Naso v Cottrell - [1999] WADC 63

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: NASO & ANOR -v- COTTRELL [1999] WADC 63

CORAM: NISBET DCJ

HEARD: 6 SEPTEMBER 1999

DELIVERED : 8 SEPTEMBER 1999

FILE NO/S: CIV 7558 of 1988

BETWEEN: MAX ELIO NASO by his next friend SABATINO NASO
First Plaintiff (First Respondent)
SABATINO NASO
Second Plaintiff (Second Respondent)
AND
FREDERICK COTTRELL
Defendant
AND
PERPETUAL TRUSTEES (WA) LTD
Applicant

Catchwords:

Trusts and trustees - Application to court for directions for application of capital for the benefit of the first plaintiff - Award forming trust estate making provision for additional cost of construction of purpose built home for first plaintiff - First plaintiff a seriously disabled quadriplegic - Directions sought by Trustee for acquisition of land and construction of house.

Legislation:

Trustees Act 1962 as amended.

Result:

Directions given.

Representation:

Counsel:

First Plaintiff (First Respondent)              :      Mr M J McCusker QC
Second Plaintiff (Second Respondent)      :      Mr M C McCusker QC
Defendant:      No appearance
Applicant:      Mr D Bruns

Solicitors:

First Plaintiff (First Respondent)              :      Brickhill & Banaszak
Second Plaintiff (Second Respondent)      :      Brickhill & Banaszak
Defendant:      No appearance
Applicant:      Hoffmans

Case(s) referred to in judgment(s):

Perpetual Trustees (WA) Ltd v Naso [1999] WASCA 80
Re Osborne (1863) 2 SCR Eq 89

Case(s) also cited:

