Callaghan & Anor v Zevering & Ors [2010] QSC 323

[1]

James, Byrne and Rudz Solicitors for the first respondent

[2]

[1] On 23 September 2009 the applicants Lynne Callaghan and Yvonne Shirley Raymont as trustees of The Outlook Estate Trust ("the Trustees") filed an originating application seeking certain orders and directions regarding the remuneration of trustees. That relief was sought in the Court's inherent jurisdiction and under sections 94 and 101 of the Trusts Act 1973 (Qld).

[3]

[2] On 15 October 2009 it was ordered that, subject to any cross-application by the first respondent, Cornelia Ellen Zevering ("Ms Zevering") for further remuneration, power be conferred on the Trustees to remunerate past and present trustees of the trust in accordance with a resolution of unit-holders passed at a meeting held on 22 March 2002, at the rate of $20 per hour for past and present time spent in the conduct of the affairs of the trust ("Base Remuneration"). Pursuant to this order for Base Remuneration, the Trustees were authorised to make certain payments, including payment to Ms Zevering up to the amount of $48,000.

[4]

[3] It was further ordered that, subject to any cross-application by the first respondent for further remuneration, power be conferred on the Trustees to remunerate past and present trustees for their services in bringing the subdivision of the Outlook Estate to a successful conclusion at a rate to be determined by the Trustees not exceeding 2.5 per cent of the gross proceeds of the land sales ("Special Remuneration"). All amounts paid to a trustee for Base Remuneration were to be considered and deducted from any amount fixed for Special Remuneration. Pursuant to this order, the Trustees were authorised to pay to Ms Zevering $86,000 less any Base Remuneration paid or payable.

[5]

[4] Directions were also made at this time to facilitate the bringing of an application for further remuneration as a cross-application in this proceeding by Ms Zevering. It is this application which now falls to be determined.

[6]

[5] It is necessary to set out some brief history of the background to The Outlook Estate Trust ("the Trust"). The Trust was established as a unit trust in November 2001. The unit-holders of the Trust were, and are, the applicants and respondents in this proceeding. The unit-holders are predominantly a group of retiree investors with little experience in property development. Some two and a half years prior to the formation of the Trust, the 26 persons who became the unit-holders had each contributed to a solicitor's contributory mortgage scheme. The total amount contributed to the scheme was $1,120,000 and the contributions were made in the same proportions as the number of units which were subsequently issued to the unit-holders. Ms Zevering holds 35 units (approximately 3 per cent).

[7]

[6] Under the contributory mortgage scheme, the contributed funds were advanced to a property developer, Clevewood Pty Ltd, which was engaged in a project for the development, subdivision and sale of broad acre lands known as the Outlook Estate. The moneys advanced were secured by a registered mortgage over the land which was held by a company, B.G. Securities Pty Ltd, as nominee for the contributors. Shortly after the advance was made, the mortgagor fell into default. Various actions were taken by B.G. Securities Pty Ltd against the mortgagor in consequence of the default. The development stalled. During 2001, the contributors became dissatisfied with the performance of B.G. Securities Pty Ltd and established the Trust, with the intention of taking over the mortgage and, as mortgagee, to complete the development, subdivision and sale of the Outlook Estate.

[8]

[7] At the time the Trust took control of the project, the development was nearing completion, and only minimal surveying and engineering aspects needed to be completed. The Trust basically took over the project to sell the lots.

[9]

[8] From 2002 onwards, the Trustees completed the development and sold the lots. This involved working with the Logan City Council to finalise surveys and engineering work to complete the development and negotiating a payment structure for money already owed to the council, engineers and surveyors. They then engaged a real estate agent to market and sell the estates and between October 2002 and September 2003, 23 of the 33 lots were sold. There remained ten "wetland blocks" which were steep and adjoined an area of wetland. These blocks did not initially sell. In April 2003, the Council indicated that it wished to acquire four of these blocks, but Ms Zevering commenced a campaign to attempt to persuade the Council to purchase all ten of the remaining blocks. This lobbying continued for almost 2 years. In December 2004, the Council resolved to purchase the four blocks as originally planned. The remaining six lots were eventually sold by the Trust's real estate agent with the last sale occurring in January 2007. Fortuitously, rather than by any intention or action of the Trustees, these six lots were sold for increased prices as a consequence of a property boom in the area. The Trustees then began the process of winding up the trust.

[10]

[9] The original trustees were Ms Ellen Zevering, Ms Mary Newton and Mr Warwick Spooner. Ms Newton was removed as trustee in September 2002 and was replaced with Ms Callaghan. Mr Spooner retired in July 2003 and was not replaced.

