When drafting a Section 38 Property Law Act 1974 application, it is not in the interest of any of the parties or the trustee to apply for the appointment of a trustee on some generic or hastily contrived terms of trust. However, it is not uncommon that, in the heat of litigating the application, terms are drafted or negotiated without due consideration to the entire trustee sale process.
Given the terms of the statutory trust are ordered by the Court upon the successful hearing of the application, it is critical that the application seeks appropriate orders that consider the entire trustee sale process. The application and orders sought should incorporate the necessary terms of trust to support and enable the trustee to progress the matter efficiently and should not include orders which hinder the trustee or set barriers requiring further intervention of the Court.
A statutory trustee’s powers as trustee (usually being all powers in the Trusts Act 1973) can be limited or expanded by the Court pursuant to Section 90(6) of the Trusts Act 1973.
Therefore, the orders made by the Court upon the successful hearing of the application will limit or expand the statutory trustee’s usual powers as trustee and could significantly affect the carriage of, and costs of, the matter going forward.
3 critical matters to consider when drafting a Section 38 Property Law Act 1974 application are:
Consider the Trustee’s costs
For two or more disputing co-owners the appointment of a statutory trustee necessarily comes at a cost, typically shared in some way by the co-owners in dispute. However, the quantum of the trustee’s costs can be greatly affected by the terms of the statutory trust. If the terms of the statutory trust allow the trustee to complete its role in an effective and efficient manner, this will result in the trustee having to do less work to achieve their purpose. Less work by the trustee means a greater net balance of sale proceeds to be distributed to the parties.
Avoid building barriers
It is critical to ensure that the orders sought or granted do not leave the trustee ‘hamstrung’ by limiting usual powers granted to the trustee. For example, setting fixed minimum sales values that must be achieved by the trustee may result in significant additional expense to the parties to vary the terms of trust if the property does not meet the expected valuation (or has some underlying damage that causes the property to not meet the expected valuation). It may also result in the trustee effectively having no power at all to progress the sale of the property without the further order of the Court.
Be careful of creating an imbalance between parties
An imbalance in the parties’ contribution to various costs, such as the trustee’s costs, maintenance and repair costs, outgoings or insurances etc. may result in one or more of the parties taking advantage of the terms of trust to perpetuate the dispute they have with their co-owner/s. For example, if one party is responsible for all costs of maintenance and repair as well as for all of the trustee’s costs, the other party may agitate for unreasonable expectations to be met by the trustee prior to sale (such as replacing the kitchen and bathrooms so they are brand new, in order to achieve the best sale value). If the trustee’s costs of responding to and dealing with the agitating party are payable by the other party, the agitating party is ‘free’ to perpetuate the dispute they have with their co-owner/s. The more they agitate and force work out of the trustee, the more their disliked co-owner pays the trustee – not an avenue you want to leave open to abuse given there is typically nothing amicable about the parties by the time a Section 38 application is made.
There are of course many other critical matters to consider when drafting a Section 38 Property Law Act 1974 application.
For more details, more matters to consider or for advice in relation to applications under Section 38 Property Law Act 1974, please do not hesitate to contact us.
Our Legal Practitioner Director, Simon LaBlack, is one of only 29 Accredited Specialists in Property Law in Queensland. He acts as a Court-appointed statutory trustee for sale and consults to other law firms on complex property related matters. He has extensive experience in Property Law in Queensland having personally handled thousands of Property Law matters. He has led multiple teams consisting of lawyers and paralegals, with a specific focus on the training of legal staff and the implementation of effective systems and processes to improve outcomes for both his clients and his team.
Important Disclaimer: The material contained in this publication is of a general nature only and is based on the law as at the date of publication. It is not, nor is it intended to be, legal advice. If you wish to take any action based on the content of this publication, we recommend that you seek professional advice.