_Bar-Mordecai v Rotman_ unreported judgments NSW, 4 Sep 1998, BC9804681, Einstein J

Supreme Court of Victoria|2010-03-22|Before: ROBSON J

ADMINISTRATION AND PROBATE - renunciation of probate by appointed executor - whether appointed executor intermeddled in estate - application for appointment as administrator of estate by mother of twenty one year old residuary legatee, who has the greatest financial interest in the estate - circumstances where a court may "pass over" nominated executor - discussion of court's inherent discretion in appointing administrator to ensure due and proper administration of the estate - requirement of applicant for administration with the will annexed to give notice to others entitled to apply for administration, inform them of their rights and obtain their consent

Bar-Mordecai v Rotman unreported judgments NSW, 4 Sep 1998, BC9804681, Einstein J

Bates v Messner (1967) 67 SR NSW 187

Hunter (decd), In re v Hunter [1932] NZLR 911

Johnson v Sammon (1974) 7 SASR 431

In re Edwards, decd [1946] VicLawRp 14; [1946] VLR 71

In the Goods of Loveday [1900] P 154

In the will of Basse [1909] VicLawRp 55; [1909] VLR 313

In the Will of Dobrzanski (decd) [1886] VicLawRp 62; (1886) 12 VLR 270

In the Will of Docker (1976) 12 ALR 521

In the Will of Orloff [2010] VSC 48

In the Will of Lyndon [1960] VicRp 17; [1960] VR 112

In re Pierce (decd) [1886] VicLawRp 152; (1886) 12 VLR 733

Levy v Victoria (1997) 189 CLR 579

Public Trustee as Executor of the Will of Karoline Fielder v Fielder [2007] WASC 296

1 I have before me an originating motion of 13 November 2009 and a summons on originating motion of 13 November whereby the plaintiffs, inter alia, seek an order that the first plaintiff, Paulette Terracall, the only daughter of the deceased, Eva Orloff, and the mother of the second plaintiff, Elly Steinlauf, the residual legatee and only granddaughter of the deceased, be appointed administrator of the deceased's estate.

2 On 25 February 2010, I found the nominated executor, Mr Joseph Churkovich, the deceased's solicitor, had not properly sought to renounce his appointment as executor. I declined to make the orders sought and stood the matter over for further consideration. I gave my reasons in In the will of Eva Orloff.[1] Since then, further affidavit material has been filed, as will be discussed below, and I have heard further submissions in support of the plaintiffs' application.

3 According to Ms Terracall, the testatrix's estate exceeds $6m. In her affidavit of 9 November 2009, she deposes that her mother's estate includes shares in private companies and joint venture partnerships which she said she reliably believed are valued at approximately $400,000.

4 In her affidavit of 17 February 2010, she deposes to the details of those shares being shares in eight private companies which she deposes have a value of $3,979,043.

5 Under the testatrix's will and codicil, the bulk of her estate fell into her residuary estate. The testatrix left her family photographs and personal mementoes to her daughter, Ms Terracall. By a codicil to her will of 7 June 2006, the testatrix left $5000 to a friend, Lucy McGraw.

6 Under her residuary estate, the testatrix left $400,000 to a friend, Jasmine Lucic, in recognition of her having been Ms Orloff's carer and companion since 1994. The balance was divided into two trust funds: one a trust called "The Eva Orloff Trust" for the benefit of several well known medical research institutions (The Royal Victorian Eye and Ear Hospital, The Walter and Eliza Hall Institute of Medical Research, the Peter MacCallum Cancer Centre and the Mental Health Research Institute of Victoria (Inc)); the other in trust for her only granddaughter, Elly Steinlauf, the second named plaintiff, the daughter of the first plaintiff Paulette Terracall. The testatrix settled $650,000 on the charitable trust and the balance of her residue on the trust in favour of her granddaughter. On the basis of Ms Terracall's valuations, the residue bequeathed to Elly Steinlauf will be in excess of $5m.

