2313/02 BRUCE CLYDE BAILEY v ARNOLD NEIL BAILEY & ORS
JUDGMENT
1 HIS HONOUR: On 12 February 2004 Master McLaughlin gave a judgment granting leave to the Plaintiffs to file a Further Amended Statement of Claim in this matter: Bailey v Bailey [2004] NSWSC 49. The First Defendant filed a Notice of Appeal against that decision on 12 March 2004, a day outside the time permitted by the rules for lodging such an appeal.
2 There are before me two Notices of Motion. The first is a Notice of Motion filed on 20 April 2004 by the Plaintiffs, seeking an order that the Notice of Appeal filed 12 March 2004 by the First Defendant be struck out. The second was filed on 22 April 2004 by the First Defendant, seeking an extension of time until 14 March 2004 within which to file a Notice of Appeal, and an order nunc pro tunc treating the Notice of Appeal filed by the First Defendant on 12 March 2004 as being good and valid.
3 The Notice of Appeal was filed late because the lawyers involved miscalculated the dates. The Plaintiffs have complained that the First, Second and Third Defendants have been dilatory in conduct of this matter ever since it was begun in 2002. It is true that the entire course of the proceedings can be looked at to decide the significance of any particular delay, but in my view, in deciding whether to extend the time for lodging a Notice of Appeal, much greater weight needs to be given to the reason for the particular delay involved in lodging that Notice of Appeal, and whether that particular delay has caused prejudice to anyone.
4 In the present case, while some of the Defendants have put on a defence to the Further Amended Statement of Claim, and the time and money expended in so doing would be wasted if the Court were now to hold that the Further Amended Statement of Claim should not have been filed, that is a matter which is able to be cured by an order for costs, if the situation arises. No other matters of prejudice are pointed to. In all these circumstances I will extend the time for filing the Notice of Appeal, and decline to strike it out.
5 The Plaintiffs and the First Defendant also argued the merits of the appeal, against the possibility that I might allow an extension of time for filing the Notice of Appeal. The Notice of Appeal asserted that the learned Master was in error in allowing the filing of the Further Amended Statement of Claim, because it disclosed no cause of action. The Notice of Appeal identified four respects in which the First Defendant contended that there was no cause of action disclosed, but at the hearing only two of those respects were pressed. These were that:
"(a) it asserted an entitlement on the part of the plaintiffs to receive a benefit from the residue of an unadministered estate (Judgment paras 37-42);
(b) it asserted a valid contractual entitlement on the part of the plaintiffs to receive a benefit from the residue of an unadministered estate (Judgment para 43)."
The Circumstances Giving Rise to Litigation
6 The following account of the circumstances giving rise to the litigation is drawn from the Further Amended Statement of Claim itself. It does not amount to factual findings, even on the prima facie basis common in interlocutory proceedings.
7 Henry Neil Bailey ("the Deceased") died on 5 February 1994. He left five children, Bruce, Janet, Neil, Glennice and Annette. At the time of his death he owned a rural property called Hazeldene, and some statutory water licenses connected with it.
8 An agricultural business had been conducted on Hazeldene by a partnership consisting of the Deceased, his wife, and the five Bailey children. Mrs Bailey died in June 1985, but the partnership continued after her death. In November 1991 Annette and Glennice began proceedings in this Court seeking the winding up of the partnership.
9 The Deceased left a Will which appointed Bruce and Janet as the executors, and divided the Deceased's assets amongst the Bailey children, and no one else. Clause 4(a) of the Will gave "Hazeldene" and the water licenses attached to it, and the Deceased's interest in the partnership in the following shares, namely, half to Bruce and one-eighth to each of Janet, Annette, Glennice and Neil.
10 The Bailey children submitted various disputes between them to mediation before the Honourable Sir Lawrence Street QC. This resulted in a mediation agreement being entered on 3 July 1995, and a supplementary mediation agreement being entered on 22 January 1996. The part of the Further Amended Statement of Claim which was the subject of argument before me is a claim for breach of the contract contained in those mediation agreements. The thrust of the allegation is that the two mediation agreements should be read together, "and constituted a regime for the due and complete administration of, including the distribution of all beneficial interests in, the estate of the deceased which bound all of the executors and beneficiaries of the will of the deceased." While two paragraphs plead that the estate administration regime "constituted both a contractual and a proprietary basis for undertaking the due and complete administration" of, respectively, the estate of the Deceased, and the winding-up of the Bailey family partnership, the "proprietary basis" appears to emerge from the incorporation by reference of certain terms of the Will of the Deceased into the two mediation agreements. The Further Amended Statement of Claim alleges that the mediation agreement contained certain terms (paras 19E, 19F and 19G of the Further Amended Statement of Claim), that those terms were breached (para 22, 23, 23A, 24, 25, 27 and 28), and that those breaches caused damage (para 29 and 29A amongst others). These are the necessary allegations for a cause of action for breach of contract.
