Rubery v Rubery - [2003] WASC 164

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RUBERY & ANOR -v- RUBERY & ANOR [2003] WASC 164

CORAM: BARKER J

HEARD: 4 JUNE 2003

DELIVERED : 28 AUGUST 2003

FILE NO/S: CIV 1279 of 2003

MATTER :Section 82 of the Trustees Act 1962 (WA)

BETWEEN: CAROLINE VICTORIA RUBERY
PETER GLEN RUBERY
Applicants
AND
JESSICA MARY RUBERY
ROBERT JESSIE RUBERY
Respondents

Catchwords:

Trustees Act 1962 (WA) - Application under s 82 Trustees Act 1962 for applicants to be appointed joint trustees of infants' property - Power of Court under s 82 to appoint joint trustees - Power of Court to appoint persons to sell and convey infants' property - Power of Court to appoint persons otherwise to exercise powers of trustee under Trustees Act 1962 in respect of infants' property - Interests of infants that order should be made

Legislation:

Rules of the Supreme Court1971 (WA), O 70 r 2(2)

Trustees Act 1962 (WA), s 27(1)(b), s 82

Result:

Application allowed in part

Category: A

Representation:

Counsel:

Applicants: Mr T M Hobday
Respondents : Mr R J Grayden

Solicitors:

Applicants: Lewis Blyth & Hooper
Respondents : Hammond Worthington

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

Re Heyworth's Interest [1956] Ch 364
Re Meux (Dec); Gilmour v Gilmour [1958] Ch 154
Re White [1959] VR 661

Case(s) also cited:

Perpetual Trustee Co Ltd v Thomas (1903) 3 SR (NSW) 277

BARKER J:

Introduction

By originating summons dated 13 March 2003, the "applicants" seek an order pursuant to s 82 of the Trustees Act 1962 (WA) that they be appointed joint trustees to sell and convey, and otherwise exercise such of the powers as are conferred upon trustees by or under the Trustees Act 1962 in respect of the property at Unit 3, 29 Ardross Street, Applecross on behalf of the infant "respondents".
The first‑named "respondent", Jessica, is six years of age, having been born on 28 May 1997. The second‑named "respondent", Robert, is her twin. They appear in these proceedings by their mother, Cheryl Lorraine Rubery who has signed a consent to act as "next friend" in these proceedings. More properly, she should have consented to act as a guardian ad litem (see O 70 r 2(2) of the Rules of the Supreme Court). I have proceeded on the basis that she has consented to act as a guardian ad litem. Before me, the infants' mother appears by counsel and indicates that the application is not opposed.

Background to application

The circumstances in which the application is made are as follows. The infants are registered as the proprietors as joint tenants of the Applecross unit, being Lot 3 on strata plan 3900, together with a share in any common property as set out on the strata plan and being the whole of the land comprised in certificate of title volume 1437 folio 717.
The property was purchased under a contract for sale of strata title property by offer and acceptance dated 17 December 1998. In that contract, the infants were described as the purchasers, but purported to act by their "guardian", the second‑named "applicant", who is their father (Mr Rubery).
However, the first‑named "applicant", who is the grandmother of Jessica and Robert (Mrs Rubery), paid the purchase price, stamp duty and other expenses related to the purchase of the property. She purchased the property to provide security for the infants' future. The property was purchased as a rental investment property, the management of which was intended to be undertaken by the "applicants" until the infants attained their majority.
Shortly after the property was acquired, Mrs Rubery caused the property to be completely renovated at a cost slightly in excess of $25,000. She met that expense. It was and is intended that this sum be a loan to the infants to be repaid from rental received from the property over time. It is intended that, when the loan has been repaid, the funds received from the rental will be placed in an interest‑bearing trust account held by the "applicants" on trust for the infants.
Since the renovations were completed, Mrs Rubery has received rental for the property (after payment of rates, taxes and expenses associated with the rental) as follows:
The financial year ending 30 June 2000  ($1681) loss
The financial year ending 30 June 2001  $6531 profit
The financial year ending 30 June 2002  $2810 profit
As at 25 February 2003, during the
2002/2003financial year   $2301 profit
The property was not rented during part of 2002, which helps explain why there was a drop in the profit of more than half when compared with the profit in the preceding financial year.
The "applicants" have at all times consulted with each other regarding the renovation and management of the property.

