[1965] AC 694
Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306
Source
Original judgment source is linked above.
Catchwords
[1965] AC 694
Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306
Judgment (3 paragraphs)
[1]
Solicitors:
George Loupos Associates (Plaintiff)
Teece Hodgson & Ward (First Defendant)
Carneys Lawyers (Second to Sixth Defendants)
Perez Varela Lawyers (applicant on notice of motion)
File Number(s): 2016/142494
[2]
Judgment
By notice of motion filed in Court on 15 November 2017, the applicant, Robert Angius, seeks an order that he be joined as a defendant to the proceedings.
The plaintiff in these proceedings is John Angius, Robert's father. It will therefore be convenient, without any disrespect intended, to refer to the members of the Angius family by their first names.
Robert and John are estranged. It is an open matter that there is considerable antagonism between them. That is also apparently true for other members of the Angius family. There have been disturbances in court, although not in any substantial way between Robert and John.
Robert originally sought that he be joined as the fifth defendant to the proceedings. In the interim, further parties have been joined as defendants, so that if an order is made on the notice of motion, Robert will be joined as the seventh defendant.
Since Robert's notice of motion has been filed, a request has been made for leave for Robert to file an amended notice of motion. In the face of opposition from other parties, the Court declined to grant the leave sought, but agreed that the notice of motion could be handed up pending an opportunity on the part of the Court to deal with the amendment application.
The first defendant to these proceedings is Gordon Albert Salier. Mr Salier is the administrator with the will attached of the estate of the late Laura Angius, who was the wife of John and the mother of Robert. Gianna (Jenny) Angius, who is the daughter of John and Laura, will also feature in these reasons for judgment.
In the draft amended notice of motion, if leave were given to file it, in addition to seeking an order that Robert be joined as a defendant to the proceedings, Robert would seek an order that Mr Salier be removed as administrator of Laura's estate, and that Robert be appointed as administrator in his place. Consequential orders would be sought, including the making of an interim distribution from Laura's estate to enable Robert to pay his legal fees. An order would be sought for an accounting by Mr Salier in respect of the administration generally, and the payment of legal fees to his solicitors.
I indicated in the course of the hearing of Robert's notice of motion that I would not personally grant leave to Robert to amend his notice of motion in accordance with the draft document, and I would not hear any application by Robert for the removal of Mr Salier and the other consequential orders that would be sought.
There may be nothing to stop Robert filing a new notice of motion to seek whatever relief he may be advised to pursue, but any such notice of motion must be filed in the Registry in the ordinary course, and be allotted a hearing date before an appropriate judge.
As I am effectively dealing with these proceedings as a de facto judge responsible for their case management, I would not grant leave to amend the notice of motion in a summary way, primarily because I am satisfied that it is in the interests of Laura's estate, as well as in the interests of justice generally, for Mr Salier to continue to act as administrator to provide the great assistance that has been provided to the Court to date by Mr Salier and his counsel, and also because that will facilitate the orderly completion of the present proceedings.
In so far as the draft notice of motion would seek an interim distribution from Laura's estate, I am told that Robert has filed a separate notice of motion to seek that relief, and that the notice of motion has been set down to be dealt with by another judge of the Court.
Before I deal with the issues arising on the notice of motion that is before the Court, it will be necessary to deal with two other matters.
The first matter concerns the issues raised by the pleadings that have been filed in this matter.
By amended statement of claim filed on 17 February 2017, John claims an entitlement to be paid certain amounts out of Laura's estate for unjust enrichment, because of certain actions allegedly undertaken by John under a separation agreement entered into between John and Laura before her death; and also in respect of repairs, maintenance, improvements and the payment of outgoings by John in respect of properties now within Laura's estate. Additionally, John claims an amount of $438,576.78 in respect of expenses paid by John for the funeral of Laura.
John also claims amounts from the second to fourth defendants, Angius Hotel Investments Pty Ltd, Togumi Pty Ltd, and J & L Angius Pty Ltd. They are three companies whose shares are owned by John and by Mr Salier as administrator of Laura's estate. The amounts claimed are respectively $1,525,844.61, $133,486.10 and $809,000.