[11]

Ms Zevering resigned in September 2007 and was replaced by Ms Raymont.

[12]

[10] Ms Zevering said that there was "investor disharmony" and escalating "tensions" between the investors and herself in the period leading up to her resignation as trustee. She stated:

[13]

"58. As the sales commenced to flow through, the investors became impatient and started demanding immediate payment. They refused to accept that there was a due process to implement and follow, in particular, that various legal and accounting protocols had to be observed in my careful administration of the land sale revenue, that being mortgagor's funds. This, in my opinion, was the turning point in the progressive fracturing of the group. The situation deteriorated further and tensions increased.

[14]

These tensions ultimately led to my engaging Macrossans Lawyers in April 2003 to assist me in dealing with the difficult issues raised by the investors' conduct towards me. For instance, in October 2003, the Newtons employed Greenhalgh Pickard Solicitors, and demanded an immediate repayment of their capital. Mary Newton had been removed as a trustee in 2002. Put simply, the trustees were not able to comply. They had statutory obligations, legal, accounting and taxation, not only as trustees but also towards the mortgagor Clevewood pursuant to the terms of the mortgage. I should mention also that during this period various personal accusations were made against me both orally and in writing. They included that I was obstructive and negligent in my duties, amongst other personal smears. All of these autocratic accusations I emphatically deny.

[15]

In July 2007, accusations of financial misconduct were also raised against me by my co-trustee Lynne Callaghan. Because of these accusations, Macrossans lawyers advised me that they could no longer act for me although the firm has continued to act for the successor trustees. They referred me to Richard Cowen of Tucker Cowen solicitors, who successfully defended me (at my cost) against these unfounded allegations. On legal advice, I resigned as trustee on 4 September 2007."

[16]

[11] Ms Callaghan provided a frank description of the circumstances of the "accusations of financial misconduct" referred to by Ms Zevering in her affidavit. Ms Callaghan explained that an interest distribution to unit-holders was proposed to be made.

[17]

Ms Olayinka Zevering (the first respondent's sister and a unit-holder) emailed the Trustees requesting that her distribution be paid by direct deposit to her bank account. Ms Ellen Zevering then spoke to Ms Callaghan advising that her sister had changed her mind and now wanted a cheque to be given to her which she would send to her sister. A cheque was prepared, made payable to O Zevering, which was given to Ms Ellen Zevering at her insistence. Ms Olayinka Zevering then complained to the Trustees that she had not received the distribution. Ms Callaghan was subsequently informed that the cheque had been deposited into an account of Ms Ellen Zevering and that the "O" had been changed to a "C". A copy of that altered cheque is in evidence in the proceeding. Ms Zevering was asked by the Trustees to provide an explanation for her actions, but no satisfactory explanation was provided. When cross-examined on the issue, Ms Zevering again failed to provide any explanation for her actions. A meeting of the unit-holders was called for 4 September 2007 to remove Ms Zevering as trustee. At that meeting,

[18]

Ms Zevering's solicitors attended on her behalf and tendered her resignation. The resignation was accepted. It was apparent from the demeanour and conduct of the parties and the evidence given, that Ms Zevering no longer has any relationship of trust or amicable dealings with the other Trustees and investors.

[19]

[12] At a meeting on 18 March 2002, the unit-holders passed a resolution that the Trustees were to be compensated for their work at the rate of $20 per hour with a majority of 10 in favour, four against. The agenda item proposing this resolution was prepared by Ms Zevering and Mr Spooner and it was Ms Zevering who presented this item to the unit-holders. Ms Zevering was in the majority of unit-holders who voted in favour of the remuneration package. The minutes of this meeting record that all unit-holders were given an opportunity to comment in relation to this, and, notably, Ms Zevering made no comment. She now says that she "at no time agreed to accept remuneration on those terms".

[20]

[13] As part of the process of finalising distributions from the trust, each of the Trustees (past and present) was asked to submit any claims for compensation they wished to make in respect of the services provided by them. The following claims were made:

[21]

[14] Ms Newton, Mr Spooner and Ms Callaghan all submitted detailed, itemised documentation in support of the amounts claimed by them. Ms Zevering however, provided a form of job description listing (in quite vague terms) what she claimed to have done for the Trust and then provided a number of payment options to the Trustees. This document, entitled "Development Project Manager: Remuneration and Expenses Claim" stated:

[22]

Project duration: 6.5 years (March 2010 to August 2007)

[23]

Work performed to complete the project included but was not limited to the following listed in point form below:

[24]

(1) Unified sixteen investors (lenders) in the loan to Clevewood Pty Ltd (borrower)

[25]

Loan to Clevewood Pty Ltd was a failed first mortgage scheme with Boyce Garrick Lawyers of Mooloolaba as mortgage managers and an incomplete land subdivision in Loganholme as security property named the Outlook Estate worth approximately $250,000 as is in 2001

[26]

(2) Called first meeting of investors in Buderim to inform them of strategies to attempt to recover lost capital and interest

[27]

(3) Liaised frequently with sixteen investors on an individual basis

[28]

(4) Chaired investor meetings, wrote meeting minutes and newsletters for investors

[29]

(5) Established Outlook Estate Trust in November 2001 as a vehicle to sell the land

[30]

(6) Appointed co-Trustees to assist with the project

[31]

(7) Effected payment to the investors of $1,120,000 capital in December 2003 and compounding interest in June 2005, June 2006 and June 2007 (approximate total interest paid to date of 15% over 7 years)

[32]

(1) Liaised with three law firms, that is, Thompson McNicholl Lawyers, Bakers Lawyers, and Macrossans Lawyers, and also the Queensland Law Society and the Australian Securities and Investments Commission (ASIC) to affect the project outcome

[33]

(2) Replaced Boyce Garrick Lawyers' nominee company BG Securities Pty Ltd as mortgagee in possession of the security property

[34]

(3) Delineated legal and personal responsibilities as development project manager and Trustee

[35]

By negotiation with the Logan City Council which included:

[36]

(1) Devised feasibility study to complete the subdivision in relation to the development proposal, application and commencement of operational works by Clevewood Pty Ltd such as earthworks, roads and services

[37]

(2) Employed contractors to finish the development such as engineers and surveyors

[38]

(3) Organised approval of the land development by the Council

[39]

(4) Registered 33 separately titled lots at the Department of Natural Resources

[40]

(5) Effected first mortgage security via Bakers Lawyers by Bill of Mortgage over eight lots in lieu of substantial debts on the property such as earthworks and rates owed to the Council by Clevewood Pty Ltd

[41]

(1) Employed real estate agents and marketing specialist, from October 2002 to January 2007 to sell 29/33 steep lots at market value according to the Property Law Act 1974

[42]

(2) Directed all marketing strategies and sale negotiations in consultation with David Miller and property valuer

[43]

(3) Effected public liability insurance over the property

[44]

(4) Wrote a covenant as part of the special conditions of the contracts for sale which stipulated that:

[45]

(5) Acted as an environmental consultant to effect the acquisition by the Logan City Council of four lots in the Outlook Estate consisting of an eight hectare wetland parcel which is part of the greater Loganholme Wetlands

[46]

(ii) Orchestrated an environmental campaign to save the Loganholme Wetlands

[47]

(iii) Researched for and submitted an environmental impact assessment (EIA) report to the Council's Planning and Environment Policy Branch to assist with their report outlining options for the future use of the properties

[48]

(iv) Directed all negotiations with the Council's Planning and Policy Branch and an independent valuer for the acquisition of the four wetland lots at market value (see spreadsheet attached: Worksheet Land Sales)

[49]

(v) Attended the Council meeting of 7 December 2004 to witness the Council passing the resolution for the acquisition of the four wetland lots

[50]

(vi) Directed all the negotiations for the contract for sale and the Council purchased the four wetland lots on 23 March 2005 as a Nature Conservation Area to be preserved for the long term future

[51]

(6) Processed all the contracts for sale and effected the conveyancing by solicitors

[52]

(7) Negotiated and paid out the contractors and all debts owed to the Logan City Council

[53]

(8) Until sold maintained vigil over the Outlook Estate by monthly visits

[54]

(9) Maintained the property by, for example, slashing and week removal

[55]

(1) Conducted all trouble-shooting involved in the project

[56]

(2) Formulated all the Trust accounting protocols and directed all negotiations with accountants (Poole & Partners Pty Ltd and BDO Kendalls) to obtain permission from the ATO for an ABN and to apply the GST margin scheme to the land sales, draft Forms 508 for lodgement at the ASIC as per the Corporations Act 2001, prepare Trust financial reports and quarterly BAS for the ATO

[57]

(3) Directed accountants to calculate investors' correct interest entitlements and provide interest schedules for payment

[58]

(4) Maintained diaries of work performed and document files for the Trust

[59]

PAYMENT OPTIONS (see attached Excel Workbook file Outlook Estate Sales.xls

[60]

1. Salary with 5% bonus commission of gross total land sales:

[61]

See spreadsheet attached: Worksheet Salary with 5% commission

[62]

3. Commission of gross total land sales: $ 797,750

[63]

See spreadsheet attached: Worksheet Commission of gross land sales"

[64]

[15] The Trustees were of the view that the claim for remuneration by Ms Zevering was excessive. The solicitors for the Trust recommended that Ms Zevering be remunerated by reference to a percentage of the sales revenue, nominating 2.5 per cent as an appropriate figure. Her remuneration on that basis would amount to $86,600. This was the figure that the Trustees proposed in their originating application.

