The Kean Memorial Trust Inc v AG for SA (No 2)

[2007] SASC 133

Supreme Court of South Australia

(Civil: Application)

THE KEAN MEMORIAL TRUST INC v AG FOR SA (NO 2)

[2007] SASC 133

Judgment of The Honourable Justice Debelle (ex tempore)

16 April 2007

EQUITY - TRUSTS AND TRUSTEES - APPLICATIONS TO THE COURT FOR ADVICE AND AUTHORITY

Application by Trust for orders and determination of meaning of terms of the trust - whether Trust is impressed with obligation to purchase property – meaning of “fair market price” – orders and declarations made.

Trustee Act 1936 s 17, referred to.
Spencer v The Commonwealth (1907) 5 CLR 418, applied.

THE KEAN MEMORIAL TRUST INC v AG FOR SA (NO 2)
[2007] SASC 133

Civil

1. DEBELLE J.        The plaintiffs have, by summons dated 9 March 2007, applied for a number of orders. It is unnecessary to recite the orders sought. Their terms may be sufficiently obtained from an examination of the summons.

   2               Broadly speaking, the nature of the orders which are sought fall under three headings, namely,

   1orders to give effect to the reasons for judgment of Besanko J in this action published on 25 July 2003;

   2further orders as to the manner in which the Trust shall purchase land in Zone I and in Zone II and, in particular, the nature of the obligation to purchase land; and

   3orders to clarify terms of the Trust which were not the subject of the reasons of Besanko J.

   3Paragraphs 1 to 4 of the orders the subject of the draft minutes of order are, to all intents and purposes, orders which give effect to the reasons of Besanko J. There is, therefore, no need for me to recite the reasons of Besanko J. It is sufficient to refer to them and to observe that the orders give effect to those reasons.

   4To the extent that sub-paragraph (j) of paragraph 4 of the orders gives the Trust power to appoint agents, I note that that power is entirely consistent with the terms of s 17 of the Trustee Act 1936. Although Besanko J said at [96] that the general rule has been that a trustee must not delegate his duties or powers, I respectfully believe that that proposition misstates the intent of s 17, which is to the effect that a trustee may delegate powers subject to any prohibition to the contrary stated in the trust instrument.

   5The Trust also seeks a determination of the meaning of some of the terms of the trust. Its reasons for doing so lie in concerns of those who have been administering the trust, prior to the incorporation of the trust, that they do not act in breach of trust.

   No Obligation to Purchase

   6The Trust is first concerned that it is not impressed with an obligation to purchase property in either Zone I or Zone II which becomes available.  The plan attached to the reasons of Besanko J provides the factual basis for this concern. It is apparent that the trust was established to purchase land which the Trust believes will be conducive to the purposes of the Tenison Woods Catholic School at Richmond. Some of the allotments of land in Zones I and II do not adjoin the school property and are separated from it by other allotments in Zone I.

   7I have considered the whole of the letter referred to in clause 3(d) of the will of the deceased. Only part of that letter is set out in the reasons of Besanko J. I am satisfied that the intent of the deceased was that the Trust would have a discretion as to how it should purchase allotments as they became available in Zones I and II.  Plainly, an obligation to purchase each property in Zones I and II as it became available could result in frustration of the intent of the deceased, which was to benefit the school. That benefit is best provided by the purchase of property adjacent to the school or at least the purchase of a property sufficiently close to the school as to enable its amalgamation with other land to provide a suitable area ready and convenient to the school and conducive to the formation of a grassed area for the school.

   8For those reasons I am prepared to make an order that there is nothing in either the will of the deceased or in the letter referred to in clause 3(d) of the will which imposes any obligation upon the Trust to purchase any property in either Zone I or Zone II which it considers is not conducive to the formation of a grassed playing area for the children attending the Tenison Woods Catholic School.

   Fair Market Price

   9The next question concerns the meaning of the expression ‘fair market price’ in the letter referred to in clause 3(b) of the will. The expression ‘fair market price’ appears in this context:

   The purpose of the TRUST FUND is to initiate a fund for the purchase of properties adjoining the ST JOSEPH’S PRIMARY SCHOOL and ALOYSIUS CHURCH, BROOKER TERRACE, RICHMOND, as they become available for sale and at a fair market price.

   The Trust has, at some time in the past, sent a circular to the owners of the allotments which comprise Zones I and II. The purpose of that circular was to seek to avoid any lost opportunity to purchase land which the Trust might seek to purchase through the Trust not being aware of the fact that the land was available for sale.  In addition to that fact, the Trust has a concern that it will soon be known, if it is not already known, that the Trust is a willing purchaser, with the consequence that a premium might have to be paid in order to purchase any particular allotment.  The Trust has already had to pay a premium for the purchase of one allotment. The Trust is concerned that it should not breach the terms of the trust if it pays a premium.

   10In my view, the payment of a premium is a consequence, from the Trust’s point of view an unfortunate consequence, of the fact that the market will quickly ascertain that there is a purchaser which is perhaps more anxious than other purchasers to purchase the land in Zones I and II. It is a well-accepted principle of valuation law that an adjoining owner will not infrequently pay a price higher than that paid by any other purchaser. That is sometimes a consequence of the fact that the adjoining owner has a particular purpose for the land while another purchaser would not. It also is a reflection of the fact that the vendor is aware of the purchaser’s intent and imposes a premium as the quid pro quo for the willingness to sell.  For those reasons, I do not believe that the concern of the Trust is necessarily justified, although one can readily understand the concern not to act in breach of trust.

   11The Trust had sought to substitute the expression ‘prudent price’ for the expression ‘fair market price’. I do not think that the expression ‘prudent price’ has any particular advantage that would make it an improvement upon the expression ‘fair market price’, which has a meaning which is understood in valuation law.

   12The expression ‘market value’ was defined in Spencer v The Commonwealth (1907) 5 CLR 418 at 432 by Griffith CJ and at 441 by Issacs J and has been consistently adopted since. Its meaning is the same as fair market price in the terms of the Trust. In my view, the concern of the Trust is best met by declaring that the expression ‘fair market price’ has the meaning expressed in Spencer’s case.  It is appropriate, therefore, to make an order that the expression ‘fair market price’ in the letter referred to in clause 3(d) of the will means the price payable as a result of voluntary bargaining between the Trust and a vendor willing to sell but neither of them so anxious to do so as to overlook any ordinary business consideration. That definition includes all the usual features which may attend negotiations between a vendor and a potential purchaser and I think would meet the concerns of the Trust.

   Priority for Zone I

   13The third concern of the Trust is to be able to purchase properties in Zone I in priority to properties in Zone II. I have already outlined the geographical situation in such a way as to indicate that it is plainly appropriate for the Trust to direct its energies to the acquisition of properties in Zone I in priority to properties in Zone II. For that reason, I will make a declaration that the effect of the letter referred to in clause 3(d) of the will is that the Trust shall, so far as it is able to do so, purchase properties in Zone I in priority to properties in Zone II.

   14For these reasons there will be orders in terms of the altered and initialled minutes.

   15In addition there will be a further orders, which will be paragraphs 8 and 9.  Paragraph 8 is an order that the plaintiffs have their costs of and incidental to this action, such costs to be taxed as between solicitor and client and paid out of the trust estate.  Paragraph 9 is a rule dispensing with the provisions of Rule 101.A.02(1).