breach of trust, pursuant to s 75 of the Trustees Act 1962
Legislation:
Trustees Act 1962, s 5(2) and s 75
Result:
Plaintiff's claims dismissed
Category: A
Representation:
Counsel:
Plaintiff : Mr P G McGowan
First Defendant : Mr R J L McCormack
Second Defendant : Mr R J L McCormack
Third Defendant : Mr R J L McCormack
Fourth Defendant : Mr R J L McCormack
Solicitors:
Plaintiff : Metaxas & Vernon
First Defendant : Kyle & Company
Second Defendant : Kyle & Company
Third Defendant : Kyle & Company
Fourth Defendant : Kyle & Company
(Page 3)
Case(s) referred to in judgment(s):
Orr v Ford & Anor (1988-1989) 167 CLR 316
Palmer v McAllister (1991) 4 WAR 206
Perpetual Trustees WA v Attorney General for Western Australia (1992) 8 WAR 441
Case(s) also cited:
Nil
(Page 4)
1 WHITE AUJ: This is an application by originating summons under O 58 of the Rules of the Supreme Court concerning a question which has arisen in relation to a deceased estate as to whether the first defendant, in her capacity as executrix and trustee acted in breach of trust in selling the block of flats called "Dunleath" in 1979. Secondary questions arise in the event that it is established that the first defendant did act in breach of trust and these are, firstly, whether the defence of laches is available to the first defendant and, secondly, whether, in all the circumstances, the first defendant has acted honestly and reasonably and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter is which she committed the breach, in accordance with the provisions of s 75 of the Trustees Act, 1962, as amended.
2 The Plaintiff is the son of the second defendant, who is now aged 86 years, and the brother of the third and the fourth defendants. The first defendant is the second defendant, sued in her capacity as executrix and trustee of the estate of the late William John Clarke ("the deceased") who was the father of the plaintiff and of the third and fourth defendants.
3 The deceased died on 23 June 1968 and by his last will ("the Will"), the deceased appointed the first defendant as his executrix and trustee. Probate of the Will was granted on 29 September 1969
4 The following provisions of the Will are relevant for the purposes of this matter:
" 2. I GIVE AND BEQUEATH free of all probate estate and other duties all my furniture linen crockery cutlery and all other articles of a purely personal or domestic use or ornament including the motor car which I may own at the date of my death to my said wife Stella Jane Clarke absolutely.
3. I GIVE AND DEVISE my residence situated at 69 The Esplanade Nedlands in the said State or my share or interest therein free of all probate estate and other duties unto my Trustee UPON TRUST to permit my said wife Stella Jane Clarke to have the use occupation and enjoyment thereof during her life she paying all rates and taxes and other outgoings thereon and keeping the same in the a good and habitable state of repair fair wear and tear and damage by fire lightening flood and tempest excepted and she keeping the same insured against fire to the satisfaction of my Trustee and I EMPOWER my Trustee at the request of my said wife Stella Jane Clarke to sell
(Page 5)
- the said residence and to employ the proceeds of such sale in the purchase or erection of another residence to be held upon the same trusts including the trust for sale and erection or re-purchase as are herein declared in respect of the original residence or alternatively at the request of the said Stella Jane Clarke to invest the proceeds of such sale and to pay the net annual income arising therefrom to my said wife Stella Jane Clarke during her life in addition to any other payments by this my Will directed to be made to my said wife Stella Jane Clarke and upon the death of my said wife Stella Jane Clarke to hold the said residence or the proceeds of sale thereof for my daughter CAROLYN CLARKE absolutely.
4. I GIVE AND BEQUEATH to my Trustee ALL THAT my Flats property known as 'Dunleath' situated at 70-72 Broadway, Nedlands in the said State but subject to any mortgage which may be registered against the said property at the date of my death UPON TRUST TO pay the net annual income arising therefrom during the lifetime of my said wife Stella Jane Clarke in the following manner that is to say :-
A three fourth share to my said wife Stella Jane Clarke
A one-fourth share to my said daughter Carolyn Clarke
And from and after the death of my said wife Stella Jane Clarke to hold the said Flats property and the capital and income thereof UPON TRUST for my children CAROLYN CLARKE, DAVID CLARKE and JOHN MARSDEN CLARKE as shall survive me in the following shares that is to say:-
To the said Carolyn Clarke two undivided fourth shares
To my said son David Clarke one undivided fourth share
To the said John Marsden Clarke one undivided fourth share.
