Fonoti Brown v Fonoti Brown [2002] WSSC 9 (15 May 2002)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN

TUALA KAMILO FONOTI BROWN, TIATIA SAUSOO
HENRY FONOTI BROWN, TURO FONOTI BROWN,
LILII SAE BENEDICT FONOTI BROWN and JOHN FONOTI BROWN Jr,
Beneficiaries of the Estate of John Brown Fonoti.
Plaintiffs

AND

LUI PAULO ASALEMO FONOTI BROWN
of Apia, Trustee of the Estate of John Brown Fonoti.
Defendant

Counsels: KM Sapolu for plaintiffs
R Drake for defendant

Judgment: 15 May 2002

JUDGMENT OF SAPOLU CJ

Plaintiff’s claim

The plaintiff’s action against the defendant claims two things: (a) that the defendant be removed as the sole trustee of the estate their father John Fonoti Brown; and (b) that their present counsel be appointed and substituted as sole trustee of their father’s estate.

The plaintiffs in their action gave two grounds for removal of the defendant as sole trustee of their father’s estate. The first ground is that the defendant has failed to provide any accounts of the affairs of their father’s estate to the beneficiaries of the estate; the second is that the defendant has frequently been absent from Samoa. At the trial evidence was given for the plaintiffs which provides further grounds for the removal of the defendant as trustee apart from the two grounds stated in the action. I will come to that evidence in the course of this judgment. In support of their claim to have their present counsel appointed and substituted as sole trustee of their father’s estate, the plaintiffs simply say in their action that they want a solicitor who is not a member of their family to be appointed trustee of their father’s estate. In dealing with this case, I will deal with the facts first, then set out the relevant law, and then apply that law to the facts.

Facts

John Fonoti Brown, the father of both the plaintiffs and the defendants, died on 9 October 1974 leaving a will dated 12 February 1974. Probate of the will was granted by the Court to the defendant on 11 February 1975. The defendant is a brother of the plaintiffs and he is appointed sole executor and trustee under the will. These proceedings are not concerned with the defendant’s office as executor under the will; they are only concerned with the defendant’s office as trustee.

Under his will, the testator gives and bequeaths his shares in the company of JB Fonoti and Sons Limited to his trustee to stand possessed of the same and to use the income therefrom for his wife Louisa Fonoti for her life and upon her death, the trustee to stand possessed of the same for all his surviving children as tenants in common in equal shares. The testator further gives and devises to his trustee under his will all freehold property owned by him at his death to permit his wife Louisa Fonoti to have the use and enjoyment of the rents therefrom for her life and upon her death such properties were to form part of his residuary estate.

Finally, the testator gives, bequeaths and devises the rest of his property both real and personal whatsoever and wheresoever to his trustee upon trust for all of his children including his deceased daughter Falesefulu as tenants in common in equal shares with the intent that the children of her said daughter Falesefulu who survived him and live to the age of 21 years or who married before that age would take equally the share their mother would have been entitled to had she survived.

It was common ground between the parties that the properties which currently comprise the estate of their father are the lands at Saleufi and Taufusi. The land at Saleufi is occupied by the defendant and his family and is rented out to a taxi stand and JB Fonoti and Sons Ltd. The land at Taufusi is also being rented out to various businesses. The evidence for the plaintiffs is that they have not received any money from the defendant for the rents the tenants are paying for the use of those lands.

