Anthony Grant
This article is based on a short decision Justice Mary Peters delivered in 2022 and deserves wider publicity than it has received to date. The case was In the Estate of JD Moleta [2022] NZHC 1763 (21 July 2022).
In this case, a trustee sought a direction under s 133 of the Trusts Act 2019 that “following the conclusion of an appropriate advertising campaign”, he could sell a property “for the best price offered”.
The application was made in 2022 when the housing market was in a bad state. The highest offer received for the property was $865,000. On the same day that offer was received, Auckland City valued the property at $1.8 million – more than double the offer price. The trustee then obtained a valuation from a reputable valuer who advised that the market value of the property was between $1.15m and $1.3m.
Armed with this valuation, the executor instructed an estate agent to seek further offers. That produced an increase of only $5000, taking the offer to $870,000.
The trustee needed to sell the property but was fearful of getting a price substantially lower than the valuation and feared that if this happened, a beneficiary might sue him for selling at an undervalue.
The trustee therefore applied to the court for approval that “following the conclusion of an appropriate advertising campaign” he could sell the property “for the best price offered”.
The High Court refused the application. It said the proposed order “would authorise the applicant to sell the property for any price, no matter how modest, provided that it was the best offered after a marketing campaign (of which no specifics have been advised).”
The court referred with approval to an English decision, Richards v McKay [2008] WTLR 1667 (Ch) where a trustee in similar circumstances had come to court with a proposal to sell a property for a particular price, on particular terms and with an explanation about why the proposal was considered to be the best achievable.
The case highlights the problems trustees face when they have to sell a property in a bad market. Just as a trustee will want to avoid being sued by a beneficiary for selling at an undervalue, judges will likewise want to avoid being criticised for authorising a sale at an undervalue.
Ultimately, some reasonable parameters need to be agreed upon and if that results in a failed attempt to sell the property, a further application to the court with reduced parameters will be needed if the sale is to be approved.
Anthony Grant is an Auckland barrister and trustee specialising in trusts and estates. He is a member of The Law Association’s Trust Law Committee
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