Supreme Court New South Wales Medium Neutral Citation: Application of Dev Menon & anor [2014] NSWSC 1888 Hearing dates: 31 October 2014 Date of orders: 31 October 2014 Decision date: 31 October 2014 Jurisdiction: Equity Division Before: Brereton J Decision: Judicial advice given Catchwords: EQUITY – trusts and trustees - trustee's applications – judicial advice PROCEDURE – compromise – infants – whether interest in proceeds of sale under s 66G is money recovered in proceedings – held it is not Legislation Cited: (NSW) Civil Procedure Act 2005, s77 (NSW) Conveyancing Act 1919, s 66G (NSW) Trustee Act 1925, s 47, 63 Category: Principal judgment Parties: Dev Menon (first applicant) Salem Kassem (second applicant) Representation: Counsel: K Ginges (plaintiffs) Solicitors: Clamenz Lawyers (plaintiffs) File Number(s): 2014/269723 Judgment (ex tempore) 1. HIS HONOUR: Prior to his death the late Nabil William Abadir was the registered proprietor of property situate at and known as 76 Warren Road, Marrickville, being the whole of the land comprised in lot A of deposited plan 445312. Subsequent to his death, the property was transmitted to his five beneficiaries: the sons of his first marriage Michael Abadir and Daniel Abadir; his second wife Merry Shaheed Abadir; and the daughters of his marriage to Merry, being Dmiana and Christine. 2. Following the deceased's death, the property was occupied by Merry and her children Christine and Dmiana. In about 2011, Merry agreed to sell the property to one Ms Rijks and Mr Prince, who appear to have paid a deposit and exchanged contracts, but the contract was later rescinded - apparently by reason of Merry's inability or unwillingness to complete it. In 2012, Michael and Daniel applied to the Court for the appointment of trustees for sale pursuant to (NSW) Conveyancing Act 1919, s 66G, and on 11 July 2013, McDougall J made orders appointing the present applicants Salem Kassem and Dev Menon, who are solicitors, to be trustees for sale on the statutory trust for sale under Div 6 of Pt 4 of the Conveyancing Act. The orders made by his Honour were in the usual form, and provided inter alia that, upon the sale, the trustees be empowered to distribute the proceeds: (a) to pay all costs and expenses in and about the sale of the property, including but not limited to the commission and other expenses of any real estate agent, auctioneer or valuer retained in respect of the sale, and the remuneration of legal and other reasonable expenses of the trustees in respect of the sale, and of transferring the property to the purchaser; (b) to pay any payments and charges, including unpaid rates, council and water, taxes, and any other statutory charges levied on or in respect of the said land until the time of completion of the sale of the property; (c) to pay the reasonable expenses and remuneration of the trustees; (d) to hold the balance remaining after payment of (a) to (c) inclusive above, and to pay to the parties the balance of the proceeds of sale in equal shares 1. In addition, orders were made for delivery up of any certificate of title, and that Merry, Christine and Dmiana give the trustees vacant possession at such time as directed by the trustees. 2. The trustees encountered some difficulty in obtaining possession of the property from Merry, but ultimately did so. On 17 April 2014, contracts for sale were exchanged for a price of $820,000. The sale was completed on 29 May 2014. After payment of rates and some other outgoings and some subsequent adjustments, the trustees received $762,448.65 into their trust account. 3. Disputes have arisen as to what payments ought to be permitted to be made out of the fund prior to the equal division of the residue between the parties. In particular, issues have arisen as to claims made by each of the plaintiffs for their costs in cleaning the property and preparing it for marketing; and, as to whether a sum claimed by Ms Rijks and Mr Prince should be recouped out of Merry's share alone or borne by the trust fund generally. In addition, although there does not seem to be significant dispute in this respect, the trustees wish to pay out of the trust fund their legal costs and remuneration, and to retain a sum on account of future costs and expenses. 4. Finally, as Christine remains a beneficiary, a question arises as to the disposition of her one fifth share. When these proceedings were instituted, both Dmiana and Christine were minors. Dmiana has since attained eighteen years of age, but Christine is now about fourteen years of age. In that context, by summons filed on 12 September 2014, the trustees seek the Court's advice pursuant to (NSW) Trustee Act 1925, s 63(1), in respect of those issues. 5. Commendably, the trustees have sought to facilitate agreement between the parties on these matters, and in addition, as is appropriate in an application for judicial advice, have obtained counsel's advice on the issues, which advice is in evidence. It is to the credit of all the parties that they have now been able to agree on the outstanding issues, save that the consent of Christine as a minor cannot be obtained. Subject to the want of her consent, each of the parties has signed and consented to a distribution as proposed by the trustees. This includes provision for payment to Michael of the sum of $13,860 and Daniel the sum of $7,200 in respect of their claims for cleaning and preparation of the property, and the entirety of the sum of $11,850.66 said to be payable to Mr Prince and Ms Rijks to be borne by Merry's share. 6. However, because Christine's consent cannot be obtained, the trustees understandably enough seeks the Court's advice as to whether they would be justified in proceeding on that otherwise agreed basis. 