[65]

[16] Ms Zevering has since provided a document entitled "Claim for Compensation Comparative Analysis" which was said to specify the amount she is currently claiming:

[66]

"Project Co-ordinator at $100,000 p.a. for 6 years = $600,000.00

[67]

[17] During her time as trustee, Ms Zevering received some $47,000 from the trust to cover out-of-pocket expenses. After Ms Zevering resigned as trustee, she was asked by the remaining Trustees to substantiate the expenditure of this money.

[68]

Ms Zevering has provided supporting paperwork for part of this claimed expenditure; however, she has not provided any substantiation for the last $19,000 advanced to her.

[69]

[18] When asked, both Ms Zevering and her counsel were unable to identify whether her schedule of compensation included the $19,000 of unsubstantiated expenses discussed at [17] or whether it was to be "set-off" against the money to be paid under the previous order.

[70]

[19] I also note that, in what initially had all the appearances of a failed investment, all unit-holders have received repayment in full of the principal invested and have, in fact, received a profit. It is estimated that the final return to investors will be approximately 110-120 per cent of the original investment.

[71]

[20] Ms Zevering swore a number of affidavits in this proceeding in which she deposed to "assuming the role of project manager" and described herself as "taking over the land development on behalf of the investors". In summary, she described herself as undertaking the following activities on behalf of the Trust:

[72]

(a) locating all the investors, calling a meeting at the Buderim Tavern on 17 August 2001 and presenting various options to recover capital to the meeting;

[73]

(b) visiting the property and inspecting the subdivision;

[74]

(c) meeting with surveyors and engineers who were owed money by Clevewood;

[75]

(d) telephoning investors during October and November 2001 to persuade them to follow her advice and complete the subdivision and sell the individual lots, by transferring the mortgage held by BG Securities Pty Ltd to a new entity;

[76]

(e) instructing solicitors to prepare a trust instrument and persuading Ms Newton and Mr Spooner to become her co-trustees;

[77]

(g) meeting with Logan City Council ("the Council") officers, while accompanied by Mr Spooner;

[78]

(h) meeting with the Council's development assessment manager, while accompanied with Mr Spooner;

[79]

(i) undertaking substantial research into 'complex development protocols' and liaising with the Council's development assessment team;

[80]

(j) meeting with the Council's engineering consultant and surveyor, again accompanied by Mr Spooner, to organise engineering works and surveys to be undertaken on the land;

[81]

(k) assessing real estate agencies in the locality of the estate and choosing David Miller of First National Real Estate to sell the lots;

[82]

(l) meeting with Mr Miller to devise the best marketing strategy for the lots;

[83]

(n) consulting with Mr Miller regarding the sales contract including drawing up a covenant to give effect to the steep profile of the lots and certain environmental considerations;

[84]

(o) directing all sales negotiations in consultation with Mr Miller;

[85]

(q) arranging the conveyancing and checking all sales contracts;

[86]

(r) conducting fortnightly visits to the estate and conducting property maintenance;

[87]

(s) completing the sale of 23 lots between 7 October 2002 and 9 September 2003;

[88]

(t) commencing a campaign in 2002 to make the council assume responsibility for the protection of the 10 remaining lots ("the Wetland Lots") including obtaining preliminary bird data from a Bird Observers' Club, having discussions with the Wildlife Preservation Society of Queensland, local community groups and the Environmental Protection Agency;

[89]

(u) approaching the manager of the Council's Planning and Environment Policy Branch with a proposal that the Council acquire the Wetland Lots for conservation purposes;

[90]

(v) lobbying Councillors, the Mayor and the Queensland Environment Minister;

[91]

(w) conducting research and writing an environmental impact assessment report to submit to Council; and

[92]

[21] No diary records, timesheets or file notes of these tasks and meetings were produced in evidence. Ms Zevering was asked questions about this and maintained that she did keep notes, but gave no explanation as to why they were not produced.