The reason for the application

The "applicants" now consider that a property more modern than the Applecross unit and with better rental potential and greater potential for capital gain would be a better investment for the children.
Mrs Rubery says that the Applecross unit is now nearly 30 years old. It is situated on a roundabout near a shopping centre which has, over the years, got busier and consequently the unit is now in a very noisy location. She says that she is experiencing a certain amount of resistance to people wanting to rent the unit because of the noise and busyness of the nearby shopping centre.
If the Court were to make orders in the terms sought, the "applicants" would sell the property and acquire a replacement property with better investment potential.
Mrs Rubery further says that, to facilitate their ability to take up new investment opportunities as they arise, the "applicants" also seek orders appointing them "joint trustees" of any replacement property purchased on behalf of the children and otherwise to exercise a number of trustees' powers referred to in the Trustees Act.

Section 82 of the Trustees Act 1962

Section 82 of the Trustees Act provides as follows:
"Where an infant is beneficially entitled to any property, the Court may, where it considers it necessary or desirable in the interest of the infant or of the infant and some other person, make an order ¾
(a)appointing a person to sell and convey, lease, mortgage or charge the property, or otherwise to exercise such of the powers as are conferred by or under this Act on a trustee, as the Court may in the order specify; or
(b)in the case of stock or a thing in action, vesting in any person the right to transfer or call for a transfer of that stock, or to receive the dividends or income thereof, or to sue for and recover that thing in action, upon such terms as the Court thinks fit."
The "applicants" say that it is in the best interests of the infants that the property be sold and a replacement property acquired which offers better long‑term investment potential and that the "applicants" be appointed "joint trustees" with powers of sale and reinvestment.
Mr Rubery agrees with his mother that it is in the interests of the infants that the property be sold and a replacement investment property be purchased in lieu thereof for the benefit of the infants. He also joins with his mother in seeking orders that she and he be appointed joint trustees to sell the property and to hold a replacement property on trust for the children and to hold powers of reinvestment.
In all of the circumstances, it appears to me to be desirable in the interests of the infants to make an order that enables the property to be sold and a replacement property acquired. While the asset is not exactly a "wasting" asset, it is fair to observe that it is difficult to rent out and is not located in the best position.
Whether or not the "applicants" should also be appointed joint trustees of the present property and a replacement property with the power to sell and convert it into other forms of property to be held in trust for the infant children is, however, another issue which raises questions of the power of the Court to so order and, if the power exists, the appropriateness of such an order.

