Bradley (dec'd), Re [1996] QSC 141

IN THE SUPREME COURT OF QUEENSLAND Brisbane O.S. No. 896 of 1993 [William Francis Bradley (deceased)] IN THE MATTER of The Trusts Act 1973 - and - IN THE MATTER of THE TRUSTS OF THE WILL OF WILLIAM FRANCIS BRADLEY LATE OF DAYBORO IN THE STATE OF QUEENSLAND REASONS FOR JUDGMENT - THOMAS J. Delivered 15 August 1996 CATCHWORDS: TRUSTS - Dismissal and replacement of trustees - Estate property of dairy farm under a life tenancy - Conflict between joint trustees as to day to day decisions on farm management - Re Whitehouse [1982] 2 Qd.R. 196 applied - Status of existing executors not interfered with. Counsel: Ms C. Holmes for the Applicant Mr C. Newton for the First Respondent Mr L. Stephens for the Second Respondent Solicitors: Rhonda Sheehy & Associates for the Applicant Greg Casey for the First Respondent Trilby Misso & Company for the Second Respondent Hearing dates: 7-9 August 1996 -- 1 of 10 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane O.S. No. 896 of 1993 [William Francis Bradley (deceased)] IN THE MATTER of The Trusts Act 1973 - and - IN THE MATTER of THE TRUSTS OF THE WILL OF WILLIAM FRANCIS BRADLEY LATE OF DAYBORO IN THE STATE OF QUEENSLAND REASONS FOR JUDGMENT - THOMAS J. Judgment delivered 15 August 1996 These are cross-applications for the dismissal of trustees and for their replacement by others. The relevant trust was established under the terms of the will of William Francis Bradley who died on 17 July 1989. The deceased was survived by his widow, three sons and a daughter. The present litigation, and extensive earlier litigation, are the result of disputes between the three sons on all manner of subjects. One application is for one brother to replace another as trustee. The cross-application is to replace both present trustees with an independent accountant. The major estate property is a dairy farm at Rush Creek, Dayboro consisting of about 800 acres. It, along with plant equipment and milk quota is said to be of a value of approximately $4.4 million. As is commonly the case with farm properties of high value, the annual income it produces is relatively modest. The mother and the three sons who reside on the property and who work hard on it are able to obtain (very approximately) an annual net income (including wages and distributions) totalling approximately $100,000. It will be convenient to refer to the three brothers by their Christian names, respectively -- 2 of 10 -- 2 Garry (age 42), Joseph (age not stated) and William (age 38). The mother, Dulcie is aged 71. The executors and trustees appointed by the will are Garry and Joseph. One of the trusts permits their mother (Dulcie Bradley) to have the use of the house and contents on the farm property until death or remarriage. Another requires the trustees to carry on the dairy business and to apply half of the income to Dulcie Bradley, and divide the remaining half equally between the three sons, until the death or remarriage of Dulcie Bradley. The will contemplated that the sons would enter into a partnership agreement, but they were never able to agree. Litigation was brought resulting in a decision by Derrington J (Re Bradley [1994] 2 Qd. R. 233) to the effect that the further condition concerning the entry into the partnership agreement was void. Consequently the two trustees have simply carried on the business and divided the income as directed by the will. Garry, Joseph and Dulcie Bradley each live in separate residences located on the farm property. William resides in Dayboro. All three brothers work the farm, and on the whole work very hard, though they are sometimes critical of each other's absences. Dulcie Bradley keeps the farm accounts and financial records for the trust, and seems to do so very adequately. Apart from their labour, there is only one employee. Each brother is employed by the trust on a wage of $2,200 per month (gross). In addition the average annual income of the trust is in the region of $25,000 to $30,000 net. Unfortunately the three sons cannot agree as to the manner in which the business should best be carried on. In particular, the two trustees cannot agree among themselves on day-to-day decisions and are in constant conflict. That situation is not of recent origin. Earlier litigation before Mackenzie J (judgment delivered 25 March 1994), on William's application to remove Garry as trustee revealed a host of issues upon which the two existing trustees were in conflict. Mackenzie J was satisfied that Garry harboured a deep-seated suspicion and distrust of Joseph and that "notwithstanding his maintaining that he is prepared to be cooperative in performing -- 3 of 10 -- 3 the duties of joint trustee and to act in the decision-making process of the farm business, he has been uncooperative over a period of time". His Honour was further satisfied that many of the misunderstandings were "largely the product of (Garry's) unpreparedness to conduct discussions in sufficient depth to enable him to gain a full appreciation of what was involved". One of the issues before Mackenzie J concerned disputes as to the signing of cheques. His Honour laid out a series of directions designed to overcome that particular difficulty, and defined the obligations of the trustees towards one another, in the hope that a working arrangement might result without the actual dismissal of a trustee. His Honour stated the primary objective of working together for the benefit of the estate and stated that "if the matter comes back before the court and there is evidence that there has been conduct that does not conform to these objectives, the court will view such conduct seriously". His Honour accordingly adjourned the summons sine die. Plainly the experiment has failed. Determination of responsibility for the failure is however a more difficult process, and that has been the principal issue litigated before me over three days. Garry has a number of problems and is to a considerable extent alienated from all other interested parties, including his mother. I have heard evidence on multiple