Tadros v Shoushani

The applicants (the Trustees) are court-appointed trustees for sale of 83 and 85 XXX Road, Greenacre (the Properties, or 83 and 85 respectively). They were appointed as part of the settlement of three sets of proceedings concerning the estate of the late Souad Shoshani (the Estate) in accordance with consent orders made by Slattery J on 3 March 2021 (the Orders and, in what follows, a reference to a particular order is a reference to one of the Orders).

One of the beneficiaries of the Estate is the defendant, Robert Shoushani, to whom I shall refer without disrespect by his given name. The Properties are registered in his name although, as a consequence of the settlement of the proceedings, orders have been made to the effect that he has no equitable interest in the Properties and is the bare legal trustee of them for the Estate.

In contravention of an order that he vacate by 3 May 2021, Robert remains in occupation of 85. The order appointing the Trustees provided that the Properties should be sold by public auction. That has not occurred, largely because of Robert's failure to vacate. The Properties, as their street numbers suggest, are adjoining and the Trustees have in the meantime entered into contracts to sell the Properties by private treaty to the owner of 87 XXX Road, Greenacre (87) subject to "the approval of the Court", which in practical terms means the Court varying the Orders to permit sale by private treaty.

The Trustees have brought the present amended notice of motion to vary the Orders to permit sale by private treaty. All the beneficiaries of the Estate consent to that relief except for Robert. At the conclusion of argument shortly before the luncheon adjournment I made the orders set out at the end of these reasons. For the reasons which follow, the Court varied the Orders to permit the contracted sales of the Properties to be completed.

Mr C D Wood of Senior Counsel appeared for the Trustees. Mr J Pope, Solicitor, appeared for Robert.

On 18 November 2020, the three sets of proceedings concerning the Estate were settled by heads of agreement which included a term that "the properties or the proceeds of the properties held in the name of Robert Shoushani in Greenacre shall be sold and the proceeds be paid into the estate". Although not dispositive of the question, the Court has been fortified in the view to which it has come because this underlying agreement between the parties did not specify the method of sale.

I should note that at the time of the heads of agreement, and until relatively recently, Robert was represented by a tutor, being Mr Hartmann who is now one of the Trustees. Unfortunately, Robert's behaviour made the relationship between them difficult and eventually, by an order which I made on 7 December 2021 on Mr Hartmann's application, Mr Hartmann was removed as Robert's tutor. For at least the last several weeks, Robert has been advised by Mr Pope who, in appearing for Robert today, assured the Court that he was satisfied that Robert was capable of understanding and giving instructions in relation to the Trustees' amended notice of motion.

On 3 March 2021, Slattery J made the Orders, which included:

The present application concerns the limitation of the mode of sale in Order 14a to public auction.

Contrary to Order 10, Robert has not vacated 85. Although a writ for possession of 85 has issued on the application of the Estate, it has been unable to be enforced because of the COVID-19 pandemic. Robert remains in occupation of 85 and, on the evidence before me today, gives no sign of intending to leave.

Shortly after their appointment, the Trustees obtained a market appraisal for the Properties. In July 2021, the Trustees retained a real estate agent, Mr Luke Knapton, for the purpose of selling the Properties. Robert's refusal to leave 85 lead to numerous complications for the Trustees, not least of which was that, in accordance with the proviso in Order 14a, they were unable to list the Properties for public sale.

In the period between July and October 2021, Mr Knapton informed Mr Hartmann on a number of occasions that he had learned that the owner of 87 was interested in purchasing the Properties. The commercial rationale for that is obvious, given that the owner of 87 would then have three contiguous properties available to redevelop, on the assumption that Council approval could be obtained for that to occur.

On 16 August 2021, Mr Hartmann obtained a market valuation of the Properties by a registered valuer, Mr Mark Newey, being a combined sum of $2,525,000. That valuation was obtained without Mr Newey being able to obtain access to the interior of the Properties. Mr Newey's valuation records that Robert would not allow him to enter 85, and includes a photograph taken by Mr Newie of a person, who I infer to be Robert, standing in the driveway preventing Mr Newey from entering 85.

Subsequently, Mr Newey was able to obtain access to 83, which resulted in a slight reduction in his valuation for that property, leaving a combined valuation of $2,515,000 for the Properties.

In the meantime, Mr Knapton was negotiating with the owner of 87. The evidence discloses that there was a process of offer and counter-offer, and concluded with a final offer of $2,480,000 (which was higher than the opening offer). On 8 October 2021, Mr Knapton wrote to Mr Hartmann:

On 28 October 2021, the Trustees entered into contracts for sale of the Properties (the Sales). Both contracts contained this special condition:

It is this special condition which has brought about the present application, including that it has had to be dealt with on an urgent basis in the Duty List to ensure that the contracts are not rescinded in accordance with the special condition.

Significantly, the contract for sale of 85 does not require vacant possession. It is expressed to be "subject to existing tenancy or occupation by Robert Shoushani".

