Alexakis v Masters

Supreme Court of NSW|2021-02-05|Before: Slattery J

Judgment

Mr Raymond John McClure was a successful investor. He purchased and rented out blocks of apartments in western Sydney and reinvested the rental income in further apartment purchases and later in listed shares. When he died on 21 November 2017 at the age of 84, he left an estate worth over $30 million. He did not marry and had no dependents.
Three relationships in his life featured in the wills he made between 1986 and 2016. For over 40 years, Mr Frank Camilleri maintained the deceased's investment properties. And the deceased had a longstanding friendship with Ms Hildegard Schwanke and her daughter. In addition, the deceased had long admired the charitable work of the Salvation Army.

Mr Raymond McClure, his Wills, his Estate and the Pleadings

Between 1986 and 2016, the deceased made four wills which recognised to varying degrees his relationships with Ms Schwanke and her daughter, Mr Camilleri and the Salvation Army.
The first three wills, which were made in 1986, 2007 and 2012 recognised Ms Schwanke and her daughter, Mr Camilleri and the Salvation Army. In the 2007 will, the deceased's house property was given to Mr Camilleri and Ms Schwanke, and the residue of the estate given to Mr Camilleri. In the 2012 will, the deceased's house property was bequeathed in the same way as in the 2007 will but the residue went to the Salvation Army. The deceased's May 2016 will bequeathed the contents of his house property to Ms Schwanke and the residue of his estate to the Salvation Army.
Dr Alexakis first features in the wills made in June and July 2017. The deceased's June 2017 will gave 65% of his estate to Dr Alexakis, 25% to Mr Camilleri, and 10% to Ms Schwanke and her daughter. Finally, the July 2017 will bequeathed the deceased's house property to Dr Alexakis. After several specific gifts, that will gave 90% of the residue of the deceased's estate to Dr Alexakis, 9% to Mr Camilleri and 1% to Ms Schwanke. The rapid introduction into the last two wills of very substantial gifts to Dr Alexakis within the last five months of his life founds part of the other parties' contentions that Dr Alexakis exercised undue influence over the deceased.
In his Amended Statement of Claim filed on 14 April 2020, Dr Alexakis seeks administration of the deceased's July 2017 will. If that will is not admitted to probate, he seeks probate of the deceased's June 2017 will. The Amended Statement of Claim joins as first defendant a representative of the Salvation Army, Mr Gary Masters, and as second defendant, Mr Camilleri.
In their defences, the Salvation Army and Mr Camilleri oppose a grant of administration of the 2017 wills to Dr Alexakis. But they do so on different grounds. The Salvation Army contends that each of the wills was executed in suspicious circumstances and resulted from the exercise by Dr Alexakis of undue influence upon the deceased and that their execution was also vitiated by fraud. Mr Camilleri does not propound a positive defence to the claims for administration made by Dr Alexakis. Unlike the Salvation Army, he does not allege undue influence sufficient to prevent admission of the 2017 wills to probate. He receives benefits under both these wills. He does not admit Dr Alexakis' claims. Rather as will be seen, he takes a different course, claiming relief based on general equitable principles of undue influence ("equitable undue influence"), not undue influence in probate ("probate undue influence").
By a Cross-Claim filed on 11 June 2020, Mr Masters seeks probate of the 2016 Will on behalf of the Salvation Army (NSW) Property Trust. Dr Alexakis, the Schwanke and Mr Camilleri are joined as cross-defendants to the first Cross-Claim.
In the motion before the Court, Mr Camilleri seeks leave to file a second cross-claim seeking declarations that Dr Alexakis procured his interests in the deceased's June and July 2017 wills by equitable undue influence and unconscionable conduct. The second cross-claim seeks relief denying Dr Alexakis the receipt of any benefit under of these wills with the result that the whole of the deceased's estate should pass under these wills to Mr Camilleri and Mrs Schwanke. The second cross-claim seeks a grant of administration cum testament annexo of the July 2017 will and in the alternative the June 2017 will to a suitable person.
Dr Alexakis opposes the filing of the second cross-claim in these proceedings, submitting that the issues of equitable undue influence that it raises should not be determined at the same time as the other probate issues such as the deceased's knowledge and approval of the 2017 wills and whether probate undue influence is made out.
The proposed second cross-claim has gone through various iterations. In its present iteration (marked MFI 1), it presently only claims the relief summarised in the previous paragraph of these reasons. A former version of the pleading also propounded Mr Camilleri's claim based in principles of equitable estoppel, and in the alternative in restitution, that he had over decades provided administrative, maintenance, caretaker and handyman services to the deceased in exchange for promises of an undefined interest in the deceased's properties.
But when the second cross-claim was first propounded including these wider issues, Dr Alexakis foreshadowed an objection to it being filed and the joinder into these proceedings of such wide-ranging issues with Dr Alexakis' probate suit. So, Mr Camilleri's legal representatives responded by producing the narrower pleading that is now propounded on behalf of Mr Camilleri.
As Mrs Schwanke and Ms Schwanke are beneficiaries under one or more of the 2016 and 2017 testamentary instruments, they are entitled to be parties in that capacity. But they do not seek probate relief themselves.
Whilst this dispute proceeds, the Court has appointed an interim administrator and receiver who is independent of the parties, Mr Lawrence Myers. He is attending to the maintenance and insurance of the properties and monitoring the deceased's share portfolio.
The Court must now decide whether the probate suit to determine the validity of the deceased's last two wills, raising probate undue influence, should be tried at the same time as, or separately from, Mr Camilleri's broader claims of equitable undue influence and unconscionable conduct. An incidental question is when, on either option, the restitution/equitable estoppel issues arising out of Mr Camilleri's past services should be tried.
Important background to the determination of these questions is the distinction between what the Court calls in these reasons respectively probate undue influence and equitable undue influence.