7 After Ms Orloff had made the bequests from her residuary to Jasmine Lucic and the Eva Orloff Trust in favour of the medical research institutions, the will provided:

The remainder being "my residuary estate" to my Trustee upon trust for my grand-daughter Elly Steinlauf subject to the following:

If my said grand-daughter is in the opinion of my Trustee competent and capable of administering the very considerable funds and assets which she would thereby receive under my Estate then to her absolutely.

If my said grand-daughter is in the opinion of my Trustee not competent and capable of administering such funds at the date of my death or thereafter then I vary the aforementioned bequest and give and bequeath my residuary estate to my trustee on trust for my said grand-daughter until such time as in my trustee's opinion she has developed sufficient competence to administer such funds on her own behalf but being no later that the age of twenty-five (25) years and in the meantime I authorise my Trustee to invest such funds.

8 The will then contained specific provisions relating to what she called the prescribed trust, being the Eva Orloff Trust. She expressed her wish but did not direct that her solicitor Mr Churkovich act as trustee of the prescribed trust. She made no special mention of the trustee of the trust in favour of her grand daughter.

9 Ms Elly Steinlauf is now 21 and will turn 22 in July. At the time Ms Orloff made her will Ms Steinlauf was 16 years of age.

10 Since the matter was last before me, Mr Churkovich has executed a deed of renunciation of probate dated 4 March 2010 and executed an affidavit verifying the deed in accordance with the practice of the court. Mr Kuperholz, the solicitor for the plaintiffs, has also sworn an affidavit verifying that he witnessed Mr Churkovich execute the deed of renunciation.

11 Mr Churkovich states that he is not able to declare that he has never in any way acted and has wholly refused to act proving and executing the will, or that he has not intermeddled in the estate or affairs of the testatrix. Nevertheless, Mr Churkovich says he desires to renounce all and every right, title and interest in, or to probate and execution of the will and administration of the estate of the testatrix.

12 Mr Churkovich sets out the steps taken by him between the testatrix's death and the date of his affidavit. In substance he has:

(a) attended, on receipt into his trust account of various medical expense refunds due to the deceased;

(b) attended, on receipt into his trust account of moneys to the credit of the deceased in her bank account;

(e) attended to the payment of balance of salary to Jasmine Lucic, the deceased's carer; and

(f) made arrangements to value the deceased's artwork.

13 I note that Mr Churkovich has not set about getting in or selling estate assets.

14 In my opinion, if Mr Churkovich has intermeddled, it has not been to such an extent that the court should not accept Mr Churkovich's renunciation: see In the Will of Lyndon.[2]

15 If the court accepts the renunciation, the first plaintiff applies to be appointed the administrator of the estate. When the matter was initially raised with me, I was pressed to grant letters of administration to Ms Terracall, who for all practical purposes has no financial interest in the estate. I was informed by Mr Robins of counsel who appears for the plaintiffs that the application was for "consent orders, in essence."[3]

16 On the resumption of the hearing, Mr Robins again applies for the appointment of Ms Terracall as administrator. He contends that all of the beneficiaries, including the charities are aware of what's being sought and either consent or in the case of the two specific legatees, certainly do not oppose what is being sought. He argues that in terms of the two specific legatees, none of this is relevant to their interest.

17 He submits that in those circumstances an administration order ought to be made. He acknowledges that usually it is the person with the greatest beneficial interest under the will who is the proper person to be granted administration. He relies on Ms Terracall's most recent affidavit, supported as it is by the letter of Ellie Steinlauf (which I discuss below). That affidavit explains that Ms Steinlauf is a young lady who will be 22 in July. He contends the testamentary trust that her grandmother set up for her is to operate until she is 25.

18 Mr Robins submits that Ms Terracall and Ms Steinlauf both agree that it's proper that Ms Terracall be appointed as the administrator in those circumstances, and he submits that that makes both good sense as well as being consistent with authority.

19 Despite Mr Robins submissions, I have had some difficulties in considering this application. I have not been assisted by the absence of a contradictor or a court appointed amicus curiae.[4] Nevertheless, undertaking my own research of the issues, with assistance from Mr Robins as counsel for the plaintiffs, I set out what I understand to be the relevant principles applicable to the appointment of an administrator with the will annexed where the nominated executor renounces probate.