Wood v Public Trustee of Western Australia (1995) 16 WAR 58

NISBET DCJ: On 29 March 1996 this Court made a number of orders approving a compromise reached by the parties for the benefit of the first plaintiff. The first plaintiff, who was born 10 August 1978, suffered horrendous injuries when he was struck down by a motor vehicle driven by the defendant on 21 March 1987. The first plaintiff was then about 8 years of age. The injuries have left the first plaintiff quadriplegic with impairment of respiratory function.
The orders approving the compromise achieved for the first plaintiff provide in part:
"5.The defendant do forthwith pay the balance of $5,750,000.00 after deduction of any amount due to the Department of Social Security pursuant to the provisions of paragraph 3 and deduction of the sum referred to in paragraph 4 of this Order to Perpetual Trustees (WA) Limited (‛the Trustee’) to be held by it on trust for the first plaintiff until further order with the Trustee to have all the powers of investment and otherwise conferred by the Trustees Act 1962 as amended including the power to make advances out of income or capital for the welfare, education or advancement of the first plaintiff.
…
8.There be liberty to apply by the first plaintiff in respect of the investment monies."
Counsel for the plaintiffs, in their opinion filed in support of the application to the court for compromise of the first plaintiff's claim, allowed the sum of $250,000.00 for the additional costs for the provision of a home specially built to accommodate the plaintiffs' particular needs and with an allowance for the future cost of maintenance of such a house. As at 2 June this year no land had been acquired by the Trustee and work on purpose built accommodation for the first plaintiff had not begun. On 2 June this year the Trustee applied by summons to chambers pursuant to O70 r12(2) of the Rules of the Supreme Court for directions concerning the application of part of the trust fund in respect of:
"(i)the purchase of a block of land and erection of a specially modified house;
(ii)the obtaining by the first plaintiff of the opinion of a Queen's counsel into the possibility of appealing the decision (sic) of the Full Court in Supreme Court action No FUL 27 of 1999 to the High Court;
(iii)payment of the first plaintiff's legal costs already incurred in Supreme Court action No CIV 2195 of 1988 (sic 1998)."
I need not canvas in any detail the reasons which have led to this delay save to say that there has been something of a breakdown in communication between the Trustee and the first and second plaintiffs. Whilst it is somewhat pointless attributing blame for the breakdown in communication it derives at least in part from the actions of the plaintiffs in forcing the Trustee's hand as it were with the plaintiffs' insistence upon the acquisition of land from the first plaintiff's parents which the Trustee sees as being unsuitable for the construction of a purpose built house. The reasons why the Trustee sees the land as being unsuitable for this purpose appear to me to be entirely reasonable they being based upon the fact the land is on a considerable slope and the estimates it has received of the probable cost of construction of a house to suit the first plaintiff and his principal carers, his parents (the second plaintiff) and his wife are high in consequence of this. (For example, a lift will have to be installed.) This has been a principal cause of the impasse between the Trustee and the beneficiary. Nevertheless the Trustee has waited too long to resolve this impasse. It should have acted earlier. Its attention was of course diverted by proceedings which culminated in a decision of the Full Court in Perpetual Trustees (WA) Ltd v Naso [1999] WASCA 80 wherein the first plaintiff purported to terminate the trust created for his benefit by the order of this Court previously referred to, and have the trust moneys vest in him absolutely, the Trustee accounting to him therefor. Whilst that action remained unresolved, the Trustee was quite unable to do anything with regard to the acquisition of land and construction of a house.
It is not clear from the papers precisely when, but it appears that sometime in 1984 the second plaintiff and his wife jointly purchased a block of vacant land situated and known as Lot 104, Wittenoom Place, Duncraig (Exhibit MEN 2 to affidavit of Max Elio Naso sworn 23 August 1999). That land having been purchased some years prior to the first plaintiff's accident it is obvious that it was not acquired for the purpose of construction of a home that would suit the first plaintiff's needs given the injuries he sustained in the accident which occurred on 27 March 1987. The first plaintiff's parents have not built on the land and the money they borrowed to acquire the land has never been repaid, instead accumulating an enormous debt to the mortgagee whom I understand to be the ANZ Bank. The Trustee is concerned that the amount owing by the second plaintiff and his wife is more than the land is worth, and that the absolute maximum purchase price a prudent trustee would pay for this land if it was otherwise suitable is $227,500.00, but even at this price it obviously has grave reservations about buying it. Further, the Trustee is concerned that the first plaintiff's insistence upon the purchase of this land for his house demonstrates a wider problem: there is no evidence of the first plaintiff ever looking in the market for other suitable land and any attempt by the Trustee to steer the first plaintiff to another choice would obviously be met by hostile opposition, thereby acting as a fetter on the exercise of the Trustee's undoubted discretion.
The difficulty is that is it the only land that the first plaintiff wants the Trustee to acquire (from his parents) and the only land upon which he wants his purpose built house to be erected. This the Trustee fears would involve an expenditure of more money than on other more suitable land because of the particular elevation of the block and things of this nature so that in the end result the whole enterprise would be grossly over‑capitalised. These are legitimate concerns for a trustee. Nevertheless the first plaintiff has deposed that this is the land he wants the Trustee to acquire. In his affidavit previously referred to he gives his reasons which may be paraphrased thus:
1.The land has unrestricted views of the ocean, Fremantle, Perth and the Darling Ranges.
2.It is close to the Karrinyup Shopping Centre and other places he likes to go to.
3.It is close to his friends.
4.The land is suitable for his interest in astronomy.
5.The sea breeze from the nearby ocean he believes is beneficial to his health.
I harbour deep seated suspicions that one of the primary motivating features in the first plaintiff's desire to have the Trustee purchase this land is the fact that his parents own it and its acquisition would relieve them of a serious financial burden. I think this has more to do with the first plaintiff's desire for this land than the reasons he has expressed on affidavit. Assuming for the purposes of this judgment that this is indeed the case, what is the true effect of such a conclusion? It cannot be doubted that for whatever reason the first plaintiff wants the Trustee to acquire this land. There is a strident tone to his affidavit which speaks volumes of his wishes in this regard. This must be placed in the context however that the first plaintiff's parents are his principal carers. They have been since his accident in 1987 and they will remain so for so long as each of them remains fit enough to perform the task. Of this too, there can be no doubt. I think it can be seen therefore that from the first plaintiff's point of view if the acquisition of this land pleases his parents and makes them more comfortable in their care of him, then that is to his benefit. Even so, the Trustee and the court reviewing a trustee's decision or alternatively acting to advise a trustee must be careful to recognise and protect a beneficiary of a trust who is in a peculiarly disadvantaged position, to ensure that the beneficiary is not being manipulated.