5. I GIVE DEVISE AND BEQUEATH to my Trustee all my farming lands and all my share and interest therein and all my share and interest in the capital and assets of all the partnership businesses of which I may be a member at the date of my death and all moneys standing to my credit in the books of any such partnerships whether it be capital account current
(Page 6)
- account or loan account UPON TRUST to pay the net annual income arising therefrom to my said wife Stella Jane Clarke during her lifetime and after the death of my said wife Stella Jane Clarke UPON TRUST for such of my sons David Clark and John Marsden Clarke as shall survive me and if more than one as tenants in common in equal shares.
6. I GIVE DEVISE AND BEQUEATH all the rest and residue of my real and personal estate wheresoever unto my Trustee UPON TRUST to sell call in and convert into money the same or such part thereof as shall not consist of money or of the nature hereinafter authorised with power in their absolute discretion to postpone such sale calling in and conversion and out of my ready money with recourse if necessary to such investments as aforesaid to pay my just debts (other than the debt charged upon the said Flats property) funeral and testamentary expenses and to stand possessed of such moneys and the investments for the time being representing the same and all such parts of my residuary estate as shall at my death consist of such investments as aforesaid and all such parts of my estate as shall for the time being remain unconverted UPON TRUST for my wife Stella Jane Clarke absolutely PROVIDED THAT if my said wife Stella Jane Clarke shall predecease me or die within twenty eight days of the date of my death then but not otherwise UPON TRUST for such of my children as shall survive me and if more than one as tenants in common in equal shares.
...
9. NOTWITHSTANDING anything hereinbefore contained I EMPOWER my Trustee to continue and carry on or join in continuing and carrying on for so long as she shall think fit any pastoral farming or other business of which I may die possessed or in which I may have any interest whether as a partner or otherwise at the date of my death and in carrying on or joining in carrying on the same my Trustee shall in addition to all other powers authorities and discretions vested in her by statute or otherwise have power to lease or let or join in leasing or letting from time to time the whole or any part of the assets or any such business upon such terms and conditions as my Trustee shall think fit and to appoint and pay or join in appointing and paying managers servants and agents in connection therewith with
(Page 7)
- power to buy and sell or join in buying and selling all such livestock plant machinery goods chattels and effects as my Trustee may think fit or necessary in the ordinary course of the carrying on of any such business and generally to act in relation thereto and to conduct and manage the same as fully and effectually as if my Trustee was the absolute owner thereof or of my share or interest therein without being liable or responsible for any loss arising thereby and in case the same shall be carried on at any time at a loss I DECLARE that my Trustee shall be reimbursed any loss so incurred by her out of my general estate and effects AND for any of the purposes aforesaid or for the purpose of paying administration expenses probate estate or other duties in respect of my estate or any other purposes I EMPOWER my Trustee to borrow or join as aforesaid in borrowing moneys on current account or otherwise at such rate of interest and whether to be capitalised according to the custom of bankers or not and on such terms and conditions as my Trustee shall think fit and as security therefor to sign and execute or join as aforesaid in signing and executing mortgages bills of sale and other securities over all or any part of my real and personal property or the real and personal assets of any such property or business and in either case including after acquired personal property such mortgages bills of sale and other securities to be in such form as my Trustee shall think fit AND I DECLARE that no person or persons firm Company or Banking institution lending money to my Trustee shall be concerned to see or enquire as to the proper application thereof AND I FURTHER DECLARE that my Trustee is joining in the carrying on of any such business may enter this and from time to time vary any partnership arrangements with the other partner or partners."
5 In 1979, the first defendant sold Dunleath for $405,000.00 and, after payment of all debts and loans in respect thereof, the net proceeds realised amounted to $329,232.00 and the first defendant paid a quarter of that sum to the third defendant, leaving a balance of $246,924.00, which the first defendant invested in interest bearing accounts, from which she derived an income.