20 In Griffith's Probate Law and Practice in Victoria,[5] the learned authors state that in making a grant of administration the court will favour the person with the greatest interest under the will. They say that accordingly a grant will be made to the universal residuary legatee. They say that he will be preferred to the next of kin or the widower of the deceased. The authors say that the court may, however, depart from this rule in a case in which the provisions of the will warrant the appointment of an impartial person.

21 In Re Pierce,[6] in a case where no executor had been appointed under the will, Webb J said:

Then the rule of this Court is that if there is a Will, and no executor is appointed, the first person entitled to administration ata is the residuary legatee.[7]

22 In Probate Practice Manual,[8] the learned authors state that where the executor renounces probate, then the court will grant letters of administration with the will annexed in favour of the person with the greatest interest in the will. They refer to In the Will of Dobrzanski (decd)[9], In re Edwards (decd),[10] In the Will of Docker[11] and In the Will of Basse.[12]

23 In In the will of Basse,[13] Madden CJ observed that the person entitled to be appointed administrator should be given notice of an application by another person seeking to be appointed administrator, the person entitled should be informed of their rights to apply to be appointed administrator, and the person seeking appointment should obtain their consent.[14]

NOTICE TO PERSONS ENTITLED TO BE APPOINTED ADMINISTRATOR

24 The persons with material interests under the will in order of significance are Ms Elly Steinlauf, the beneficiaries of the Eva Orloff Trust and Ms Lucic.

25 I discuss below Ms Steinlauf's entitlement to apply for administration of the estate and whether she has been advised of her entitlement to apply to be appointed administrator.

26 Mr Kuperholz deposes to telephoning the four charitable organisations that are beneficiaries of the Eva Orloff Trust. He says that he informed these organisations of the terms of the trust and what Ms Terracall intended to do if she was appointed the trustee of the Eva Orloff Trust. There does not appear to be evidence that the beneficiaries of the Eva Orloff Trust were told of their entitlement to apply to administer the estate or have appointed a representative of the beneficiaries, or a syndic, as such a representative is called.[15] Nor were they told of Ms Terracall's application to apply for letters of administration in the event Mr Churkovich's renunciation was accepted by the court.

27 There is no evidence of Ms Lucic being given notice of her entitlement to apply for administration, and that Ms Terracall intended to apply for letters of administration in the event Mr Churkovich's renunciation was accepted by the court.

28 I am not satisfied that those with a material interest in the estate have been given proper notice of the application including notice of their right to apply for administration.

MS ELLY STEINLAUF'S ENTITLEMENT TO APPLY FOR ADMINISTRATION

29 On the facts before me, it is clear that Ms Elly Steinlauf is the person with the greatest interest in the estate being the universal residuary legatee. Absent any other disqualifying feature, normally she would be entitled to be appointed the administrator if she so applied. This right might be qualified if her interest is to be held on trust for her. In that case, the trustee may have the prior entitlement to apply for administration. As discussed below, it appears that Ms Steinlauf will be entitled to the residuary absolutely.

30 Mr Kuperholz deposes that he spoke to Ms Steinlauf by telephone on 5 March 2010. He says he explained my previous decision of 22 February 2010. He says he took her through the text of a letter which he had prepared for her to sign and return to him. He says Ms Steinlauf informed him that she agreed with the contents of that letter and she would fax it back to him. He exhibits the letter. In it she says:

In particular, I am perfectly happy with the position which my mother has adopted concerning the renunciation by Mr Denis Churkovich of his appointment as executor of my late grandmother's estate.

I am also perfectly happy with what my mother proposes do to as far as dealing with the residuary estate which my grandmother left to me is concerned. My mother and I always have and do now continue to enjoy a very close and loving relationship and I have no doubt whatsoever that my mother will deal with that residuary estate and with me in relation thereto, in the manner she has proposed, in my best interests.

I hereby authorise you to exhibit a faxed copy of this letter to the affidavit you intend swearing and filing in the Court in order to convey to the Court my consent as to the way in which this proceeding should be resolved and Mr Denis Churkovich's renunciation should be accepted, with my mother being appointed as the administrator of my late grandmother's estate and as the trustee of the two trusts established by my late grandmother's will.

