New South Wales Supreme Court CITATION : Feeney v Feeney [2008] NSWSC 298 HEARING DATE(S) : 10 March 2008 JUDGMENT OF : Hammerschlag J EX TEMPORE JUDGMENT DATE : 10 March 2008 DECISION : Order under s 81 of the Trustee Act 1925 refused CATCHWORDS : TRUSTS AND TRUSTEES - s 81 Trustee Act 1925 - whether transaction proposed is expedient - requirement for it to be in the interest of the beneficiaries LEGISLATION CITED : Trustee Act 1925 Bowmil Nominees Pty Ltd [2004] NSWSC 161 CASES CITED : Arakella v Paton [2004] NSWSC 13 Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004 Riddle v Riddle (1952) 85 CLR 202 Peter Feeney PARTIES : Christopher Feeney Ian Ross Carpenter FILE NUMBER(S) : SC 6397/2006 COUNSEL : B.L. Jones (Plaintiff) F. Kalyk (Defendants) SOLICITORS : O'Brien Lawyers (Plaintiff) KQ Lawyers (Defendants) - 8 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST HAMMERSCHLAG J 10 MARCH 2008 6397/2006 PETER FEENEY -V- CHRISTOPHER FEENEY EX TEMPORE JUDGMENT 1 HIS HONOUR: The defendants, Mr Christopher Colin Feeney and Ian Ross Carpenter are the executors and trustees under the last will and testament ("the Will") of Daniel Aloysius Feeney dated 5 March 1982 ("the Testator"), who died on 25 September 1994. 2 By Amended Notice of Motion dated 10 March 2008, they move for orders pursuant to s 81 of the Trustee Act 1925 that they be authorised and empowered to enter a Deed of Agreement and Release in such form as may be approved by the Court, on terms which are described below. 3 By the Will, the Testator appointed Elva Muriel Feeney to be his executor and trustee and in the event of her earlier death, Christopher Feeney and Ian Carpenter to be the executors and trustees. 4 Elva Muriel Feeney had pre-deceased the Testator. 5 Probate of the Will was granted to the defendants by this Court on 6 February 1995. 6 Clause 3(b) of the Will provides: " I GIVE DEVISE AND BEQUEATH MY HOME 74 Mountain Road Austinmer together with all items of household or domestic use therein unto my Trustees to permit my son CHRISTOPHER COLIN FEENEY to reside therein during his lifetime he to pay all rates and taxes and insurance and other outgoings and to maintain the property and after his death UPON TRUST to sell the same and to divide the proceeds of sale between such of them PETER STUART FEENEY MARGARET CATHERINE SMALLMAN SUSAN ELVA CARPENTER IAN WILLIAM FEENEY and MICHAEL HERBERT FEENEY as shall then be living and if more than one as tenants in common in equal shares AND I DECLARE that should any of my said children predecease the said Christopher Colin Feeney leaving a child or children him her or them surviving then such child or children shall take and if more than one as tenants in common in equal shares the share which his her or their parent would have taken had he or she survived me." 7 Christopher Feeney never married and has no children. 8 In an affidavit sworn 10 March 2008, he deposes to the current position with respect of the beneficiaries and potential beneficiaries designated in cl 3(b) of the Will. 9 After the death of the Testator, Christopher Feeney lived alone at the house referred to in cl 3(b) of the Will for a few years until his younger brother Michael Feeney moved into the house with him. Michael has two children. 10 The plaintiff, Peter Feeney, is married to Jacqueline. There are no children of this marriage. He has, however (according to Christopher Feeney), "one, possibly two children to a different partner". Christopher Feeney has never met them and is unaware of their whereabouts. One would be approximately 45 years old. 11 The other beneficiaries under the Will are all living. Margaret (now Heyes) is married and has two children. Suzanne (Carpenter) is married and has one son. Ian Feeney is married and has three children. 12 On 18 January 2005, a deed was entered into – which has been described in the proceedings as a Deed of Family Arrangement ("the Deed") – by the defendants as executors, Christopher Feeney in his own right, and each of the other named beneficiaries in cl 3(b) of the Will. 13 In brief, that transaction involved the sale of the house. The Deed records that Christopher Feeney no longer wishes to live in the house and that the beneficiaries wish to deal with their entitlements under the Will. 14 Under it, the house was to be offered for sale by public auction and, if not sold, thereupon by private treaty, at a proper market price. Upon completion of the sale and the payment of the costs and expenses associated therewith, the executors were to pay each of Christopher Feeney and the other beneficiaries one-sixth of the net proceeds of sale. 15 After the Deed was entered into, the parties to it fell into dispute. 