issues as to day-to- day decisions on farm management upon which Garry and Joseph cannot agree, and as to which each alleges that the other has acted unreasonably. It will be necessary for me to mention only briefly a few of these. One is the cessation of spraying activity by Garry. In the division of labour accepted by the brothers, this was Garry's responsibility. He had used Grazon DS for some time and it was effective in weed control. One place where it was used was in the "pocket" paddock, in which cattle which are in an advanced stage of pregnancy are kept. In late 1994 it was noted that there had been about eight or nine spontaneous late abortions in that paddock. That was highly unusual, although pathological testing of the foetus failed to reveal the cause. This was not -- 4 of 10 -- 4 conclusive proof of the absence of chemical effect upon the cow, and Joseph was entitled to be suspicious and cautious of the further use of that particular chemical. He asked Garry to keep a record in the future of all areas sprayed. Garry's reaction was that he was not prepared to accept that "condition" being placed on his spraying, and that if he had to keep such records he would not spray at all. For an appreciable time he refused to spray. Significant deterioration through weed infestation occurred, and it will now take a considerable time to overcome the problem. In recent months, fairly close to the time when the present proceedings were reactivated by William, Garry has recommenced spraying and is keeping records. This is a good example of rather petulant conduct on his part. I prefer the evidence of Joseph on this issue and consider that Garry's description of the events is not persuasive and fails adequately to explain his cessation of spraying activity. The productivity of the farm has suffered in consequence of this incident, and so have the ultimate benefits of the beneficiaries. Another issue is Garry's initial refusal to consider William's suggestion that cottonseed be used as a supplement. This beneficial decision (as I regard it to be) was delayed because Garry was not prepared to give proper consideration to William's proposal. I understand that Garry has since changed his mind on this issue, but not entirely. He maintains that the benefits of using it do not match the cost. Once again on this issue, I find Joseph's evidence and reasoning far more convincing. Garry's reasoning significantly underestimates the factor of increase in milk production. It also reveals some lack of grasp of the statistical data and a failure to acknowledge the distinction between bulk feed and protein supplement. Unfortunately the frustrations engendered by almost daily disagreements have led on a number of occasions to physical confrontations, and, as it seems to me, direct physical violence on at least two occasions. In this instance I think that Joseph and William have been less than candid. On at least one occasion their account appears inconsistent with the physical results which are independently recorded. This goes to some extent against their credit, but it leaves -- 5 of 10 -- 5 unresolved the question of who was responsible for provoking or for starting each of these fights. I am unable to resolve that question but consider that there have been faults on all sides. To some extent these confrontations are the direct result of the frustrations engendered by mutual perceptions between Garry and Joseph that the other one was being unreasonable. Having heard the evidence of all three it is clear that Garry does not have a good grasp of the necessary data for problem-solving in the context of running a farm such as this. He has personality problems and appears rather insecure, and distrustful of others. He appears to lack insight into these difficulties. It emerged during final address, when the subject was raised of an undertaking from the trustees that Garry might be permitted to inspect all relevant books, that he would have difficulty in doing this personally because he does not understand the books. That perhaps gives some insight into the difficulty, noted by Mackenzie J and also by me, of Garry engaging in full and meaningful discussion of managerial issues. I do not propose to canvass the other multiple issues which have been litigated. In general it seems to me that Garry emerges on the wrong side in most of these issues. It is obvious that Joseph and Garry cannot continue to work together whilst both of them have equal powers, and in effect a veto on day-to-day decisions in farm management. Matters have gone well past possible reconciliation or commonsense solutions. It was eventually conceded (belatedly in my view) by Garry's counsel in final address that the stage has been reached when joint management will no longer work. The present applications are for dismissal of trustees and replacement by others. The present trustees cannot function effectively when they cannot agree upon a matter as fundamental as the appointment of a farm manager. There should be a single farm manager, and the trusteeship will have to be altered in order to enable such a decision to be made. The principles upon which a trustee may be removed are usefully stated in Re Whitehouse [1982] 2 Qd.R. 196, 206-207. The jurisdiction is exercised with a view to the -- 6 of 10 -- 6 interests of the beneficiaries, the security of the trust property, an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. Plainly in the present case the continuation in office of the present trustees is not calculated to promote the welfare of the beneficiaries. Although some of the problems are due in part to unavoidable clashes of personality, I consider that the disputes and the state of animosity which exists is largely attributable to the respondent Garry Bradley and that the evidence shows sufficient obstructive conduct to justify removal. The question remains as to the person or persons (if any) who should be appointed in his place. I consider that Joseph is clearly the most articulate of the three brothers, but more than this he has demonstrated