Rahman v Rahman [2024] NSWSC 1616 | Case summary

Selling the Roselands Properties

The March 2023 orders appointed the wife trustee for sale of both property 1 and property 1A. The March 2023 orders gave the wife authorisation to sign documents on behalf of the husband to give effect to the trusts for sale of both properties and to give any consents necessary on his behalf to facilitate the sale and gave her the power to engage real estate agents, give instructions for the sale and to exercise all trustee powers available under the Trustee Act 1925. The orders drew no distinction between the need for the sale of each property. The Family Court further ordered that upon the sale of each property, after the deduction of sale expenses and other essential sale related costs, the sale proceeds were to be divided as to 36% for the husband and as to the wife 64%.
This matter was referred to me as Duty Judge by the Registrar in Equity on 7 November 2024 in pursuance of her general power to manage proceedings. It immediately appeared that both sides were without the benefit of legal advice and in deep conflict about the sale of property 1 and property 1A.
The parties had strongly conflicting versions of who was at fault for the situation. The Court does not have to determine who was at fault at this stage. The present task is to progress the sales of these two Roselands properties. But the nature of the present conflict needs brief description.
These two residential properties are close to one another. The wife and other family members occupy property 1. Property 1A is a tenanted investment property owned by the couple. The husband does not live in either property 1 or property 1A.
As trustee for sale, the wife has not taken active steps to sell property 1, which she occupies. Unsurprisingly she appears to be reluctant to disturb her family's occupation of property 1. But she has tried to sell property 1A. She sought to auction property 1A, but it was passed in at the auction. The couple's adult daughter, who lives with the husband, put in an offer to purchase property 1A after the failed auction.
The daughter says that offer was accepted and resulted in a contract for sale of property 1A to her and that that contract is still on foot. She has lodged a caveat and to protect her rights under her claimed contract. The wife says the contract is terminated and the caveat should be removed. She has applied for its removal. There is possibly to be a contest as to whether the contract has been terminated. But hopefully this can be avoided by sensible negotiation or mediation. But at present the situation as a stand-off which should not be allowed to continue.
Neither litigant in person had any real conception of how difficult it would be for a person without legal qualifications to conduct litigation for the specific performance of the contract for the sale of property 1A to the daughter or about whether that contract had been terminated. Neither party had given much thought to the conflict which was yet to emerge in relation to property 1, namely the wife and family members vacate in that property to enable it sale, to give effect to the March 2023 orders. The wife appeared to have only limited appreciation that she had an equal duty as trustee for sale to sell property 1 and property 1A.
In this situation on 7 November 2024 the Court raised of its own motion whether the wife should be removed as the trustee and replace with independent trustees, on the basis that she was now unlikely to be capable of executing the trust to which she was appointed. The parties were given an opportunity to react to this idea and to put submissions on 14 and 28 November 2024.
The husband put submissions to the Court first in writing and then orally that the wife should be removed and that he should be appointed as trustee for sale in her place for a period of two months to sell both properties. The husband submits that he will be able to sell both properties within two months and that is therefore how the Court should now proceed.
The wife indicated that she was prepared to relinquish her trusteeship under the March 2023 orders. But she submitted that, as the Court had proposed, an independent trustee should be appointed in her place. She was unwilling to have the husband replace her as the trustee. She did not have confidence in his potential trusteeship and feared that in such a role he would treat her interests with disdain.
Therefore, the situation is: the husband cannot accept the wife continuing as the trustee for sale, and the wife cannot accept being replaced by the husband as the trustee.
Although she consents to that course, there is a basis to remove the wife as the trustee. Delay of 20 months in the execution of a trust for sale, when market factors are not the reason for the delay, is unacceptable. Such delay demonstrates lack of resolve the part of the trustee to execute the trust.