Whilst the Trustee comes to the court pursuant to the provisions of O70 r12(2) of the Rules of the Supreme Court the jurisdiction being exercised is analogous to that under s92 of the Trustees Act 1962 which provides:
"92(1) Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the Trustee.
(2)Every application made under this section shall be served upon, and a hearing thereof may be attended by, all persons interested in the application or such of them as the Court thinks expedient."
The nature of the jurisdiction is such that in effect the court is giving the Trustee its advice and accordingly is to be limited to circumstances in which (in the main) the question for answer is the extent to which a trustee's power should be exercised. There are authorities which suggest that where a trustee has had a particular discretion clearly conferred upon him a court will not advise a trustee on the manner in which the Trustee should exercise his discretion: Re Osborne (1863) 2 SCR Eq 89, cited in Jacobs Law of Trusts in Australia 6th ed at para 2314. That text then goes on to state:
"But the court will advise a trustee whether he would be justified in exercising his powers or discretions in particular ways even though it does not advise him that he should do so. The principles upon which the judge should act in advising trustees are discussed by Harvey J in Re Mitchell (1913) 30 WN (NSW) 137."
In that case Harvey J had this to say: "… It seems to me that the Judge, in advising under that section, ought always to give very conservative advice …" which, with respect to the learned authors of Jacobs Law of Trusts in Australia, is not particularly helpful in the instant case. Here the parties are at an impasse and the legitimate rights and expectations of the only beneficiary of the trust administered by the Trustee (in effect as a delegate of the court), are not being satisfied. That is on the one hand. On the other, the plaintiffs are seeking to fetter and control the Trustee in the exercise of a discretion which the court has vested in it, and it alone.
Having carefully considered all of the affidavits, the opinions and the judgments in the matter I have come to the conclusion that the acquisition by the Trustee of Lot 104 Wittenoom Place, Duncraig is for the benefit of and in the best interests of the first plaintiff, and that land should be acquired. This leaves the question of the purchase price. The evidence is such that the Trustee would be unwise to spend more than $227,500.00 in its acquisition and accordingly I direct that the Trustee spend no more than that sum in the acquisition of this land. I understand from the affidavit of the first plaintiff that he is happy with this course and if there is a residual debt owed by his parents in respect of the acquisition and holding of that land then the first plaintiff is content that that is a matter for them.
This then brings me to the issue of the design and construction of a house upon the land which will suit the first plaintiff's particular needs. The Trustee has been receiving advice from an architect whose expertise in design for the disabled is well known and has been accepted by this Court on a number of occasions, namely Mr J Christopher Keen of KTA Partnership. Mr Keen had originally been retained by the plaintiffs' first solicitors to assist them in formulating the plaintiffs' claim in respect of the need and cost of house modifications to provide for the first plaintiff's particular needs. For reasons which are not at all clear the first plaintiff no longer has confidence in Mr Keen. Such reasons as may be gleaned from the papers seem to me to be wholly inadequate but the fact of the matter is that the papers suggest that a working relationship between the first plaintiff and Mr Keen may be difficult to establish. Having regard to the fact that there is also a break down in the relationship between the Trustee and the first plaintiff, again for reasons which seem inadequate to me, the practicalities of the situation are such that a satisfactory working relationship between the persons required to effect one of the objects of the court's trust, namely to make provision for the first plaintiff's housing, may prove difficult to achieve. No matter that it may be difficult to establish a good working relationship between the first plaintiff, the Trustee and Mr Keen, he is a person of undoubted competence in designing for the disabled and I advise the Trustee to obtain a written quotation from Mr Keen for his services for consultation with the first plaintiff, design and drawings of a residence on the Duncraig land. The Trustee should likewise obtain a quote from Mr Keen for contract administration (which I understand to be the modern term for architects' supervision of building contracts).
The first plaintiff having expressed a preference for another architect, Mr Ron Boshart, who is himself disabled and who likewise has undoubted expertise in designing for the disabled he, should also be approached by the Trustee for a quotation for his fees for the same project and in each case the fee should be quoted with an estimated cost of construction of $500,000.00. Ordinarily a wise trustee would choose the cheaper of the two quotations however, if there is little to choose between their fees then my advice to the Trustee is to then engage the services of Mr Boshart being the architect with whom the first plaintiff thinks he can best establish a working relationship, counsel for the Trustee having informed me that his client had no difficulty working with Mr Boshart.
The architect having been chosen and engaged, my advice to the Trustee is to instruct the architect to proceed to prepare with all speed working plans and drawings with sufficient particularity to enable the project to be put out to tender with a tender list of not less than four nor more than six builders, half the tender list to be nominated by the Trustee and half by the first plaintiff. Obviously the lowest tenderer should get the work and my advice to the Trustee is to accept the tender and get on with the job of construction as quickly as possible before the impact of the forthcoming GST is felt and part of this award is lost to taxation.
I should make it plain that in the design and construction of this residence, extravagance must be avoided.
I propose therefore, the following formal directions and orders:
1.The Trustee acquire Lot 104 Wittenoom Place, Duncraig from the second plaintiff and his wife, for the use and benefit of the first plaintiff, at a price not exceeding $227,500.00.
2.The Trustee obtain quotations for the architectural services described in this advice from each of Mr Keen and Mr Boshart.
3.The Trustee proceed to instruct either Mr Keen or Mr Boshart to proceed to consult with the first plaintiff (and the Trustee) and then produce for letting out to tender, a full set of working plans and drawings for a house for the first plaintiff as will provide as far as is practicable for his special needs, with an estimated cost of construction of $500,000.00.
4.The Trustee's summons for directions be otherwise adjourned sine die with liberty to all parties to apply generally (including liberty to apply with respect to the working out of this order).
5.Costs reserved.
Any party wishing to address me on this matter should arrange a listing through my associate within five working days, otherwise an order may be extracted in the terms above.