7. I turn then to the several issues on which advice is sought, the first being the claim by Michael and Daniel for the expenses of cleaning and preparation of the property for marketing. This claim amounts to a total of $21,000 approximately. At face value, this appears a large amount for a claim by lay persons for labour in preparing a property for sale. There is precious little evidence to explain what work they did and what time it took. Counsel's advice analysed such evidence as there was, and - very reasonably and, in my view, correctly - concluded that, in the absence of advice from the Court, the trustees would not be justified in accepting those claims without evidence that satisfied them as to their reasonableness. 8. The claims appear to involve Michael and Daniel each spending about nine weeks on cleaning and preparing the property for sale. As I have said, however, the other adult beneficiaries whose interests would be affected by this claim, namely, Merry and Dmiana, have now agreed to a distribution which provides for these claims. The trustees take the pragmatic view that further agitation and disputation of them is likely to cost more than the $4,000 odd that might be saved to Christine's interest if the claims were totally rejected. 9. I take into account first that, while the quantum of the claims might well be the subject of dispute, it is unlikely that they would be totally rejected, and probable that some amount would be allowed. Secondly, that the other adult beneficiaries who have a real interest in disputing the claims have consented to them. Thirdly, that one of those adult beneficiaries is Christine's mother, with whom Christine resides. Fourthly, that once it is accepted that it is unlikely that the claims would be rejected in full and that something would be allowed, the proportionate benefit to Christine's interest from requiring the claims to be litigated would be even less than $4,000. Fifthly, that there has no doubt been an overall compromise of the various matters in dispute, with some give and take in several directions, including for that matter by the trustees themselves in respect of their own costs and remuneration. 10. For all of those reasons, it seems to me that, notwithstanding counsel's advice, and notwithstanding the paucity of evidence to support the claims, the trustees would be justified for pragmatic reasons in paying from the trust the amounts claimed by Michael and Daniel without further scrutiny. 11. Next, sofar as the amount payable to Ms Rijks and Mr Prince is concerned, as Merry now consents to that being borne by her share, and as that concession operates to the benefit of the other parties interested, it really requires no further consideration. 12. Next, as to the trustees' legal costs and remuneration of $22,000 to the commencement of the present application, the evidence reveals that that is an amount which has been moderated in any event, and as counsel has advised, falls within the provision in the orders for the trustees' costs and remuneration. 13. Likewise, although the evidence suggests that the further costs from 6 June 2014 now significantly exceed the sum of $20,000 claimed, the trustees have indicated that their claim will be restricted to the $20,000 foreshadowed in the summons. Again, that is within the orders and seems a not unreasonable amount. 14. As to Christine's share, the trustees had in mind paying it into court pursuant to (NSW) Civil Procedure Act 2005, s 77. It does not seem to me that the interest of a beneficiary in a trust arising from an exercise of a power of sale under s 66G falls within the terms of Civil Procedure Act, s 77(1), which states: (1) This section applies to money recovered in any proceedings on behalf of any of the following persons: (a) a person under legal incapacity, (b) a person who, during the course of the proceedings, becomes a person under legal incapacity, (c) a person whom the court has found, under section 76 (1) (c), to be incapable of managing his or her own affairs, pursuant to a compromise, settlement, judgment or order in any proceedings. … 1. I do not think the money is recovered "in the proceedings". The proceedings are not proceedings for the recovery of money. 2. Merry has indicated a desire that Christine's share be paid to her, to enable her to purchase accommodation, no doubt for the benefit of both of them. However, that would place Merry in a position of conflict of interest and duty, and it is also appropriate to bear in mind that the deceased left the property in five separate shares, of which only one fifth passed to Merry, and that should be reflected sofar as possible in what ensues in respect of the proceeds. 3. (NSW) Trustee Act, s 47, authorises a trustee to pay moneys held on behalf of an infant beneficiary to the New South Wales Trustee, and that seems to me to provide the appropriate course for the trustees here. Merry, if she wishes, can consult with the New South Wales Trustee as to how Christine's share might be used and whether, for example, it might be invested in the purchase of an interest in a home in conjunction with a purchase by Merry. 4. Accordingly, pursuant to Trustee Act, s 63, the Court by order advises the trustees that: 1. The plaintiffs as trustees would be justified in paying from the trust the amount of $13,860 to Michael Abadir for cleaning and preparation of the property for marketing, and the amount of $7,200 to Daniel Abadir for cleaning and preparation of the property for marketing; 2. The plaintiffs as trustees would be justified in distributing the trust fund on the basis that the whole of any amount that might be payable to Ms Rijks and Mr Prince in respect of the 2011 contract up to a maximum of $11,850.66 be charged against and deducted from the share of Merry; 3. The plaintiffs as trustees would be justified in paying from the trust the amounts of $22,000 on account of the trustees' legal costs and remuneration up to 5 June 2014, and the further amount of $20,000 on account of further legal costs and expenses since 6 June 2014. 4. The plaintiffs as trustees would be justified in paying Christine's share directly to the New South Wales Trustee pursuant to Trustee Act, s 47. ********** 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. Decision last updated: 27 January 2015