Bovaird v Frost

Number 95

1. William and Saoud purchased Number 95 in about 1979. It became the family home. Sonya lived there from the age of 5 until she was married in 1998 at the age of 24. She claims a close historical and emotional connection to the property.
2. William still lives at the unmortgaged Number 95. After Saoud's death William took a new partner, Li Gin Zhao whom he married in June 2013. Sonya thinks William may have income from a lodger residing at Number 95.
3. William and the Trust as the equal owners of Number 95 incur regular expenses in connection with the property, including council rates, insurance, water rates, electricity and expenses connected with repairs and maintenance.
4. Sonya's statement as trustee states that William has never paid council rates, water rates or home building insurance in relation to Number 95 and that she has paid all the costs associated with its repair and maintenance.
5. In 2007 William and Sonya agreed to allow a lodger to occupy part of Number 95 for $250 per week. The trust collected the rent from the lodger. But in October 2013 that lodger stopped paying rent and abandoned the property. Sonya claims that William made it impossible for the lodger to stay. Sonya received the rent from the lodger and paid it to William to provide a fund for him to meet the expenses being incurred for Number 95. Sonya claims that he mostly did not use this money to pay expenses for Number 95 other than electricity and the occasional maintenance expenses.
6. Sonya's assessment is that for the 2013/2014 financial year (FY14), the annual outgoings for Number 95 were: 1. Council rates: $1,210.16 2. Water: $573.16 3. Insurance: $943.54 4. Repairs: $0 5. Total: $2,726.86
7. The various financial transactions between Sonya and William about Number 95 have led to some of the disagreements that require the present judicial advice, as have similar disagreements about the outgoings for Number 93.

Number 93

1. In about October 1996 William and Saoud purchased Number 93, the property next door to Number 95. Since its purchase Number 93 has been tenanted as an investment property. Initially the property was negatively geared and the rent from it was insufficient to cover the mortgage payments. But over time the rent from Number 93 has increased and the mortgage is now being paid down from the property's income.
2. Until April 2013 the rent from Number 93 was paid into a bank account in William's name. But Sonya says that William never paid the council rates, water rates or home building insurance for Number 93. She says she paid all those outgoings, together with associated repairs, maintenance and improvements of the property.
3. The tenant at Number 93 paid $720 a week to the real estate agents managing the property, Unique Property. The agents estimate that Number 93 could be rented for as much as $750 to $760 per week. Rent for Number 93 is deposited into an account in the name of Saoud's estate. The mortgage payments for Number 93 are paid out of that account. At the time judicial advice was sought the amount outstanding on the mortgage loan for Number 93 was approximately $103,579.50. The current weekly repayment required to service this debt is $410 per week.
4. Sonya assesses that for FY14 the annual outgoings for Number 93 are in summary as follows: 1. Council rates: $1,210.16 2. Insurance: $1,171.40 3. Water: $938.46 4. Land tax: $2,256.04 5. Real Estate Agent's Commission: $1,690.81(inclusive of GST) 6. Repairs: $110 7. Total: $7,376.87