Mr Salier has filed a defence and cross claim in the proceedings. The cross claim seeks payment of a number of small sums, together with one half of the mesne profits of the property at 2 Denning Street Coogee, at the rate of $1800 per week for the period between 15 January 2012 and 1 May 2017.
After the filing of those pleadings, I have made orders joining Tararba Pty Ltd as fifth defendant, and Angius Investments Pty Ltd as sixth defendant.
I have also made an order that Brian Raymond Silvia be appointed as receiver and manager of the second to sixth defendants, initially for the purpose of conducting the defence of the claims made against them. In short, that course was necessary because, given the dispute between John and Mr Salier, and the fact that both held shares in those companies, it would have embarrassed Mr Salier to be given the conduct of the companies' defences, because of the conflict that would have been created. As I understand it, at present John and Jenny are the appointed directors of the companies.
Mr Willmott of senior counsel for Mr Salier has expressed the view on a number of occasions that the issues in these proceedings are relatively straightforward, and if John would only do what is necessary to provide particulars and evidence in support of his claims, the proceedings could be heard and determined in a relatively straightforward way. While I am not personally au fait with the issues, Mr Willmott's observation appears to be correct to me.
On 5 April 2018, I made orders that the time for John to file and serve a defence to the cross claim be extended to 18 April 2018; that the order that he serve all further affidavit evidence be extended to 18 April 2018; and that by the same date John serve on Mr Salier a written statement of particulars of the expenditures that he claims to have made in relation to the various properties. I then ordered that if John failed to comply with the orders made, he would not be permitted to rely upon any evidence, whether by affidavit or by the tendering of evidence in support of his amended statement of claim, without the further leave of the Court.
On 6 April 2018, I made orders that varied the orders by which Mr Silvia was appointed as the receiver for the second to sixth defendants. By the varied orders, Mr Silvia was empowered to represent each company for the purpose of recovering, by legal action or otherwise, payments made from the accounts of the second to sixth defendants with a value of more than $5000 each for the benefit of John or his legal or accounting advisors for the period following 1 July 2011. John and Jenny, as directors of the companies, were ordered to provide in writing to Mr Silvia the identification of all banking institutions in which they held accounts personally or as directors of the companies from 1 July 2011. I granted leave to Mr Silvia to issue subpoenas to produce relevant documents addressed to a number of banks and the rental agent for various properties.
Because of a change of solicitor representing John, on 20 April 2018 I made an order extending the time for John to comply with the orders that I made on 5 April 2018 to 30 April 2018.
I now understand from what I have been told that John has complied with the Court's orders, and that subject to any additional case management directions that may be necessary, these proceedings have reached the point that it should be possible to set them down for hearing.
This brings me to the second circumstance to which I referred above. That is that Jenny has commenced proceedings for family provision relief against Mr Salier as administrator of Laura's estate. The significance of that matter is that, given the amounts at issue in the present proceedings, the outcome of these proceedings may affect the value of Laura's estate. In the best of all worlds, it would be desirable for these proceedings to be determined before the family provision application made by Jenny is heard.
As Mr Willmott has observed, any delay in the determination of these proceedings is unlikely to have dire consequences in relation to the determination of Jenny's family provision application, because although the amount claimed in these proceedings is substantial, the amount claimed is only a relatively small part of Laura's estate. If these proceedings are unresolved when the family provision application comes before the Court, that should only cause inconvenience, and should not be a barrier to the determination of the family provision application.
I have set these matters out in order to explain why it is that I have taken the view that it is now desirable for these proceedings to be brought to a hearing as soon as possible, and without any inessential distractions.
That will explain why I propose to approach the determination of Robert's notice of motion on the basis that will cause the least distraction and delay to the conduct of these proceedings as possible.
I was able to make a brief amount of time available on 3 May 2018 in order to hear Robert's notice of motion. It was necessary for me to reserve judgment.