The power of the Court under s 82 to appoint a trustee of property

The first question is whether the Court has the power pursuant to s 82 of the Trustees Act to appoint a person as a trustee in respect of the property of an infant, with powers of sale and reinvestment.
On its face, s 82(a) is the relevant provision to consider. It relevantly permits the Court to make an order "appointing a person to sell and convey … property, or otherwise to exercise such of the powers as are conferred by or under this Act on a trustee, as the Court may in the order specify." The provision does not expressly refer to a power to appoint a person as a "trustee" of the property of the infant who is beneficially entitled to the property. Thus, a question arises whether on the proper construction of the provision it includes such a power.
In Re White [1959] VR 661, Smith J had occasion to consider the extent of a not dissimilar power of the Supreme Court of Victoria under s 55 of the Trustee Act 1953 (Vic). In that case, three infants were the legal and beneficial owners of shares in a company. These shares were a hazardous investment for the infants and it was proposed to sell them at a price which equalled or exceeded the value of the shares to the infants or the proposed purchasers. The Court was asked to make the necessary orders to carry the proposed sale into effect and to direct that the proceeds of the sale in each case be held upon trust for the infants with powers of investment and application during infancy. I interpolate to observe that this is what the "applicants" in effect seek in the present case.
Section 55 of the Trustee Act 1953 (Vic) provided that:
"Where an infant is beneficially entitled to any property the Court may, with a view to the application of the capital or income thereof for the maintenance, education, advancement or benefit of the infant, make an order -
(a)appointing a person to convey such property; or
(b)in the case of stock, or a thing in action, vesting in any person the right to transfer or call for a transfer of such stock, or to receive the dividends or income thereof, or to sue for and recover such thing in action, upon such terms as the Court thinks fit."
Smith J noted, firstly, that the expression "beneficially entitled" does not confine the operation of the section to cases in which the infant's interest is an equitable one. His Honour noted (at 664 ‑ 665) that its purpose is merely to exclude cases in which the infant has a legal title only and not a beneficial interest. If the infant is the legal and beneficial owner, the infant is nonetheless the beneficial owner. I should observe in passing, that is the case here.
Smith J noted that the power of the Court under s 55 of the Victorian Act to make the orders sought was dependent ultimately upon whether or not the application of the capital income thereof would be for the "benefit" of the infant. He noted, at 665, that the word "benefit" in a context such as this is construed very widely, as is the word "application". It may be noted that neither of these terms is used in s 82 of the Trustees Act 1962.
However, Smith J noted that some difficulty is created by the cases of Re Heyworth's Interest [1956] Ch 364 and Re Meux (Dec); Gilmour v Gilmour [1958] Ch 154, where it appears to have been held or assumed that the conveyance or transfer of the property that the Court authorises (plainly a reference to s 55(a) of the Victorian Act) cannot, of itself, constitute the application of capital referred to in the section. If this be correct, then, his Honour accepted, it would appear to follow that benefits arising solely from such a conveyance or transfer are irrelevant to the question whether an application of corpus for the infant's benefit is in contemplation. However, his Honour (at 666) appeared to doubt the wisdom of such a rule and stated:
"It does not say that the conveyance or transfer must be with a view to an application. It merely says that the Court's order must be made with a view to an application."
Nonetheless, his Honour assumed for the purposes of the application before him that the construction adopted in these two cases was the correct one, and he proceeded to consider whether, upon that footing, they show that the present application before him should fail.
In Heyworth's case, what was sought was an order appointing trustees to convey to the tenant for life of a trust fund, as purchaser, the contingent reversionary interest of an infant therein and to receive the purchase moneys on trust for the infant with a view to the application of the capital or income thereof for the infant's maintenance, education and benefit. The price and terms of sale were most advantageous to the infant and so, too, was the changing of the infant's interest from a contingent reversionary one into a vested interest in possession. However, these benefits were not regarded by Upjohn J as providing the element of benefit referred to in the section. He observed that the section does not authorise the Court to convey an infant's property merely because it is for the infant's benefit, but only with a view to an application for the infant's benefit. The infant was nearly 21 years of age, As Smith J observed in Re White, Upjohn J appears to have considered there was no benefit to the infant in vesting the purchase money in trustees, nor in any application of the money that they might make, or at least that the obtaining of benefits in such ways was not one of the purposes for which the transaction was put forward. The decision in Heyworth has been criticised in an article by Professor O R Marshall in the Conveyancer and Property Lawyer, vol 21 pages 448 ‑ 454 and it was distinguished by Wynn‑Parry J in Re Meux (supra).