Aspects of the Current Dispute

1. William and Saoud originally purchased Number 95 as joint tenants. But in 1993 Saoud was diagnosed with cancer. Upon legal advice and due in part to existing family unhappiness she decided to sever the joint tenancy over Number 95. From March 1994 it became a tenancy-in-common.
2. Much of the background of that family unhappiness is recounted in the statement and some affidavits filed in the proceedings, which the Court has read. But it is not necessary to set out all that part of the family history in these reasons.
3. Sonya now wishes as trustee to purchase William's interest in each of the two properties. She has a close personal connection with the properties which arises from her close relationship with her late mother. She believes her mother Saoud would have wanted the properties to stay in the family. She wishes to fund the purchase of the properties by having the Trust borrow money, with her acting as the guarantor for the loan in her personal capacity.
4. Sonya says in her statement that she has met accruing liabilities since her mother's death from the ownership of the properties. She says that both William and herself (or in the case of some invoices, Saoud) were named as liable on the invoices for these outgoings. She says she treated these payments, when she made them, as a loan to the trust. She says that the total amount she has advanced in this manner to the trust up to 9 February 2015 (net of some minor reimbursements) is $84,631.16.
5. As at 9 February 2015 she claims to have lent the trust a total of $116,664.11, including the $84,631.16. The difference, an additional amount of approximately $32,000, is made up of general expenses, legal fees and other estate expenses which Sonya has also met from her own personal resources.
6. Sonya also claims that her father William owes the estate a total of $129,087.06. This figure will be analysed further below. Of the total amount of $129,087.06, a portion relates to legal fees in connection with a dispute Sonya had with her father about securing a tenant for Number 93.
7. Another amount in issue is the sum of $111,303.64 that Sonya and her husband George Sarkis say that they lent to William and Saoud prior to Saoud's death. And since Saoud's death Sonya and George say that they have also lent William a further $156,251.36. Whether these amounts were loaned as alleged has not been tested in any contested proceedings and the Court now makes no findings about the loans or the amounts. But the Court is entitled to assume as true the facts set out in Sonya's statement, including these facts.
8. Serious Bkassini family discord erupted in May 2013. Due perhaps to an overload from the family disputes at that time William excluded Sonya from entering Number 95: he chained and padlocked the door and threatened to kill Sonya if she entered the property. About the same time Sonya's solicitor wrote to William requesting he pay a half share of bills in connection with the two properties. The amount demanded has not been paid.
9. Each of the Trust beneficiaries other than Sonya, namely William, Assid and Sam have been served with notice of the proceedings. Sam appeared and put submissions on the application for judicial advice. He relied upon an affidavit which added some additional background about the family history and the recent disputes. The following additional relevant facts arise from his evidence. The relationship between William, Sonya, Assid and Sam has become dysfunctional and has been unpleasant for some time. Sam appears to have a slightly better relationship with his father William than does Sonya. William's recent re-marriage to Li Jin Zhao has divided the children. Sonya is concerned that Li Jin may have designs over the share of the property held within the Trust. On the other hand Sam seems to think that Sonya wishes to buy the property in her own name.
10. Sam also has concerns that Sonya might distribute the whole of the estate to herself. She is theoretically entitled to do that under the Trust. But his fears may well be groundless. If Sonya were to follow Saoud's memorandum of wishes, a document executed simultaneously with her will (set out later in these reasons) then one of her ultimate options could be to wind up the Trust and distribute Trust assets equally among herself, Assid and Sam. Although she is not obliged to follow the Memorandum of wishes, the evidence suggests that much of her approach as trustee has been to respect her mother's wishes.
11. But Sam also has specific concerns about the two Marrickville properties, Number 95 and Number 93. He says they have been increasing in value given the state of the Sydney real estate market. He is concerned that Sonya will seek to purchase those properties based upon valuations that have been carried out based on past sale prices and which cannot give full value for the land.
12. Sam also raises larger issues. He says William is threatening to commence (or has commenced) a Succession Act 2006 claim for family provision against the estate. Were this to occur it would be well out of time. Whether it should proceed or not would be a matter in the Court's discretion in those proceedings. Sam says that if his father's claim proceeds he will also give consideration to bringing such a claim.
13. Sam has also threatened to put in issue the validity of Saoud's will. He makes clear that in referring to the Trust in his correspondence and submissions that he does not accept there is a valid subsisting Trust. This seems to be because he contends that: Saoud had neither the capacity to execute the will nor did she know and approve its contents because of her state of health a month before she died. But Sam has done nothing for over ten years about these concerns about the validity of Saoud's will. His prospects of now being able to have a grant of probate revoked seem remote.