6 In 1983, the first defendant utilised $176,224.00 in an investment, in the name of the estate, in a unit trust known as the Bunbury Medical Centre Unit Trust ("the Unit Trust") which owns a building in Bunbury leased for a medical centre and the first defendant is registered as the
(Page 8)
- owner of 12 units in the Unit Trust and she is a director of Bunbury Medical Centre Pty Ltd which was incorporated to act as the trustee of the Unit Trust.
7 The balance of the proceeds of the sale of Dunleath, being $70,700.00 remained in an interest bearing investment account until 1997, when the first defendant distributed it to the plaintiff and to the third and fourth defendants. She says in her affidavit that the distribution was made in the proportions to which they would have been entitled, under the Will, upon the death of the first defendant, but the plaintiff says that each beneficiary received one-third of that sum. The plaintiff accepted his share of that distribution.
8 The plaintiff, by the Originating Summons filed on 19 September 2000, contends that, on its proper construction, the Will did not permit the first defendant to sell Dunleath. He alleged that the current market value of Dunleath was approximately $2.6 million and that, had Dunleath not been sold, then upon the death of the first defendant, he would have been entitled to receive a quarter share of the property which would, at the date of the Originating summons, have been worth $650,000.00.
9 In the Originating summons, the plaintiff claims:
1. a declaration that upon its proper construction the Will did not permit the first defendant to sell Dunleath;
2. an order that the first defendant "do make compensation to the estate of the deceased in an amount to be determined" by the Court;
3. such further or other orders as the Court deems fit; and
4. costs.
10 The first defendant responds by contending that:
1. properly construed, the Will does not contain a prohibition against the exercise of the power of sale in respect of Dunleath, thus enabling s 27(1)(a) of the Trustees Act 1962 ("the Act")to operate as empowering the first defendant to sell Dunleath;
2. the operation of the Dunleath flats amounts in law to a business and the power of sale is conferred also by cl 9 of the Will;
(Page 9)
- 3. Alternatively, if the first defendant was in breach of trust in selling Dunleath, she is entitled to rely upon the exculpatory provisions in cl 9, to the exclusion of liability for such breach;
4. Further alternatively, the defence of laches is available to the first defendant;
5. Further alternatively, the Court should exercise its discretion under s 75 of theAct to relieve her of liability.
11 The affidavits filed of record and sworn by the plaintiff, the first and fourth defendants, Mr Pollo, the valuer, and by Kimberley David Mosedale were agreed to represent the examination in chief of those witnesses (with some additional examination in chief in amplification or explanation of the contents of the affidavits) and those witnesses (other than Mr Mosedale, whose affidavit was admitted without the need for his cross-examination) were cross-examined. I have no reason to believe that any of the witnesses was other than an honest witness of the truth, at least to the best of his or her recollection.
12 It is clear that clause 4 of the Will does not contain any express power of sale in relation to Dunleath, nor any express prohibition against sale, albeit the clause may fairly be understood as containing an implied prohibition against a sale of the flats during the lifetime of the first defendant. In construing the Will, it is necessary to have regard to all its terms and not only to the provisions of cl 4.
13 Sections 5(2) and 27(1)(a) of the Act provide as follows:
" 5. (2) The powers conferred by or under this Act on a trustee who is not a corporation are in addition to the powers given by any other Act and by the instrument (if any) creating the trust; but the powers conferred on the trustee by this Act, unless otherwise stated, apply if and so far as a contrary intention is not expressed in the instrument (if any) creating the trust, and have effect subject to the terms of that instrument.
...
27. (1) Subject to the provisions of this section, every trustee, in respect of any property for the time being vested in him, may –
(a) sell the property;"
(Page 10)
14 I propose to consider in turn the defences raised to the plaintiff's claim.
1. Was the first defendant empowered by s 27(1)(a) of the Act to sell Dunleath?
15 Mr McCormack, of counsel for the defendants, submitted that, while a prohibition against sale necessarily involves an absence of any power of sale, the converse does not apply where there is simply an absence of any power of sale. That is to say, he submitted, that a mere absence of any power of sale is not to be read as a prohibition, the nature of which would thereby exclude the implied power of sale available by application of s 27(1)(a) of the Act. Mr McCormack relied on the provisions of s 5(2) of the Act and referred to Palmer v McAllister (1991) 4 WAR 206, per Owen J at 209 and 207 and to Perpetual Trustees WA v Attorney General for Western Australia (1992) 8 WAR 441, per Wallwork J at 446.
