Foote v Foote

JUDGE: JACOBSON CJ DATE: 11 DECEMBER 2014 PLACE: SYDNEY VIA VIDEOLINK TO NORFOLK ISLAND

REASONS FOR JUDGMENT 1 This is an application under the Partition Act 1900 of the State of New South Wales (the Adopted Act) as adopted by the Partition Ordinance 1931 as amended of Norfolk Island (the Ordinance, now the Partition Act) for an order for partition or in the alternative for sale of a property on Norfolk Island known as "Foot Nort" (the Property). The property is registered in the names of nine co-owners as tenants-in-common in unequal shares. The plaintiffs, Anne Foote, Marcus Truman and Brigitte Truman hold collectively a five-eighths share in the property. The six defendants collectively hold the remaining three-eighths share. 2 The property came into the ownership of the present owners as tenants-in-common under a transmission application made on 10 January 2013 by Mr John Terrence Brown as administrator of the estate of the late Eldon Foote who died on 17 May 2004. The first plaintiff, Mrs Anne Foote is the widow of Eldon Foote and holds a half share in the property. The second and third plaintiffs, Marcus and Brigitte Truman, are children of the late Eldon Foote and Anne Foote. They hold a one-sixteenth share each in the property. Each of the six defendants holds a one-sixteenth share of the property, that is to say three-eighths in total. 3 The defendants are children of Eldon Foote but they are not children of Anne Foote. All of the defendants other than Douglas Foote, who is the first defendant, have filed submitting appearances. It is the wish of each of the plaintiffs, expressed in their affidavits, that the property be sold and that the net proceeds of sale be distributed to all of the co-owners proportionately to their respective ownership interests. Douglas Foote, who was represented at the hearing by Mr Adrian Cook QC, opposed the making of the orders sought by the plaintiffs. The principal ground of opposition raised by Mr Cook was that under the terms of the will of the late Eldon Foote his trustees and executors, Messrs David Dewolfe Bentley and Steven Quaiver, were appointed as trustees for sale. 4 The effect of Mr Cook's submission on the central issue was that a trust for sale produces an immediate notional conversion of the estate into money to be held on trust for the beneficiaries under the will. It would follow on this analysis that the transfer of title to the present owners of the property was a breach of trust and accordingly that the plaintiffs have no title and hence no standing to bring the present application. The answer to Mr Cook's submission turns upon the terms of the will of the late Eldon Foote. This question and the other grounds of defence are addressed below. 5 Before dealing with them I should say that I was assisted by written submissions provided by the solicitor for the plaintiffs and by Mr Cook. The submissions dealt comprehensively with the issues raised in the proceeding. However, when the matter came on for hearing yesterday Mr Cook sought an adjournment. I refused to adjourn the proceeding for reasons which sufficiently appear in the transcript. 6 The relevant provisions of the Adopted Act are sections 4(1)(b), 4(3), 15(b) and 17. Section 4(1) commences with the words: "In a suit for partition where but for this Act … a decree of partition might have been made:" 7 Section 4(1)(b) provides relevantly: "if parties interested collectively to the extent of one moiety or upwards, or some persons as hereinafter provided on their behalf, request the Court to direct a sale of the property and a distribution of the proceeds instead of a division of the property accordingly" 8 Section 4(3) of the Adopted Act provides: "The Court when making any order under this Act shall give all necessary consequential directions." 9 Section 15 of the Adopted Act provides: "Wherever the Court orders a sale under this Act it may order such sale to be effected - (a) by the Court; or (b) out of Court subject to such restriction as the Court thinks fit; or (c) altogether out of Court". 10 Section 17 provides: "For the purposes of this Act a suit for partition shall include a suit for sale and distribution of the proceeds, and in a suit for partition it shall be sufficient to claim a sale and distribution of the proceeds, and it shall not be necessary to claim a partition". 11 The relevant provisions of the Will are set out below. Clause 2 of the Will of the late Eldon Foote appointed Mr Bentley and Mr Quaiver as Executors and Trustees. Clause 3 commences as follows: "I GIVE AND BEQUEATH my Norfolk Island estate to my Trustees subject to the following trusts…" 12 The trusts include a large number of specific bequests set out in clause 3C of the will. 13 Clause 3D commences with a direction to the trustees to inform the testator's wife, children and stepchildren of the provisions in the Will relating to the disposition of the "Foot Nort Property" and to the disposition of the proceeds realised by the Estate on the sale of the Property. There then follows in subparagraphs (ii) to (viii) of clause 3D a series of directions relating to the steps to be taken to realise the Property and to maintain it pending sale. Clause 3D(ix) then provides: "Any of the three (3) parcels included in the Foot Nort Property not sold by the Trustees within twenty-four (24) months following the date of my death or not the subject of a pending sale due to close within 3 months of the end of the 24 month period shall form part of the residue of my Norfolk Island Estate and shall be dealt with in accordance with the terms of this my Norfolk Island Will." 14 Clause 3H provides: "To divide the rest and residue of my Norfolk Island Estate amongst the following named beneficiaries who have survived me for 20 days as follows: 50% to my wife, Anne Stewart Foote 50% to be divided as follows: 1 share Trudy Marie David 1 share Douglas Alexander Foote 1 share Dean Norman Foote 1 share Laurie Louise Evans 1 share Robert Patrick Foote 1 share Deborah Leigh Entwistle 1 share Marcus Truman 1 share Brigitte Truman"

15 Clause 12 provides: "SUBJECT TO any express direction to the contrary, my Trustees may use their discretion in the realisation of my Norfolk Island Estate, and to that end to expend such Estate funds relative to the appraisal and sale of the Estate property as they in their absolute discretion deem advisable with power to my Trustees to sell, call in and convert into money my property at such time or times in such manner and upon such terms and either for cash or credit or for part cash and part credit as my Trustees in their discretion may decide upon, with a separate and substantive power and discretion to postpone such conversion of my Norfolk Island Estate or any part or parts thereof for such length of time as my trustees may think best and I declare that my Trustees may retain as an authorised investment of my Norfolk Island Estate any portion of my Estate in the form in which it may be at my death (even though it may not be in the form of an investment in which the Trustees are authorised to invest trust funds, and whether or not there is a liability attached to any such portion of my Norfolk Island Estate) for such length of time as my Trustees in their discretion may deem advisable, and my Trustees shall not be held responsible for any loss that may happen to my Norfolk Island Estate because of Trustees so doing." 16 The principal affidavit in support of the plaintiff's case is sworn by Marcus Truman. He deposes to a number of attempts to sell the property commencing in about September 2013. His evidence establishes that a number of offers have been made at amounts up to $2.4 million but that ultimately Mr Douglas Foote was the only co-owner who would not agree. The evidence is not disputed but Mr Douglas Foote has expressed objections to the identity of the offerors largely on the ground that they were not persons who would have been acceptable to his father. 17 The nature of a trust for sale is explained in the authorities referred in a Singapore case Foo Jee Seng v Foo Jhee Tuang [2012] SGCA 41 to which Mr Cook referred. The effect of the explanation given by the court in that case in paragraph 18 and following is that a trust for sale is a trust which directs the trustee to sell the trust property, invest the proceeds and hold the resulting fund upon the trusts declared by the settor. 18 The distinction between a trust for sale and a power of sale is explained by the Court in the Foo Jee case at [23] as follows: "It must be made clear that a trust for sale is distinct from a power of sale. The trust for sale produces an immediate notional conversion, whereas a mere power does not." 19 In my opinion the trust declared by the late Eldon Foote in his will provided for a power of sale and did not create a trust for sale. This is because the testator specifically contemplated that the property may not be able to be sold within 24 months. He therefore provided that if it were not sold within that period it would form part of the residue. Indeed, clause 12 of the Will empowers the trustees in their discretion to postpone the conversion of the Norfolk Island real estate or any parts thereof for such a length of time as the trustees may think fit. 20 This seems to me to be inconsistent with the concept of an immediate notional conversion of the property into money. Instead the Will contemplates that the property may be in existence two years after the date of the testator's death and in that event it was to be divided amongst the named residuary beneficiaries in the proportions stated in clause 3H. 21 That was what was effected by the transmission application. It follows that all of the other grounds of objection to the orders do not arise apart from those that I now propose to address. 22 First, paragraph 9 of the defence asserts that the present application is incompetent and inappropriate to be brought under the Adopted Act. However, even if there was any force in this ground of opposition as an answer to the Originating Application filed on 8 August 2014 it is no answer to the Amended Originating Application that seeks an order for partition. 23 Order 2(b) of the Amended Originating Application provides as follows: "in the alternative, if the Court is satisfied that parties interested collectively in the Property to the extent of one moiety or upwards request the Court to direct a sale of the Property and a distribution of the proceeds instead of a division of the Property, and if the Court sees no good reason to the contrary, to be sold in accordance with section 4(1)(b) of the Adopted Act and conformably with the Orders and Directions set out below." 