The Court may remove a trustee as part of its statutory expediency jurisdiction under Trustee Act 1925 s 70, or in the exercise of its inherent jurisdiction in equity which is ancillary to the Court's principal duty to see that trusts are properly executed: Ngarluma Aboriginal Corporation v RNTBC v Attorney-General(WA) (2014) 14 ASTLR 164; [2014 WASC 245 at [34]. The jurisdiction is remedial rather than punitive because the dominant consideration is the welfare of the beneficiaries not the imposition of a sanction or punishment on the trustee because of misconduct: Elovalis v Elovalis [2008] WASCA 141 at [34].
The exercise of the jurisdiction in the interest of the beneficiaries is discretionary: Miller v Cameron (1936) 54 CLR 572, at 580-581. A trustee is not lightly to be removed: Gilmour Finance Pty Ltd v Aesthete Pty Ltd [2022] NSWCA 279 at [15]. One of the considerations relevant to the appointment of new trustees whether the appointment will promote the execution of the trust: Hancock v Reinhardt (2015) 106 ACSR 207; [2015] NSWSC 646 at [120] - [124].
It is clearly in the interests of the beneficiaries for the wife to be replaced as trustee. The delay that has occurred is unacceptable and it is aggravating the existing hostility between this former husband in this wife. Replacing the wife will serve the important objectives of reducing the risk of a breach of the existing AVO and separating the entangled property interests of this couple, so they can individually realise the value of their joint matrimonial property and set their own separate courses in life.
But who is to replace the wife? The Court must first consider the husband's application to replace the wife and to sell property 1A within two months. The Court has experience of dealing with the appointment and execution of trusts for sale of residential properties like these two, where conflict exists in the background between the parties who are also the beneficiaries of the trust for sale.
In the Court's view, although the husband's offer to act and that he will be able to execute the trust completely within two months, appears to be sincerely meant, for several reasons the Court is not prepared to accede to that offer.
First, there is an AVO out against the husband requiring the husband to stay away from the wife. This makes normal communication between the trustee for sale and the beneficiary fraught with the risk of escalating hostility and unnecessarily difficult at a practical level. Smooth communication between trustee for sale and beneficiaries is essential to the efficient execution of a trust for sale.
Secondly, the wife has as little trust in the husband's capacity to execute the trust as the husband now has in the wife. One important ingredient of effective trusteeship is that the beneficiary has confidence in the trustee. If the husband is appointed as the trustee, the wife will begin the trust relationship with little confidence in his execution of the trust. This will be with good grounds, as the husband has waged a campaign of caveat lodgement and correspondence with the wife for extension of the caveat. New conflicts are likely to arise. The trust for sale is likely to be paralysed in new ways.
Thirdly, the Court has had an opportunity over the three occasions this matter has been before the Court to make observations about the husband's personality, attitude to the wife, and his insight in relation to the challenges of the trust for sale. The sale of these two properties is likely to lead to further conflict in relation to the sale of land. The husband is not equipped with legal experience which would allow a professional trustee to make quick and sound judgments to give instructions in relation to managing such conflict whilst at the same time efficiently executing the trust for sale.
Fourthly, the husband has unrealistic views about what he can achieve as trustee. He believes he can sell property 1A within two months. This is improbable, particularly at this time of the year and in the context of the broader disputes. It will take some time to work through the contract dispute after the failed auction of property 1A. And the wife's unwillingness to vacate property 1 quickly is uncertain. The past delay of the wife and the conflict between this couple causes the Court to be very cautious about accepting any such assurance from the husband.
Finally, the husband argues that if independent trustees for sale are going to be appointed that their appointment should be qualified by an order that the costs of these trustees should be entirely borne by the wife. The husband contends that because the two properties are mortgaged, the wife's delay has resulted in an increase in the mortgage interest charges over the period of delay which has diminished the divisible matrimonial property. The husband submits that consequent upon neglect and default of the wife in executing her trusteeship for sale, these interest charges have risen steeply in the meantime and the costs of the independent trustee should therefore be borne by the wife.
The Court's decision on this issue will be reserved and can be considered later. Independent trustees for sale can be appointed now, without the Court deciding the question whether the husband or the wife, or both are responsible for their costs. The Court does not have sufficient evidence before it at the present time to decide those issues. Moreover, the speedy appointment of the independent trustees for sale is more important than giving priority to deciding this issue. To decide this question now would require the Court to adjourn these proceedings into next year to allow the parties to put on evidence about who is said to be primarily responsible for the delay which has occurred. No party will suffer prejudice if that issue is decided later.