32 Ms Terracall deposes in her affidavit of 2 March 2010 that if she were to be appointed administrator, then:

As far as my daughter (who will be 22 years of age in July 2010) is concerned and whom I know to be competent and capable of administering the residuary estate bequeathed to her it is my intention to administer that residuary estate in conjunction with my daughter and to invest the funds comprising the residuary estate on her behalf and in consultation with her until she attains the age of 25 years. That investment is intended, in the first instance, to comprise a residence for my daughter to own and live in. When my daughter attains 25 years, I intend handing-over the residuary estate to her for her thereafter to formally administer on her own but, in keeping with the very close and loving relationship which my daughter and I have always shared, I will always be there to give her whatever financial and other advice in regard to that residuary estate that she may consider necessary, desirable and appropriate.

33 Notwithstanding the above evidence, the evidence before me does not expressly address whether Ms Steinlauf has given a fully informed consent to her mother being appointed administrator, after receiving independent legal advice of her own entitlement to be appointed the administrator.

34 I have no reason to doubt that her mother's wish to be appointed administrator of the estate is motivated other than by a desire to assist her daughter. On the other hand, her mother has no financial interest in the estate save to the extent that the mementoes left to her have any financial value. She is, of course, the next of kin of the deceased.

35 Mr Robins has drawn my attention to Bar-Mordecai v Rotman.[16] There, Einstein J of the Supreme Court of New South Wales considered the appointment of an administrator where the deceased had nominated an executor. In doing so, Einstein J canvassed many of the relevant principles applicable to where the court is entitled to "pass over" a person otherwise entitled to administration and where the named executor has renounced his appointment.

36 In the case before him, the plaintiff sought to establish that the deceased had revoked her will of 1989, in which the plaintiff was named executor, by tearing it up in the plaintiff's presence. The plaintiff sought to claim to be entitled to the whole of her estate as her de facto husband. Under the 1989 will, the plaintiff received substantially less than he would if she had died intestate and he the de facto husband.

37 Einstein J held that the plaintiff had sworn falsely that the will had been revoked. During the hearing, the plaintiff had renounced propounding of the will but subsequently when the court had held that the 1989 will had not been revoked and it was the deceased's last will and testament, the plaintiff sought to be granted probate.

38 Einstein J refused to grant probate to the plaintiff. He held that the court had both an inherent and statutory power to bypass the testator's appointment and grant the right to administer the estate to another person.[17] He held that the circumstances for exercise of the inherent power are found in the real object of the court in the due and proper administration of the estate and the interests of the parties beneficially entitled thereto.[18]

39 Einstein J cited with approval the proposition that some of the reasons the court may "pass over" a person who is otherwise entitled to administration include the character and fitness of the applicant, for example, drunkenness and the lack of management ability.[19] The circumstances where a court will "pass over" go well beyond these two examples but confirm the overriding object to ensure the due and proper administration of the estate.

40 Einstein J also cited Hunter (decd), In re v Hunter,[20] where the New Zealand Court of Appeal had occasion to consider the meaning of "competent" in s 73 of the Court of Probate Act 1857 (20 & 21 Vict, c 77), which was held to be in force in New Zealand, to enliven the court's jurisdiction to appoint an administrator where the deceased had not appointed "an executor ... willing and competent to take probate ..." Reed, Adams and Ostler JJ held that competent meant legally qualified and not having in advance been guilty of misconduct in the testator's affairs serious enough to justify his removal, had probate been granted to him when the misconduct occurred.[21]

41 As indicated above, Einstein J rejected the plaintiff's contention that he was the appropriate person entitled to probate of the will of the deceased. He turned to who should be appointed administrator and confirmed the rule (that applies also in Victoria) that the court prefers the person having the largest interest in the estate being granted administration.[22]

42 Consistently with the principles discussed above, where the court may "pass over" the named executor, in my opinion, it would not be appropriate to appoint as administrator the person having the largest interest if that person would otherwise be passed over. For example, if the applicant lacked appropriate management ability, the court may refuse to make the grant. No doubt that ability would have to be assessed in the light of the task facing the administrator in the particular estate.

