Clark, Re; Re Clark [1992] QSC 164

T~'ISCRIPT OF PROCEEDINGS State Reporting Bureau, 4th Floor, The Law Courts, George Street, BRISBANE. 0. 4000 Tel. (07) 227.4360 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION SHEPHERDSON J o.s. No 112 of 1992 IN THE MATTER OF the Trusts Act 1973 and IN THE MATTER OF the trusts of the will dated 11 December 1989 of RICHARD BRUCE CLARK, deceased, late of Mount Lindesay Highway, Laravale, via Beaudesert in the State of Queensland and IN THE MATTER OF an application by GREGORY CLARK an executor and trustee of the said will BRISBANE .. DATE 24/4/92 ORDER 1 REVISED COPIES ISSUED Stale flepoii:ng 8ure.:;u Date [""/ 5; 9d.... -- 1 of 18 -- ( 09 09 ov 240492 ORDER HIS HONOUR: This application first came before me on 14 February 1992 when Mr Murphy appeared for the applicant, who is Gregory Clark, described in the originating summons as executor and trustee of the will of Richard Bruce Clark, deceased. Mr Mullins of counsel appeared for Paul Franklin Clark, Justin Lyle Clark and Peter John Clark who are three infant beneficiaries named in the will of Richard Bruce Clark. The matter was further heard on 17 February and then adjourned to a date to be fixed so that further material could be placed before me. The matter has come on today for further hearing and, as I have a clear view as to what should be done, I have decided to give these reasons extempore. 08 The amended originating summons which was handed to me on 14 February shows that the applicant sought orders: 1. That he be authorised to enter into a contract of sale between himself as trustee of the will of 06 Richard Bruce Clark, deceased, as vendor and himself personally as purchaser in respect of a one quarter share in property known as "Tamrookum Homestead" described as lot 2 on Registered Plan 167855 described in Certificate of Title Volume . 0~ 5936 Folio 240, .s~ch property being part of property subject to the trus~of the will. 2. That- the applicant be authorised to enter 2 -- 2 of 18 -- I( 09 os ov 240492 ORDER into contracts of sale between himself as trustee of the trusts of the will in respect of one half share of the trust estate in real property held as tenant in common as vendor, and in the same capacity together with Edwin Franklin Clark as vendors of certain property, plant and equipment and Edwin Franklin Clark as purchaser in respect of that real property, plant and equipment, the land constituent thereof being known as "The Dairy" described as lots 2 and 3 on Registered Plan 7587, lots 1 and 2 on Registered Plan 7588, lots 5 and 6 on Registered Plan 7590, lot 2 on Registered Plan 7591, lot 3 on Registered Plan 7614, lots 1 and 2 on Registered Plan 7618, and lot 1 on Registered Plan 65568. 08 The application also listed certain plant and equipment and a one half share owned by the estate of Richard Bruce Clark in a milk quota, certain cattle and other leased plant and equipment, all of which were proposed to be bought by Edwin Franklin Clark. Oc The amended application also sought an order from the court varying trusts of the will of Richard Bruce Clark and I shall come to this later. 0 ~ Richard Bruce Clark died on 31 January ~991. The sole executor is the applicant who is his nephew. The will was dated 11 December 1989. Probate was granted by ·this court on 23 April 1991 and the grant was sealed on a date which is 3 -- 3 of 18 -- ( 09 os 240492 ORDER indecipherable but was in May 1991. The whole of the estate was left to the three children for whom Mr Mullins appears and the will contained the further provision in clause 3 thereof: "And further provided my trustee shall not sell or dispose of any real property of which I might die possessed for a period of FIFTEEN (15) YEARS, as and from the date of my death." The three children are now aged 16, 7 and 5 respectively. Paul was born on 18 April 1976, Justin on 6 August 1984 and Peter on 26 March 1987. Graham John Moore ,a solicitor of Brisbane, hcis · applfed to be appointed to act as guardian ad litem for ov these three children. Gregory Clark, the applicant, is the son of Norman Wallace Clark, a brother .of the deceased. Gregory is aged about 26 years and is a meatworker employed at Bromelton. At the date of his death Richard and his brother Edwin Franklin Clark were partners in the business 08 of primary production. This partnership was informal in that there was no written deed and Richard's death dissolved it. When Richard died he and Edwin owned certain real estate as tenants in common. First there was the land described in six different certificates of title or deeds of grant on which "The Dairy", a fully operational dairy farm, oz was conducted. Secondly there were three p·arcels of land called cultivation land used for farming lucerne, grains and other cattle feed. This land is lot 1 on Registered Plan148639 and lot 5 on Registered Plan WD 6378 in the County of Ward, Parish of Knapp and lot 1 on Registered Plan 32511 in 0~ the County of Ward, Parish of Telemon. Thirdly there was a further parcel of land also used for cultivation. This