In Re Meux, the proposed transaction was similar to that proposed in Heyworth's case. The main differences were that the interest to be conveyed to the life tenant was an entailed interest which would be disentailed by the conveyance and that, in the hands of the trustees, the purchase money was to be resettled on virtually the same trusts as before, but omitting the purchaser's life interest. Wynn‑Parry J accepted the argument that if the sale and the resettlement were to be looked upon as separate transactions, or even as separate parts of a single transaction, the case would fall outside the section, because of the approach in Heyworth. He appears to have considered that, on that footing, the benefit from the sale would not supply the element of benefit required by the section and the resettlement, considered separately, was not of benefit to the infant. He held, however, that, in the special facts of the case before him, the resettlement was an essential part of the transaction and that the sale and the resettlement formed one transaction which could not be severed into parts. Thus, he distinguished Heyworth's case.
In Re White, Smith J noted that the facts of the case before him were distinguishable again from those considered in Heyworth and Meux. His Honour observed that, in each of those cases, it was held, rightly or wrongly, that no benefit would arise from the creation of a mere trust of the proceeds of sale. His Honour then added, at 666:
"In the present case, however, there is to be a creation of a trust where none existed before, and there is a lengthy period to elapse even before the oldest of the three infants attains 21. In these circumstances it appears to me that the vesting of the proceeds of sale in trustees who can exercise the statutory and other powers of the trustee for the benefit of the infants, and, in particular, can invest the proceeds in authorised investments and collect the income and invest or apply that income and, within limits, the capital too, is itself an application of capital for the benefit of the infants. It involves a benefit distinct from, and additional to, any benefit arising from the sale. Indeed I should have considered it a benefit to the infants to vest their shares in trustees even if there were to be no sale of the shares; and, in my view, the contemplated application of the proceeds of sale by vesting the money in trustees is, in the facts of this case, an application of capital in respect of which all the conditions (a), (b) (c) and (d), that I have listed, are satisfied."
The conditions which his Honour said must be satisfied before an order can be made under the terms of the Victorian Act were:
(a)some application of the capital or income of the property must be in contemplation;
(b)it must be an application "for the benefit of" the infant owner;
(c)the Court's purpose, or one of its purposes, in making the order must be to cause or enable that application to be made;
(d)the circumstances must be such that the Court considers it desirable that the discretionary power conferred by the section should be exercised.
The opinion expressed by Smith J in Re White tends to support the view pressed by or on behalf of the "applicants" in this case, that it is open to the Court under s 82(a) of the Trustees Act 1962 to order the conveyance of the property to the applicants to be held by them as joint trustees to exercise such of the powers as are conferred by or under the Trustees Act on a trustee as the Court may in the order specify.
However, the terms of s 55 of the Victorian Act considered in Re White are different in material parts from s 82. First, as noted above, the circumstances in which the Court may make an order are different. There is no need under s 82 for a determination to be made as to whether or not there is to be an "application of the capital and income" for the "maintenance, education advancement or benefit of the infant". Instead, the Court simply needs to determine whether "it considers it necessary or desirable in the interest of the infant or of the infant and some other person" that the appointment or vesting respectively referred to in pars (a) and (b) be ordered.
Secondly, while the order comprehended by s 82(b) is precisely in the same terms as s 55(b), the terms of par (a) of s 82 are different from those of par (a) of s 55. The latter is limited to "appointing a person to convey such property", whereas s 82(a) permits the Court to make an order "appointing a person to sell and convey, lease, mortgage or charge the property, or otherwise to exercise such of the powers as are conferred by or under this Act on a trustee, as the Court may in the order specify."
In Re White, the opinion expressed by Smith J that it would be a benefit to the infants to vest their shares in trustees even if there were to be no sale of the shares, was plainly by reference to the power of the Court under s 55(a) of the Victorian Act. Section 82(a), however, seems to restrict the Court to making an order appointing a person "to sell and convey … the property, or otherwise to exercise such of the powers as are conferred by or under this Act on a trustee, as the Court may in the order specify" (emphasis supplied). By reason of the use of the conjunctive "and", it would not appear to be within the first part of par (a) simply to appoint a person to "convey" the legal and beneficial interest of an infant to that person or some other person to be held in trust for the infant, as such a transaction would not also constitute the act of sale. If this be right, the mere conveyance of property to a trustee with powers of sale and investment would not constitute an order appointing a person to "sell and convey the property".
I am inclined to think that the terms of s 82(a) of the Trustees Act 1962 are designed to permit the Court, in effect, to approve a particular dealing or transaction that the Court considers necessary or desirable in the interests of the infant and that they are not designed to permit the appointment of a trustee with general powers of sale, conversion and reinvestment of the capital of the infant's estate.