[93]

[22] Evidence was given by a number of Council employees (Mr Creagan, Mr Power, Mr McDonnell, Mr Shaw and Mr Miller) who had had contact with Ms Zevering during the relevant period. They recalled that it was Ms Zevering who was their contact within the Trust and that they had the majority of their negotiations, telephone calls and meetings with Ms Zevering, believing her to be acting as the representative of the Trust. Mr Shaw recalls her being accompanied to meetings by a gentleman whose name he could not recall. It is clear on the evidence that he is referring to Mr Spooner.

[94]

[23] Ms Zevering estimated that she spent on average 25-30 hours per week from late 2001 to early 2004 working on the project, with this dropping to 20-25 hours per week throughout 2004 and 2005. From 2005 to September 2007, she claims to have spent 20 hours per week engaged in "final sales, complex accounting matters and working towards winding up the trust". In her affidavits, she describes establishing a "proper accounting system", comprising a basic spreadsheet recording income and expenditure. Evidence was given by Ms Callaghan, however, that she created the spreadsheet accounting record from handwritten records provided by Ms Newton. When shown the spreadsheet, Ms Zevering stated that Ms Callaghan had prepared it. It is clear from this that Ms Zevering significantly overstated her role when she claimed to have been engaged in "complex accounting matters".

[95]

[24] Ms Zevering swore: "I verily believe that the work I undertook was principally in the area of project management and environmental consultancy. In the latter years my work was more in the accounting area. Also, as mentioned, a great deal of my time was spent liaising with the various investors and often giving them advice which contained a legal or accounting element to it."

[96]

[25] Ms Zevering is a scientist by profession and is currently consulting as an editor in science; she had no relevant legal, accounting or property development experience or qualifications prior to becoming involved in this project. As Ms Zevering has no qualifications or experience in accounting or the law, I would be most concerned if she was, in fact, giving accounting and legal advice.

[97]

[26] Each of the other past and present trustees has provided affidavit evidence and

[98]

Ms Callaghan, Mr Spooner and Ms Newton also gave oral evidence before me. Each of them made statements to the effect that the decisions of Trustees were made in consultation with each other and that no one person controlled the decisions of the Trust.

[99]

[27] Mr Spooner, who has experience in the marketing and sale of businesses and properties, refuted many of the claims made by Ms Zevering, in particular relating to her account of single-handedly organising inspections, surveys and discussions with the Council. Mr Spooner said that he was present at meetings, had discussions with relevant people and initiated and undertook many of the negotiations with Council which Ms Zevering claims to have done on her own. I do not intend to set out each of these claims and responses, but will mention a few examples.

[100]

[28] In Ms Zevering's first affidavit she stated that she "had to draw up a special covenant giving effect to the steep profile of the lots and certain environmental considerations. Again, as we had no money to retain lawyers I had to engage in that pursuit myself". Mr Spooner rebutted this by stating that "the covenant to which Ms Zevering seeks credit was in fact prepared by me. I downloaded examples of covenants from property developments displayed on the internet. I utilised these to produce a viable covenant for the estate and, with the concurrence of the other trustees, submitted it to the Trust's lawyer for review and inclusion in the sale contract." In response to this, Ms Zevering withdrew from her original position of having drawn up the covenant herself, to say "I asked Mr Spooner to obtain some examples of covenants from internet websites to produce a simple covenant format for inclusion in the sales contracts. The eventual covenant text included in the sales contracts ... was expanded and ultimately settled by myself in conjunction with

[101]

Mr David Miller." I find that this is just one of numerous examples of Ms Zevering significantly overstating her contributions and minimising the work of other trustees in order to advance her case.

[102]

[29] In relation to their first meeting with Mr Shaw of the Council, Ms Zevering claimed that she arranged the meeting and conducted all negotiations. She said that

[103]

Mr Spooner "followed her lead and initiatives" at all times. However, this simply does not seem to be the case. Mr Spooner maintained that he arranged the meeting, played an active part in negotiations and subsequently reported to the unit-holders about the first meeting with Mr Shaw. The minutes of this meeting of unit-holders are in evidence before me. Ms Zevering admitted that she introduced his report to the unit-holders with a statement to the effect that "Mr Spooner took charge of the meeting and "spearheaded" the discussions, so it is appropriate that he present the report". This is quite contrary to her original claims that he took no part in the discussions at that meeting. When asked whether it was in fact not her but

[104]

Mr Spooner who had arranged the first meeting with Mr Shaw, she said that he only made the phone calls to set up the meeting at her direction.

[105]

[30] In evidence before me, Ms Zevering maintained a position that anything

[106]

Mr Spooner did was at her express direction and under her supervision, despite this plainly not being the case.

