Application by John Gerard Klumper and Maxine Louise Klumper [2003] NSWSC 854

New South Wales Supreme Court

CITATION : Application by John Gerard Klumper and Maxine Louise Klumper [2003] NSWSC 854 HEARING DATE(S) : 11 September 2003 JUDGMENT DATE : 11 September 2003 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Lease of minors' property authorised. Application to vest minors' real estate in trustees adjourned

CATCHWORDS : FAMILY LAW AND CHILD WELFARE - CHILD WELFARE OTHER THAN UNDER FAMILY LAW ACT 1975 AND RELATED ACTS - property - section 50 Minors (Property and Contracts) Act 1970 - authorisation of lease of minors' property - whether real property of minors to be vested in trustees upon whom a general power of leasing is conferred Conveyancing Act 1919 LEGISLATION CITED : Conveyancing and Law of Property Act 1898 Minors (Property and Contracts) Act 1970 Real Property Act 1900 Application of L R Kershaw, Young J, 12 February 1997, unreported CASES CITED : Re Stack's Settled Estates (1910) 26 WN (NSW) 181 Tickle v Tickle (1987) 10 NSWLR 581 PARTIES : John Gerard Klumper - First Plaintiff Maxine Louise Klumper - Second Plaintiff FILE NUMBER(S) : SC 4816/03 COUNSEL : JJ Garnsey QC - Plaintiffs SOLICITORS : Toltz La Hood - Plaintiffs