Undue Influence in Probate and in Equity

An interlocutory judgment is not the place for a lengthy exposition of the law. But the relevant background legal issue may be shortly stated.
Long-standing statements of legal principle declare that the equitable doctrine of undue influence does not apply to testamentary gifts: Boyce v Rossborough; Craig v Lamoureux [1920] AC 349; Winter v Crichton; Estate of Galieh (1991) 23 NSWLR 116; Trustee for the Salvation Army (NSW) Property Trust t/as the Salvation Army v Becker (2007) 14 BPR 26,867; [2007] NSWCA 136.
But in Bridgewater v Leahy (1998) 194 CLR 457; [1998] HCA 66, at 474-475; [62]-[63], ("Bridgewater") the High Court (Gaudron, Gummow and Kirby JJ) left open the possibility that principles of equitable undue influence might yet be held to apply in probate cases. Their Honours said the following on this subject, pointing at least to the possibility of relief based on equitable undue influence subjecting property passing under a will to a constructive trust: "[62] The position taken by courts of probate has been that to show that a testator did not, by reason of undue influence, know and approve of the contents of the instrument propounded as a testamentary instrument, 'there must be - to sum it up in a word - coercion': Wingrove v Wingrove (1885) 11 PD 81 at 82-83. See also Baudains v Richardson [1906] AC 169 at 184-185; Craig v Lamoureux [1920] AC 349 at 357; Winter v Crichton (1991) 23 NSWLR 116 at [121]-[122]. The traditional view, repeated by Sir Frederick Jordan [in his 'Chapters on Equity in New South Wales', reprinted in Jordan, Select Legal Papers (1993), page 137], has been that a court of equity will not, on the ground of undue influence as developed by the Court of Chancery, set aside a grant made by a court of probate: Allen v M'Pherson (1847) 1 HLC 191 (9 ER 727); cf, Birmingham v Renfrew (1937) 57 CLR 666 at 674, 676, 683, 690]. [63] The approach taken in the probate jurisdiction appears to be concerned with the existence of a testamentary intention rather than the quality of that intention or the means by which it was produced. It is a concern of this latter nature which finds expression in the treatment by equity of dispositions inter vivos. In the present litigation, with respect to the dispositions made by the will, no party submitted that equity might apply or extend its principles respecting undue influence and dispositions inter vivos, not to attack a grant of probate itself, but to subject property passing under a will to a trust in favour of the residuary beneficiary of the next kin".
The relationship between the operation of the doctrine of undue influence in probate and in equity raised in Bridgewater has received subsequent attention in this Court. In Boyce v Bunce [2015] NSWSC 1924 ("Boyce"), Lindsay J observed that: "…the present proceedings appear to be an appropriate vehicle within which to test the interconnection, if any, between the historically different concepts of 'undue influence' in the probate and equity jurisdictions...As presently advised, I do not see any necessity, or justification, for assimilation of 'equitable undue influence' in the concept of 'probate undue influence'; but neither do I apprehend that an application of equitable principles, as a supplement to an exercise of probate jurisdiction, in the manner contemplated by the High Court in Bridgewater v Leahy is beyond fairly arguable."
The present position was aptly summarised by Hallen J in Blendell v Byrne & Ors; Estate of Noeline Blendell [2019] NSWSC 583 at [498] ("Blendell"), where his Honour said there remains "difficult and, so far, unanswered, issues" on this question.
Without further analysis of Bridgewater, Boyce, or Blendell it can safely be said that the application of equitable doctrines of undue influence to dispositions under otherwise valid wills is an open and arguable question.
There is no procedural obstacle to the Court trying questions of probate undue influence and equitable undue influence together. The Court has broad power to consolidate, order and organise the trial of proceedings involving common questions or transactions, or where the issues overlap: Uniform Civil Procedure Rules 2005 ("UCPR"), r 28.5. And Civil Procedure Act 2005, ss 56 and 57 require the Court to facilitate the just quick and cheap resolution of the real issues in the proceedings and to manage proceedings to promote the efficient disposal of the business of the Court.
It is common for questions of the grant of probate of a will to be decided separately from other issues. But the amalgamation of probate and non-probate issues occurs from time to time. Two quite lengthy cases that I have decided exemplify the amalgamation of probate and non-probate issues: Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat; Yesilhat v Calokerinos, Executor of the Estate of the late George Sclavos [2017] NSWSC 666; and Mekhail v Hana; Mekail v Hana; In the Estate of Nadia Mekhail (No 3) [2018] NSWSC 1452. And the parties gave the Court other recent examples where probate and equity proceedings had been consolidated: The Estate of Stanislaw Budniak; NSW Trustee & Guardian v Budniak [2015] NSWSC 934; Stojic v Stojic [2018] NSWSC 723; Stojic v Stojic [2018] NSWCA 28.