[107]

[31] In relation to the sale of the wetland lots, Mr Spooner said that the Council were not influenced by the environmental studies and lobbying of Ms Zevering. The Council had already resolved to consider the purchase of the four lots (which were the same four which it ultimately purchased) prior to her involvement. Mr Spooner stated that "After almost two years the LCC simply reiterated their resolution made in April 2003 to acquire four lots only. The work of the Trust to complete the sale of land was put on hold for all that time. It proved to be fruitless and a time wasting exercise. These lots were eventually sold (not to the Council) at a profit, however this is attributed to the property boom, not foreseen by any of the Trustees, rather than any efforts of Ms Zevering in lobbying the Council to accept her proposal."

[108]

[32] In her evidence, Ms Zevering consistently sought to diminish the input and efforts of her co-trustees and to overstate the contributions she made. Her oral evidence was most argumentative and she regularly sought to evade and avoid questions. She was patently self-interested. Unless there is independent corroboration, I would be disinclined to accept her evidence.

[109]

[33] Mr Sissons, a person with over 25 years experience in the property and development industry in Queensland, was called by the first respondent to give expert evidence regarding appropriate remuneration in the circumstances. Mr Sissons' experience is predominantly with much larger subdivisions than the one in question, with involvement in developments of up to 18,000 lots. Mr Sissons was familiar with the Outlook Estate subdivision, having been approached to assess and advise on the development prior to the Trustees taking over development.

[110]

[34] Mr Sissons said that Ms Zevering (based on the information she provided in her affidavits) fulfilled a number of overlapping roles, namely developer/principal, development manager/project coordinator, project manager, sales manager, sales person, environmental consultant, investor advocate/representative and trustee.

[111]

Mr Sissons was cross-examined on the differences between these roles and explained in depth what he perceived to be the tasks and responsibilities of a person normally engaged in each of these roles. It appeared that many of the roles overlapped in many ways; for example, the developer, principal and trustee were, in this case, one and the same. He was also asked about the ability of these roles to be carried out by one person. He conceded that a person would not have been required to act in each of these positions throughout the life of the project and that the roles could be done by one person. He also agreed that it was "uncommercial" for a project of this size to be completed in the time frame of six years as was taken. In his affidavit, Mr Sissons stated that he felt a retainer of $120,000 per annum for the duration of the project together with a success fee of 2-3 per cent of gross turnover would be appropriate in the circumstances. However, a particularly illuminating answer was given when asked the following questions:

[112]

"His Honour: Mr Sissons, gross turnover, the gross sales, for this development was about three and a half million. What do you say about the notion that the amount to be paid to the sort of consultant you've been describing is calculated in, to keep it in round figures, the order of $700,000, so 20% of the gross revenue from the project?-- Yes, so---

[113]

Have you ever heard of fees of that magnitude being paid to the sort of consultant you're talking about? -- On a project of this size and price?

[114]

[35] Mr Hotchkin is a property developer and construction manager with approximately 25 years experience in subdivisions for residential developments and provided an affidavit in this proceeding. He commented that "it should be recognised that there was a successful outcome in completing this development, which means that those responsible were effective in negotiating with Council, engaging consultants and successfully marketing the property" and acknowledged that, from affidavit material he had read, it appeared that Ms Zevering had played an active role in achieving these results.

[115]

"4. From the material it seems that the trustees decided to take on a number of tasks to complete the development, which would normally be undertaken by a qualified and experienced industry consultant in property development. That means that without the appropriate experience the trustees who undertook the work no doubt spent more time in achieving the outcome than an experienced and qualified industry professional would have done..."

[116]

[37] He suggested that if an industry expert had been engaged to undertake the development, the industry standard would be for the negotiation of a fee on an hourly rate or a percentage of development costs, possibly with a success fee.

[117]

"6. The affidavit material does not provide detail as to the activities which were undertaken by Ms Zevering and there is no itemisation or diary of hours spent. From the material however, I make the following observations about the activities which were undertaken by the trustees to complete the development:-

[118]

(a) It appears that the civil works in connection with the sub-development were virtually complete. The civil works can be described as site works, which bring the development to the point where the lots are capable of being subdivided to create individual titles. This means that earth works have been done, services are provided to the lots, and roads have been sealed. The civil works are obviously an important and large part of an subdivisional development and, as indicated, these were virtually complete.