16 On 20 December 2006, the plaintiff, Peter Feeney, commenced proceedings in this Court seeking, amongst other things, declarations and orders requiring the defendants specifically to perform and to carry into execution the terms of the Deed. 17 By a cross-summons, the defendants sought, amongst other things, orders rectifying the Deed. 18 The central nub of the dispute between them is a disputed contention by Christopher Feeney that the house was only to be sold if a particular minimum threshold purchase price was obtained, so as to guarantee him a minimum level of the proceeds. Those proceedings are pending. 19 It is now proposed to enter into a further deed entitled Deed of Agreement and Release ("the New Deed"), which is the subject of the present motion. 20 The substance of the proposed new transaction is that proceedings 6397/2006 will be dismissed so that in effect the Deed will cease to have any exigible content as between the parties. Instead, Christopher Feeney shall, within 14 days of the approval of the New Deed by the Court, pay to Peter Feeney $100,000 and take the interest under the Will Peter Feeney or any residuary beneficiary being a child of Peter Feeney would have had but for the making of the New Deed. 21 The proposed New Deed records that, except as otherwise provided in it, the Will shall be given effect and for the avoidance of doubt, the life estate granted to Christopher Feeney in the Will is not varied, transferred, extinguished or otherwise disturbed. 22 The effect of what is proposed is that Christopher Feeney will regain his life interest pursuant to cl 3(b) of the Will, and will in addition acquire the interest (whatever its nature) held by Peter Feeney under it is so that, in the event of Christopher Feeney's death, neither Peter Feeney nor, if at that date he has children living, would share in the share which would have enured for the benefit of Peter Feeney. Christopher Feeney will retain the right to live in the house and, if his interest is not accelerated at any time, that is the interest he will acquire from Peter Feeney, and if he dies he will drop out of the picture; whereas, if it is accelerated, he will share with the other siblings as well as Peter Feeney in the proceeds of sale. 23 Mr Kalyk of counsel appeared for the defendants. Mr Jones of counsel appeared for the plaintiff, Peter Feeney. 24 It was made clear by Mr Jones that it was not accepted that the Deed was other than fully enforceable. However, his position with respect to the motion was that he neither consented nor opposed the relief sought. 25 The immediate effect of what is proposed, leaving aside whatever prior effect the Deed may have had, is that any of the persons who have or might have a benefit under the Will via Peter Feeney would no longer have it. The children of Peter Feeney have not been given notice and are not before the Court. 26 The relief was sought on the basis that it would be expedient for the Court to permit the trustees under the provisions of s 81 of the Trustee Act 1925 to vary the trust deed (the Will) in effect by permitting the property to be sold. 27 Section 81(1) of that Act provides: "81 Advantageous dealings (1) Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the instrument, if any, creating the trust, or by law, the Court: (a) may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, including adjustment of the respective rights of the beneficiaries, as the Court may think fit, and (b) may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne as between capital and income. (2) The provisions of subsection (1) shall be deemed to empower the Court, where it is satisfied that an alteration whether by extension or otherwise of the trusts or powers conferred on the trustees by the trust instrument, if any, creating the trust, or by law is expedient, to authorise the trustees to do or abstain from doing any act or thing which if done or omitted by them without the authorisation of the Court or the consent of the beneficiaries would be a breach of trust, and in particular the Court may authorise the trustees: (a) to sell trust property, notwithstanding that the terms or consideration for the sale may not be within any statutory powers of the trustees, or within the terms