Deciding the Procedural Issues

The parties were sharply divided on the proper course to be followed in the management of these proceedings and the filing of the second cross-claim.
Mr Bedrossian SC, counsel for Mr Camilleri, submitted that it would be more efficient for the probate issues and the claim based in equitable undue influence to be decided with the probate proceedings and the two sets of issues should be heard together. He contended as follows: that the Salvation Army would be seeking to advance a claim that suspicious circumstances existed in relation to the disputed 2017 wills pointing to the likelihood of probate undue influence; and the factual matrix giving rise to the alleged 'suspicious circumstances' would also serve as important evidence of a relationship of equitable undue influence of Dr Alexakis over the deceased. Mr Bedrossian SC argued this evidence would be directly relevant both to probate and equitable undue influence.
This is a compelling argument. The period over which the claimed equitable undue influence is said to operate substantially overlaps with the time of execution of the two 2017 wills. The medical condition of the deceased and the prominent role in his treatment of Dr Alexakis are common elements of both forms of alleged undue influence. The parties were directed to supply a list of the lay and expert medical witnesses that they are likely to call both on the probate issues and on the equitable undue influence issues. The lists produced showed there was a substantial overlap in both the lay and expert witnesses on both these sets of issues. It seems to the Court more efficient to have these two sets of issues decided together.
Mr Bedrossian SC advanced another argument for the joint trial of the probate and equitable undue influence issues. He argued that Mr Camilleri's restitution/equitable estoppel claim may not need to be pursued, if Mr Camilleri were to succeed on his primary case: to leave the deceased's July 2017 will, or June 2017 will intact but excise by way of a declaration of a constructive trust the interests that would otherwise have gone to Dr Alexakis under either of those wills.
This argument supports the course taken so far of removing the restitution/equitable estoppel claim from the proposed second cross-claim for possible later trial; that trial my never be needed. But even if Mr Camilleri were to obtain some form of relief in his undue influence claim, this may only partially satisfy Mr Camilleri's restitution/equitable estoppel claim.
Mr Masters, the first defendant and cross-claimant, had originally consented to the filing of Mr Camilleri's cross-claim. His appearance on 5 February 2021 was mentioned by counsel for Mr Camilleri. But at the Court's suggestion Mr Masters' counsel appeared. He made short oral submissions in support of having the probate and equitable undue influence issues heard together. And counsel for Mrs Schwanke and Ms Schwanke, Mr Brown, did not oppose all these issues being heard together.
Mr Ellison SC, counsel for Dr Alexakis opposes leave to file the second cross-claim. He contended that much of the 50-year history of contact between Mr Camilleri and the deceased outlined in Mr Camilleri's affidavit dated 16 November 2020 and marked Exhibit A in these proceedings would be irrelevant to the probate suit. He submits it would be inefficient and unnecessarily burdensome for his client to have to defend an equitable undue influence case brought against the estate at the same time as a probate suit. He says that a probate suit is normally short and sharp and if he wins it he will have the benefit of his position as administrator to defend any equitable undue influence case brought by the Salvation Army. If he loses the probate suit, he is out of the case and does not have to deploy any further resources in defending the estate.
But the Court must look at this issue from a broader perspective. If Dr Alexakis' argument is accepted it is inevitable that much similar evidence will be recanvassed by several parties in two sets of proceedings tried at different times. And one trial is likely to be measurably shorter overall than two trials of very similar issues. Moreover, one source of Mr Ellison's concern, Mr Camilleri's affidavit, may perhaps not be admissible and relevant in either undue influence case: some of its detail is only relevant to the restitution/equitable estoppel case and could be excluded.
Mr Ellison SC also argued that the issue of undue influence in probate has traditionally been kept separate from the determination of claims of equitable undue influence and other claims against estates, these being two discrete branches of the law. Whilst that submission is true in general terms, where a case requires the joinder of other issues with a probate suit on grounds of efficiency because of the overlap of issues, it will at times be ordered. And the cases cited earlier in these reasons are examples of where such joinder has occurred. It is more common to add a family provision suit to a probate suit, but it is not unknown in respect of other types of claims against an estate. And hearing both types of undue influence claims together does not encounter any obstacle in authority as Bridgewater has left the equitable influence claim open in a probate context.
This leaves the question of managing Mr Camilleri's claim against the estate based in restitution and in equitable estoppel for his alleged decades of work for the deceased. The claim has been excised from the present version of the second cross-claim. It is highly desirable that Mr Camilleri's evidence in that claim be visible to all the parties in these proceedings, when the issues in these proceedings are determined. The range of work that Mr Camilleri did for the deceased and the period that he did it, is potentially relevant to Mr Camilleri's claims on the deceased's testamentary bounty, which in turn is a factor arguably to be weighed in the determination of Mr Camilleri's claims of equitable undue influence.
But it is too early to tell whether Mr Camilleri's restitution/equitable estoppel claim should be determined at the same time as the rest of the proceedings including the second cross-claim. If those proceedings are likely to involve lengthy questions of fact about what work was done for the deceased and what are appropriate reasonable rates of remuneration for that work, then it is probably undesirable that the proceedings be heard together.
But the best way this can be judged is by first exposing the plaintiff's case in those other potential proceedings by requiring them to be commenced. A judgment can then be made, before these proceedings are set down for hearing, based on the filed evidence in those other proceedings, as to whether joinder of those proceedings with these proceedings is appropriate or not.
It may well not be necessary for Mr Camilleri's restitution/equitable estoppel proceedings to be contested by the estate in the short-term. Gaining an understanding of the nature of his claim is the critical question: for determining whether those proceedings should be tried and determined with these proceedings. Before that further trial management decision is made, it is quite sufficient for those restitution/equitable estoppel proceedings to continue in the absence of a representative of the estate. That can be regularised by the making of an order under UCPR, r 7.10(2)(a). Leave to so proceed should be sought by motion if, and when, those proceedings are commenced. A representative for the estate would only need to be appointed, if the estate were required to put on evidence in the restitution/equitable estoppel proceedings.
Directions are made below for Mr Camilleri to commence any equitable estoppel/restitution proceedings within 28 days so that this aspect of trial management can proceed in an orderly way.