The ordinary default position on the independent trustees' costs and the interest charged by the mortgagee would be that such charges would be borne in the same proportions as the orders of the Family Court divide the proceeds of sale, namely the wife would bear 64% of the costs and the husband 36% of the costs. But the husband has the right to argue later about who should bear these costs and the Court can consider it then.
The Court will therefore exercise its discretion to appoint independent trustees for sale under the statutory trusts for sale under Conveyancing Act 1919, s 66G. At the time of the hearing on 28 November the parties had not identified trustees for sale.
Ordinarily, if these parties were legally represented the Court would ask the lawyers to come up with the names of willing trustees for sale for appointment. The Court has decided that it will appoint trustees for sale. Conveyancing Act 1919, s 66G requires there to be a pair of trustees for sale to execute these trusts for the security of the parties, unless the Court dispenses with that requirement. Here because of the intense conflict between this former husband and wife the Court is not disposed to dispense with the usual structure mandated by the Parliament that there be two trustees for sale.
After hearing submissions from the parties on 28 November, the Court offered to discuss with the Registrar in Equity names of potential trustees with appropriate experience to act upon appointment as trustees for sale. The parties seemed to the Court to be content with this course. The Court discussed the matter with the Registrar and as a result the Court has decided to appoint two trustees, who the Court understands consent to appointment. These orders will be made in chambers.
The Court is mindful in appointing trustees for sale of minimising the costs to the parties of their work ensuring that their time is deployed as economically and cost-effectively as possible. But it must also be recognised that where there is an engagement of professional persons, some expense for their years of experience will be involved. But that cost should be balanced against the fact that this long running dispute has already been costly to the parties and that overall costs including additional mortgage interest charges are likely to be reduced by this appointment. The selection has been made with the object of ensuring that the overall fees kept as moderate as the circumstances will allow. Should there be any dispute in relation to any aspect of the fees of the trustees, their final fees will be the subject of approval by the Court at the conclusion of the sale process, when all parties will have a right to be heard.
The Court will settle the balance of the orders in chambers. The parties can anticipate that once the trustees for sale have been appointed, they will have to address two essential issues, one for the residential property and the other for the investment property.
As to the residential property, property 1, the trustees for sale will ask the wife to vacate that property at some reasonable time in the future. As to the investment property, property 1A, the trustees will be turning to the husband and the daughter, the claimed purchaser to that property, to ascertain whether they accept that that the previous claimed contract for sale of that property is terminated, or whether there is going to be a contest about whether that alleged contract is on foot. The trustees will have to deal with any legal dispute that arises out of such a contest if it occurs.
The Court will bring the matter back early in the new Law Term so that the trustees can raise any issues concerning their execution of the trust. The trustees can then seek any further directions from the Court once they have familiarised themselves with both properties and the parties' disputes.
Finally, the husband has raised the issue that the Court's indication that the wife will have to vacate property within "a reasonable time" is insufficiently precise. The Court will take that submission into consideration at a future date. As soon as the new trustees for sale are familiar with the properties the Court will ask them to indicate a date by which each of the properties should be sold. And then, if requested, the Court may fix a date for the wife to vacate property 1.

The Application for Disqualification

As earlier indicated, the husband applied for me to disqualify myself from further involvement in these proceedings. My reasons for declining this application are the following.
The husband put the substance of his application in a written submission dated 14 November 2024. The written submission requests that the case be assigned to another judge. But it cites Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337, a leading authority in relation to apprehended judicial bias, which is authority that a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide. The application was treated as one for disqualification. None of the reasons given for my disqualification had substance.
The husband first submitted that the Court treated him unfairly by allowing Mr Gilmore to appear for the wife. The husband argued the Court did not have the power to allow a nonlawyer to address the Court or should not have done so in its discretion and therefore demonstrated bias to a fair-minded reasonable person.