a sounder grasp of the matters necessary to carry on the farm effectively than the other witnesses. In other words on the evidence before me if there is to be a sole manager, Joseph is the obvious choice. There is of course a risk that if Joseph becomes the person in effective control, Garry may decide not to remain as a farm worker. That would be unfortunate, because his contribution is probably greater than that of an employed farm labourer. However that is a choice that only he can make in the long term. However, if Joseph is to be in charge, it is desirable that Garry be protected from arbitrary treatment. I accept Joseph's evidence that he desires Garry to remain working on the farm and that he has no intention of dismissing him. Similarly he considers that irrespective of what might happen Garry should be permitted to remain in the house which he presently occupies on the farm with his family. It would be desirable however, as a condition of any order that I make that there be suitable undertakings given which will make those intentions binding. It is to be noted that the primary application in this matter was brought by William, seeking to have himself appointed as trustee to replace Garry. During argument I intimated that I thought it better in the long term that Garry not be seen to be ousted by his brother, and the -- 7 of 10 -- 7 submissions of Garry's counsel were to the effect that if he were to be removed as trustee he would prefer Joseph to be the ruling party rather than Joseph and William. There is an additional protection however which I propose to achieve by appointing Dulcie Bradley to be a co-trustee. It is better that there be two trustees than one. It was suggested on Garry's behalf that his mother should be sole trustee, but in view of her age and the nature of the disputes that she would be likely to be called upon to settle I do not think that this is a desirable solution. A joint trusteeship between Dulcie Bradley and Joseph Bradley seems to me to be a useful protective measure which is likely to promote even-handed treatment of all beneficiaries. I should also deal with the submission on behalf of Garry that the existing trustees should be replaced by an independent accountant nominated by him, Mr Geoffrey Stephens. If I were to do this I would be putting off to another day the difficult decision of who should manage the farm. Mr Stephens said he did not know at this stage who he would appoint as manager. This would create the opportunity for further game-playing, threats to leave the farm and so on. I think it better that a decision be made here and now that will settle this fundamental question. A further objection to the appointment of Mr Stephens is the additional cost that this would entail. He expected fee would be $12,000 per annum, and this would contribute very little to the actual management. I therefore do not consider this to be an appropriate solution. It is to be noted that these proceedings are concerned only with the trusts in relation to the farm property until the death or remarriage of Dulcie Bradley. It should be clearly understood that the orders which I am about to make in no way interfere with the status of the existing executors, Joseph Henry Bradley and Garry Wayne Bradley. The different functions of executors and trustees are described in Lee, Manual of Queensland Succession Law, 2nd edn., para 901. It is normal for the duties of the trustee to overtake and displace the duties of the personal representative, and whether this occurs is a question of fact to be determined by -- 8 of 10 -- 8 reference to the particular asset and the particular trust. In turn there may well be residual executorial duties after the trusts have been discharged. However it should be clearly understood that so far as the trusts created by the will are concerned, there is now a change of trusteeship. Upon the death of Dulcie Bradley, Joseph Bradley will be the sole trustee charged with the carrying out of the remaining trust of holding the farm property and chattels upon trust for the three sons in accordance with the will. Presumably the beneficiaries who are all sui juris would then be entitled to call for their share if they do not agree among themselves upon some other course. I propose to make the following orders: Upon the following undertakings by Joseph Henry Bradley and Dulcie Florence Bradley respectively - (a) to permit Garry Wayne Bradley and William Francis Bradley by themselves or their agents to inspect the books and accounts of the farm and the trust as if they were respectively trustees of the will of William Francis Bradley (deceased); (b) that until the death or remarriage of Dulcie Frances Bradley they will not without the consent or this court dispossess Garry Wayne Bradley from the house which he and his family now occupy on the farm property: (1) Order that Garry Wayne Bradley be removed as a trustee of the trust established under the terms of the late William Francis Bradley and that Dulcie Florence Bradley be appointed as a substitute trustee of the said trust. (2) Direct that the trustees on behalf of the said estate purchase at their original cost the cattle purchased at the Pittsworth Sale and registered in the name of Joseph Henry Bradley and -- 9 of 10 -- 9 William Francis Bradley. (3) Direct that the beneficiaries shall meet with the accountant for the trust each year prior to the completion of the annual accounts to discuss matters arising in relation to them. Without limiting the generality of the foregoing the trustees shall give due consideration to the exercise of powers in paragraph 3 and 4 of the 6th and 7th sheets of the testator's will in such discussions. Each beneficiary shall be entitled to a copy of the annual accounts upon completion. (4) Order that the cross-application of Garry Wayne Bradley be dismissed. (5) Order that the costs of all parties to these proceedings be taxed on a party and party basis and paid out of the estate. (6) Liberty to apply upon four days' notice to the solicitors for the other parties. -- 10 of 10 --