land is described as lot 1 on Registered Plan 68708 in the County 4 -- 4 of 18 -- 240492 ORDER of Ward, Parish of Knapp, being the land in Certificate of 09 os ov 08 Title Volume 2593 Folio 249. On part of this land Edwin has built a dwelling house in which he and his family reside. From the material filed it appears that Edwin paid the cost of building the house. All the abov.e 1 ands are subject to mortgages registered in the Office of Freehold Land Titles. In addition to the above land Richard had an interest in a further parcel of land known as "Tamrookum Homestead", the real property description of which is lot 2 on Registered Plan 167855 in the county of Ward, Parish of Knapp containing 63.4694 hectares. That land is registered in the names of Richard Bruce Clark, Edwin Franklin Clark, Norman Wallace Clark and the applicant, Gregory Clark, as tenants in common in equal shares. It is subject to three registered mortgages. The registered owners of the land contributed the purchase money in equal shares when it was bought in 1983. "Tamrookum Homestead" has not been subdivided, but despite this the material shows the land was run as two separate farming concerns on approximately equal oz size parcels of land. Gregory and his father ran one concern and Richard and Edwin the other. Arising out of this arrangement for the use of "Tamrookum Homestead" Gregory and his father, Norman, have built a dwelling house on the half part of "Tamrookum Homestead" which they manage. 0 ~ Norman Clark and his .family, which include Gregory, live in that house. Richard also owned another block of cultivated land described as lot 3 on Registered Plan 2333016 in the County of Ward, Parish of Knapp, containing 9.583 hectares. 5 -- 5 of 18 -- ( 09 os ov 240492 ORDER This land was used in the partnership business but the applicant does not seek to buy it. Since Richard's death, Edwin, with the assistance of Paul, who is one of the beneficiaries, has continued to operate "The Dairy" and the cultivation land. Gregory is unable to assist in these operations; he is in full-time employment as a meatworker and his spare time is applied to the cultivation of his share in "Tamrookum Homestead". The evidence before me shows the partnership's operations were severely adversely affected by flooding in February 1991, which is not long after the testator died, when the entire dairy and all the cultivated land were completely submerged save for about 20 acres. Stock, crop and fencing losses were said to have been severe. Further bank 08 assistance to re-build and reinstate was refused and eventually Edwin reinstated the fencing and replanted crops from funds generated by the operations of "The Dairy". The applicant's affidavit sworn on 31 January 1992 deposes OG to the vital need to sell some of the.estate's land in order to meet liabilities and prevent foreclosure or repossession by estate creditors. Professional advice was obtained from pers~ns, including a public accountant named Paul Gerrard Ebbage and a valuer named Raymond Bertram Farren of North 0 ~ Tamborine. Since the hearing in February another valuer, Henry James Jewell, has furnished independent valuations. Ebbage furnished a report dated 19 November 1991 from which it appeared that as at 31 October 1991 the total assets in 6 -- 6 of 18 -- 09 240492 ORDER the estate were worth some $1,003,868, the total liabilities were some $315,859 and the net assets were some $688,009. I should here say that the assets were valued separately and the valuations from Farren form the basis of Ebbage's calculations. Further, there was no separate valuation of the estate's interest in the partnership which I have os mentioned. OP The statement of assets and liabilities sho~that each partnership asset was separately valued and a half share thereof allotted to the deceased, and similarly in respect of the partnership creditors one half only of any particular partnership debt has been treated as the estate's liability. Mr Ebbage concluded, and this appears from paragraph 31 of the applicant's affidavit sworn on 31 January 1992, that: 0£ 1. The partnership generates an insufficient cash flow to support the appointment of a manager to manage the estate's share of the trading activities. oz 2. 3. 0~ The erosion of the estate's equity in estate land may lead to the sale by the secured creditors of the estate land as mortgagees in possession. The chances of refinancing the estate debt are remote due to trading losses made by the partnership in previous years and the reluctance of financiers to deal with deceased estates~ 7 -- 7 of 18 -- { 240492 ORDER To solve the trading difficulties of the partnership, to prevent foreclosure by secured creditors and to preserve as much of the estate land as is practicable for the benefit of the three infant beneficiaries, the applicant and Edwin proposed the following steps for the benefit of the estate: 1. That he purchase Edwin's and the estate's half share in "Tamrookum Homestead" at $218,000 being the then valuation of Farren. 