The Conveyancing Act s 66G Claim and the Cross Claim

1. The Conveyancing Act, s 66G proceedings were not before the Court. But as these reasons will later consider, the summons for section 66G relief should be listed for directions before me. Once the parties have the benefit of this judicial advice they may be prepared to mediate those proceedings even before any cross claim is filed. Consequent upon the giving of the judicial advice, and conscious of the difference between these Trustee Act, s 63 proceedings and the other proceedings, the Court is nevertheless prepared to give directions that may assist in the possible resolution of those proceedings.
2. The cross claim that Sonya proposes to bring has a number of components. She traces out those components in her statement and evidentiary materials supplied with her statement. Because this potential cross-claim is relevant to the judicial advice that she now seeks about whether or not she should file a cross-claim in those proceedings and if so on what terms. Sonya's statement gives the following summary of the potential cross-claim. The Court adds its own comments in these reasons to aspects of her summary. Sonya's proposed cross Claim is referred to in these reasons, though not yet filed, as a "Cross Claim".
3. (1) Trust's Share of Number 93 Rent. The Trust claims $58,960.26 in rent as the estate's share of rent for Number 93. The amount concerned is the net amount of rental money ($87,079.90) that it is alleged William retained in the period 18 May 2005 to 11 April 2013, less the estate's own retention during the later period of 12 April 2013 to 9 February 2015 of $28,119.64. Sonya alleges on behalf of the Trust that William retained the first amount of $87,079.90 in rent from Number 93. But she acknowledges that she also had retained the amount of $28,119.64. The contention is that the rent from Number 93 should be shared.
4. This part of the Cross Claim does not seem to be correctly calculated. Both William and the Trust are entitled to 50 per cent each of the whole of the rent collected for the period 18 May 2005 to 9 February 2015. The correct calculation would be to add the total rent for the period and divide it into halves to ascertain the appropriate proportion for each of William and the estate and then ascertain what payment had to be made between them so that each ended up paying his and her correct proportion.
5. That calculation should be done the following way. The total amount of the rent for the period 18 May 2005 to 9 February 2015 is $115,199.54 (being $87,079.90 plus $28,119.64). Each of William and the estate is entitled to half this amount, namely $57,599.77. Equality is achieved if William pays to the Trust the difference between the amount he received, $87,079.90, and his correct proportion namely $57,599.77, which difference is $29,480.13.
6. (2) William's 50 per cent Share of Outgoings. The Trust claims $42,315.59 against William in respect of liabilities which the Trust has paid over time in respect of Number 95 and Number 93 for which it has not received reimbursement. The Trust says that each of these amounts is the subject of an invoice, addressed to William and Sonya jointly. Sonya has paid the whole of the invoice and now claims reimbursement of 50 per cent. Exactly how the $42,315.59 is made up from paid invoices is not clear. Presumably to justify a claim of $42,315.59 from William, Sonya would need to have paid invoices of twice that amount, namely $84,631.18. If she has only paid invoices of $42,315.59 her right of contribution will only be half that, namely $21,157.80.
7. (3) Reimbursement of William's Redraws. The mortgage over Number 93 had a redraw facility. Sonya alleges that William redrew $2,950 on this facility for his own personal use. The Trust claims $1,475 in reimbursement. Although Mr Wood on behalf of Sonya conceded in his submissions that she cannot as yet claim it.
8. In my view he is right about this. She is jointly liable for the repayment of the $2,950 on the mortgage over Number 93. William has withdrawn $2,950. But she cannot, as yet, have a money judgment to satisfy her right to contribution for that joint liability until she actually repays the money. She may strictly have a right in anticipation. But when a final accounting is done this sum can be taken into account for the benefit of the Trust.
9. (4) William's Retention of Lodger Fees. The Trust claims $61,130 in lodger fees that William has allegedly received in respect of the lodger occupying Number 95. Sonya has said in her evidence this amount was used for the Trust's share of expenses on Number 95. But it is to be alleged that William instead has without authorisation retained this amount for his own personal use. Exactly how the amount of $61,130 is calculated is uncertain on the materials before the Court. But the amount claimed is potentially double what it should be. If William retained $61,130 in lodger's fees the estate is entitled to half of that, namely $30,565.
10. This claim may otherwise be problematic. Until there is an exclusion of one party from co-owned property, the law is that the non-occupying (but not excluded) party cannot claim back rent: Forgeard v Shanaham (1994) 35 NSWLR 206 at 223. Although the final exclusion of Sonya occurred in May 2013 it may well be arguable on the materials that the Court has seen that there was some substantive exclusion before that time, so rent can be claimed for an earlier period. Especially given that the Trust has other sound maintainable claims to justify a cross claim, it is reasonable to include this claim as well.
11. (5) Water Usage at Number 95. This is a small claim for $512.52. It is a claim which Mr Wood acknowledges is insufficient to justify the investment of any further time and resources upon it. It appears that this claim will be abandoned.
12. (6) The Trust's 50 per cent Share of Mortgage Repayments on Number 93. The Trust acknowledges that the amount of $70,122.40 was the net amount of mortgage payments made out of William's bank account for the property during the period 18 May 2005 to 11 April 2013. The mortgage payments made from the Trust's bank account during the period 12 April 2013 to 9 February 2015 were $19,640.50. The calculation Sonya advances seems to have been undertaken by deducting the $19,640.50 from the $89,762.90 to produce the net figure of $70,122.40. But that is not the estate's share of the mortgage payments for the period 18 May 2005 to 9 February 2015.
13. A proper accounting for this outgoing would be as follows. The total mortgage payments for the full period in question 18 May 2005 to 9 February 2015 are $109,403.40 (being $89,762.90 plus $19,640.50). As each of William and the Trust were co-owners of the mortgaged property, Number 93, they were each liable to pay $54,701.70 (being 50 per cent of $109,403.40) for this whole period. William has borne more than his full share of those outgoings. The Trust is liable to reimburse him $35,061.20 (being $89,762.90 minus $54,701.70).
14. But Mr Wood expresses doubts as to whether this amount can be recovered. He submits that the nature of any legal and equitable claims should be distinguished and the basis on which those claims can be brought should be clearly identified. In this he is correct. What is really required here is a single account showing all moneys paid and received and producing a figure for the Trust's claimed net entitlement from William. The quantum of any doubtful claims can then be isolated. It may turn out upon analysis that what the Trust actually claims from William is not very great.
15. (7) Legal Costs for the Number 93 Tenant Dispute. Sonya engaged lawyers to resolve a dispute about whether or not Number 93 could be tenanted. But this matter has now been resolved. Mr Wood's view is that Sonya cannot maintain that claim. There is now no need to consider it further.
16. (8) Occupation Fee for Number 95. The Trust claims rent of Number 95 for the period after which William is said to have excluded Sonya as trustee from Number 95. The claim is for the period 3 October 2013 (when William's alleged exclusion commenced) up to 5 February 2015 and is for the sum of $26,250.

