Kerr v Perusia Nominees Pty Ltd [2002] VSC 277

The proceeding is brought pursuant to rule 54.02 of the Rules of Court and also seeks the exercise of the jurisdiction of the court to grant an interlocutory injunction. After some discussion the parties agreed that the dispute for resolution today is whether the trustee of the trust should be restrained from dealing with certain assets pending other steps being taken concerning the trust.

Supreme Court of Victoria|2002-07-01|Before: GILLARD J.

ADMINISTRATION OF A TRUST - Interlocutory injunction to preserve position until proper investigation of Trust.

This is the return of a summons in a proceeding instituted by an originating motion seeking orders in relation to the administration of a family trust called the Kerr Family Trust.

The proceeding is brought pursuant to rule 54.02 of the Rules of Court and also seeks the exercise of the jurisdiction of the court to grant an interlocutory injunction. After some discussion the parties agreed that the dispute for resolution today is whether the trustee of the trust should be restrained from dealing with certain assets pending other steps being taken concerning the trust.

This dispute involves a brother and a sister. The plaintiff, William Oscar Kerr ("the plaintiff"), is aged 51. The defendant, Perusia Nominees Pty Ltd, is trustee of the Kerr Family Trust and is sued as such. One of the directors of the trustee company is the plaintiff's sister, Pamela Marjorie Sanson ("Mrs Sanson"). They are the only two children of Evelyn May Kerr, who died on 8 October 2001. Her will was dated 19 September 1994 and in effect divides the not insubstantial estate of $4,577,720 equally between the plaintiff and Mrs Sanson. The plaintiff has issued a proceeding pursuant to Part 4 of the Administration of Probate Act 1958 seeking a greater share in the estate.

The trust was established by a deed of settlement on 8 December 1976. It is a typical family discretionary trust. The main beneficiaries were the deceased and her late husband, who died in 1982. The plaintiff and Mrs Sanson and their children are discretionary beneficiaries. As such they have limited rights.

Recently the trust sold a valuable property in Swanston Street, Melbourne for M$2.420. The property was to be settled today, but the settlement was brought forward to 28 June 2002. This has, not surprisingly, aroused suspicion in the plaintiff's camp, as the summons herein was issued prior to last Friday seeking to restrain the trust from dealing with its assets. The affidavit material shows that the plaintiff has very little knowledge of the workings of the trust. Mrs Sanson was appointed a director on the death of her father, the other director being her mother until her death, when an accountant who performed accountancy work for the family, James Morris, was appointed. Mr Morris is semi-retired and is at present in Queensland on what is apparently a trip around Australia.

The affidavit material shows that the deceased apparently used the family trust as her own property, and this was acquiesced in by Mrs Sanson. This is not surprising in a family set-up but has the danger of rights not being recognised and being ultimately ignored. The plaintiff views everything his sister does in relation to the trust with suspicion. For her part she maintains she has done nothing wrong.

On an application for an interlocutory injunction in most cases it is extremely difficult to resolve disputes of fact, and this proceeding is no exception. I do not propose to attempt to resolve any conflict, but, consistent with the principles concerning interlocutory injunctions, if there is a risk to property, the court should act. The plaintiff's counsel have indicated that their client needs more information concerning the trust and its administration in the past and is contemplating seeking to remove the trustee, which is controlled by Mrs Sanson and the holidaying accountant.

I am of the opinion that an interlocutory injunction should be granted to preserve the trust property for a period to enable a proper investigation of the trust, its operation and administration, and to determine what amount is owing to the estate. Mrs Sanson has stated in her affidavit that $550,000 was owing to the estate and that amount has been paid to it and held pending the resolution of the TFM proceeding.

The reason why I should grant the interlocutory injunction is because there are a number of worrying features about the administration of the estate in the past and the trustee's understanding of its obligations. I mention these concerns without commenting on them. I am not suggesting that those who control the trustee company have done anything wrong, but Mrs Sanson has demonstrated an ignorance of the duties resting on her as a trustee, and Mr Morris is on an extended holiday.

The first concern relates to the deceased estate's interest in the trust. In the estate inventory the estate claimed one share in the trust estate valued at $550,000. It is said that was an error. In fact the trust owed a debt to the deceased which was $550,000. This is an extraordinary error, especially when it is observed that a solicitor was responsible for the inventory. I must say that the present solicitors were not acting for the trust and were not responsible for that error. This error shows a misunderstanding of the trust and the obligations, but also as to legal entitlements. How much is the debt? What is the evidence concerning its make-up? Proper investigation may answer those questions and the result may affect the value of the estate, which of course is relevant to the TFM proceeding.

The second matter of concern relates to an offer by Mrs Sanson to her brother in December 2001 to split the net proceeds of the sale of the real estate equally. She was not in a position to do that: it is trust property.

This matter leads into the third matter, and that concerns the suitability of Mrs Sanson to be a director of the trust company. She frankly admitted in her affidavit that she was ignorant of her obligations as a trustee, and, importantly, not appreciating the legal difference between trust property and her mother's property. She has now been apprised of her obligations and recognises that she cannot deal with the trust property as if it was hers or indeed as if it was the estate's. Unfortunately, Mr Morris is not in Victoria to guide and supervise Mrs Sanson. These facts cause concern and the court should protect the interests of the beneficiaries.

Fourthly, there is a dispute about discovery in the TFM proceeding concerning trust documents.

In my view, until all these matters of concern are investigated, there is a risk of loss to the plaintiff, and maybe others. Accordingly, I am prepared to grant an interlocutory injunction in this proceeding for a period which should be limited. Mr Southall, Q.C., who appears with Ms D. Lyle of counsel for the plaintiff, sought an order for the taking of accounts of the trust which is not opposed. It seems to me to be a practical first step in this family dispute, and I will make an order concerning the preparation of accounts. I will hear the parties on the form of the orders.

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