It is also clear from the evidence given for the plaintiffs, particularly the evidence given by the plaintiff Sailivao Peter Brown (Sailivao), that ever since the testator passed away on 9 October 1974, the defendant has not submitted to the beneficiaries any accounts regarding their father’s estate. As partial confirmation of that fact, Sailivao produced two letters. The first is a letter dated 24 November 1980 sent by a solicitor on behalf of Sailivao and his later mother Louisa Fonoti to the defendant. In that letter, the solicitor pointed out that he had been instructed by Sailivao and his mother that they have never been consulted as beneficiaries of the testator’s estate or informed of what the defendant was doing with the estate. The defendant was then requested to disclose up to date information regarding the estate and to furnish accounts. Nothing of what was requested of the defendant was done. The second letter is dated 13 August 1984 and was sent by the same solicitor to the then solicitors for the defendant. In that letter, it was pointed out to the defendant’s then solicitors, that according to the plaintiff’s mother, the defendant had not furnished any accounts to explain what had been done to the estate despite several requests to him. The defendant’s solicitors were then requested to intervene in the matter and to ask the defendant to furnish accounts regarding the estate. Again there was no response to that letter. When the plaintiffs' mother died on 16 December 1988, the defendant had still not furnished any accounts regarding the estate. And since the mother died, the defendant has still not furnished any accounts on the estate, according to the evidence for the plaintiffs. In other words, since probate of the will was granted to the defendant on 11 February 1975, he has not furnished any accounts of the estate to the beneficiaries. There is evidence, however, that in 1979 Mr GT Jackson, the solicitor who prepared the testator’s will and must have been the solicitor for the testator when he was alive, submitted accounts of the estate. Apart from that, the defendant, himself, has not furnished any accounts of the estate he is supposed to administer.

Documents were produced by the defendant at the hearing of these proceedings which were purported to be accounts of the estate. I have perused those documents and I reject them as they are not proper accounts at all. They appear to represent an attempt to persuade the Court and to make up for the defendant’s failure over many years to provide any accounts of the estate to the beneficiaries. The attempt does not persuade this Court at all and is rejected.

The other complaint against the defendant which came up from the evidence given for the plaintiffs is the absence of any meetings between the beneficiaries and the defendant as trustee concerning the affairs of the estate. The evidence for the plaintiffs is that no such meetings were ever held. The defendant’s evidence was that he called a meeting of the beneficiaries in 1974 one week after the death of the testator. Then he called another meeting of the beneficiaries in June 1979. In 1980 he prepared notices for two meetings to be held in September and November of that year. Then in 1988 after his mother’s funeral he tried again to call a meeting of the beneficiaries, but that meeting did not eventuate as not all the beneficiaries were present at his mother’s funeral as some of them reside overseas. He then unsuccessfully tried to call a meeting of the beneficiaries at a birthday party held at the home of his sister Odile Aumua at the end of 1996. In 1997 after the funeral of his brother Fonoti Inu, he tried again to call a meeting of the beneficiaries.

The plaintiffs denied such meetings and do not seem to be aware of the attempts by the defendant to call any meetings of the beneficiaries with him as trustee. From what was said by the defendant, it appears the first meeting he called of the beneficiaries was in 1974 one week after the death of the testator. No doubt all or most of the beneficiaries were present having come to the testator’s funeral. That must have been before probate of the testator’s will was granted to the defendant on 11 February 1975. I would not consider such meeting, if one was in fact held, to be a proper meeting of the beneficiaries and the trustee of the estate concerning the administration of any trusts under the will of the testator. The matter at that stage must have been with the solicitors for the testator to prepare the appropriate motion to the Court for the grant of probate. It was too early at that stage for the defendant, who had not yet been granted probate of the will, to be involved and engaged as trustee in the administration of the estate, to call a beneficiaries meeting concerning the administration of the estate.

It was not, according to the defendant’s own evidence, until five years later in 1979 that he called the second meeting of the beneficiaries. Why it took that long to call the next meeting of beneficiaries is not clear. Then in September and November 1980, the defendant, according to his own evidence, prepared notices for meetings of the beneficiaries but no such meeting eventuated. Then for the next eight years the defendant made no attempts to call a beneficiaries meeting until their mother died on 16 December 1988 when some of the beneficiaries came to her funeral. For the next eight years after that, there was again no attempt by the defendant to call a meeting of the beneficiaries until a birthday party that was held at the home of his sister Odile Aumua at the end of 1996. But not all the beneficiaries attended that birthday party and the defendant must have been fully aware of that. Then again, according to the defendant’s evidence, he tried to call a beneficiaries meeting in 1997 following the death of his brother Fonoti Inu which not all of the beneficiaries attended.

I must say that from the evidence, I cannot accept that the defendant was genuine and sincere about calling or convening a meeting of the beneficiaries with him concerning the affairs of their father’s estate. The time lapses between the years he said he tried to call such meetings and the occasions during which he tried to call such meetings, when he should have known that not all the beneficiaries were present, do not inspire confidence in the defendant’s genuiness about calling such meetings. Add to that his continuing failure to submit accounts concerning the affairs of the estate despite several requests, and I am driven to the conclusion that the defendant did not really call any meeting of the beneficiaries concerning the affairs of the estate. I prefer the evidence for the plaintiffs that the defendant did not call or convene any meeting of the beneficiaries and himself as trustee.