43 On the issue of the competence of Ms Steinlauf to act as administrator if she applied to be the administrator, her mother deposes that she is competent and capable of administering the residuary estate. As indicted above, in her affidavit of 2 March 2010 Ms Terracall says that:

As far as my daughter (who will be 22 years of age in July 2010) is concerned and whom I know to be competent and capable of administering the residuary estate bequeathed to her it is my intention to administer that residuary estate in conjunction with my daughter and to invest the funds comprising the residuary estate on her behalf and in consultation with her until she attains the age of 25 years.

44 Under the terms of the will, if Ms Steinlauf is, in the opinion of the trustee, competent and capable of administering "the very considerable funds and assets which she would thereby receive" under the testatrix's estate then the bequest of the residuary estate is to her absolutely. If, on the other hand, Ms Steinlauf is in the opinion of the testatrix's trustee not competent and capable of administering such funds at the date of her death or thereafter, then the testatrix varies the bequest and gives and bequeaths her residuary estate to her trustee, to be held on trust for Ms Steinlauf until such time as in her trustee's opinion she has developed sufficient competence to administer such funds on her own behalf, but being no later than the age of twenty-five (25) years, and in the meantime she authorises her trustee to invest such funds.

45 Accordingly, if Ms Terracall was the trustee, then in view of the opinion she has of Ms Steinlauf's competence and capability to administer the residuary estate, under the terms of the will Ms Steinlauf would be entitled to the bequest absolutely.

46 I note also that under s 26(1) of the Administration and Probate Act, where a minor is the sole executor of a will, administration with the will annexed shall be granted to his guardian or to such other person as the Court thinks fit until the minor attains the age of eighteen years, and on his attaining that age and not before probate of the will may be granted to him. Ms Steinlauf is twenty one, an age well above the age limit referred to in s 26(1).

47 In view of the above matters and on the evidence before me, I am not prepared to grant letters of administration with the will annexed to Ms Terracall.

48 If Ms Terracall's application is further pursued, the proper processes would need to be observed in appointing an administrator, including the giving by Ms Terracall of proper notice to all the other parties entitled to apply for administration and obtaining their consents to the application. In the case of Ms Steinlauf, I consider it would be appropriate for clear evidence to be led that Ms Elly Steinlauf has received independent legal advice of her right to apply for administration and has declined to apply for administration with full knowledge of those rights.

49 The court would also be assisted by full submissions on the relevant principles and authorities on appointing a person who has no material interest in the estate and on any other matters which may go to the issue of the due and proper administration of the estate in the interests of the parties beneficially entitled thereto. It may also be necessary for the court to receive submissions on s 56 of the Act, the administration guarantee and r 7.01 of the Supreme Court (Administration and Probate) Rules 2004.

50 That leaves the matter of the renunciation of Mr Churkovich. Until this matter is resolved, I consider the appropriate course is to reserve my decision on whether to accept the renunciation of the executorship of Mr Churkovich.

[3] I note that when the matter was before Williams J on 5 February 2010, Her Honour was presented with "draft consent orders."

[4] Public Trustee as Executor of the Will of Karoline Fielder v Fielder [2007] WASC 296; Johnson v Sammon (1974) 7 SASR 431; Wentworth v Wentworth (Estate of the Late Wentworth) Levy v Victoria (1997) 189 CLR 579, 604-605 per Brennan J; United States Tobacco Co v Minister for Consumer Affairs [1988] FCA 213; (1988) 20 FCR 520.

[5] 2nd edition, edited by R A Sundberg, at 34.

[8] John V Kaufman, Stewart F McNab, David M R Were**,** Probate Practice Manual (2006).

[15] In the will of Basse [1909] VicLawRp 55; (1909) VLR 313 at 316.

[16] Unreported judgments of NSW, 4 September 1998, BC 9804681, Einstein J.

[18] Citing In the Goods of Loveday [1900] P 154 at 15; and Bates v Messner (1967) 67 SR NSW 187 at 189-191.

[19] Citing Certoma, The Law of Succession in New South Wales (1997, 3rd ed) LBC Information Services at 267.

[22] Unreported judgments of NSW, 4 September 1998, BC 9804681, Einstein J at 33-34.

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