Applicable Legal Principles

1. The relevant legal principles for the giving of Trustee Act, s 63 advice may be shortly stated. There is only one jurisdictional bar to the Court granting Trustee Act, s 63 relief, namely the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument and there is nothing in s 63 which limits its application to non-adversarial proceedings: Macedonian Orthodox Community Church Saint Petka Inc v His Eminence Petka, the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; 237 CLR 66 ("Macedonian Church") at [56] to [58].
2. Obtaining judicial advice resolves doubt about whether it is proper for a trustee to incur the cost and expenses of prosecuting or defending litigation and resolving those doubts means the interests of the trust would be protected and not subordinated to the trustee's fear of personal liability for costs; and therefore, it is not correct to see a trustee's application for judicial advice about whether to sue or defend proceedings as directed only to the personal protection of the trustee: Macedonian Church at [71] to [72].
3. There appears to be no distinction between the provision of judicial advice for either the prosecution or the defence of litigation: Bovaird v Frost [2009] NSWSC 917 at [32] and Frost and Fallon [2011] NSWSC 591 and Re Estate of Heywood [2010] SASC 247; Loblay v Loblay [2013] NSWSC 1195; Stephens v Chee [2015] QSC 138; and Coore v Coore [2013] QSC 196. The law therefore seems to be clear that a trustee should seek judicial advice before either defending or instituting proceedings and the failure to do so may result in the trustee engaging in the proceedings at its own risk as to costs: Wooster v Morris [2013] VSC 594. In substance here Sonya is seeking advice in both capacities, in relation to defending the Conveyancing Act, s 66G proceedings and in relation to bringing a cross claim.
4. It is open to a trustee to seek judicial advice as to whether or not to settle proceedings. Judicial advice proceedings should not be used to settle disputes between parties to a trust and the distinction should be maintained between deciding whether it would be proper for a trustee to sue or defend proceedings and deciding the issues tendered in the proceedings that it is proposed to institute or defend: Macedonian Church at [111].
5. A different test may apply to trustees being sued in proceedings that criticise their conduct as trustee. In those circumstance the Court may refuse to give judicial advice because the legal proceedings are not solely concerned with the management or administration of the trust property or the interpretation of the trust instrument but with the conduct of the trustee: Re Australian Pipeline Ltd [2006] [2006] NSWSC 1316; (2006) 60 ACSR 625 at [23]. That is not the case here. Sonya is not facing a suit in respect of her administration of the Trust.