of the instrument, if any, creating the trust, or may be forbidden by that instrument, (b) to postpone the sale of trust property, (c) to carry on any business forming part of the trust property during any period for which a sale may be postponed, (d) to employ capital money subject to the trust in any business which the trustees are authorised by the instrument, if any, creating the trust or by law to carry on. (3) The Court may from time to time rescind or vary any order made under this section, or may make any new or further order. (4) The powers of the Court under this section shall be in addition to the powers of the Court under its general administrative jurisdiction and under this or any other Act. (5) This section applies to trusts created either before or after the commencement of this Act." 28 There is to my mind a significant issue as to whether in the circumstances of this case s 81 of the Trustee Act 1925 is enlivened in any event. 29 Mr Kalyk took me to a number of authorities, including Bowmil Nominees Pty Ltd [2004] NSWSC 161, Arakella v Paton [2004] NSWSC 13 and Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004. 30 In the last mentioned decision, Campbell J at [46] considered the scope of s 81 of the Trustee Act 1925. His Honour referred to and quoted with approval what was said by Williams J in Riddle v Riddle (1952) 85 CLR 202 at 220 to the effect that s 81 of the Trustee Act 1925 is couched in the widest possible terms, and that "The sole question is whether it is expedient in the interest of the trust property as a whole that that such an order should be made." 31 Also in Riddle v Riddle, Dixon J said at 214: "Expediency means expediency in the interest of the beneficiaries". 32 Despite my misgivings, I proceed on the assumption that s 81 of the Trustee Act 1925 can be enlivened by the defendants in the present case. 33 Mr Kalyk put that the principal reason why the transaction here proposed was expedient was that it would resolve the dispute which has arisen as a consequence of the differing positions taken on the Deed. It would, he put, be consistent with the Testator's underlying intention that there be a life interest in Christopher Feeney; and that that life interest would be thwarted by the Deed if implemented. The submission proceeded, as I understood it, to the proposition that the Testator's intention would be restored by the proposed New Deed. 34 For a number of reasons, I have come to the conclusion that, even if s 81 of the Trustee Act 1925 applied, I should not exercise my discretion to make the order sought. In my opinion, it is not expedient for a number of reasons. 35 The current position has been brought about by the entry into, by the plaintiff and the other parties, including Christopher Feeney in his own right, of a transaction which may or may not be binding but, if it has efficacy, the defendants have concluded a bargain under which the life interest would, even on their stance, if a price threshold is met, come to an end. 36 The proposed transaction does nothing more than to restore that life interest and then take the plaintiff out of the picture. 37 Mr Kalyk candidly informed me, and I accept, that the trust property may subsequently be sold in circumstances where Christopher Feeney might renounce or surrender his life interest and then share in the proceeds of sale. This, to me, makes it abundantly clear that the proposition that the transaction is expedient as being in the interest of the beneficiaries as restoring the Testator's intention to create a life interest does not withstand scrutiny. On such a subsequent sale, the life interest which it is sought to restore would disappear. 38 There is, however, a further important reason why I would refuse the order. It is not necessary to finally determine what the nature is of the interests of the named beneficiaries in cl 3(b) of the Will, or what the interests might be of those who might in future claim through them. Mr Kalyk put that the nature of those interests is a matter of technical complexity. 39 I consider it to be of material importance that those whose interests may be affected – in particular, the progeny of Peter Feeney – are not present before the Court, and that there is no contradictor to advocate their position. 40 I decline to grant the relief in the Amended Notice of Motion. 41 I stand these proceedings over to Thursday 27 March 2008 before the Registrar. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.