2. That the following assets be transferred to Edwin: (a) The estate's half share in the dairy farm then valued by Farren at $217,500. (b) The estate's half share in the land on which Edwin's house is constructed which had been valued by Farren at $200,000 less $60,000, being the value of Edwin's house. (c) A half share in the estate's plant and equipment, being plant and equipment not subject to lease as per Farren's valuation- $27,500. (d) The estate's half share in the milk quota, then valued by Farren at $123,046. 3. Edwin proposed to transfer to the estate his half share in three cultivation properties: lot 1 on RP 148639 - $60,000; lot 5 on plan number WD 6378 - 8 10 20 30 40 50 60 -- 8 of 18 -- ( 240492 ORDER $102,500; lot 1 on Registered Plan 32511 - $67,500. There were further proposals that Edwin purchase leased plant and equipment at pay-out values and that cattle be 10 sold over the ensuing years and that Edwin lease the balance of the cultivation blocks. At the time the matter first came before me it was apparent that the Commonwealth Bank of Australia had been concerned 20 about the estate's ability to meet mortgage commitments, and correspondence with the applicant's solicitor, Mr Richardson, particularly in a letter dated 9 July 1991, made that clear. Further, AGC Limited, the lessor of certain farm machinery, had threatened to repossess 30 machinery if arrears of payments from June to September 1991 were not paid. CBFC Limited, another lessor of farm machinery owned by the estate, was also owed money. When the matter came before me in February I was not 40 satisfied of a number ofmatters and was not prepared to rely on opinions then furnished by Catherine Snip, a sales person employed by Bartholomew & Company, as to prospects of sale of the land. In addition, no contract of sale whereby the applicant was to buy the land had been executed. The 50 practice seems to make it clear that a conditional contract should be presented to the Court. Now, further material has since been filed. It is plain to 9 60 -- 9 of 18 -- ( 09 os OP 08 oc: 0~ 240492 ORDER me - before I go to that material, it is quite clear that an auction of the property which the applicant proposes to buy is quite out of the question. We are dealing with fractional shares and the complications of the remains of a partnership and there is the strong desire of all'persons concerned to continue to have the primary production formerly carried on. It is patently obvious that it would be virtually impossible to sell at public auction a fractional share of land and thrust on any purchaser (if one could be found) relationships with eo-owners with wham the purchaser had no prior dealings. Mr Lagos, a solicitor acting for the applicant, has exhibited to his affidavits three conditional contracts. I shall mention them shortly. Mr Jewell, a valuer, who inspected the various lands after February 1992 has furnished valuations. As might be expected, his valuations and Farren's valuations do not agree in all respects. Exhibit HJJ5 is a comparison of Farren's valuations and Jewell's valuation in respect of the various assets. I should say that Farren's valuation as shown in that exhibit is his recent valuation, that is one made since February, and one has to go to other documents to find Farren's valuations of the same property made earlier. The principal contract to which consent is sought is an agreement dated 20 March 1992 made between the applicant, Gregory Clark, as personal representative of the estate of Richard Bruce Clark, deceased and Edwin Franklin Clark as vendors and Gregory Clark as purchaser. This is for the 10 -- 10 of 18 -- 09 os 240492 ORDER sale and purchase of the vendors•one half share of the land which I have already described and which is known as "Tamrookum Homestead". The contract in dealing with the consideration has said: "1. 2 the purchase price shall be the sum of $218, 000, less any amount which may be ordered by the Supreme Court of Queensland to be paid as costs and disbursements in respect of the Originating Summons No 112 of 1992 for the sanction of this agreement and for the sanction of the agreement made between the purchaser (as vendor) and Edwin Franklin Clark (as purchaser) for the sale of land contained in Schedule B annexed hereto." Clause 1.3 refers to the manner of payment of the purchase ov price including the need for a deposit of $20,000. That deposit has been paid. The contract is especially made subject to the condition that it receives the sanction of this Court within 45 days from its date. The matter, therefore, has a degree of urgency about it. 08 When the matter was argued this morning I indicated to Mr Murphy and to Mr Mullins that I was concerned about the arrangement as to costs as contained in the above clause, 1.2. I shall return to the matter of costs shortly. oc As for the price, this initially caused me some concern. Farren had earlier valued the property without improvements at $436,000. The recent valuation of the property with improvements, and by that I understand it-to be -,the house arid land 1 0 ~ was at $460,000. Without improvements he now values it at - $410,000. Jewell has valued the property with improvements at $335,000 and without improvements at $265,000. The $218,000 is one half of Farren's original valuation of the 11 -- 11 of 18 -- ( 09 og ov 08 oz 0~ 240492 ORDER property unimproved. The authorities strongly suggest that in a case where a trustee purchases the trust property he should pay the full valuation price if no auction is being held. It is apparent that the $218,000 is less than one half of the $460,000 at which Farre,n now values the property. As against that it can be fairly said that if the various transactions which are the subject of the contract before me do not proceed to completion then almost certainly the estate assets will be sold by mortgagees or alternately foreclosed by mortgagees. The sale to the applicant even at a slightly lower price is, in my view, one which the Court should sanction. It is, in my view, clearly beneficial to the estate to have a sale at that price rather than the alternative which I have just mentioned. I come now to the matter of costs. In Lewin on Trusts, 16th Edition, at p 700 in a footnote to a part of the work dealing with "Sanction of purchase by trustee where beneficiaries under disability" the authors say: "The Court may require that the purchasing trustee pay the costs of the application: indeed it will usually do so unless it is satisfied the proposed purchase is clearly beneficial to the trust." In the present case, while in my view the various transactions are clearly beneficial to the trust, what cannot be overlooked is the fact that the house in which the applicant resides is on the property which he is buying. Further, as I have just indicated, the $218,000 is something less than one half, or is some $12,000 less than one half, of Farren's latest valuation. 12 -- 12 of 18 -- 09 os Ot> 08 Oc 0~ 240492 ORDER The matter was adjourned so that the parties could discuss possible compromise. It 'is quite clear that the matter had to come to Oourt not simply for the Court's sanction of the purchase by the applicant, but because an application had to be made under s 95 of the Trusts Act to vary the requirement of the testator's will in which the time embargo was placed on sale of the real property. Figures as to costs were placed before me from the Bar table and these are, of course, but estimates. I was informed that the applicant is prepared to pay and can only pay $22,000 on top of the consideration of $218,000. In my view, in the rather peculiar circumstances of this particular case where the estate is, in my view, faced with financial hardship, if not ruin, if the proposed transactions do not proceed to completion, it is appropriate not to require the applicant to,pay all the costs apart from costs attributable to the s 95 aspect. So, in respect of the - before I do that I should mention that s 95 of the Trusts Act 1973 (as amended) enables the Court in this particular case to approve of the sales of the trust real 'property despite the embargo of the 15 years imposed in the testator's will. I would order, in effect, because the further proviso in clause 3, which I have earlier set out, is limited to real property of which the testator was possessed at his death and because the Court knows details of all that property which is connected_with farming in the Tamrookum district, that the trust imposed by clause 3 of the will be read as if the words, ", ... and further provided my trustee shall not sell or dispose of any real property of which I 13 -- 13 of 18 -- 240492 ORDER might die possessed for a period of FIFTEEN (15) YEARS as 09 from the date of my death.", had ·been expunged from the will. There is no doubt that this Court has inherent jurisdiction to sanction the contract dated 20 March 1992 for the 09 purchase by the applicant of the estates share of "Tamrookum Homestead". If authority be needed I refer to Halsbury's Laws of England, 4th Edition, Vol 48, paragraph 808; The Union Trustee Company of Australia Limited and Anor v Gorrie, (1962) QdR. 605; and an article by Mr G W Hinde, ov "Purchase of trust property by a trustee with the approval of the court." in Vol 3 of the Melbourne University Law Review at p 15. The applicant by obtaining the Court's sanction to his purchase will be protected from any future claim by the children or any of them to have the purchase by 08 him declared void. I leave to one side the question whether · a purchase by a trustee of a trust property of which he is the trustee in a case where beneficiaries are under a disability is fully avoidable as that is unnecessary to determine. OZ I, therefore, sanction the agreement dated 20 March 1992, which is Exhibit RGL 2-2 to the affidavit of Richard George Lagos provided that that document be read and construed as if clause 1.2 read simply, "The purchase price shall be the 0~ sum of $218,000.". I turn then to the other contracts which have been placed before me. The first is an agreement also dated 14 -- 14 of 18 -- 09 os 017 08 OZ 0~ 240492 ORDER 20 March 1992 (Exhibit