Church takes legal action on property feud

The trustees act in a voluntary capacity [and] are not remunerated. Trustee spokesman

The Presbyterian Church of Victoria has become embroiled in a bitter fight with the trustees of one of its property portfolios, launching a lawsuit that alleges its commercial holdings in the CBD have been mismanaged.

The dispute has broken out over control of the income from a 99-year lease of a prime Russell Street property that will become the $150 million headquarters for Westpac and the redevelopment of the historic Assembly Hall building on Collins Street.

The writ filed in the Supreme Court claims that the trustees of the Scots Church Properties Trust have made "unauthorised" deductions from commercial rental income, used church property to secure a multimillion-dollar loan without permission, and failed to pay commissions or maintain proper accounts.

The trustees own and control multiple CBD properties on behalf of the Presbyterian Church of Victoria's Trust Corporation, including the Scots Church at the corner of Russell and Collins streets, a car park and commercial premises behind the church, and the former Georges Building at 162 Collins Street.

In 2008, the trustees leased the car park site to APN Property Group, which is developing the property, along with Grocon, into Westpac's new Melbourne headquarters.

The 99-year lease paid $5.5 million upfront, of which $4.5 million was used by the trustees to then fund the purchase of the neighbouring Assembly Hall building from the Presbyterian Church's Trust Corporation.

The writ alleges that the trustees then used the Assembly Hall - which houses a mixture of commercial tenants and church-related groups - as an "unauthorised security" to borrow more than $5 million from Westpac in June 2009, which was used to fund a redevelopment of the building.

"The trustees failed or refused to obtain the consent of either the General Assembly or the Presbytery to either the redevelopment of the Assembly Hall or the grant of the mortgage over the Assembly Hall," court documents say.

Other allegations include that the trustees made "unauthorised deductions" for expenses from the income generated by the church's commercial property holdings, breached their trusts and duties, and failed to maintain proper accounts.

Presbyterian Church of Victoria's Trust Corporation is seeking a declaration that specifies the powers of the trustees and unspecified financial damages.

A spokesman for trustees of the Scots Church Properties Trust said they were "disappointed" by the legal action and intended to defend the proceeding, which he said centred on a dispute about the proper interpretation of a complex trust deed made in 1891.

"They consider that at all times they have acted honestly, with integrity and in the best interest of Scots Church congregation, the PCV Trust Corporation and the Presbyterian Church," he said.

"The trustees act in a voluntary capacity, are not remunerated, and that there has been no allegation made, or suggestion, that they have in any way obtained a personal advantage from the matters the subject of the litigation."

The Presbyterian Church of Victoria did not respond for comment.

cvedelago@theage.com.au

Twitter: @chrisvedelago

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