11 Bruce and Janet are the plaintiffs in this litigation. Neil, Glennice and Annette are the first three Defendants. The nub of the complaint of the Plaintiffs is that the mediation agreements obliged all of the Bailey children to agree to the proceeds of sale of Hazeldene, the water licenses, and all other assets, being divided in a particular way. The Plaintiffs say that the terms of the mediation agreement were such that they were entitled to receive their share of the proceeds of sale of assets immediately upon the sale of those assets. Their share of the proceeds of sale of any particular asset was the proportion of the net sale price of that asset which the parties had agreed the estate would be divided into. The Plaintiffs contracted to purchase some of the estate assets at an auction (as they were entitled to do under one of the terms of the mediation agreements), but when the time for settlement of the purchase came, the First, Second and Third Defendants insisted on part of the proceeds being held back in a contingency fund, to meet possible future expenses. This led to the Plaintiffs not having enough money available to them to purchase all the estate assets which they had contracted to purchase. The Plaintiffs arranged for a water license to be purchased by someone else, but were able to purchase the rest of the assets which they had contracted to purchase. The damages which they claim include loss of the increase in value which there has been in the water license which they were unable to complete the purchase of.
12 The attack which the First Defendant makes on this pleading is at a very fundamental level of principle. He submits that where there is an unadministered estate (as the estate of the Deceased was) neither a residuary beneficiary (Commissioner of Stamp Duties (Q) v Livingston (1964) 112 CLR 12; [1965] ASC 694) nor a specific devisee or legatee (Official Receiver in Bankruptcy v Shultz and Another (1990) 170 CLR 306, at 312) has any right of property in any specific asset of the estate. That proposition is unarguably correct, if all there is is an unadministered estate. It does not follow, however, that all of the beneficiaries of an estate and the executors of the estate cannot agree that an unadministered estate will thenceforth be administered in some particular way. Further, it is open to them to agree that the estate will be administered in a way different from the provisions of the Deceased's Will. The familiar situation of a deed of family arrangement is one example of such a contract. It is open to them to agree that particular people will receive particular assets, or particular proportionate interests in particular assets. If such a contract is broken, there is no reason why damages cannot be given for that breach. It is just such an allegation which is made in the Further Amended Statement of Claim. I do not accept the submission that the two bases, identified in para [5] above for the Further Amended Statement of Claim disclosing no cause of action, apply.
13 It is, of course, completely a different matter whether the mediation agreement, on its true construction, contains terms of the type pleaded. Part of the reason why a beneficiary of an unadministered estate ordinarily has no right of property in any particular asset is that the executor or administrator has power to realise any asset for purposes of administration, so the donee under the Will of any particular asset might not actually receive that asset, and the donee of residue or a share in residue cannot know in advance what particular assets the residue will consist of once administration is complete. The contention of the Plaintiffs is that the executors and beneficiaries of this estate made an agreement the effect of which was that the executors would have no such power. A consequence of such an agreement having been made might possibly be that the executors personally underwrote or insured against the possibility that debts of the estate, not known about at the time of the mediation agreement, might be found to exist. It is a question of construction of the mediation agreement, not before me now, whether the mediation agreement really means what the Plaintiffs say it means. It suffices for present purposes that the allegation in the Further Amended Statement of Claim that an agreement in the terms alleged was made, is part of an internally coherent allegation of a known cause of action.
14 The Further Amended Statement of Claim is prolix, and contains some matter in its particulars which strictly should be pleaded. However the attack on it was not based on such minutiae.
Costs
15 While I have not upheld the Notice of Motion of the Plaintiffs filed 20 April 2004, one of the reasons why it was not upheld was because, once it had been filed, the First Defendant, on 22 April 2004, filed his own motion seeking an extension of time. That circumstance, considered by itself, would justify the Plaintiffs in having their costs of their Notice of Motion up to 22 April 2004. But it should not be considered by itself. Once the First Defendant's Notice of Motion of 22 April 2004 was filed, the Plaintiffs persisted, unsuccessfully though briefly, in seeking the relief claimed in their Notice of Motion. In all the circumstances, the appropriate order is that there be no order as to costs of the Plaintiffs' Notice of Motion.
16 The First Defendant has obtained the relief claimed in his Notice of Motion filed 22 April 2004. It was his own conduct in being late in filing the Notice of Appeal, which led to the need for that Notice of Motion to be filed at all. However, the Plaintiffs opposed, again, unsuccessfully but briefly, the orders claimed in that Notice of Motion. The appropriate order is that there be no costs of that Notice of Motion.
17 The First Defendant having lost the appeal, should pay the costs of it.
18 For the benefit of any assessment of costs, the hearing time occupied by the two Notices of Motion together was about five percent of the total hearing time.
Orders