16 In Palmer v McAllister (supra), Owen J was dealing with a case that involved a term in a Will which included the words: "I direct that my trustee shall not sell my estate or interest in " certain property. The application before his Honour was made pursuant to s 89 of the Act which, relevantly, provides:
"(1) Where in the opinion of the Court any sale ... cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, ... ."
17 Owen J said, at 209,
"On the face of it, this is not a case of an 'absence of power' but, rather, an express provision against the exercise of the power."
18 Wallwork J, in Perpetual Trustees WA v Attorney General for Western Australia (supra), again concerned with the provisions of s 89 of the Act, came to a different conclusion and said, at 446:
"Also to be considered are the words in subs (3), 'An order may be made under this section, notwithstanding anything to the contrary contained or expressed in the instrument creating the trust'.
The words 'an absence of power for that purpose ' are equivalent to 'no power for that purpose'.
(Page 11)
- In this case the settlor not only gave no power of sale to the trustee but he declared that 'the trustee shall never sell the land'. It can be seen that this is an 'emphatic' or 'express' 'no power of sale' as opposed to the settlor just not giving the trustee a power of sale.
Viewed in this way, the prohibition against a sale is an absence of any power of sale and I so hold."
19 The present case is not concerned with the provisions of s 89 of the Act, however, but with the different wording and effect of s 5(2) of the Act. Section 89 of the Act is expressly available notwithstanding anything to the contrary contained or expressed in the instrument creating the trust, and accordingly falls within the ambit of the expression in s 5(2), "unless otherwise stated".
20 Section 5(2) of the Act applies the powers conferred on a trustee by that Act if and so far only as a contrary intention is not expressed in the instrument creating the trust. In my opinion, the provisions of cl 4 of the Will are inconsistent with any power to sell Dunleath in the lifetime of the first defendant and accordingly that clause contains the expression of a contrary intention, within the meaning of s 5(2) of the Act. It is not a case, as I see it, of the clause simply omitting to provide a power of sale. The testator's intention appears clearly from the clause that he wished Dunleath to be sold only after the death of the first defendant and not before. I do not think that s 5(2) requires the "contrary intention" to be stated in express words of prohibition. It is enough if the intention appears from the words used in the instrument creating the trust. While therefore, there is no express term prohibiting the sale of Dunleath in the lifetime of the first defendant, I consider that the effect of the clause is that a contrary intention to such sale is sufficiently expressed therein.
21 For that reason, I am of the opinion that the first defendant was not empowered by the provisions of s 27(1)(a) of the Act to sell Dunleath.
2. Was the first defendant empowered by clause 9 of the Will to sell Dunleath?
22 Mr McCormack submitted that cl 9 is an over-riding provision and includes, expressly or by implication, a power of sale of a business. He submitted that the operation of Dunleath by the deceased in his lifetime was a business for the purposes of cl 9 of the Will and, accordingly, that the sale of Dunleath was within power pursuant to that clause.
(Page 12)
23 In support of this submission, Mr McCormack pointed to the following indicia of a business:
"6. It is respectfully submitted that generally accepted indicia of a business, such as the following, are consistent with the testator's ownership, at the date of his death, of the Dunleath Flats:
(a) purchase of the land;
(b) causing the 22 flats to be constructed;
(c) offering to members of the public leases in respect of the 22 flats, and each of them, in consideration for rental return;
(d) that leases in respect of property in WA are subject to stamp duty;
(e) maintenance expenses, as well as costs associated with management of the Dunleath Flats;
(f) the preparation of lease documents;
(g) the purpose of and continuity in respect of the letting out of the Dunleath Flats, and each of them, on a regular basis, with rents being derived therefrom;
(h) payment of insurance;
(i) payment of rates;
(j) payment of taxes;
(k) depreciation;
(l) mortgaging the Dunleath property;
(m) subsequent to death of testator, Dunleath Flats placed under management by Robertson & Co."