The Terms of the Trust

1. As summarised earlier in these reasons the Trust gives the trustee the discretion to appoint the income of the Trust among different classes of beneficiaries upon terms that are common for discretionary trusts. It is not necessary to reproduce all the terms of the Trust in these reasons. The general outline of the Trust's principal provisions will suffice.
2. The trustee has the discretion to apply the annual income of the Trust for the benefit of any income beneficiary (clause 2.2) as the trustee in her absolute discretion determines and any income not appropriated in any one year is held on Trust absolutely for default income beneficiaries (clause 2.2). The principal income beneficiaries are William and Saoud's children or remoter issue. William is the default income beneficiary in priority over Saoud's children and grandchildren and remoter issue.
3. The Trust excludes William from the discretionary appropriation of capital. The trustee is empowered under the Trust at any time before the vesting date to appropriate capital for any capital beneficiary (clause 2.5) or any default capital beneficiary (clause 2.6). The principal difference between capital beneficiaries and income beneficiaries is that the classes of capital beneficiaries and capital default beneficiaries exclude Saoud's husband William but otherwise include Saoud's children and grandchildren and remoter issue.
4. The trustee has a wide range of express powers conferred upon her which she may in her absolute discretion exercise in the manner and to the extent that she thinks fit (clause 3.1). These powers include powers to: appropriate assets in specie (clause 3.1(a)); value assets of the trust fund (clause 3.1(b)); distribute specified assets (clause 3.1(c)); to sell, transfer, hire, lease or dispose of real personal property (clause 3.1(d)); lend money (clause 3.1(f)); buy, transfer, acquire, hire or lease any property (clause 3.1(g)); borrow money or raise financial accommodation or charge the trust funds as security for any such financial accommodation (clause 3.1(i)); transpose investments in her absolute discretion to different form (clause 3.1(k)); manage the trust fund (clause 3.1(m)); effect repairs and meet outgoings (clause 3.1(n)); allow beneficiaries to occupy trust property (clause 3.1(o)); determine whether outgoings have been met out of capital or income (clause 3.1(q)); guarantee the payment of money in the performance of obligations and give indemnities to or on behalf of any person the trustee thinks fit and give the parties security over the whole or part of the trust fund; or institute, defend, conduct or settle or discontinue or compromise proceedings (clause 3.1(y)).
5. In addition to these powers the trustee has broad powers of investment (clause 4) and powers to act despite a personal interest in a transaction (clause 5.1), a provision not uncommon in family discretionary trusts. Clause 5.1 of the Trust provides as follows: "5.1 Trustee may act despite interest The Trustee may exercise or concur in exercising all powers and discretions conferred on it by this document or by law even though: (a) it or any other Trustee or any person being a director or shareholder of a Trustee (being a company) has or may have a direct or personal interest (whether as a Beneficiary, shareholder, director, member or partner of any company or partnership or otherwise) in the mode or result of exercising such power or discretion; (b) it may benefit directly or indirectly as a result of the exercise of the power or discretion; (c) the Trustee for the time being is the sole Trustee. A company may act as Trustee even if a director or shareholder of the company is a Beneficiary or the spouse of Beneficiary or has any other direct or indirect interest in the Trust Fund or the income from it whether as shareholder, director or member of any company or partnership or otherwise."
6. At the time that Saoud made her will she also executed a "Memorandum of Wishes", which gave some indications as to how she expected Sonya to discharge her functions as trustee. It provided as follows: "MEMORANDUM OF WISHES 1. This Memorandum is made with a view to indicating to my Executor of my estate the manner in which she should exercise her powers as trustee of the discretionary testamentary trust created under my Will. 2. During the lifetime of WILLIAM BKASSINI. I require my Executor to administer the trust primarily for the benefit of William so that in using her discretions she ensures that the income is used for his benefit and also within her discretion that the capital is used for his benefit but so that capital is not distributed to him absolutely but preserved for the benefit of my children. 3. Following the death of William I wish my Executor to: * Pay the sum of $20,000 to my son SAM WILLIAM BKASSINI by way of acknowledgment that during my lifetime I provided financial assistance to my son ASSID BKASSINI and my daughter SONYA SARKIS and because I was not able to provide the same assistance to Sam, * Divide the remainder of the fund into 3 equal shares and to hold each of those shares for the following persons respectively: (i) My son Assid Bkassini; (ii) My son Sam William Bkassini: and (iii) My daughter Sonya Sarkis. 4. I wish my Trustee, following the death of William Bkassini and the creation of the 3 individual family trusts, to consult with Assid and Sam as to whether they wish their one third share in the trust fund to be paid to them absolutely or to be dealt with in such other ways as they might agree with my trustee. 5. If Assid, Sam and Sonya wish to take their shares absolutely from the trust then the trust should be wound up and the trust fund distributed. 6. Once there has been a distribution to any of my children of their one third share in the trust fund, I would expect that my Trustee would not make any further distributions from the fund to that child or his children. 7. This Memorandum is signed in the knowledge that my Trustee will not be bound by the terms of this Memorandum but in expectation however that my Trustee will use her best endeavors to ensure that the terms of this Memorandum are implemented as nearly as may be possible and prudent in the light of circumstances generally pertaining at the time that she makes her decisions."
7. Sonya is not obliged as trustee of the Trust to act on the Memorandum of Wishes but may take it into account.

