Thorn v Bettens - [2006] SASC 59

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
THORN v BETTENS
Reasons of Judge Lunn a Master of the Supreme Court
3 March 2006
EQUITY - TRUSTS AND TRUSTEES - TRUSTEES - THEIR APPOINTMENT, DISMISSAL, ESTATE, ETC
Application under s 36 Trustee Act to remove trustee - trust beneficiaries were infant children - action brought by grandmother of the children who was not a beneficiary of the trust or the guardian of the children - held she was not a person who had a proper interest in the trust under s 36(1c)(e) of the Act and so had no locus standi to be the plaintiff - defendant voluntarily appointed Public Trustee to the trustee in his place - held there should be no order as to costs.

THORN v BETTENS
[2006] SASC 59
Reasons on cross applications for the costs of the action.

JUDGE LUNN: Sally Anne Smith (“the deceased”) had four children, two of whom were Blake and Kiara Smith, who were born respectively in 1995 and 1996. It is asserted the father of those two children was Kewyn John Thorn. He was not married to the deceased. The defendant disputed that it had been properly proved under s 7 of the Family Relationships Act 1975 that Kewyn Thorn was the father of these two children. I need not go into the issue as it does not affect my decision. The plaintiff is the mother of Kewyn Thorn and I will assume she is the grandmother of the two children in question.
The deceased owned a house property at 9 Yarnbrook Street, Davoren Park (“the house”). She resided there with her four children.
The deceased died on 24 December 2001. The defendant took out probate over her estate. Her four children were the beneficiaries under her Will but no copy of the Will has been put before the Court in this action.
On 14 May 2004 the Family Court of Australia appointed Charmaine Drowley as the guardian of the four children. That Order gave her the sole responsibility for the long term and day to day care, welfare and development of the children, but did not give her control of any assets of the children. Mrs Drowley, her husband, her own children and the four children of the deceased continued to live in the house. She was obliged to pay rent to the defendant as the then trustee of the deceased’s estate. There was no suggestion that there was any tenancy agreement.
The plaintiff and her son regularly visited Blake and Kiara at the house. The plaintiff became concerned at the poor state of repair of the house. She consulted her solicitors who wrote to the defendant on 9 June, 27 July, 2 and 30 November 2004 and 16 February 2005 complaining about its state of repair, requesting that improvements be made and threatening Court proceedings when it appeared the defendant was not attending to the matters as requested. The only reply made by the defendant was in a letter of 6 August 2004 in which he said he would do various work.
In letters of 27 July and 2 November 2004 the plaintiff’s solicitors requested financial information about the estate. The defendant made no response to these requests. From January 2004 the defendant, without apparent legal authority, had borrowed substantial sums of money from the estate account which he had used to purchase an ice cream shop. He claims in retrospect it was an investment for the benefit of the children, but it is very difficult to accept that. Mrs Drowley was aware to some extent of him borrowing money from the estate. She had been employed to work part-time in the ice cream shop.
The plaintiff instituted this action on 30 June 2005. In it she claimed under s 36 of the Trustee Act 1936 an order appointing an independent trustee for the estate of the deceased in substitution for the defendant. In her supporting affidavit she relied upon the alleged continuing default of the defendant to repair and improve the house and his having failed to register a transmission of the estate of the deceased to himself on the title to the house. In her affidavit she said
11….. I am concerned as to whether he (the defendant) is adequately managing the estate. I have a concern as to the well-being of my grandchildren.
12I am prepared to act as the Executor and Trustee of the estate …..
In a later affidavit Mrs Drowley said:
I was reluctant to take any legal action myself against Bettens because I felt in a vulnerable position. I felt that I was Betten’s tenant but I had no influence in respect of matters concerning the house …..
At the time of issuing the summons the plaintiff also issued a notice for specific directions seeking an interlocutory order that an independent trustee be appointed in substitution for the defendant. That application was apparently served on the defendant with the summons. On the initial return of the application on 22 July the defendant attended in person, indicated that he had only been served on 20 July and obtained an adjournment to 8 August for him to obtain legal advice. On 8 August the application was further adjourned to 15 September for an attempt to resolve the matter. On that date there was a further adjournment to 28 October as the defendant was consulting Public Trustee. On 9 October 2005 the defendant executed the necessary document under Part 5 of the Trustee Act to appoint Public Trustee in his place as trustee of the deceased’s estate. Public Trustee accepted that appointment on 24 October 2005. Public Trustee investigated the affairs of the estate and has since entered into an arrangement with the defendant for him to repay $40,440 including interest to the estate by fortnightly instalments.