It will be convenient first to deal with the response of the respondents to Robert's notice of motion.
Mr Silvia, as the receiver for the second to sixth defendants, properly took the stance that he was neutral to the application.
The solicitor for John opposed the application, essentially for the reason that permitting Robert to become a party was likely to be disruptive, given the self-evident antagonism between Robert and John.
Mr Salier also opposed the application. The general basis of Mr Salier's opposition to Robert's joinder was the terms of rule 6.24(1) of the Uniform Civil Procedure Rules 2005 (NSW), which provides:
If the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party.
Mr Salier submitted that where, as here, John makes no claim against Robert, and Robert proposes no cross claim which cannot be made by the existing parties, it cannot be said that his joinder is "necessary".
Furthermore, the question of whether Robert "ought to have been joined as a party" invites enquiry as to the interests which Robert seeks to protect by virtue of his joinder. Mr Salier submits that Robert has no legal or equitable interest in the assets of the estate until the administration of the estate is complete. He only has a right to due administration of the estate of Laura: Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12; [1965] AC 694; Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306; [1990] HCA 45.
Mr Salier submits that it is he who has the responsibility of bringing in the assets of Laura's estate, and of defending the claims made against the estate.
In the context of family provision claims, Mr Salier submits it has been held that the joinder of a beneficiary to proceedings should not normally be necessary, but will be permitted in special circumstances: Vasiljev v Public Trustee [1974] 2 NSWLR 497 at 503.
Mr Salier submits that the exception that may be pertinent to family provision applications does not apply to the present case, which essentially involves matters of account as between John and Mr Salier as the administrator of Laura's estate.
Mr Salier points to the fact that Robert has foreshadowed that he is in partnership with Togumi Pty Ltd, and claimed that accordingly Robert is a necessary party to the claim made by John against Togumi Pty Ltd.
Mr Salier also refers to the fact that Robert has indicated that he wishes to make a claim, by way of a cross claim, against John in respect of the personal property of Laura at 2 Denning Street, Coogee, as to which Robert claims entitlement as residuary beneficiary of Laura's estate.
In short, Mr Salier puts forward in opposition to Robert's application to be joined as a defendant to the proceedings, that by reason of his participation in John's claim against Togumi Pty Ltd, and by his making of a cross claim in respect of Laura's personal property, he is likely to unnecessarily complicate the proceedings, increase the expense involved in the running of the case, and cause unnecessary further delay.
In the latest written submissions on joinder, Robert accepted that if an order is made by the Court for his joinder as the seventh defendant, the joinder should be on the following conditions:
(a) that he would be at risk as to his own costs in that he will pay his own costs of the proceedings, unless the Court otherwise orders;
(b) that unless the leave of the Court is granted, cross-examination by his counsel would be limited to areas not otherwise covered by senior counsel for Mr Salier; and
(c) that his evidence will deal with the Togumi Partnership issue only, unless the leave of the Court was otherwise granted.
Robert relied upon the fact that in the decision of Hallen J in Angius v Salier [2015] NSWSC 1446, an order was made that Robert be joined as a defendant on the conditions set out in pars (a) and (b) of the preceding paragraph. In that case, John sought orders setting aside certain agreements that he had entered into with Laura and Jenny.
However, Hallen J made an order joining Robert on the following basis:
[8] Subsequently, Robert Angius, the only other child of the deceased and the Plaintiff, made an application, by notice of motion filed on 30 July 2015, that he be joined as the second Defendant in these proceedings. On 11 August 2015, without opposition, the court made an order that he be joined as a party/second Defendant, subject to two conditions, namely, that he would be at risk as to his own costs in that he would pay his own costs of the proceedings unless the court otherwise ordered, and, secondly, that unless the leave of the court was granted, cross-examination by his counsel would be limited to areas not otherwise covered by senior counsel for Mr Salier.
The order was made without opposition by the other parties. That is not so in the present case.