[119]

(b) From the material it appears that when the trustees took over it was more of an administrative role dealing with the following:-

[120]

(i) debts owed to consultants and Council in connection with the development;

[121]

(ii) engaging an engineer to prepare "as constructed" drawings to satisfy Council in order to seal the plan of subdivision;

[122]

(iii) engaging a surveyor to submit and obtain title deeds;

[123]

(iv) engaging consultants to market and sell the subdivided lots;

[124]

(v) it appears that Ms Zevering was involved in negotiations with Council to acquire some of the lots for environmental purposes."

[125]

[39] Mr Hotchkin gave evidence that he was exactly the sort of person who would be engaged to manage a project of this kind and size and that he would take it on alongside other projects which he was involved in, and would regard a negotiated hourly rate as an appropriate form of remuneration. He did not put a figure on the hourly remuneration he would expect.

[126]

[40] The Court has power to fix trustee's remuneration either under s 101 of the

[127]

Trusts Act 1973 (Qld) or its inherent jurisdiction.

[128]

[41] Section 101 of the Trusts Act 1973 provides:

[129]

(1) The court may, in any case in which the circumstances appear to it so to justify, authorise any person to charge such remuneration for the person's services as trustee as the court may think fit.

(2) In the absence of a direction to the contrary in the instrument creating the trust, a trustee, being a person engaged in any profession or business for whom no benefit or remuneration is provided in the instrument, is entitled to charge and be paid out of the trust property all usual professional or business charges for business transacted, time expended, and acts done by the person or the person's firm in connection with the trust, including acts which a trustee not being in any profession or business could have done personally; and, on any application to the court for remuneration under subsection (1), the court may take into account any charges that have been paid out of the trust property under this subsection."

[130]

[42] Subsection (2) applies to a person engaged in any profession or business for whom no benefit or remuneration is provided by the trust instrument. As Ms Zevering could not be described as a professional, her Counsel submitted that she would be a person engaged in business as she "engaged in a quasi form of business in what she did". However, this subsection is generally used to cover the situation where a solicitor or accountant is appointed the executor of a will or the trustee of a trust and performs their professional services for the trust. No authority was cited to support an extension of this to cover a "quasi form of business", as was submitted to be present here. I do not consider it appropriate to extend the application of the subsection to the present situation.

[131]

[43] Turning to subsection (1), the court may authorise remuneration as it sees fit where it is justified in all the circumstances.

[132]

[44] The court may determine what is reasonable in the circumstances "having regard to the degree of responsibility to exercise, the amount of skill and knowledge required and applied ... and the value to the beneficiaries of the work done".[1] In Re Postle and Hodsdon's Application, remuneration was awarded to trustees who were appointed as trustees for the sale of property on which a hotel business was run. One of the applicants, an accountant, was allowed remuneration for work reasonably required for the due administration of the trust which was claimed at or below rates then approved by the Insolvency Practitioners Association, which was considered an appropriate basis for determining remuneration.[2] The relevant consideration in determining remuneration is not the size or value of the trust, but what activities have been carried out in relation to it during its administration.[3]

[133]

[45] Given the express statutory provision, recourse to the Court's inherent jurisdiction to award remuneration will only be necessary where there is no authority for the trustee's remuneration or where the authority that exists will not ensure that they receive remuneration that is fair or reasonable.[4]

[134]

[46] In Re Duke of Norfolk's Settlement Trusts,[5] Fox LJ said:

[135]

"I conclude that the court has an inherent jurisdiction to authorise the payment of remuneration of trustees and that that jurisdiction extends to increasing the remuneration authorised by the trust instrument. In exercising that jurisdiction the court has to balance two influences which are to some extent in conflict. The first is that the office of trustee is, as such, gratuitous; the court will accordingly protect the interests of the beneficiaries against claims by the trustees. The second is that it is of great importance to the beneficiaries that the trust should be well administered. If therefore the court concludes, having regard to the nature of the trust, the experience and skill of a particular trustee and to the amounts which he seeks to charge when compared with what other trustees might require to be paid for their services and to all the other circumstances of the case, that it would be in the interests of the beneficiaries to increase the remuneration, then the court may properly do so."

[136]

[47] Australian courts have tended not to depart significantly from the traditional English approach when exercising their inherent jurisdiction.[6] However, in

[137]

Nissen v Grunden,[7] Griffith CJ expressed a view that the High Court will not take such a strict view regarding exercising its inherent jurisdiction to award remuneration to a trustee except in exceptional cases, when speaking in the context of a jurisdiction conferred by statute. Ford & Lee, the learned authors of "The Law of Trusts"[8] make the following observations in relation to this:

[138]

"Where a statutory jurisdiction to allow remuneration is conferred it is submitted that it should be exercised having regard not to the traditional practice of the Court of Chancery but to the presumed intention of the Parliament in conferring it; and it is clear from the statutory wording, particularly in States such as Queensland, South Australia and Western Australia, that the statutory powers are intended to be exercised broadly. But when a trustee seeks remuneration under the inherent power of the court, because for some reason the trustee cannot be brought within the statute, there is no reason why any Australian court should depart, at any rate to a significant degree, from English traditional practice."

