Jubilee Properties v Parkview Farm [2014] NSWSC 563

A developer, through a trust, purchased properties to erect an apartment. The developer owned 75 units in the trust and 25 units were given to a consultant in return for his services. The developer was the sole director of the trustee. The developer and the consultant fell out. The consultant sought to claim damages for breach of trust by reason of the trust borrowing to repay the developer’s loan to it and the trust acting as guarantor on a loan taken out by the developer. The consultant sought to have the trust wound up.

The court held no breach. The repayment of the developer’s loan was itself funded by a loan at an interest rate much less than that charged by the developer and hence was in the interests of the trust. In relation to the guarantee, the benefits to the trust outweighed the risks, because it improved the financial position of the developer of the project and enabled part of the loan funds not used to purchase the developer’s home to be on-lent back to the trust to fund the project. The court found that the developer’s decision and that of the trustee were made honestly, in good faith, for a proper purpose and motivated by a belief that overall the trust would benefit.

The court held no basis to remove the trustee.

The court also held that only the unitholders jointly had the right to require the trust to be wound up. The court found that the amendments to the trust deed to remove the right of the consultant to lodge a caveat was consistent with the trust’s interest.

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