24 An order in these terms is appropriate in the present case. There is no good reason why the property should not be sold in accordance with the terms of s 4(1)(b) of the Adopted Act. This approach is in accordance with that stated by Deane J in Squire v Rogers (1979) 27 ALR 330 at 341-342. The provisions of s 4(1)(b) of the Adopted Act do not seem to me to engage the same considerations as arise under s 66G(4) of the Conveyancing Act 1919 (NSW). That subsection contains a "more beneficial" criterion which was discussed by the New South Wales Court of Appeal in Segal v Barel [2013] NSWCA 92 at [49] and following. 25 But even if the "more beneficial" criterion is applicable under the Adopted Act the effect of what was said in Segal v Barel is that non-financial considerations are not to be taken into account. It follows that on the approach stated by the Court of Appeal, which I respectfully adopt, the non-financial considerations raised by Mr Douglas Foote are not a "good reason to the contrary" for declining to order a sale of the property. 26 Second; paragraph 10 of the defence pleads that the only available application is one made under s 77 of the Administration and Probate Act 2006 (Norfolk Island). 27 That section is materially identical in form to s 57 of the Probate and Administration Act 1898 (NSW). It seems to me that this provision is inapplicable for the reasons given in the plaintiff's submissions at paragraph 41. Those submissions direct attention to the work Geddes and others, Wills, Probate and Administration Law in New South Wales, LBC 1996 at pages 425 to 427. The effect of the observations made by the learned authors of that text is that the section is redundant in light of the powers conferred upon an administrator to obtain directions from the Court. In any event I do not see that the approach taken by the plaintiffs in the present case is precluded by the terms of the provision relied upon. 28 Third; paragraph 11 of the defence pleads that by clause 7 of the Will the plaintiffs are disqualified from bringing this application, however that paragraph assumes that a distribution of the property to the residuary beneficiaries is an attack on the Will. For the reasons given above it is not. 29 Fourth; paragraph 12 of the defence pleads that orders for sale will prejudice an application to be brought by Douglas Foote against the executors for maladministration and breach of trust. The short answer to this is that if Douglas Foote wishes to bring such an application there is nothing in the orders sought which prevent it. 30 Fifth; the orders are opposed on the ground that the appointment of Norfolk Island Real Estate as sole agents should be refused because they were unable to secure a sale over a long period of time and because the proprietor of the firm is the sister of Mrs Anne Foote. In my opinion the evidence establishes that the asserted failure to sell the property (at least during 2013 and 2014) has resulted not from the lack of efforts made by the agent but by the inability of the co-owners to reach an agreement as to the terms of sale and perhaps also the identity of the offeror. 31 As to the contention that Mr James of Norfolk Island Real Estate ought not to be appointed because the proprietor of the agency (Ms Mogey) is the sister of Ms Anne Foote, I accept the submissions contained in paragraph 51 of the plaintiff's submissions. I do not consider that any conflict arises. It is in the common interest of all co-owners that the property be sold at the best price and on the best terms obtainable. It is equally in the agent's interest to achieve that objective. Moreover, in paragraph 7 of his affidavit Mr James discloses the relationship between Ms Mogey and Mrs Anne Foote. He also gives an undertaking to the Court, which I accept, to undertake the tasks and obligations set out in the draft order annexed to his affidavit. The undertaking is to do so to the best of Mr James' professional ability. The draft order annexed to the affidavit is substantially similar to the orders I propose to make. 32 As to the costs, these are sufficiently dealt with in orders 14 and 16 of the proposed orders. The orders are conformable with the ordinary practice and, instead of "proposed orders", I will say orders 14 and 16 as set out in the Amended Originating Process. Although Mr Douglas Foote seeks to deny the title of the plaintiffs that submission was merely a consequence of the submission made by Mr Cook that the will gave rise to a trust for sale. As I have said, the submission turned upon the construction of the Will. 33 Although I decided that issue against Douglas Foote I do not think in the circumstances it is appropriate to make a cost order against him. For these reasons I propose to make orders in terms of the orders contained in the Amended Originating Application, subject to a number of minor changes that I think need to be made. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. Associate: Dated: 5 January 2015