Robert put his claim to be joined as a defendant on two grounds: first, he has a real, practical interest in the outcome of the proceedings, as he is the primary beneficiary of Laura's estate and he is concerned that Mr Salier will not adequately represent his interests; and secondly, Robert owns one of the properties that is the subject of John's claim for reimbursement in partnership with the third defendant, Togumi Pty Ltd, so that he is a necessary party to the proceedings.
As to the first of these matters, Robert referred in his affidavit in support of the notice of motion for the decision of Ball J on 1 July 2015 in Salier v Angius [2015] NSWSC 853, which involved questions of construction of Laura's will, where it was determined that Laura had left almost all of her estate to Robert, including Units 8 and C5 at 8 Allen Street, Waterloo, and all her shares in each of Angius Investments Pty Ltd, Angius Hotel Investments Pty Ltd, Togumi Pty Ltd, J & L Angius Pty Ltd and Taraba Pty Ltd. Those shares constitute 50% of the issued capital in each company.
Commercial suite C5 at 8 Allen Street Waterloo is the subject of John's claim in pars 20 to 21A of his amended statement of claim. John also makes claims against Angius Hotel Investments Pty Ltd, Togumi Pty Ltd and J & L Angius Pty Ltd. Although Mr Silvia, as receiver, has been appointed to conduct the companies' defences, Robert will be entitled on the administration of Laura's estate to become a 50% shareholder in those companies.
Robert relied upon an aspect of a report to the Court prepared by Mr Trevor Vella, as court appointed expert, as evidence that Robert is in partnership with Togumi Pty Ltd, which is the subject of John's claim in pars 31 and 32 of the amended statement of claim in respect of partnership property at 167 George Street Windsor, which are in the following terms:
31. The plaintiff incurred costs and expenses in performing work on improvements of the restaurant at 167 George Street Windsor at the request and for the benefit of Togumi Pty Ltd (the third defendant) on the basis that the plaintiff would be reimbursed for such costs and expenses.
Particulars
Bundle Invoices No 31: $133,486.10.
32. The plaintiff claims reimbursement from Togumi Pty Ltd.
Mr Vella expressed dissatisfaction with the accounting records of Togumi Pty Ltd and the partnership, and noted that the rent received by the partnership had declined from amounts over $100,000 per year to $0 and $13,611 in 2015 and 2016.
In support of his application, Robert relied upon a number of authorities that deal with the question of when it is appropriate for the Court to make an order joining beneficiaries of a deceased estate that is the subject of an application for family provision relief and is being defended by the executor. In my view those authorities are not directly applicable as there are special considerations that are involved in relation to the executor's duty to defend the will and to put all relevant information before the Court, including information claimed to be relevant by beneficiaries whose interests in the estate may be adversely affected if family provision relief is granted. However, in the special circumstances of the present case these authorities may provide some guidance, and I will return to them below.
It will be appropriate to begin by having regard to the following statement of principle by a unanimous Court of Appeal in Ashton v Pratt [2013] NSWCA 400 on the issues of when it is necessary for the Court to make an order joining a non-party, as well as when it is appropriate for the court to make an order joining a beneficiary in a case that is being defended by a trustee:
[21] Where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined: John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19 ; (2010) 241 CLR 1 (John Alexander) (at [131]). That situation will arise, relevantly, where the orders sought establish or recognise a proprietary interest in a monetary fund, in which circumstances all persons who have or claim an interest in the subject matter are necessary parties because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest: John Alexander (at [132]) approving News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410 (at 524-525) (News Ltd).
[22] In such circumstances the non-party "is entitled to have the order set aside, and is not limited merely to seeking the favourable exercise of a discretion, whether or not the person in question becomes a party": John Alexander (at [137]).
[23] However, prima facie, where proceedings have been commenced by a trustee, it is not necessary to join as a party any of the persons having a beneficial interest under the trust: UCPR 7.9(1) and (2). UCPR 7.9 does not limit the power of the court to order that a party be joined under UCPR 6.24: UCPR 7.9(5). Application of the prima facie rule requires, relevantly, an examination of whether the trustee sufficiently represents the beneficiaries', or potential beneficiaries', interests for the purposes of the proceedings: Alexander v Perpetual Trustees WA Ltd [2004] HCA 7 ; (2004) 216 CLR 109 (at [52]-[53]) (Alexander) per Gleeson CJ, Gummow and Hayne JJ.
[24] The general position in this respect was explained by Brooking J (JD Phillips and Batt JJ agreeing) in Young v Murphy (1996) 1 VR 279 (at 283) as follows:
… [W]hile the trustee in general sufficiently represents the beneficiaries' interests for the purposes of proceedings to redress a breach of trust, they should be made parties if their interests may not be properly represented by the trustee. If it can be said that for any reason the trustee should not be regarded as a party who will properly represent the interests of all beneficiaries, then he should not be regarded as able to sue without joining any beneficiary. … The proceedings which the trustee brings may be such as to raise, or be capable of raising, questions between one beneficiary and another or questions between the beneficiaries and himself. In such a case the trustee does not sufficiently represent the interests of the beneficiaries for the purposes of the proceedings. Accordingly, if in the proceedings the trustee seeks the execution or administration of the trust in addition to seeking to have the breach of trust redressed, the beneficiaries will or may be necessary parties, since their interests inter se or their rights against the trustee may have to be determined. (Emphasis added).
I am satisfied that I should accept Robert's argument that he should be joined as a defendant to these proceedings so that he can resist John's claim in relation to 167 George Street Windsor that is owned in partnership by Robert and Togumi Pty Ltd, for the reasons set out by the Court of Appeal at [21].
The joinder of Robert on that basis would not necessarily entitle him to participate in the defence of the other claims made by John. The question is whether the basis of Robert's joinder should be widened to permit him to participate in the defence of John's claims generally, and if so on what basis.
I do not believe that there is any risk that Mr Salier will not conduct the defence of John's claim competently or that there is any conflict of interest between Mr Salier and Robert that gives rise to any real possibility that Mr Salier will not adequately represent the interests of all beneficiaries to Laura's estate. Accordingly, the principles outlined by the Court of Appeal at [22] and [23] would not justify the joinder of Robert generally as a defendant.
However, as I mentioned above, I consider Robert's position to be relatively exceptional in this case. Although John's application is not for family provision relief, the present case has something in common with such an application, as John is making a claim for compensation against Mr Salier as administrator of Laura's estate, in circumstances where his success would significantly diminish Robert's entitlement as a beneficiary. Robert is the primary beneficiary, and the evidence is that he will ultimately be entitled to a substantial gift, running to the tens of millions of dollars, whatever might be the outcome of Jenny's family provision application. Laura died on 3 January 2012, and the grant of letters of administration with the will annexed to Mr Salier occurred on 17 December 2013. As I understand it, no distribution of Laura's estate has yet occurred. That has not been any fault of Mr Salier, as the estate has been engaged in significant litigation, and the present case and Jenny's family provision application remain to be determined. For whatever reason, Robert has been kept out of his money for over five years. It is, in the circumstances, understandable that Robert is frustrated with the course of the administration of the estate and the protracted nature of the litigation.
As Hutley JA said in Vasiljev v Public Trustee (above) at 503 (with the agreement of Hardie and Reynolds JJA) (footnotes omitted):
…Beneficiaries may be allowed to intervene on special grounds, but their intervention is unwelcome.
These rules put the executor in a position of great responsibility, as he is the only defender of the will. In In the Will of W.F. Lanfear (Deceased), Williams J., speaking with the concurrence of Nicholas C.J. in Eq., said:
"In an ordinary case, specially where the estate is a small one, it is the duty of the executors either to compromise the claim, or to contest it and seek to uphold the provisions of the will. For that purpose they should place all the relevant evidence before the Court relating, not only to the case generally, but to any particular circumstances which the Court should take into consideration relating to any particular gift in the will. In special cases where for instance the executors are themselves beneficiaries under the will, or where very substantial benefits are conferred upon beneficiaries, it can be proper for beneficiaries to intervene and be separately represented, but as a general rule such separate representation should not be necessary if the executors do their duty. If beneficiaries desire to intervene an application to do so must be made before or at the hearing, and it is by no means a matter of course that such application will be granted. If the executors take up an attitude, which compels beneficiaries to seek separate representation to protect their gifts, they run a grave risk of the Court holding that they have acted improperly and, in a case where the Court considers that only one set of costs should be allowed between the respondents, the result may follow that the Court will order that set of costs to be applied in the first instance on behalf of the beneficiaries who have been forced to intervene, and only the residue to be applied on behalf of the executors."