Conclusions and Orders

The Court therefore will grant leave to Mr Camilleri to file his second cross-claim, so that Mr Camilleri's equitable undue influence claims shall be heard together with the probate issues in the proceedings. The matter will continue to be managed by Hallen J in his Honour's probate list. The matter should be listed in the next convenient probate list thereafter.
Mr Camilleri's equitable estoppel and restitution claims against the estate will be the subject of separate proceedings in which orders should be made for Mr Camilleri to file evidence in the near term. Once commenced, those proceedings may involve minimal case management and should at least travel with these proceedings in directions hearings.
The motion to file a second cross-claim indirectly raised a difficult issue of trial management with which the Court would have had to grapple independently of the motion at some stage in considering the trial management of these proceedings. It is therefore not particularly appropriate to consider any party as being the winner or loser on this motion in these proceedings. Therefore, unless one or other party wishes to move the Court for a different order within seven days, the Court will make orders that each party's costs of the motion be that party's costs in the proceedings.
The Court will therefore make the following orders and directions: 1. Grant leave to the second defendant to file a second cross-claim substantially in the form of MFI 1; 2. If the second defendant proposes to bring proceedings against the estate of the late Raymond John McClure on grounds of equitable estoppel and restitution in respect of services that the second defendant alleges that he provided to Raymond John McClure during his lifetime, then direct the second defendant to commence such proceedings within 28 days and to apply to the probate judge by motion for orders under UCPR, r 7.10(2)(a) for such proceedings to continue in the absence of a legal representative of the estate until the resolution of these proceedings, or further order; 3. Unless any party notifies the Associate to Slattery J by 5 March 2021 that they seek a different costs order, then thereafter the Court will order that each party's costs of the second defendant's motion to file a second cross-claim will be that party's costs in the proceedings; 4. List these proceedings for further directions before Hallen J in his Honour's probate list on Monday, 29 March 2021 at 9AM; and 5. Grant liberty to apply.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 March 2021

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