(Page 13)
- defendant "to continue and carry on or join in continuing and carrying on ... any pastoral farming or other business" of which the deceased might die possessed or in which he might have an interest. The powers in cl 9 to lease or let the whole or any part of the assets of any such business and to appoint managers servants and agents would seem relevant and necessary in relation to Dunleath.
25 The power of sale set out in cl 9 is the power to "buy and sell or join in buying and selling all such livestock plant machinery goods chattels and effects as my Trustee may think fit or necessary in the ordinary course of the carrying on of any such business ..." In my opinion, that power does not, upon the proper construction of the Will, extend to the power to sell Dunleath contrary to the provisions of clause 4 of the Will. The power, contained later in cl 9, "to sign and execute ... bills of sale ... over all or any part of my real and personal property ..." is "for any of the purposes aforesaid" and applies therefore to the sale in the ordinary course of the carrying on of any such business as is mentioned above.
26 I conclude that cl 9 of the Will did not empower the first defendant to sell Dunleath when she did so in 1979.
3. Can the first defendant rely on the exculpatory provisions of clause 9 of the Will?
27 The first defendant has submitted that it is entitled to raise as a defence the provision in cl 9 of the Will that the trustee might do what the clause permits "without being liable or responsible for any loss arising thereby". That exclusion of liability relates specifically to those acts which the trustee is authorised to perform by the preceding words of the clause and, in my opinion, cannot be extended beyond those particular acts. Accordingly, I hold that they have no application to the alleged breach of cl 4 of the Will and that the first defendant may not, therefore, rely upon them as a defence.
4. Is the Defence of laches available to the first defendant?
28 In Orr v Ford & Anor (1988-1989) 167 CLR 316 at 341, Deane J said:
" ... the use of the phrase 'gross laches' does little to aid in the identification of particular circumstances in which a defence of laches will preclude relief being granted to a beneficiary in an action for the enforcement of an express trust. The ultimate test
(Page 14)
- effectively remains that enunciated by Lord Selborne LC ... speaking for the Privy Council, in Lindsay Petroleum Co v Hurd (1874) 5 PC 221 at pp 239-240, namely, whether the plaintiff has, by his inaction and standing by, placed the defendant or a third party in a situation in which it would be inequitable and unreasonable 'to place him if the remedy were afterwards to be asserted': see Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 at p 1279 and also, per Rich J, Hourigan (1934) 51 CLR at pp 629-630."
29 His Honour goes on to discuss two categories of cases, falling short of waiver, release, election or estoppel, in which the laches of a beneficiary would produce a situation in which it was inequitable and unreasonable to grant relief in proceedings for the enforcement of an express trust.
30 In the same case, Wilson J, Toohey J and Gaudron J, in their joint judgment, said, at 330:
"The substance of the respondent's case in relation to laches was that of prejudice in defending the appellant's claim by reason that evidence which might earlier have been available was lost to them. ... where entitlement depends on factual matters which are fairly open to dispute we see no reason why prejudice occasioned by the loss of evidence as a result of delay on the part of the claimant might not be raised in answer to such a claim."
31 The alleged breach of trust by the first defendant which is relied upon by the plaintiff is the sale of Dunleath in the situation that the first defendant had no power to sell that property. The sale took place in 1979, the first defendant having decided in June of that year to sell the property. In her affidavit sworn on 17 January 2001, the first defendant says:
"8. In June 1979 I, as Trustee of the Estate, decided to sell the property because:
(a) I was advised by Mr Harry Lodge of Parker and Parker, the Estate's Solicitors, that I was entitled to do so under the terms of the Will and the powers given to me by the Trustees Act. Annexed hereto and marked 'SJC2' is a copy of a letter from Mr Lodge dated 23 May 1979.
(Page 15)
- (b) I was advised by my property advisors, Robertson Bros, and WA Trustees and my accountants, and verily believe, that the property was not a good investment;
(c) The condition of the property was deteriorating because the Estate did not have the money to pay for adequate maintenance and a considerable amount of money was required to restore the condition of the property.
(d) My property advisers, Robertson Bros and WA Trustees, told me and I verily believe that all of the plumbing in the property would have to be replaced in copper or alternatively I would sooner or later have to bulldoze the flats.
(e) My property advisers advised me and I verily believe that in order to realise the full value of the property the flats needed to be strata titled. However, this would require considerable alteration to the flats to comply with the Strata Title Legislation and the Estate did not have the resources to do that.