Another complaint made by the plaintiffs is that in 1984 the defendant obtained a loan of $20,340 from the Development Bank for the extension of his own taro plantation at Lotofaga and used the estate property at Saleufi as security without the knowledge or consent of the plaintiffs or their mother who was still alive at the time. In his own evidence, the defendant testified that his sister Odile Aumua who is one of the beneficiaries of the estate but not one of the plaintiffs also obtained a loan of $100,000 from the Development Bank and he also permitted the estate property at Saleufi to be used as security for that loan without the knowledge or consent of the plaintiffs. After $30,000 of that loan was disbursed by the Development Bank, he stopped any further disbursement. Even though both loans have been repaid, the conduct of the defendant in using trust property to secure his own personal loan and that of his sister for her own purposes without the knowledge or consent of the other beneficiaries was a clear breach of trust and of his fiduciary duties as trustee to the beneficiaries of the trust. He clearly placed property which was the subject of the trust at risk by using it to mortgage his own personal loan and that of his sister without informing the beneficiaries of the trust about his actions.

As to the complaint in the plaintiffs action about the defendant being frequently absent overseas, the defendant testified that after his mother died in 1988, he did not travel overseas again until 1994 when he went on a government trip to China and then when he went to Hawaii for a week for the funeral of a nephew. I do not consider the evidence concerning the defendant’s absence overseas as sufficient to support his removal as trustee.

However, the defendant’s continuing failure to furnish the beneficiaries with accounts of the estate, especially when the properties at Saleufi and Taufusi have been and are still earning revenue from rents paid by tenants on those properties; his continuing failure to convene proper meetings of the beneficiaries; and his clear breach of trust when he used the trust property at Saleufi to secure his own loan and then permitted the same property to secure his sister’s loan without the knowledge or consent of the other beneficiaries, clearly justify his removal as trustee of the testators estate.

Law

The jurisdiction of the Court to remove a trustee and appoint a new te in his place is both statutory and inherent. The statutory jurisdiction is provided in s.in s.12 of the Administration Act 1975 and s.35 of the Trustee Act 1975. The inherent jurisdiction is set out in the case law. Section 12 of the Administration Act 1975, which is the provision relied upon by counsel for the plaintiffs, provides as far as relevant:

"(1) ـ Whn admi administraistrator is absent from Samoa for 12 months without leaving a lawful attorney, or desires to be discharged the e of administrator, or becomes incapable of acting as administrator or unfit so t so to acto act, or where it becomes expedient to discharge or remove an administrator, the Court may discharge or remove that administrator, and may if it thinks fit appoint any person to be administrator in his place, on such terms and conditions in all respects as the Court thinks fit."

Section 35 of the Trustee Act 1975 provides as far as relevant:

"(1) &#The Cmayt when whenever iver it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do withoutassis of turt, make an order appointing a new truw trustee stee or neor new trustees, either in substitution for or in addition to any existing trustee or trustees or although "there is no existing trustee.

"(2) ҈ rticularcular and wand without prejudice to the generality of the foregoing provision, the Court may make an order appointing a new trustee in substitutiona truwho:

"(a) ҈ Has bees bees been been held by the Court to have misconducted himself in the administration of the trust; or

"(b) Is convicted of any offence involving dishonesty; or

"(c) Isntally defective person;rson; or

"(d) Is a bankrupt."

n p>On thrts int juction to remove a trusteesubstitute a new trustee, the leading English authority is this the jude judgmentgment of t of the Privy Council in Letterstedt v s [18 App 71. In d In deliveelivering ring their Lordships judgment in that case, Lord Blackburn at p.385 cited a passage from s.1289 of Story’s Equity Jurisprudence where it says:

"But in cases of positive misconduct, Courts of Equity have no difficulty in interposing to remove trustees who have abused their trust; it is not indeed every mistake or neglect of duty, or inaccuracy of conduct of trustees, which will induce Courts of Equity to adopt such a course. But the acts or omissions must be such as to endanger the trust property or to show a want of honesty, or a want of proper capacity to execute their duties or a want of reasonable fidelity."