The Questions for Advice

1. The four matters for advice may now be considered under the following headings: 1. Bringing a Cross Claim; 2. Resisting the s 66G Proceedings on Terms; 3. Borrowing Money as Trustee to Purchase; and 4. Possible Conflict of Interest and Duty.
2. The Court has had the benefit of considering a confidential exhibit in the form of a Memorandum of Advice from Mr Wood of counsel to the plaintiff. The advice will not be reproduced in these reasons. But the Court has had the advantage of being able to take it into account.

(a) Bringing a Cross Claim

1. In my opinion the trustee is justified in bringing a Cross Claim against William. The nature of the Cross Claim has been sufficiently explained above under the heading "The Conveyancing Act, s 66G Claim and the Cross Claim". But the trustee would not be justified in including every one of her putative heads of claim in the Cross Claim, only the ones that appear to be reasonably maintainable, less the ones, such as (6) for which credit should be given. These would appear to be the following: (1) Trust's share of Number 93 rent; (2) William's 50 per cent share of outgoings; (3) reimbursement of William's re-draws; (4) William's retention of lodger fees; allowance for (6) the Trust's 50 per cent share of mortgage repayments on Number 93; (8) occupation fee for Number 95. Thus of the original posited Heads of Claim in my view the trustee is justified in allowing for claim (6) and bringing all but claims number (5) and (7).
2. But as the Court's analysis above shows, even these claims are in total less valuable than the plaintiff first anticipated. Leaving aside the smaller claims, and rounding the larger claims to the nearest thousand, and applying the logic to the claims that the Court has set out above, the net position would appear to be as follows: the Trust could claim from William $29,000 for claim (1); $21,000 for claim (2); $31,000 for claim (3); and $26,000 for claim (8), making a total of $107,000. But from that an allowance against the Trust of $35,000 would need to be made in respect of claim (6). Thus the net potential claim is about $72,000. This is not a particularly large sum in the context of a Supreme Court action for the appointment of trustees for sale to two parcels of valuable real estate.
3. Each of the claims in the Cross Claim appears to have been maintainable and for the benefit of the Trust estate.
4. But in giving Trustee Act, s 63 advice the Court does not manage the Trust or give commercial advice to the trustee. The ultimate course that the trustee takes here is a matter for her. For example, although each of the claims in the Cross Claims appear to be maintainable, it may be better for them to be dealt with in a way that does not hold up the Conveyancing Act, s 66G proceedings. It may be possible for the trustee and William to agree to reserve sufficient funds to satisfy these claims from the sale proceeds of Number 95 and Number 93, if trustees for sale are appointed. The money can either be paid into Court or kept in one of the parties' solicitors' trust accounts and paid over once the substance of the Cross Claim is resolved. Once the Trust's Cross Claim is filed the Cross Claim could perhaps be referred out to a referee or for expert determination. The claim may also be brought in the Local Court.
5. Indicating in these reasons that the trustee would be justified in bringing a Cross Claim does not preclude the trustee from making a decision to pursue any one of these other courses, which may end up being more efficient and in the best financial interests of the Trust. For example, proceeding either before a referee, or a jointly agreed expert, or in the Local Court may be more cost effective than bringing a Cross Claim in the s 66G proceedings.

(b) Resisting the s 66G Proceedings on Terms

1. It would be difficult for the Trust to defend the s 66G proceedings. A co-owner is entitled to s 66G relief almost as of right: Re Fettell (1952) 52 SR (NSW) 221. This does not appear to be the kind of case where Sonya could contend that the appointment of the trustee was inequitable in itself: Tory v Tory [2007] NSWSC 1078 at [42].
2. What Sonya seeks in this request for judicial advice is not so much in the nature of a defence to the s 66G proceedings but she requests advice as to whether she is justified in taking advantage of Conveyancing Act, s 66I. That section provides as follows: "66I Right of co-owners to bid at sale under statutory power of sale (1) On any sale under a statutory trust for sale the court may allow any of the co-owners of the property to purchase whether at auction or otherwise on such terms as to non-payment of deposit, or as to setting off or accounting for the purchase money or any part thereof instead of paying the same, or as to any other matters as to the court seems reasonable. (2) A co-owner, with a right to purchase shall not, without the leave of the court, be entitled to act as trustee in connection with the sale."
3. When in the s 66G proceedings the Court grants relief the Court is authorized to do so on such terms and conditions as the Court thinks fit: Civil Procedure Act 2005 (NSW), s 86(2). When granting s 66G relief, a combination of s 66I and Civil Procedure Act and s 86(2) permit the Court to impose terms for the conduct of the sale.
4. The trustee regards certain particular sale terms as convenient and advantageous for the Trust. Specifically the terms she raises are: 1. The right to purchase without the payment of deposits; 2. The right to purchase by private treaty or auction; 3. The right to set off the trustees' entitlement to proceeds of sale and to set off any amount found due from William to the Trust on the proposed Cross Claim; and 4. A right of access to Number 95.
5. As to (i) and (ii), the position is clear. Section 66I expressly authorizes a co-owner such as the Trust to purchase on terms "as to non-payment of the deposit". The right of a co-owner to purchase under s 66I is broad enough to encompass all kinds of sale, whether by private treaty or auction.
6. As to (iii), the trustee's preference to set off of her entitlement to the proceeds of sale and her preference to set off the outcome of the proposed Cross Claim against William raise slightly different issues. Again, s 66I expressly authorises the imposition of terms "as to setting off or accounting for the purchase money or any part thereof instead of paying the same". The section, and indeed the general law before it was enacted, demonstrate a long history of permitting a co-owner to be given the privilege of not paying the whole amount bid but setting off the co-owner's entitlement to the proceeds against the monies bid, although the calculation of amounts due may at times require the careful calculation of interest and other monies due so that other co-owners are not disadvantaged: Re Dracup [1894] 1 Ch 59 and Penny Nominees Pty Ltd v Fountain (No. 3) (1990) 5 BPR 11,284 at 11,295. Exercising this right could well advantage the Trust's estate and the trustee would be justified seeking to take that course.
7. Sonya would also be justified in seeking to set off the amount found due by William upon the determination of any Cross Claim against him. Pursuing such a set off could be raised under the Court's general s 66I discretion to consider "any other matters as to the Court seems reasonable". In a domestic situation such as this one and where one party has a fear that the other may take the proceeds of sale out of Australia, wrapping up all claims between the parties at the time of sale is desirable. Settling a final accounting at the time of the sale including all amounts due on the Cross Claim is clearly to the material advantage of the Trust.
8. But as earlier indicated, although the trustee would be justified in seeking this order in the s 66G proceedings, she may in practice be best advised to do so in a way which does not delay the sale of the properties and which minimizes the cost of determining the Cross Claim.
9. As to (iv), apart from her legal entitlement to access as a co-owner it would be to the material advantage of the Trust for Sonya to have access as trustee to Number 95. She may wish to inspect the property in order to ascertain what price she should bid on behalf of the Trust. She may wish to assess whether or not there was a lodger in Number 95 to decide whether or not to pursue that head of her Cross Claim. Though she would be justified in bringing this claim on such grounds, in practice her right of access would be regulated on strict terms either by the trustees for sale or by the Court, so that her exercise of the right did not cause any pre-sale disruption to William and any other occupants of Number 95.

(c) Borrowing Money as Trustee to Purchase

1. Quite apart from the general law, the Trust confers broad express powers on Sonya to acquire property and to borrow money: see clause 3.1(g) and (i). No greater authorization than this is necessary.
2. The trustee expresses a desire to purchase William's interest in Number 95 and Number 93. It is not for the Court to give the trustee commercial advice, only legal advice as to her powers. And relevant powers are clearly conferred on her here.
3. But in considering whether to exercise those powers the trustee would be entitled to take into account the efficiency for the Trust estate of having Number 95 and/or Number 93 entirely under the Trust's control. The conflict which has occurred between William and the trustee in the past is a conflict in part occasioned by the fact that the Trust and William are co-owners of these two properties. Given this background the exercise of the trustee's discretion to either sell, buy or partition one or both of these properties, would be understandable.
4. Sonya has both the power to borrow money and purchase William's share of the property. The acts of purchasing and borrowing would not in themselves place her in breach of Trust or fiduciary duty because of these express powers she has under the Trust.