[139]

[48] In Re Sutherland,[9] Campbell J said:

[140]

"Although generally a trustee is not entitled to remuneration for his time and trouble in execution of the trust, there is an inherent jurisdiction to allow a trustee remuneration, which is usually exercised sparingly and in exceptional cases: Re Worthington (dec'd); Leighton v MacLeod [1954] 1 WLR 526."

[141]

[49] Plomley v Shepherd[10] considered the principles upon which the court will make a retrospective order for an allowance to trustees for their time and trouble in the past. Manning J said:

[142]

"I think the Court ought to be very chary in allowing a trustee remuneration for his services in the past, as it might operate so harshly upon the person entitled to receive the rents and profits if suddenly a whole year's receipts were to be swamped by payments to a trustee for his duties performed in previous years when nothing was said as to any remuneration being expected. If a trustee performs his duties in the trust and says nothing as to the payment of any remuneration at the time, I do not think that the Court ought to allow any such remuneration if the trustee subsequently applies for it. A trustee must not remain silent at the time and then at the end of the term come to the Court and ask to be remunerated. If, however, at an earlier stage he has indicated to the persons concerned that he cannot continue to carry on the duties of his trust unless he is remunerated for his time and trouble, then I think the ground-work is laid for an allowance."

[143]

[50] In that case, the trustee had informed the beneficiaries that he could not afford to continue his work for the trust for nothing and they reached an agreement by which the trustee was to be given an allowance at a prescribed rate. Manning J found that he was entitled to be allowed a commission for the performance of his duties as trustee, but fixed the amount at that sum which had previously been agreed between the parties.

[144]

[51] This principle seems particularly relevant in the present case, given that the unit-holders of the Trust resolved to remunerate the Trustees at the prescribed rate of $20 per hour. If Ms Zevering was not willing to accept this, she could have voted against the resolution, noted her objection and made a request for further remuneration. However, Ms Zevering made no indication to the unit-holders of her intention to seek remuneration at such an excessive rate until after her rather acrimonious departure from the Trust.

[145]

[52] It is for the applicant for further remuneration to show proper evidence of the quality and quantity of work done for which remuneration is sought.[11] The Court will adopt the role of an auditor when the remuneration charged is questioned and insist that proper accounts and records are kept.[12] No timesheets, file notes, diaries or anything of this kind were provided by Ms Zevering to substantiate her claims. All that has been provided are her own vague retrospective estimates of her time which, in the absence of any corroborating records or evidence, I am not prepared to accept.

[146]

[53] The unit-holders passed a resolution providing for a scheme of remuneration for the Trustees. What is being sought here is something far in excess of that. In the inherent jurisdiction of the court, and under s 101(1) of the Trusts Act, there is a power to order remuneration over and above that which was agreed at the meeting of the unit-holders, but what is required to exercise that discretion, are "exceptional circumstances".

[147]

[54] Ms Zevering has not established the existence of any exceptional circumstances which would warrant the exercise of the discretion to allow remuneration over and above that which was agreed between the trustees and unit-holders. Her application therefore fails.

[148]

1. The first respondent's application for further remuneration is dismissed.

[149]

[1] Re Postle and Hodsdon's Application (1991) 1 Qd R 160 at 163, per Byrne J.

[150]

[2] (1991) 1 Qd R 160 at 164.

[151]

[3] In the Will of Sheppard [1972] 2 NSWLR 714, per Helsham J.

[152]

[4] Ford & Lee, "The Law of Trusts" at [13170] accessed via Legal Online.

[153]

[6] Will of Stratton [1981] WAR 58.

[154]

[7] [1912] HCA 35; (1912) 14 CLR 297.

[155]

[9] (2004) 50 ACSR 297; [2004] NSWSC 798.

[156]

[10] [1896] NSWLawRp 83; (1896) 17 LR (NSW) Eq 215.

[157]

[11] Re Orre, Unreported, SC (NSW) 19/12/91; noted in PW Young J "Case Note" (1993) ALJ 309.

At a glance

Court

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Before

Catchwords

Source

Catchwords

Judgment (157 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (2)