It is instructive to note that, in 1970, s 73 of the Trustee Act 1925 (NSW), which was in terms similar to s 55 of the Victorian Act, was replaced by s 50 of the Minors (Property and Contracts) Act 1970 (NSW). Section 50 now provides that:
"(1)Where a minor is beneficially entitled at law or in equity to property, the Supreme Court may, on such terms as the Court thinks fit, make orders authorising a person, either generally or in any particular instance:
(a)to make any disposition of the property;
(b)to receive the proceeds of disposition of the property;
(c)to call for a disposition of the property to the person so authorised or as he directs;
(d)to receive the income of the property;
(e)to sue for and recover any chose in action comprised in the property;
(f)to invest the property; or
(g)to apply the capital or income of the property for the benefit of the minor.
(2)The court shall not make an order under this section unless it appears to the Court that the order is for the benefit of the minor."
Under this provision, I have little doubt that what is here proposed by the "applicants" could, in substance, be achieved. As Jacobs' Law of Trusts in Australia, 6th ed, R P Meagher, W M C Gummow, eds, at [2512], says of s 73 of the New South Wales Act:
"One clear effect of this provision is to abolish the limitations on the power of the court which were discussed by Upjohn J in Re Heyworth's Settlements. It appears that the only limitations which now exist are:
(1)the minor must, at law or in equity, be beneficially entitled to the property; and
(2)it must appear to the court that the vesting order is for the benefit of the minor."
However, a further question arises whether the proposal that the property effectively be held on trust by the applicants for the benefit of the infant children, if made the subject of an order, may be achieved by an order "appointing a person … to exercise such of the powers as are conferred by or under this Act on a trustee, as the Court may in the order specify" which is also permitted under s 82(a). This requires consideration of what powers are conferred by or under the Act on a trustee that may be specified in an order to be exercised by a person so appointed.
Part VI of the Trustees Act 1962 sets out the general powers of trustees. Without dealing with them exhaustively (the topic being the subject, generally speaking, of the whole of the Act), they include the following:
(1)the power to sell the property (s 27(1)(a));
(2)the power to dispose of the property by way of exchange for other property in the State of a like nature or a like or better tenure (s 27(1)(b));
(3)the power to let or sublet the property at a reasonable rent for any term not exceeding one year, or from year to year, or for a weekly, monthly or other like tenancy or at will (s 27(1)(d));
(4)in exercising the power of leasing or subleasing, the power to grant to the lessee or sublessee a right of renewal for one or more terms, at a rent to be fixed or made ascertainable in a manner specified in the original lease or the original sublease, but so that the aggregate duration of the original and of the renewal terms shall not exceed the maximum single term that could be granted in the exercise of the power (s 27(3)(a));
(5)in exercising the power of leasing or subleasing, the power to grant a lease with an optional or compulsory purchasing clause (s 27(3)(b));
(6)in exercising the power of leasing or subleasing, the power to grant to the lessee or sublessee a right to claim compensation for improvements made or to be made by him or her in, upon or about the property which is leased or subleased (s 27(3)(c));
(7)where the trustee is authorised, amongst other things, under the Act or by law to pay or apply capital money subject to the trust for any purpose or in any manner, the power to raise the money required by sale, conversion, calling in or mortgage of all or any part of the trust property for the time being in possession; and where a trustee, in the exercise of powers in that behalf, purchases any property for the trust, the trustee has the power to make the purchase on terms of deferred payment or on mortgage of that property (s 43(1));
(8)the power to employ and pay an agent, whether a solicitor, accountant, bank, trustee corporation, stockbroker or other person, to transact any business or do any act required to be transacted or done in the execution of the trust or the administration of the trust property (s 53(1));
(9)the power to grant a lease or sublease of the property for any term not exceeding, in the case of a building lease 30 years, or in the case of any other lease (including a mining lease) 10 years (s 27(1)(e));
(10)the power to expend money for the repair, maintenance, upkeep or renovation of the property (s 30(1)(a)).
If a person were to be appointed with the power of a trustee simply to sell the property, under s 27(1)(a), the question would arise as to what may then be done with the proceeds of sale. If a person were appointed to exercise the power to dispose of the property by way of exchange for other property in the State, etcetera, under s 27(1)(b), then the question of what should be done with the proceeds of sale would not arise. However, it may also be said that if a person were appointed with the power to sell the property, they could also be empowered to vest the proceeds of sale "in any form of investment", as a trustee might do under s 17 of the Trustees Act 1962 that appears in Pt III of the Act. That provision authorises a trustee to invest "trust funds" in any form of investment and at any time to vary an investment. There is no "trust fund" in this case. However, the property itself may be treated as the "trust fund" for this purpose.
Indeed, I consider a broad view should be taken of the expression in s 82(a), "such of the powers as are conferred by or under this Act on a trustee". It would seem appropriate, for example, to read the powers to make investments referred to in Pt III of the Trustees Act 1962 and other powers of trustees referred to in the Act, in effect mutatis mutandis for the purpose of an order made under s 82(a), so that a person might be appointed to sell property and to invest the proceeds of sale or do other things in respect of the property that a trustee may do generally in respect of trust property.
It would be an odd result if s 82(a) were to be construed so as effectively to oblige an infant to retain property to which he or she is beneficially entitled in that particular form, even though it may demonstrably not be in their interests so to do.