(d) Possible Conflict of Interest and Duty

1. Through her counsel Mr Wood, Sonya expresses concern that she may be in a position of conflict of interest and duty if she exercises her clause 3.1 powers to borrow money and purchase William's share of Number 95 and Number 93. Sonya is candid both in her statement and through Mr Wood's submissions that she has a personal desire to purchase William's share in these two properties as trustee, because of her historical and emotional attachment to the properties. She raises the question as to whether this desire conflicts with her duty to act in the best interests of the beneficiaries.
2. This question in my view has a practical answer and a legal answer. The practical answer is that it is difficult to see how any conflict of the kind Sonya postulates could arise in this case, especially after trustees for sale are appointed under s 66G, as appears likely. If Sonya were so emotionally attached to the property that she was prepared to pay an extravagant price for William's share of these properties beyond market value then that would plainly not be in the best interests of the Trust. But there seems to be no suggestion of that in this case. The trustees for sale will offer the properties at auction or by private treaty to obtain market price for them. Sonya as trustee would not be negotiating privately with William where her emotional attachment to the property might lead to a divergence from market prices. In circumstances where the trustees for sale have a duty to sell and may sell by public auction and Sonya has a right to bid at that auction, she will pay the market price on behalf of the Trust for the acquisition of William's share of the assets.
3. There is also a legal answer to this question. The full details of the future sale of these properties are not yet known and therefore cannot be considered. But even if Sonya were to lend money to the Trust herself to assist the Trust's borrowings from a financial institution to fund acquisition of William's share in the properties (a transaction which would ordinarily offend the trustee's self-dealing principle) such a borrowing from Sonya may well be justified with respect to this Trust under clause 5.1. And the concern that Sonya raises about purchasing the property seems to fall within the description of a technical or hypothetical conflict: El Sayed v El Hawach [2015] NSWCA 26.
4. Once Sonya acquires the properties, how they are turned to account for the benefit of the Trust will raise new questions: whether family members can occupy them; and, whether they are to be rented out. These will be matters for later consideration by the trustee and if necessary the taking of further advice from the Court.

Conclusions and Orders

1. The Court has now dealt with the matters for judicial advice. In doing so the Court has declined to give the trustee any advice about William's threatened Family Provision Act proceedings. Such proceedings are not on foot. Any such advice would be theoretical.
2. As the Court observed in the course of argument, the s 66G proceedings, the potential Cross Claim and the future administration of the Trust are all matters which may usefully be considered in a mediation among family members. The Court will therefore list the s 66G proceedings for mention at a date to be agreed with my Associate, with a view to the Court making orders under Civil Procedure Act, s 26 for the compulsory mediation of those proceedings, together with the Cross Claim issues. And the parties may want to take the opportunity at the same time of seeing if they can agree upon the future administration of the Trust, which perhaps also will be a useful matter for their future discussion.
3. Mr P. Baltins appeared on behalf of Sam to put submissions on the application. Mr Baltins sought costs of his appearance on behalf of Sam on this application. The Court has broad powers under Trustee Act, s 93 to allow out of the Trust estate or otherwise such costs orders as "to the Court may seem just".
4. In my view Mr Baltins's appearance upon the application has been useful in clarifying issues which he raises on behalf of beneficiaries and in better defining the trustee's proposals as to her future action. Mr Baltins's appearance did not unnecessarily lengthen the proceedings. This is an appropriate case for a costs order to be made in Mr Sam Bkassini's favour. But as the Trust fund does not currently have any liquid assets the actual payment of those costs will probably have to await the accounting associated with the sale of the two properties under Conveyancing Act, s 66G. Mr Sam Bkassini's costs should be paid on the ordinary basis not on an indemnity basis.
5. The Court's orders therefore are: 1. In answer to the questions raised in the Summons under Trustee Act, s 63 the Court advises as follows: 1. The trustee is justified in bringing a Cross Claim against Mr William Bkassini in respect of the matters described in paragraph [67] of these reasons. 2. The trustee is justified in resisting relief in the proceedings brought by Mr William Bkassini pursuant to Conveyancing Act, s 66G (proceedings no. 2015/27946) ("the s 66G proceedings") by contending that the Court in those proceedings make orders upon the terms described in prayer for relief 8(b)(i) to (iv) of the Summons. 3. The trustee has the power to borrow money and purchase Mr William Bkassini's share of the two properties co-owned by the Trust and for the trustee to do so does not itself place her in breach of trust or fiduciary duty. 4. The course proposed by the trustee as described in her statement does not place her in a position of conflict of interest and duty by reason of her desire for sentimental reasons to purchase Mr William Bkassini's share in the Trust's real estate. 1. Order that the trustee's costs of this application be paid out of the Trust on the indemnity basis. 2. Order that Mr Sam Bkassini's costs of this application be paid out of the Trust on the ordinary basis. 3. Direct that these proceedings be listed at 9.30am on Tuesday, 27 October 2015 before me for mention with a view to the Court making orders for the mediation of the s 66G proceedings, and possibly also, together with the mediation of any issues in relation to the future administration of the Trust. 4. Grant liberty to apply.

Amendments 13 October 2015 - Paragraph [10], change "sought those proceedings" to "sought in those proceedings". Paragraph [27], change "accruing the liabilities" to "accruing liabilities". Paragraph [49], change "more of his full share" to "more than his full share". Paragraph [77], change co-owners entitlement to co-owner's entitlement. 13 October 2015 - No publication restriction. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 October 2015