RGL2-1) between Gregory Clark, as personal representative of the estate of Richard Bruce Clark, as vendo.r, and Edwin Franklin Cl ark, as purchaser, for the sale and purchase of the estate's one half share in land known as "The Dairy". The price is fixed at $295,000. I am told it is made up of a one half share of Farren's earlier valuation of "The Dairy", namely $217,500, plus a half share of his later valuation of the land on which Edwin's house is built including the house, which half share is $77,500. It can be seen then the price arrived at is a mixture of an earlier valuation with a current valuation. If one looked to the earlier valuations of "The Dairy" and the house and land these totalled $635,000 so that a half share was $317,500. Since then Farren has reduced his valuations of both these items to $415,000 for "The Dairy" and $155,000 for the land with improvements. I should at this stage say that Jewell's valuation of "The Dairy" was initially $635,000, but this was on the basis of sub-division into lots. Material has been placed before me to show that the local authority, the Beaudesert Shire Council, regards this land as what is called arable land, it was subject to flooding and it .is quite clear that there would have beenlocal authority problems standing in the way of anyone seeking to obtain sub-divisional approval for the purpose of smaller lots for resale. Jewell eventually agreed with Farren's valuation (current) .of $415,000 dollars in.one piece. As I have already mentionede Edwin has already paid for the cost of the house and his price of $295,000 in one respect means that he is paying again for this building. Strictly speaking, the Court's 15 -- 15 of 18 -- 09 09 ov 08 oc 0~ 240492 ORDER sanction of this contract is unnecessary. However, it is part of the overall series of transactions of which the purchase by the applicant which I have already sanctioned forms part. I mention that clause 15, the finance clause in this agreement, no longer operates and I have been assured that the contract is a cash contract. I should add that each of the contracts is interdependent upon the other and it is envisaged that each of the sales will be completed at the same time. The remaining contract placed before me is one dated 20 March 1992 in which Edwin Franklin Clark as vendor is selling to the applicant, as personal representative of the estate of Richard Bruce Clark, as purchaser for a price of $230,000 three parcels of land described as lot 1 on Registered Plan 148639, lot 5 on plan WD6378 and lot 1 on Registered Plan 32511. Again, strictly, the Court's sanction of this transaction is not necessary. However, I point out that in this contract, as indeed in the immediately preceding contract, number RGL2-1, there is a specific clause to the effect that completion of the sale and purchase is to take place, "no later than 45 days from the date which this agreement receives the sanction of the Supreme Court of Queensland in accordance with clause 14.1 hereof." Clause 14.1 in each of these two agreements relevantly reads: .' ·~ ''This Agreement is subject to the condition that it receives the sanction of the Supreme Court of Queensland pursuant to Originating Summons No 112 of 1992 within 45 days from the date hereof." 16 -- 16 of 18 -- 09 os Ot 08 oc 0~ 240492 ORDER The parties having so considered it is necessary for the court to give its sanction to each of these two contracts the Court now does so. Consequently the 45 days commences to run. I mention now the plant and equipment referred to in the amended Originating Summons. This is not mentioned in any of the contracts before the Court and it appears that it is unnecessary for the Court to be further concerned with this aspect or, indeed, the cattle or the milk quotas or other items, none of which are mentioned in the contract whereby the applicant is purchasing from himself as trustee. This leaves the matter of costs. I have already mentioned that the applicant is prepared to pay $22,000. It is apparent that the infant beneficiaries' costs will have to be taxed and paid out of the estate. The orders which I propose then in respect of costs are as follows: 1. That the costs of the Guardian ad Litem in respect of the said children be taxed on a solicitor and own client basis and paid out of.the estate of Richard Bruce Clark, deceased. and that the applicant do pay up to, but not exceeding, $10,500. towards such costs; 2. The applicant do pay personally the sum of $11,500 towards the costs and disbursements of and incidental to this Originating Summons No 112 of 1992. 17 -- 17 of 18 -- ( 240492 ORDER I grant liberty to apply. As far as I am concerned that 09 os OP 0£ OZ 0~ means if you have any difficulty in working out these~orders you can come back to me. I have overlooked, as Mr Mullinshas properly pointed out, formally making an order appointing Graham John Moore Guardian ad Litem of the three children earlier mentioned. I formally make that order which is to be treated as having taken effect on and from 14 February 1992. 18 -- 18 of 18 --