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

CAMPBELL J

THURSDAY 11 SEPTEMBER 2003

4816/03 APPLICATION BY JOHN GERARD KLUMPER AND MAXINE LOUISE KLUMPER JUDGMENT – Ex Tempore 1 HIS HONOUR: This is an application made by Mr and Mrs Klumper. They are the parents of children aged four and seven. Mr Klumper has caused those children to become the registered proprietors - one property each - of two strata title lots of land. That transfer to the children was done without proper or, it seems, any thought being given to the way in which the property could be managed for the benefit of the children. 2 One of the properties is suited for use as a restaurant. The restaurant had, under an arrangement which appears to have been worked out within the family, been operated by a company which Mr and Mrs Klumper control. Now they have decided it would be preferable if the restaurant were leased. A tenant for that restaurant has been found who is experienced, and independent of Mr and Mrs Klumper. The terms of the lease have been negotiated by Mr Klumper. He is a man who has years of experience in the property industry. One of the orders which is sought today is that Mr Klumper be appointed, under s 50 of the Minors (Property and Contracts) Act 1970 to execute that lease. Section 50 says: "(1) Where a minor is beneficially entitled at law or in equity to property, the Supreme Court may, on such terms as the Court thinks fit, make orders authorising a person, either generally or in any particular instance: (a) to make any disposition of the property, (b) to receive the proceeds of disposition of the property, (c) to call for a disposition of the property to the person so authorised or as the person directs, (d) to receive the income of the property, (e) to sue for and recover any chose in action comprised in the property, (f) to invest the property, or (g) to apply the capital or income of the property for the benefit of the minor. (2) The Court shall not make an order under this section unless it appears to the Court that the order is for the benefit of the minor." 3 The section is expressed in extremely wide terms. It has previously been used to authorise children, in whom property was absolutely vested, to sell that property: Application of L R Kershaw, Young J, 12 February 1997, unreported. In Tickle v Tickle (1987) 10 NSWLR 581 Young J said, at 584: "The only restriction on the power under s 50 is that there must be vested in the minor the beneficial interest in property either at law or in equity and it must appear to the court that the disposition, etc, is for the benefit of the minors involved." 4 The evidence in the present case does not condescend to detail about the way in which the provisions of the lease are for the benefit of the children. The lease in question is one for five years with the option of a further five years. During the first year of lease payment of rent is by monthly instalments in advance of $1500 per week (exclusive of GST) from commencement to 31 January 2004, and $2500 per week (exclusive of GST) from 1 February 2004 to 31 August 2004. Thereafter, there is a procedure whereby there are annual increases of rent, by in each case the increase in the CPI plus one per cent until 31 August 2008. In the year starting 31 August 2008 the rental is fixed again at the market rental, and thereafter there are increases each year by the CPI plus one per cent. The lease is a lengthy one, obviously drafted by a lawyer. The terms of the lease are ones which are thoroughly thought through. 5 Usually in applications under this section it would be desirable to have evidence which establishes in clear terms the benefit to the child involved. Often this would involve some independent evidence that the terms of a proposed dealing are proper commercial terms. In the present case, though the evidence is not as clear as I would ordinarily like, I would be prepared to infer that the lease is for the benefit of the children. 6 Another application which was sought to be made was for the parents of the children to be appointed trustees of the two parcels of land under s 151C of the Conveyancing Act 1919, with all the powers conferred by s 151C(2). Section 151C says: (1) If and as long as any person who is entitled to a beneficial interest in possession affecting land is a minor, the trustees appointed for this purpose by the settlement, or if there are none so appointed, then the trustees of the settlement, unless the settlement or the order of the court whereby they or their predecessors in office were appointed to be such trustees expressly provides to the contrary, or if there are none, then any persons appointed as trustees for this purpose by the court on the application of a guardian or next friend of the minor may enter into and continue in possession of the land on behalf of the minor, and in every such case the subsequent provisions of this section shall apply. (2) The trustees shall manage or superintend the management of the land, with full power: (a) to fell timber from time to time in the usual course for sale, or for repairs or otherwise, and (b) to erect, alter, pull down, rebuild, and repair houses, and other buildings, dams, fences, and other erections, and (c) to continue the working of mines, minerals, and quarries which have usually been worked, and (d) to drain or otherwise improve the land or any part thereof, and (e) to insure against any insurable risk, and (f) to grant leases for any term not exceeding three years, and (g) to make allowances to and arrangements with tenants and others, and (h) to determine tenancies, and to accept surrenders of leases and tenancies, and (i) generally to deal with the land in a proper and due course of management, but so that, where the minor is impeachable for waste, the trustees shall not commit waste, and shall cut timber on the same terms only, and subject to the same restrictions, on and subject to which the minor could, if of the age of eighteen years or upwards, cut the same. (3) The trustees may from time to time, out of the income of the land, including the produce of the sale of timber, pay the expenses (including any commission to which they are entitled) incurred in the management or in the exercise of any power conferred by this section or otherwise in relation to the land, and all outgoings not payable by any tenant or other person, and shall keep down any annual sum and the interest of any principal sum charged on the land. (4) This section applies only if and as far as a contrary intention is not expressed in the instrument, if any, under which the interest of the minor arises, and has effect subject to the terms of that instrument and to the provisions therein contained." 7 It is to be observed that the conditions for operation of that section is that a person be entitled to "a beneficial interest in possession affecting land", and be a minor. The requirement for that person to be entitled to "a beneficial interest in possession affecting land" presupposes, it seems to me, however, that the interest of the child is not an interest of the absolute kind which the registered proprietor of Real Property Act land will hold. 8 However, s 37(7) of the Conveyancing and Law of Property Act 1898 provides that: "Where a person is in his own right seised or beneficially entitled to land for an estate in fee simple...is a minor, such land, ... shall be deemed to be settled estate within the meaning of this part." 9 Section 38 of that Act conferred upon the Court power to authorise the leasing of any settled estate and s 46 conferred on the Court power to vest that power of leasing in trustees. 10 It may be that the power under s 46 might enable the general type of activity which the plaintiffs wish to engage in to be carried through. However, AH Simpson CJ in Eq had a practice of refusing to grant general powers of leasing (Re Stack's Settled Estates (1910) 26 WN (NSW) 181), and by the time of publication of Stuckey, The Conveyancing Act, 2nd ed, in 1970 the learned author could say (at 427) "The practice of the Court in general is only to sanction specific leases, and not to grant general powers of leasing". Section 50 Minors (Property and Contracts) Act 1970 would in its terms be wide enough to confer power on the Court to order that a disposition of the property of minors take place which resulted in the property being vested in trustees for the minors, but it would depend on the evidence whether the power was actually exercised. 11 After discussion which pointed out some of these difficulties, it was decided to not, for the present, press for orders appointing trustees of the land. The application will be stood over for a short time for consideration to be given to that matter. 12 I make orders 3 in the summons. 13 I make an order in terms of par 4 of the short minutes of order which I initial and date today's date and place with the papers. 14 The exhibits may be returned. **********