Lord Blackburn then goes on to say at p.386 of his judgment:

"It seems to their Lordships that the jurisdiction which a Court of Equity has no difficulty in exercising under the circumstances indicated by Story is merely ancillary to its principal duty, to see that the trusts are properly executed. This duty is constantly being performed by the substitution of new trustees in the place of original trustees for a variety of reasons in non-contentious cases. And therefore, though it should appear that the charges of misconduct were either not made out, or were greatly exaggerated, so that the trustee was justified in resisting them, and the Court might consider that in awarding costs, yet if satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate."

Then at p.387 His Lordship goes on to say:

"In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyond the very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries. Probably it is not possible to lay down any more definite rule in a matter so essentially dependant on details often of great variety. But they proceed to look carefully into the circumstances of the case."

Letterstedt v Broers was followed and applied by Luxford CJ in the Samoan case of Meredith v Nelson [1930-1949] WSLR 33 where the defendant as trustee of an estate invested the trust funds in a company of which he was the managing director and principal shareholder. The Court was of the view that in such a situation there was a likelihood that a conflict would arise between the trustee’s own personal interests and his duties as trustee. Having regard to the welfare of the beneficiary which was the guiding principle, the Court decided to grant the application for removal of the trustee if he did not rectify the situation within a specified time. The significance of this case is that it accepted that the guiding principle in the exercise of the Courts inherent jurisdiction whether to remove a trustee from his office is the welfare of the beneficiary of the trust estate.

In Miller v Cameron (1936) 54 CLR 372 which was concerned with an action by a settlor and the beneficiaries of a trust to remove the sole trustee of a trust settlement, the High Court of Australia followed and applied Letterstedt v Broers. At p. 575 Latham CJ held that the dominant consideration in determining whether it is proper to remove a trustee is the welfare of the beneficiaries. At p.579 Starke J held that the only guide when determining whether a trustee should be removed from his office is the welfare of the beneficiaries; and a trustee will be removed if his continuance in office would be detrimental to the interest of the beneficiaries. Then at p.580 Dixon J said:

"The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. But in a case where enough appears to authorize the Court to act, the delicate question whether it should act and proceed to remove the trustee is one upon which the decision of a primary Judge is entitled to especial weight".

The last case I wish to refer to is Hunter v Hunter [1937] NZLR 794 where the plaintiff sought, inter alia, the removal of the trustees from their office as trustees. Smith J after making reference to the principles stated by Lord Blackburn in Letterstedt v Broers ordered the removal of the trustees from their office as trustees. His Honour said at p.796:

"In determining whether the trustees should be removed, the Court has a discretion. The leading case is Letterstedt v Broers (1884) 9 App Cas 371. The Privy Council there held that there is a jurisdiction in Courts of Equity to remove old trustees and substitute new ones in cases requiring such a remedy, and that the main principle upon which the jurisdiction should be exercised is the welfare of the beneficiaries and of the trust estate."

Having regard to the trustees slackness in the management of the trust estate, unnecessary losses to the estate, the trustees failure to investigate a claim for the refund of certain monies, and the state of hostility between the trustees and the life tenant of the estate, Smith J decided that the welfare of the beneficiaries and of the trust estate will be best secured by removing the trustees and appointing new trustees in their place.

From the authorities cited, it is clear that the court has a duty to see that trusts are properly executed. In carrying out that duty, the Court has an inherent jurisdiction in equity to remove a trustee and appoint a new trustee in his place to ensure proper execution of a trust. In the exercise of that jurisdiction, the principal guide is the welfare of the beneficiaries to be ascertained by looking at all the circumstances including, as Dixon J pointed out at p.580 in Miller v Cameron, the interests of the beneficiaries, the security of the trust property, the efficient and satisfactory execution of the trusts, and the loyal and sound exercise of the powers given to the trustee. The jurisdiction must be exercised with caution since the removal of a trustee from office is no trivial matter.

Apart from the statutory and inherent jurisdiction of the Court to remove a trustee, a power to remove a trustee may be given under a trust instrument. The Court will not usually interfere with the exercise of such power unless its exercise has been abused. As we are not concerned in this case with a power given under a trust instrument for removal of a trustee, nothing more will be said about it.