This passage was quoted with approval by the Full Court, Owen J.,
McLelland C.J. in Eq. and Walsh J., in Re S.J. Hall, Deceased.
The proposition that the fact that a beneficiary wishes to intervene to protect a very substantial benefit that is conferred on the beneficiary by the instrument creating the estate may provide an exceptional basis that justifies the beneficiary being joined in the proceedings is supported by the decision of the Victorian Court of Appeal in The Official Trustee in Bankruptcy v Frangos (7 July 1995, unreported) at 15; and Boldi v Crozier [2015] NSWSC 2155 at [4] (Brereton J).
I have decided that an order should be made that Robert be joined as the seventh defendant to the proceedings based on these considerations, and also my judgment that this course will give Robert a 'stake' in the proceedings and their outcome, and increase the likelihood that Robert will ultimately be satisfied that his voice has been heard and that his interests have been properly protected in the determination of the proceedings. It might be a forlorn hope, but I believe this course is most likely to promote the finality of litigation.
However, the joinder of Robert at this late stage in the proceedings must not be allowed to interfere with the earliest and most efficient determination of this case that is possible.
Robert's joinder can only be entertained on the basis that his involvement in the case does not interfere with the primary conduct of the defence and the prosecution of the existing cross claim by Mr Salier. Robert must strictly play the role of 'second fiddle' of which experienced lawyers will be familiar, where Robert's role will primarily be to augment the conduct of the proceedings by Mr Salier in a disciplined and limited manner.
Robert foreshadowed in his affidavit in support of his notice of motion that there are claims that he wishes to make by way of cross claim in these proceedings. It is most unlikely that the Court will permit any significant cross claim that is likely to delay the final determination of the existing proceedings. The order for the joinder of Robert will be made on the condition that he may not file any cross claim without notice to the other parties and the leave of the Court.
The order for the joinder of Robert will be made on the conditions offered by Robert, and also the additional condition set out below in the order.
As Robert's application has effectively been made in the course of a series of case management hearings that I have conducted, and as Mr Salier's costs will ultimately be protected out of Laura's estate (which will largely be in reduction of Robert's share in that estate) I think that the proper course is for no order for costs to be made in relation to Robert's notice of motion. I will make an order to that effect, but give leave to any party to the proceedings who wishes to argue to the contrary to do so by arrangement with my associate.
I make the following orders:
1. Robert Angius is joined as the seventh defendant to these proceedings on the following conditions.
2. Robert Angius' participation in these proceedings will be at his own risk as to his costs in that he will pay his own costs of the proceedings, unless the Court otherwise orders;
3. Unless the leave of the Court is granted, cross-examination by Robert Angius' counsel will be limited to areas not otherwise covered by counsel for the first defendant;
4. Robert Angius' evidence will deal with the Togumi Partnership issue only (arising from pars 31 and 32 of the amended statement of claim), unless the leave of the Court is otherwise granted.
5. Robert Angius is joined as a defendant to these proceedings on the condition that he not file any pleading, whether by defence or cross-claim, without first providing a draft of the pleading to all other parties as well as the receiver of the second to sixth defendants, and that he be given leave by the Court to do so on application on 7 days' notice.
6. Without prejudice to the right of the first defendant to claim his costs and expenses of the notice of motion filed by Robert Angius on 15 November 2017 out of the estate of Laura Angius, the Court makes no order as to the costs of the notice of motion, with the intent that the parties will bear their own costs.
[3]
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Decision last updated: 05 June 2018