- 9. Based on the advice referred to in paragraph 8, I consider that my decision to sell the property was appropriate at the time in order to achieve a reasonable rate of return on the capital value of the property and to avoid the risk of substantial expense in maintaining it.
10. Before I offered the property for sale, my sons, David Clarke and John Clarke, the Plaintiff and the Fourth Defendant respectively, asked me to sell the property for $330,000.00 to them. I specifically remember my son David Clarke coming to Perth and orally asking me to sell the property to them. This was below its value and I did not agree to their request. Furthermore I believed neither of my sons had the financial capacity to pay me that sum. I informed my sons that I intended to sell the property on the open market.
11. The property was sold to Searle Investments Pty Ltd for $405,000.00 which I verily believe was its true value at
(Page 16)
- the time of sale. My belief is based upon the fact that the sale was a completely 'arms length' transaction organised by WA Trustees as selling agent after publicly marketing the property."
32 The offer by the plaintiff and the fourth defendant to purchase Dunleath at a price $330,000.00, referred to in par 10 of the first defendant's affidavit was based on the average of two valuations obtained at the time. The plaintiff says that he asked the first defendant whether she was entitled to sell Dunleath and that she told him she was. In her affidavit sworn on 11 June 2001, the first defendant says, in part:
"4. I deny that the plaintiff asked me if I had the power to sell the property or that I said that I did have the power. The question did not arise. The plaintiff told me that he wanted me to sell the property. He had received a copy of his father's Will long before this time and had had ample opportunity to consider my power as trustee of the estate.
5. If the plaintiff had expressed any concern as to the sale of the property or my right to do so, I would have sought advice from my solicitor, Mr Lodge, as to my powers as trustee of the Estate to sell the property. Mr Lodge had told me that I had the right to sell and that it was the right thing to do. I refer to Mr Lodge's letter to me being Annexure SJC2 to my affidavit sworn 17 January 2001.
However, if my right had been questioned I would have sought further advice from Mr Lodge. I believe that I would also have asked for written consents to the sale from my three children if there had been any question as to my power to sell the property."
33 The letter from Mr Lodge to which the first defendant refers is dated 23 May 1979 and reads as follows:
"Thanks for your letter of the 14th May and I note that the proposed deal with David and John is not now proceeding and that the West Australian Trustees are endeavouring to find a Purchaser for the flats.
I think you are wise in making a decision in respect of the flats as they must either be sold or be re-developed. To make no decision would simply leave the flats to deteriorate which
(Page 17)
- would simply have the effect of reducing the net income and substantially reduce the amount of capital increment which you could otherwise be entitled to expect.
As previously mentioned to you I will be leaving Australia on the 10th of July for approximately one year and if during my absence you wish to contact the office perhaps you could speak with Steven Cole or Dudley Stow with both of whom I will leave notes relating to you and the Clarke family generally."
34 When the first defendant was cross-examined by Mr McGowan, the following exchange took place:
"I just need to put one thing to you because the sequence is this, isn't it: sometime earlier in 1979 your son David has a discussion – when I say 'earlier', that is before the flats were sold – has a discussion with you in which he indicates that he and his brother John are interested in buying the flats property if you were going to sell it? Do you agree with that? --- Yes.
And he asked you – that is, your son David asked you – if you had the power to do that, that is, to sell the property, and you told him that you did? ---Yes."
35 In her affidavit of 17 January 2001, the first defendant also says:
"19. The balance of the proceeds of sale of the flats, being $70,700.00 remained in a Challenge Bank interest bearing investment account until in 1997 I distributed it to my three children in the proportion in which they would, under the Will, be entitled to it upon my death. Each of my children accepted this distribution.
...
21. Between 1979, when I sold the property, and about 1995, my son David Clarke made no complaint about the sale of the property.
22. However, in December 1996, I received a letter from my son David Clarke's solicitors, Deacons Graham and James, seeking access to accounts of the Estate. ...
(Page 18)
- 23. On my instructions my Solicitors provided my son's Solicitors with a copy of the accounts of the Unit Trust for the year ending 30 June 1995.
...
25. I am informed by my solicitors and verily believe that since I have become aware of my son David Clarke's complaint as to the sale of the property they have made inquiries of my former solicitors, Parker & Parker, and their successor firm, Freehills, and have been informed by them that they no longer have any records relating to the Estate or, in particular, the sale of the property.
26. I recall that I received advice from a number of sources about the sale of the property or its retention and as to the financial ramifications of those alternatives. While I recall that everyone I consulted thought it best to sell the property I can no longer recall the details and have no records of those advices. I have made inquiries and verily believe that Robertson Bros, the real estate firm that advised me at the time, has ceased to exist and that WA Trustees has been taken over by Perpetual Trustees Ltd."
36 It is not in dispute that, in 1997, the plaintiff received and accepted from the first defendant a one-third share of the remaining proceeds of the sale of Dunleath. He continues to retain that amount. In cross-examination of the plaintiff, the following exchange took place (T65):
" ... You received that from your mother, the one third of the $70,000 or thereabouts? ---Yes.
Is that the case? --- Yes.
And you understand that to be the balance of the proceeds of the sale of the Dunleath flats, which had remained in a Challenge Bank interest-bearing account until about 1997. Is that the case? --- That's correct.
And your understanding is that the distribution to you of one third was mirrored, as it were, with your brother John and your
(Page 19)
- sister Carolyn each receiving one-third of that $70,000 balance. Is that your understanding? --- Sorry, just for - that's correct."
37 It is apparent from the affidavit evidence of the first defendant and from the affidavit of Mr Mosedale that, in consequence of the lapse of time, records are no longer available either from Mr Lodge's former firm, Parker & Parker, which subsequently merged with Freehills, or from the successor to WA Trustees Ltd, namely Perpetual Trustees WA Ltd. Those records might have been supportive of the first defendant's claim for relief pursuant to s 75 of the Act and, accordingly, the delay on the part of the plaintiff in bringing the present proceedings more than 20 years after the sale of Dunleath, might have caused substantial prejudice to the first defendant.
38 Accordingly, if I am wrong in the conclusion to which I have come in relation to the provisions of s 75 of the Act and which is set out below, then in my opinion, the defence of laches would be available to the first defendant as an answer to the plaintiff's claim.
5. Should the first defendant be granted relief pursuant to s 75 of the Act?
39 Section 75 of the Act is in the following terms:
" 75. If it appears to the Court that a trustee, whether appointed by the Court or otherwise, is, or may be, personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter in which he committed the breach, then the Court may relieve him either wholly or partly from personal liability for that breach."
40 In her affidavit sworn on 17 January 2001, in pars 8, 9 and 25, which I have set out above, the first defendant deposed to the reasons for her having sold Dunleath and to the legal advice received by her from Mr Lodge as to her power to do so, confirmed in his letter to the first defendant dated 23 May 1979.
41 In these circumstances, I am of the opinion that at the material time in 1979 the first defendant held an honest and reasonable belief that she was empowered by the Will to sell Dunleath. If she informed the plaintiff
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- that she had the power to sell that property, I accept that she believed that she did, on the basis of advice received from a well-respected solicitor.
42 It appears to me that the first defendant is, or may be, personally liable for a breach of trust, arising from the sale of Dunleath in 1979, but that is so doing she has acted honestly and reasonably. There is no evidence suggesting that she acted otherwise than honestly and reasonably and she took pains to secure the best available price for the property, being an amount substantially in excess of the average of two valuations obtained at the time which latter amount was the price at which the plaintiff and the fourth defendant were prepared to purchase Dunleath.
43 Prior to the sale of Dunleath, the plaintiff and the fourth defendant offered to purchase Dunleath. Later, in 1997, the plaintiff received and accepted from the first defendant and has retained a share of the remaining proceeds of the sale of Dunleath with the knowledge that that was the source of the funds so paid to him. The other beneficiaries have not intervened in the present proceedings (although the fourth defendant did give evidence as a witness called by the first defendant) and I accept that they do not complain of the sale of Dunleath.
44 In all the circumstances of this matter, I am satisfied that the first defendant ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in relation to the sale of Dunleath.
45 Accordingly, I dismiss the plaintiff's claims and I shall hear from counsel as to the appropriate order as to costs.
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