Law applied to facts

Under s.12 of the Administration Act 1975, the Court is given broad powers to remove an administrator of an estate where it becomes expedient to do so, and to appoint a substitute. The Court is also given broad powers under s.35 of the Trustee Act 1973 to appoint a new trustee where it is expedient so to do.

The defendant as trustee in this case has never furnished accounts of the estate to the beneficiaries since probate of the testator’s will was granted to him in 1975. This has been so despite the fact that the two properties which comprise the trust estate have been and are earning revenue from the rents paid by the tenants who are leasing on both properties. Some of the beneficiaries have also made several requests to the defendant to furnish accounts but he has failed to do so. Thus the defendant has been administering the estate for many years without disclosing to the beneficiaries the financial situation of the estate and what he is doing. This is not likely to inspire in the plaintiffs as some of the beneficiaries, any degree of confidence in the defendant as trustee. Apart from the absence of any accounts of the estate, the defendant has also failed to convene any meetings of the beneficiaries to explain the affairs of the estate, and I find that he has made no genuine attempt to do so. As a consequence, the beneficiaries are not aware of the real state of the estate and what the defendant is doing as trustee. The defendant has also committed serious breaches of trust by using trust property to secure a personal loan with the Development Bank without the knowledge and consent of the beneficiaries of the estate, and by permitting the use of trust property to secure a loan by his sister, again without the knowledge and consent of the beneficiaries. Given all these circumstances, I am of the opinion it will be expedient in terms of the aforesaid s.12 and s.35 to remove the defendant as trustee and to appoint a new trustee in his place.

In considering this case in terms of the Courts inherent jurisdiction to remove a trustee and appoint a new trustee in his place, it is clear the defendant has not administered the estate in an efficient or satisfactory manner whatsoever. His continuing failure to furnish accounts of the estate to the beneficiaries or to convene meetings of the beneficiaries reflects a grave inability to perform his duties as trustees in an efficient and satisfactory manner. In my opinion this is not in the interests of the beneficiaries welfare. Furthermore, the defendant’s use of trust property to secure his own personal loan and the loan of his sister without the knowledge or consent of the other beneficiaries were serious breaches of trust and do not generate confidence in the administration of the trust properties being left in the hands of the defendant as trustee. Even though a breach of trust by a trustee may be a separate issue from the welfare of the beneficiaries, it is relevant to the question whether a trustee should be removed. All these circumstances combine to lead me to the conclusion that the defendant ought to be removed from his office as trustee and a new trustee be appointed in his place.

Appointment of new trustee

The plaintiffs in their action want their present counsel to be appointed sole trustee of the testator’s estate in place of the defendant. This issue, apart from being raised, was not fully addressed at the hearing of these proceedings.

The parties and any other surviving beneficiary are to present a written statement or written statements to the Court whether they accept present counsel for the plaintiffs being appointed sole trustee of the testator’s estate.

Judgment

The Court makes the following orders:

(a) &#T60; efe dantnds reioved oved as trustee of the testator’s estate effective from 29 May 2002.

(b) A new te is appo in pof ahendant.

(c) >(c) &#160  ;
h0; Trties, ies, includicluding every surviving beneficin Sam New nd, a subm the within 1hin 14 day4 days a ws a writteritten stan statementement or written statements indicating their agreement or otherwise to have present counsel for the plaintiffs appointed as sole trustee of the testator’s estate.

(d) Failing agreement au req ired in (c), counsel for both parties to request the Public Trustee for his consent to be appointed as trusf theator&;s es The c Trustee to indicate his position in wrin writing ting to thto the Coue Court byrt by 29 M 29 May 2002.

Costs

Counsel to file memorandum as to costs within 10 days. Counsel for the defendant to also advise in writing within 10 days whether the estate is in a position to meet the costs of the plaintiffs in this case.

This case will be re-mentioned at 9.00am on 30 May for counsel to advise the Court on the matters contained in this judgment in relation to the appointment of a new trustee.

CHIEF JUSTICE

Solicitors:

Sapolu & Lussick for plaintiff
Drake & Co., for defendant