The plaintiff was content with the appointment of Public Trustee to manage the estate and indicated to the Court that she did not seek any other substantive orders. However, both the plaintiff and the defendant brought cross applications that the other should pay the costs of the action.
In the costs argument the defendant contended that the plaintiff had no locus standi to institute this action. The action was instituted under s 36 of the Trustee Act, which provides:
(1)The Supreme Court may, on the application of a person referred to in subsection (1c), make-
(a)an order removing one or more of the trustees of a trust; or
(b)an order replacing one or more of the trustees of a trust; or
(c)an order appointing a trustee or trustees, or an additional trustee or trustees, of a trust; or
(d)any other order that in its opinion is necessary or desirable.
(1b)There is no need for the Court to find any fault if it is satisfied that the order is desirable –
(a)in the interests of the persons (whether identified or not) who are to benefit from the trust; or
(b)to advance the purposes of the trust.
(1c)The following persons may apply for an order under this section:
(a)The Attorney-General; or
(b)a trustee of the trust; or
(c)a beneficiary of the trust; or
(d)in the case of a trust established wholly or partly for charitable purposes the following persons may apply for an order in addition to those referred to in the other paragraphs of this subsection:
(I)a person who is named in the instrument establishing the trust as a person who is entitled to, or may, receive money of other property for the purposes of the trust; or
(ii)a person who is named in the instrument establishing the trust as a person who must, or may, be consulted by the trustees before distributing or applying money or other property for the purposes of the trust; or
(iii)a person who in the past has received money or other property from the trustees for the purposes of the trust; or
(iv)a person of a class that the trust is intended to benefit; or
(e)any other person who satisfies the Court that he or she has a proper interest in the trust.
The defendant contends that the plaintiff does not qualify under any of the subparagraphs of subsection (1c).
The plaintiff’s counsel submitted that she came within subpara (e) as a person who “has a proper interest in the trust”. I cannot agree. I am unaware of any reported judicial exposition of the meaning of subpara (e). In its context “interest” there means a legal, equitable or financial interest. It does not extend to an interest merely as a person who is morally concerned about the affairs of the trust. It also must be an “interest in the trust”. Here the subject matter of the trust has only been shown to be the house. (In the absence of the Will I cannot find that it extended any further.) It does not encompass an interest in the welfare of the beneficiaries of the trust.
Accordingly, the plaintiff had no locus standi to bring this action. If it had proceeded further, presumably the defendant would have taken the point and the plaintiff would have been removed from the action. However, it is likely that the action would not have been dismissed, but an opportunity would have been given for proper plaintiffs, who are the children, Blake and Kiara, by a suitable next friend to be substituted as the plaintiffs in place of Mrs Thorn. As the Order of the Family Court did not give Mrs Drowley any control over the assets of the children she could not have been a proper plaintiff. In that event it is likely that either Mrs Thorn or Mrs Drowley would have been a suitable next friend for the infant plaintiffs, but, if Mrs Thorn were so appointed, it would have been in a different capacity to that in which she did institute the action. The upshot of this is that there is no basis in law to make any order for the costs of the action to date in favour of a plaintiff who had no locus standi to bring the action.
I now need to deal with the defendant’s application for costs. If he had not voluntarily had Public Trustee appointed in his place as trustee of the estate, the action would have proceeded against him after the infant children had been appointed to be the plaintiffs. He disputed his obligation as trustee to repair or improve the house. I cannot predict that he would have been held to have been in breach of his duty as trustee in this respect or whether that would have given a proper basis for replacing him as the trustee under s 36 of the Act. However, in retrospect, it is clear that his unauthorised borrowings from the estate would have provided a powerful basis for him to be removed as the trustee, and particularly as he is not in a position to make immediate restitution. Where an action does not proceed to final determination because there is no further need for the relief sought the Court has a broad discretion under s 40 of the Supreme Court Act as to what order for costs it should make: Boscaini Investments Pty Ltd v Corporation of Kensington & Norwood Debelle J, 5 August 1999, Judgment No 1999 SASC 327, unreported. Here the appropriate order is that there should be no order as to costs in favour of the defendant.
I have today made the following orders:
1Summons dismissed.
2Applications by plaintiff and defendant for the costs of the action are each dismissed.
3No order as to the costs of the action