Trustees - Direction under s 92 of Trustees Act 1962 - Turns on own facts

Trustees Act 1962

Directions given under s 92 of Trustees Act 1962

Augusta Beach Estate Pty Ltd v The Beneficiaries of the Augusta Beach Estate Trust [1999] WASC 12

1 PULLIN J: The second plaintiff was incorporated by Mr Maxwell Peter Lenegan in 1972. Mr Lenegan died in 1975. His widow, the first plaintiff, and the first plaintiff's children are beneficiaries of the estate. The first plaintiff was at all times a director of the second plaintiff. The plaintiffs have approached the Court in this case, seeking a direction under s 92(1) of the Trustees Act 1962, which reads:

"Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee."

2 The property in question is some land which the second plaintiff purchased in Bremer Bay in 1972. It consists of 1,000 acres of land, and it is described as Bremer Bay lot 1307, the whole of the land in certificate of title volume 2016 folio 753.

3 Between 1972 and 1975, the first plaintiff, now known as Mrs Nevin, had little to do with the sale of interests in the land, which had been taking place as a result of the efforts of her then husband, Mr Lenegan. Numerous undivided one-thousandth shares in this land were sold to various members of the public, who live in various States, including Queensland, New South Wales and Western Australia.

4 At the time that Mr Lenegan was promoting the sale of these shares in the Bremer Bay Estate land, he and a Mr Fowler were also promoting a similar venture in relation to adjoining land known as the Peppermint Beach Estate land, which comprises 2,745 acres, and it had been sold off in shares in the same way.

5 The second plaintiff, the trustee, presently has no funds available to pay expenses, the immediate one being rates payable to the Shire of Jerramungup for the land.

6 The rates have been paid over certain of the years by the second plaintiff and by Mr Lenegan's estate, without any contribution from co-owners during the period 1973 to 2001. Legal costs of the plaintiffs have been paid from the estate of Mr Lenegan, and the trustee intends to seek reimbursement of these and other costs from the proceeds of sale of the Bremer Bay Estate land, if that land can be sold.

7 The second plaintiff does not have any property or assets other than the Bremer Bay Estate land. Since the land was purchased in 1972, it has remained in the same undeveloped condition. A valuation of the land has been obtained. It shows that the land has a value of $275,000. That valuation was paid for out of Mr Lenegan's estate and, once again, reimbursement will be sought in relation to those moneys.

8 Town planning advice has been sought by the trustee about whether there is any potential to subdivide the Bremer Bay Estate land into small lots, and the advice is that a subdivision would be unlikely to be approved. There are presently persons who are showing an interest in purchasing the Bremer Bay Estate land. A sale of the land seems to be the only option open to the second plaintiff, because it does not have any funds to develop the land and there are difficulties in communicating with co-owners. When I refer to co-owners, I mean persons who are beneficiaries and who have beneficial interests in the land of which the second plaintiff is the trustee.

9 In May 2001, the trustee caused its solicitors to send a letter to co-owners concerning the proposal to sell the land and to divide the proceeds of sale amongst the co-owners. A number of letters were sent out to persons where their addresses were known, and a proportion only of those persons replied. The total letters sent out were 159. Replies received were 56, and 30 came back marked "return to sender".

10 Almost all of the co-owners who replied favoured a sale of the Bremer Bay Estate land. The most significant co-owner in support of a sale and a winding up of the trust, is the Lenegan Estate, which owns 306 out of 1,000 shares. It favours a sale. With that background, the trustee approaches the Court for directions.

11 A trustee has no power to sell the trust property except under authority expressly or impliedly conferred on it by the trust instrument or under the authority of some statute or under order of the court: Jacobs, "Law of Trusts in Australia" 6th ed par 2002.

12 In Western Australia, there is a general power to sell trust property under s 27(1)(a) of the Trustees Act, and the trustee wishes to exercise that power of sale but seeks directions under s 92(1) of the Trustees Act.

13 The direction is sought in relation to the power of sale which is vested in the trustee pursuant to s 27 of the Trustees Act.

14 The authorities suggest that if advice is given by a Court under s 92, that it should be conservative advice; see Re J S Mitchell, Deceased (1913) 30 WN(NSW) 137. On the information available to me at the moment, I am prepared to direct that the second plaintiff, as trustee, should exercise the power of sale conferred on it under s 27(1) of the Trustees Act, providing such sale is effected in a way which is calculated to achieve the highest price for the land.

15 That will require further advice from a reputable real estate agent, who should recommend the method of sale, the method of marketing the land, the type and amount of advertising necessary, and where such advertisements should be placed. I should add that it would be rare that a sale would be directed by the Court or advice would be given by the Court to sell the land, other than by public auction after an adequate period of advertising of the property.

16 In this case I think that it is also necessary to further advertise the intention of the trustee to sell the land. There has been such a lapse of time since the land was first purchased and interests sold off to beneficiaries, that some beneficiaries cannot now be located, and the only safe way to proceed, I think, is to advertise in a national newspaper and local newspapers in the three States that I mentioned; ie Queensland, New South Wales and Western Australia.

17 For those reasons, and subject to the above conditions, I will direct that the trustee should exercise the power of sale subject, of course, to the possibility that I will have to review that advice if the advertisements placed produce persons who wish to make submissions in relation to the direction that I have given.

18 After the property has been sold, further directions can be sought about the proceeds.