This argument has little substance. The Court merely allowed Mr Gilmore to speak on behalf of the wife at her request as she was absent from the courtroom due to her fear of being in the same room as the husband.
The law was more restrictive in the past about the role that a McKenzie friend could take in supporting a person. Initially it was only in rare and exceptional circumstances that a McKenzie friend is permitted to address the court or otherwise take an active part in proceedings: Schagen v The Queen (1993) 8 WAR 410 at 412 per Malcolm CJ. Allowing such advocacy is usually greeted with judicial hesitation, especially where the support person is taking the full role equivalent to a legal representative: Santos v The State of Western Australia [No 2] [2013] WASCA 39. Misbehaviour of the representative and abuse of the Court's processes usually results in denial of the opportunity to act as a McKenzie friend: Cristovao v Butcher Paull & Calder [2006] WASCA 184.
But as more modern cases such as Gindy v Capital Lawyers Pty Ltd [2022] ACTCA 66 make clear, a McKenzie friend addressing the court on behalf of the person being supported the longer attracts automatic adverse comment, provided the advocacy role of the next friend is not unfair to the other party. One example of the value of such a temporary advocacy role by support person is where a self-represented litigant's English is poor, and the litigant has confidence in a relative to speak for them in English and there is no interpreter arranged for the litigant. There are many other examples.
But apart from this case law, the provisions of Civil Procedure Act 2005 Part 6 now give ample power to the Court to allow someone to temporarily speak on behalf of another person, provided permission to do so promotes the just determination of the proceedings and the efficient disposal of the business of the Court.
Here the Court allowed Mr Gilmore to speak and hand up documents on a temporary basis in circumstances where: (1) the wife had telephone but not full visual AVL communication with the Court, (2) the wife requested Mr Gilmore to advocate for her in the courtroom because she was not present there due to the AVO, (3) Mr Gilmore appeared to be very familiar with the facts and to have the wife's confidence, (4) Mr Gilmore's submissions very substantially involved providing factual information to the Court and were delivered with courtesy, and (5) Mr Gilmore's assistance to the wife did not appear to the court to substantially disadvantage the husband.
Next the husband argued that the Court did not verify the wife's identity before allowing her to appear by AVL and therefore demonstrated bias to a reasonable person. But several matters made it clear that it was the wife, the defendant in the proceedings, who was appearing by telephone. She had corresponded previously by email with my chambers. Until he raised this point, the husband seemed to recognise the speaker on the telephone as the wife. Mr Gilmore plainly recognised her too. Finally, she correctly answered a series of questions that the Court posed to confirm her identity. There is no substance in this point.
The husband argued that the Court "appeared to endorse legal actions against the husband's daughter" and therefore created and apprehension of bias in a reasonable person. The Court did make comments that the husband's daughter may be involved in future legal action involving the parties. This was because the Court understood that the daughter was claiming to have purchased property 1A and there is likely to be a future legal dispute about whether that contract is valid. There is no substance in this point.
Finally, the husband submitted that "the judge's conduct, including remarks perceived as limiting the plaintiffs submissions and failing to acknowledge key concerns, has led the plaintiff to believe the judge may be biased or unwilling to engage fully with his arguments".
This point has no substance. The context is that from the first time this was dealt with in the duty list on 7 November 2024 the Court was attempting quickly to bring procedural order into this case, where little had been done to execute the trust for sale created by the March 2023 orders for some 20 months. The matter needed to be dealt with as expeditiously as possible, which required the Court to impress firmly upon the parties both of whom were self-represented that decisions needed to be made in the short term to fix this procedural drift. These comments were directed both parties and showed no bias against the husband.
None of the matters the husband raised would create a reasonable apprehension in a fair-minded person that I would not bring an impartial mind to the resolution of the questions before me. On the contrary, the Court's close case management was designed to assist the husband to realise his interest in matrimonial property sooner rather than later and has resulted in the husband having partial success on this application with the wife's removal from her appointment as trustee for sale of these two properties.

Rahman v Rahman

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