The question of discretion

However, it is a different question whether it is in the interests of the infant in each case that a person should be appointed with the discretion to exercise a wide range of powers as are conferred by or under the Trustees Act on a trustee so that, in effect, the person is appointed a trustee with broad powers of sale, conversion and investment.
In the present circumstances, I consider that the order that should be made is one that permits the "applicants" to exercise the power of a trustee referred to in s 27(1)(b) of the Trustees Act, namely to sell the existing property and acquire a replacement property. They should also have the necessary powers to manage and improve it. If in the future they consider that some further sale, conversion or reinvestment of this particular asset is warranted, it would seem to me appropriate for the "applicants" to make a fresh application in that regard to the Court pursuant to s 82.
I consider this is an appropriate approach to take, because, in this case, the infants are presently the legal and beneficial owners of the property. If it had been intended that a particular asset should have been held on trust for their benefit, no doubt the property here in question would not have been registered in their names in the first instance. In all of the circumstances, I am not inclined effectively to convert the legal and beneficial interests of the infants into purely beneficial interests pursuant to a virtual trust in which the powers of the virtual trustees are so general that the asset may be sold, converted and invested in various forms of property over time without reference to the Court.

Conclusion and orders

For these reasons, I make the following orders:
(1)That during the minority of the children Jessica Mary Rubery and Robert Jesse Rubery (the infants), Caroline Victoria Rubery and Peter Glen Rubery (Appointed Persons) be appointed to sell and convey all that piece of land known as Unit 3, 29 Ardross Street, Applecross, Western Australia, and more particularly described as Lot 3 on strata plan 3900, together with a share in any common property as set out on the strata plan and being the whole of the land comprised in certificate of title volume 1437 folio 717 (the Applecross Unit);
(2)The Appointed Persons shall apply the proceeds of sale of the Applecross Unit in the purchase of land (whether improved or otherwise) within Western Australia as a substitute investment to the Applecross Unit on behalf of the infants;
(3)The Appointed Persons open an account or accounts with a bank or banks to deposit and withdraw funds from the sale of the Applecross Unit in order to purchase the substitute investment and to pay rates, taxes, insurance premiums and other outgoings in respect thereof;
(4)The Appointed Persons invest any surplus moneys from the sale of the Applecross Unit in investments authorised from time to time by the Trustees Act 1962 (WA);
(5)The Appointed Persons may lease, sublease, renew, surrender or extend any lease or sublease of the Applecross Unit or the substitute investment;
(6)The Appointed Persons may expend money for the repair, maintenance, upkeep or renovation of the Applecross Unit or substitute investment;
(7)The Appointed Persons may mortgage the Applecross Unit or substitute investment for the purpose of raising moneys to be expended for the purposes described in par (6) above;
(8)The Appointed Persons may exercise and execute all powers which may be vested or conferred upon them as lessors or mortgagors or mortgagees as a result of the exercise of the powers created by the above orders;
(9)The Appointed Persons must maintain accurate books of account and records of all receipts and expenditures on account of the Applecross Unit or substitute investment;
(10)The Appointed Persons be empowered to employ and pay an agent, whether a licensed real estate and business agent, a settlement agent, a solicitor or accountant to give advice in respect of, or to exercise, any of the powers conferred on the Appointed Persons by the above orders.