In late October, Mr Hartmann obtained consent to the Sales from the each of the beneficiaries of the Estate other than Robert.

The proceedings came before me in the Duty List on 7 December 2021, at which time I made orders to prepare the application for hearing, including for the provision of written submissions, which I gratefully acknowledge have been of considerable assistance in the expeditious determination of the application.

On that occasion, I also granted leave for an amended notice of motion to be filed, which sought this relief:

It will be noted that the relief sought included an application for judicial advice. Mr Wood SC accepted my suggestion during the course of today's hearing that if the Court acceded to the application to vary the Orders pursuant to the liberty to apply in Order 16, then it would not be necessary for the application for judicial advice to be pressed. The reason for that was my view that for the Court to vary the Orders, it would necessarily have to be satisfied as to the propriety of the Sales.

Mr Wood SC's submissions essentially were that in circumstances where all beneficiaries other than Robert consented; there was evidence from an experienced solicitor-trustee (Mr Hartmann) that it was his view that the Sales should proceed in the best interests of the Estate; and there was evidence that the price that had been achieved was in line with the market value of the Properties, the Court should, pursuant to the liberty to apply, vary the Orders to permit sale by private treaty.

Mr Pope, on behalf of Robert, submitted that the market had not been tested and that if the Properties went to auction then either because of the involvement of third party bidders, or by Robert bidding in his own right or as a member of a syndicate that he might put together, a higher price might be obtained for the Properties than would be achieved by the Sales.

In making his submissions, Mr Pope accepted that the Court had power to vary the Orders but submitted, for the reasons which I have just recorded, that the Court should not exercise its discretion to do so. He also accepted, entirely properly in my respectful view, that Mr Hartmann had the requisite experience to have formed the view which he had that the Sales were in the best interests of the Estate reflecting a commercial decision on the part of the Trustees.

The Court accepts Mr Wood SC's submissions for three reasons.

First, all of the beneficiaries other than Robert consent.

Second, the Court accepts the Trustees' evidence that it is in the best interests of the Estate for the Sales to be completed for at least these reasons:

Third, allowing the Sales to proceed will save all of the costs and expenses (including marketing and agent's commission) that would be associated with auctioning the Properties, including the additional professional costs of the Trustees, in circumstances where there was no evidence to justify the conclusion that there was any real prospect that an auction would achieve a better price than the Sales.

The Court rejects Mr Pope's submissions for six reasons.

First, Robert has no basis to complain about the market not having been tested. This is because it is his own disobedience of the Orders by failing to vacate 85 which has brought about the situation that the Properties have not been able to be publicly listed for sale.

Second, Robert has not proffered any undertaking that he would comply with the Orders and vacate the Property.

Third, there is no evidence that he has ever put an offer to the Trustees for the Properties, including since he became aware of the Sales or the present application.

Fourth, he has tendered no evidence of his capacity to purchase the Properties either on his own or with others.

Fifth, he has tendered no valuation evidence of any kind and certainly none to suggest that the price obtained by the Trustees for the Properties is, for example, at a significant undervalue to the market price.

Sixth, he has tendered no expert or other evidence by reference to which the Court could conclude that there was any real prospect that an auction would achieve a better price than the Sales.

For these reasons, the Court will make orders varying the Orders to enable the Properties to be sold by private treaty.

I have heard the parties on the question of costs.

Mr Wood SC submitted that Robert should pay the costs of the application because it could all have been avoided by Robert consenting. In that event, all that would have been required was for the parties to submit a consent order to Slattery J to vary his Honour’s earlier orders.

For Robert's part, Mr Pope submitted that there should be no order as to costs. He submitted that this was an application which the Trustees would have to have made in any event, at least insofar as they were also seeking judicial advice. He submitted correctly that the judicial advice application was only not pressed after the Court today indicated its preliminary view that it would be unnecessary for judicial advice to be sought if the Court acceded to the application to vary the orders.

While I have recorded that the Trustees obtained the consent of the other beneficiaries of the Estate, it does appear that Robert's consent was not sought before the motion was filed. However, since the time he has been represented by Mr Pope, he could have consented at any time to the relief being sought to vary the Orders. Instead, he filed evidence and made submissions opposing the variation of the Orders and he was unsuccessful in that.

Balancing the fact that Robert's consent was not sought before the motion was filed, against both his failure to consent and his unsuccessful opposition to the motion today, the just result is that Robert should pay the costs of today on the ordinary basis to be taken out of his share of the proceeds of sale otherwise to be paid to the Estate. This is to ensure that on any final distribution of the Estate in accordance with the Orders, it is only Robert who bears those costs.

The Trustees should have an order that their costs, both legal and professional, of the present application are otherwise properly recoverable by them as part of their expenses in respect of the sale of the Properties for the purposes of Order 14b.

The orders made earlier today by the Court were: