Judgment
1These proceedings concern the estate of the late Percy Clifford Bird ("Percy"), who died on 2 September 1996. Probate of the will was granted on 8 November 1996. Percy was survived by his wife, Mona Ethel Bird ("Mona") (fourth defendant), his son Warrick Lindsay Bird ("Warrick") (first defendant), his son Rodney David Bird ("Rodney") (second defendant) and his daughter Deborah Michelle Bird ("Deborah") (plaintiff).
2At the core of the case is the fate of the proceeds of the sale of four properties all owned by Percy: 500 hectares of farming property known as Bonnington, Lot 161 Russell Road ("Lot 161"), Lot 163 Russell Road ("Lot 163") and 83 Marks Point Road ("Marks Point"). Deborah claims that Warrick and Rodney obtained the benefit of those proceeds, or a significant portion of them, to the disadvantage of Percy, hence to the disadvantage of Percy's estate and hence to her disadvantage as one of the beneficiaries of the estate. There is also a claim against Warrick, Rodney and Mr Herbert James Cannington ("Mr Cannington") (third defendant) in respect of their actions or inaction as executors, based upon their failure to recover the proceeds from Mona.
3By his will, Percy gave a legacy of $300,000 and Lots 161 and 163 to Mona and the rest of the net residue to Warrick, Rodney and Deborah in equal shares: see Exhibit D at pp773 - 774 and p984 (Court Book 4). By a codicil it was provided that:
"1. In the event that I have disposed of my real estate [Lot 161] and the lot adjoining known as [Lot 163] I give to my wife Mona Ethel Bird the sum of seven hundred thousand dollars ($700,000).
2. If at the date of my death my wife has acquired another home then I give to her the sum of five hundred thousand dollars ($500,000)."
There is no dispute that the effect of the codicil was that if Percy had sold Lots 161 and 163 and Mona had not purchased a property, she was to receive $700,000, but if Mona purchased a property, she was to receive only $500,000, although there is a dispute about the relationship between the codicil and the powers of attorney pursuant to which Mona sold the four properties.
4By his will, Percy appointed Warrick and Rodney as executors together with Mr Cannington. Mr Cannington had been Percy's solicitor.
5Percy and Mona were married for 50 years and until Percy's ill health in 1991, Percy controlled all the assets, both real estate and money, and gave Mona an allowance each week. Mona did have an account in her own name ("Account 6307") but, until the deposit of the proceeds of sale, it contained only a small amount. Mona owned a property which I shall refer to as Carrington, having inherited it from her parents, but until 1991 she did not have much else in the way of her own assets. Percy was admitted to the John Hunter Hospital ("the Hospital") on 24 September 1993, aged 90, and went from there to the St Joseph's Convalescence Home and from there to the Greenhills Nursing Home, where he remained until his death.
6In 1991, Percy spoke to his solicitor, Mr Cannington, about preparation of a power of attorney. Percy told Mr Cannington that he did not want the donees of the power to be able to use the power for their own benefit. Mr Cannington prepared a power of attorney in accordance with Percy's instructions, which appointed Mona, Warrick and Rodney as attorneys jointly and severally but with the clause in the printed form permitting benefit to the donees deleted ("the 1991 Power of Attorney"): see Exhibit D at p764 (Court Book 4).
7In 1994, a second power of attorney was prepared which appointed Mona solely and Warrick and Rodney jointly; it also had the clause permitting benefit to the donees deleted ("the 1994 Power of Attorney"): see Exhibit D at p1075 (Court Book 4).
8There is no dispute that the four properties, Bonnington, Lots 161 and 163 (the latter being a block of vacant land) and Marks Point, were sold with net proceeds produced of approximately $850,000. There is similarly no dispute that cheques representing all of those proceeds were made out to Percy and given to Mona and banked by Mona into Account 6307. Mr Cannington says that he told Mona at the time that the proceeds of cheques (which were made out to Percy) were Percy's money and should be kept separate: see T616.31 - T617.2.
9The balance of Account 6307 was later paid into another account, also owned by Mona, which I shall describe as "Account 5007". Nothing turns on that transfer.
10In or after 1993, amounts that had been in accounts operated by Percy alone were transferred to accounts in the joint names of Percy and Mona.
11A small amount of the net sale proceeds of $4375 was paid by Mona into a joint account in Mona and Percy's name, but the rest, an amount of $847,349.75, was paid into Account 6307. An amount of $5000 of the proceeds paid into Account 6307 was received in respect of the deposit on a small portion of land forming part of Bonnington and owned by P C Bird Pty Ltd ("PCBPL"). PCBPL is a company the shares in which were held as to half by Mona and all but one of the balance by Percy and one share by Warrick. A further $3370 of the proceeds paid into Account 6307 was then used to pay for sales expenses. Thus the total amount that Mona allegedly misappropriated is actually $838,979.75 ("the Property Proceeds").
12The plaintiff alleges that a considerable portion of the Property Proceeds was paid out to Warrick and Rodney prior to Percy's death (some within a very short time of receipt by Mona) in large lump sums and that much of the balance was taken out in cash in circumstances where it can be inferred that they were not for Mona's benefit and most likely for the benefit of Warrick and Rodney. These claims are described as Barnes v Addy claims, a reference to Barnes v Addy (1874) LR 9 Ch App 244. Although at the end of the case the claim in respect of the smaller cash payments appeared to have been abandoned, the allegation is that Mona, having obtained the Property Proceeds by virtue of the powers of attorney, then took to herself the proceeds to her own use and benefit when this was not permitted by the powers of attorney.
13The plaintiff alleges that Warrick and Rodney, in breach of fiduciary duties owed by them as donees of the powers of attorney to Percy as donor, assisted Mona to receive the monies and place them in her bank account and that they did so with knowledge that Mona had obtained money to which she was not entitled and in breach of the powers of attorney. The plaintiff does not allege that Mona was not entitled to sell any of the four properties on behalf of Percy. The only breach of duty alleged is in relation to the obtaining of the proceeds for herself.
14Warrick and Rodney deny that they knew that Mona had obtained the proceeds in breach of any duty owed by her, deny they knew that the powers of attorney restricted Mona or themselves from obtaining a personal benefit, deny that they knew all properties (other than Bonnington in respect of Rodney: see T495.47 - T496.3) were only owned by Percy, and deny they knew that Mona had placed the proceeds into a sole account rather than an account owned by Percy or owned jointly by Percy and Mona.
15As I understand Deborah's position in relation to the Barnes v Addy claims, it is that she is entitled to undertake that claim because the executors did not do so: see Re Atkinson [1971] VR 612 at 616 - 617 per Gillard J. It is clear that the executors will not launch the proceedings or make claims against Rodney and Warrick and I think Deborah has standing to bring these claims, but that does not mean that she can be in any better position than the estate to pursue those claims: see Re Atkinson at 617, lines 50 - 60.
16The second limb of the plaintiff's case is that when Warrick, Rodney and Mr Cannington were appointed executors of Percy's estate in November 1996, they were under a duty to ascertain and get in all of the property of Percy, to make proper enquiries in that regard and take all appropriate steps to achieve realisation of the assets of Percy. It is alleged that the executors, with the knowledge they had that:
(1) Percy had owned the four properties;
(2) the four properties had been sold;
(3) Percy had since 1993 been in a nursing home and not been involved in any business or property transactions; and
(4) the accounts they say they did examine had very little money in them;
should have appreciated that Percy's assets had been depleted in the three years before his death and should have made further enquiries which would have revealed that Mona had obtained the benefit of the sale proceeds. Mona, by her affidavit of 5 February 2008 filed in these proceedings, did not dispute that she had received the sale proceeds into Account 6307.
17The plaintiff then contends that the executors, in breach of their obligations, failed to take action to obtain from Mona the return of the monies, either by demand or, in the absence of payment, by proceedings, or alternatively, by withholding payment of the legacy of $500,000 due to her under Percy's will or, as it turned out, the payment of $445,586.70 which was the total amount paid to her in 1997.
18The defendants dispute that they were on notice that Percy's bank accounts, including joint accounts, contained less than they should have contained or that Mona had wrongly obtained the Property Proceeds for herself. They also assert that even if they had been aware of Mona having obtained property of Percy to which she was not entitled, regard would have to be paid to debts owed by the estate to Mona (and not paid) and to a potential claim under the Family Provision Act 1982 (now replaced by the Succession Act 2006), available to Mona as a widow of Percy who had not been accorded a sufficient benefit under the will to meet her "maintenance, education or advancement in life". Questions were raised as to what the executors should have done in such circumstances, and the defendants called in aid a report of Mr Paul Blackburn-Hart SC who, it was accepted, has sufficient expertise to opine on the likelihood of Mona recovering money from the estate in a Family Provision Act claim should she have made one and based on the assumptions he was asked to make.
19Another dimension to this aspect of the case is the question of what Percy knew about the use of the proceeds of sale and whether he approved of their receipt by Mona into her own account, notwithstanding the content of the powers of attorney. This links to the question of whether Percy had, in the period 1993 to 1996, sufficient understanding of matters to give informed consent to what had occurred. The thrust of the plaintiff's evidence is that Percy, after his admission to hospital in September 1993, had very little comprehension and was either unresponsive or inappropriately responsive: see pars 27 - 36 of Deborah's affidavit of 27 October 2011 in Exhibit D at pp286 - 288 (Court Book 2). The thrust of the evidence of Warrick and Rodney through their affidavits was that although Percy had suffered a trans ischaemic attack and was frail, he was able to fully understand matters relevant to his financial interests and had the capacity to understand the contracts of sale which had been entered into on his behalf.
20Three other dimensions of this part of the case are that:
(1) Mona spent money on buying a block of land and building a house on it in 1994 to 1995. That property, which I shall refer to as "Ashtonfield", was, unlike the house that Mona and Percy had resided in for many years at Lot 161, located close to the nursing home in which Percy later resided. The total expenditure on that property was $228,328.05.
(2) Mona spent a considerable amount of money improving Carrington, in which Deborah resided (and had resided since 1983) and which was owned by Mona and which Mona had offered to transfer in 1996 and in fact transferred to Deborah in 2005.
(3) It is apparent that the farm account ("Account 0275"), an account used to operate Percy's substantial cattle breeding business and held jointly by Percy and Mona and which formed part of Percy's estate, was taken over by P C Bird Holdings, a partnership conducted by Warrick, Rodney and Deborah, which partnership was formed shortly after Percy's death.
21Mona was herself joined to the proceedings in 2008, following the expression by Palmer J of his view that without Mona's joinder the proceedings were misconstituted as she was a legatee under the will. However, when joined, Mona was informed by par 65A of the amended statement of claim (and by a letter from the plaintiff's solicitor) that no relief was sought against her. This express statement was entirely consistent with Deborah's instructions to her solicitor that she did not want to make a claim against her mother as she did not regard her mother as having obtained the benefit of the sale proceeds: see T20.20 - 36. Mona died on 26 January 2011 and probate was granted of her will on 4 May 2011 to Rodney. Mona never filed an appearance, nor did Rodney as her executor.
22Given that there is no dispute that Mona obtained the sale proceeds and lodged them in an account operated solely in her own name (Account 6307) the questions to be determined are:
(1) In depositing those monies to Account 6307, was Mona acting in breach of the powers of attorney?
(2) Did Percy approve or ratify the payment of the sale proceeds to Mona either orally or implicitly by endorsing the cheques to be paid into Account 6307?
(3) Did Percy have the capacity to approve or ratify the payment of the sale proceeds to Mona?
(4) Did Mona use any of the sale proceeds for Percy's benefit?
(5) What amounts are established to have been received by Warrick from the sale proceeds (i.e. out of Mona's account, Account 6307)?
(6) What amounts are established to have been received by Rodney from the sale proceeds (i.e. out of Mona's account, Account 6307)?
(7) What amounts are established to have been received by Deborah from the sale proceeds (i.e. out of Mona's account, Account 6307)?
(8) Did Rodney or Warrick know that Mona had deposited Percy's money into her account and did they know (within the expanded use of that expression in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373) that the monies paid to them came out of the sale proceeds?
(9) Did Rodney, Warrick and Mr Cannington become aware as executors that Mona had received the sale proceeds into her own account and if they did not at any time before 2008 know that fact, was that as a result of their failure to make reasonable enquiries on behalf of the estate as to whether Mona had received the proceeds of sale and what she had done with them?
(10) Is the fact that some of the sale proceeds were used by Rodney or Warrick to pay for real property relevant?
(11) Assuming that the executors either had knowledge or ought to have had knowledge that Mona had received the proceeds of sale and what she had done with those proceeds, what steps should the executors, acting prudently, have taken to obtain the assets?
(12) Are any of the claims brought by Deborah barred by virtue of the Limitation Act 1969 or by virtue of (a) laches; (b) acquiescence; or (c) estoppel?
(13) By virtue of the Trustee Act 1925, are Rodney, Warrick or Mr Cannington entitled to be excused from any breach of trust if otherwise established?
(14) As between the defendants, is Mr Cannington liable to indemnify Rodney and Warrick?
(15) As between the defendants, are Rodney and Warrick liable to indemnify Mr Cannington?
23There was a further issue which is a cross claim brought against Deborah by Rodney and Warrick, but on which no submissions were made by those defendants.
24Before dealing with the issues, I need to note that a significant attack was made on the credit of Deborah and the credit of Rodney and Warrick. I shall express my views on the credibility of each of them.
The plaintiff's credibility
25Deborah finished school at the age of 15 and she has been employed for only a short period since then. She has had three children and been a mother and homemaker in her three marriages. Mr Grieve, in a vigorous cross examination, demonstrated that she was unsophisticated, but in my view, leaving aside the specific topics Mr Grieve raised, which I shall consider separately, his cross examination did not establish that she was unreliable or untrustworthy. It is true that she needed the questions repeated on many occasions and even twice repeated on quite a number of occasions, but I did not gain the impression that this was out of any feigned or deliberate attempt to avoid the question or to give a dishonest answer.
26I think that cross examination established that Deborah had a perception about her brothers' conduct and a desire to do something about it that might be out of all proportion to the real economic loss that she, if she were right in her assertions, could establish. The defendants seek to paint her determination to recover what she believes she has lost as "greed" on her part. I am conscious, and indeed endeavoured to remind the parties on a number of occasions, of how costly this case must be, particularly having regard to the amounts at stake, but if the brothers or her mother have benefited improperly out of money that was due to Percy's estate, or Deborah has a reasonable basis for believing that to be so, I do not think Deborah can be characterised as greedy for her decision to pursue her brothers and Mr Cannington.
27The specific matters relied on by Mr Grieve are first that Deborah says that in or about June 2004, she had a conversation with Mona in which Mona told her that Marks Point proceeds had been used to build Mona a new house and "for dad's [Percy's] medical expenses", with Mona adding that "it cost a lot of money to keep him in the nursing home". Deborah says that Mona told her that she did not know where the proceeds of sale of Lots 161 and 163 went, or what happened to the main part of Bonnington proceeds, and that Mona believed the Westpac bond "still exist[ed]". This conversation is set out in Deborah's affidavit in reply: par 35 of her affidavit sworn 27 February 2012 in Exhibit D at pp317 - 318 (Court Book 2). Deborah annexed a note of her conversation to her affidavit: see Exhibit D at p325 (Court Book 2). She was challenged on this conversation and on the authenticity of the note (the original of the document is Exhibit E). Deborah said she had not mentioned this conversation or her notes of it to her solicitor, which is a very surprising statement (T237.14 - 18) but Mr Nolan, who was not cross-examined on his affidavit, said she had told him about this in 2004. I am satisfied that Deborah did have the conversation with Mona in 2004 and did make notes of that conversation at about that time, but her evidence that she had not told her solicitor was against her interest and incorrect if I accept Mr Nolan's evidence, which I do. Accepting that Deborah did have the conversation with Mona that Deborah says she did, her failure to recall that she told her solicitor about it is of little moment.
28The second assertion is that Deborah falsely denied that Mona had spent money on the pool. That denial, however, was not shown to be "false". Deborah did receive $50,000 from her mother as a gift and she admits that she used the money for the pool but that is not expenditure by Mona on the pool.
29The third matter is that Deborah said she did not remember the contents of the amended statement of claim (by which she joined Mona as a nominal defendant but did not seek relief against her) and I do not think it is unlikely that she would not remember that fact.
30Fourthly, it was claimed that her evidence that she had not thought about what would have happened if Mona had been sued was false, but I do not think this can be treated as an example of false evidence given by her, as the defendants seek to characterise it.
Rodney's credibility
31Rodney is and was at all relevant times a real estate agent operating through his company trading as L J Hooker Maitland. He is educated and intelligent and his evidence had a level of sophistication. Cross examination of him was extensive and I formed a negative view of his reliability. I shall endeavour to summarise the main points:
(1) He claimed that, other than in respect of Bonnington, he did not know that Percy was the sole owner of those properties, notwithstanding that his real estate agency was involved in two of the sales and indirectly involved in relation to the other two and he attended the auction of all four of them.
(2) He claimed that he never read either of the two powers of attorney under which he and his brother jointly, and his mother separately, were appointed as donees of the power. The several opportunities for reading or having its contents described to him were explained with implausible explanations as to why he did not do so, see for example T492 - 495, T499 - T501 and T531 - T536, T559 and T560 - 562 and see T691 - 692. The evidence which he gave about what he was told in 1993 about the 1991 Power of Attorney (see par 26 of his affidavit sworn 15 April 2011 in Exhibit D at p369, Court Book 3) is inconsistent with the terms of that power of attorney but consistent with the 1994 Power of Attorney. Not a lot turns on the difference in appointment but what is significant is that both Rodney and Warrick give the same erroneous account.
(3) His assertion that his mother told him that she had no money to pay the farm manager and stockman was implausible and his attempts to deal with that implausibility - including his assertion that he made no offer to assist his mother, and the fact that there was demonstrated to be a substantial amount of money available to Mona at the time that she was supposed to have told him that there was no money - were unconvincing;
(4) Rodney asserted that he thought, based on what he says he was told by Percy's accountant, that Bonnington needed to be sold to pay a tax bill of $300,000 to $350,000 and that this had been paid by Mona but this did not square with the actual tax bill of $193,000 and the fact that it was paid out of Account 0275 and not out of Account 6307.
(5) Rodney's affidavit of 11 July 2007 at par 14 stated that cheques for the proceeds of sale were in the name of P C Bird. In the course of his evidence he asserted that, apart from the cheque for Bonnington, he did not know that the cheques were made out to P C Bird until after these proceedings had commenced: see T673.39 - 674.9,T709.46 - 710.17 and T822.31 - 48. He claimed that he learnt that the cheques were made out to P C Bird from documents - but he could not identify which documents. I read par 14 as indicating awareness from the time of the sale and not from information subsequently gained and I think that Rodney, on realising that his admission of such knowledge might assist in the plaintiff's case in determining that he did know that Mona had obtained monies that she was not permitted to obtain, thought it best to resile from his previous evidence: see T710.43 - T711.9.
(6) His assertion that he had perceived a conflict in relation to the sale of land for his mother (see T493) (proffered as a reason why he did not involve himself in the details of the sale) was illogical.
(7) Rodney asserted in his affidavit that Mona had paid the accounts out of her own account (i.e. Account 6307): see par 9 of his affidavit sworn 20 February 2012. In fact, all of the expenses for the nursing home were paid by Mona out of a joint account (Account 0152). Rodney said that he did not take notice of the notations on the invoices for the nursing home that showed that the accounts had been paid by "Mr Bird" and appeared to place responsibility for this error on Mr Ralph Ward, the solicitor for the first and second defendants: see T425.11 - 50.
(8) Rodney gave evidence that the major part of the proceeds from the sale of Bonnington was used to pay the tax liability of Percy: see par 15 of Rodney's affidavit sworn 11 July 2007 in Exhibit D at p357 (Court Book 3), and T683.1 - 11. As I have noted, the money was actually paid from Account 0275, which was a joint account, and not Account 6307.
(9) There is now no dispute that Rodney received $90,000 from Mona in 19 November 1993. As Mr Drummond points out, it was not until Rodney was confronted with Exhibit O that he conceded that he had received the amount and even then it was a slow process: see T403.46 - T405.38, T702.35 - T703.3. This is of dual importance because in his affidavit sworn 11 July 2007 at par 17, he said that apart from what was in his affidavit he was unable to identify the manner in which Mona had dealt with the proceeds. Also he did not say then, as he did later in his affidavit sworn 15 April 2011 at par 126, that his mother gave him other cheques: see Exhibit D at p395 (Court Book 3).
(10) Although he knew before Percy's death that his parents had accounts in Newcastle Permanent Building Society and Greater Permanent Building Society, he says he left it to Warrick to investigate the accounts (see T579 - T580) and he does not say what, if anything, Warrick told him.
(11) A further matter is that in a letter dated 18 July 2005 sent by Mr Ward (see Exhibit D at pp1666 - 1669, Court Book 6), Deborah's solicitor was told in response to a query about the sale of the four properties:
"The deceased P C Bird died on 2 September 1996. You have provided information which suggests that during his lifetime certain properties were sold by him. Our clients were not involved in transactions which took place during P C Bird's lifetime and accordingly cannot supply any information. We doubt that the files or other records are currently available, although clearly your client is entitled to search the Land Titles Office records. It is, however, the view of our clients that what the deceased did with his assets during his lifetime is not a matter which is of concern to them or a matter which can be reviewed by his daughter over six years after his death." (emphasis added)
The first point of that statement, which I infer was made after consultation with both Rodney and Warrick (see T792.11 - 23), was untrue. The last sentence exhibits an approach to their role as executors to which I shall return.
(12) His claim that Percy was "lucid and alert" in the nursing home and his claims that he had meaningful, albeit limited, discussions with his father, do not sit comfortably with the hospital notes and his own acceptance that his father was admitted with dementia. He exhibited those notes to his affidavit and did not then assert that they were incorrect or misleading. I note in this connection that Rodney conceded that there had been a history of dementia (see T539.16: "to a degree"), which he then sought to explain in re-examination in an unconvincing fashion: see T819.2 - T820.26.
(13) He said that he did not know his father was the sole owner of Marks Point and Lots 161 and 163, yet he organised the sale of Marks Point with LJ Hooker Belmont, instructing Mr Cannington to prepare the contract of sale, and his company, LJ Hooker Maitland, conducted the auction of Lots 161 and 163; he was even present at the auctions of those three properties on 25 September 1993 and 6 May 1994 (see T534.5 - 7 and T550.16). He claimed he left everything to Mr Cannington (see p373 of CB3 par 51 and p376 of CB3) and did not "turn his mind to what might be involved in signing the documents for sale". I did not find this evidence credible.
Warrick's credibility
32I did not form a favourable view of Warrick's reliability and honesty as a witness. He was combative and frequently started answering questions addressed to him by Mr Drummond before Mr Drummond had finished the question. There are a number of specific aspects of his evidence (much of them in similar territory to that of his brother):
(1) He claimed that he did not read the powers of attorney prior to proceedings, notwithstanding numerous opportunities to do so and even when collecting a copy of the 1994 Power of Attorney from his mother on three separate occasions: T867.43 - T868.23 and see T873.
(2) Contrary to his assertion in par 31 of his affidavit sworn 15 April 2011 (see Exhibit D at p472, Court Book 3) that he had not read the 1994 Power of Attorney, he said in cross examination that he had read the power of attorney down to the word "jointly": T869.12 - 16.
(3) The version of the powers of attorney which he and Rodney say they heard discussed with Mr Cannington in 1991 was not consistent with the 1991 Power of Attorney: see Exhibit D at p764, Court Book 4. Warrick, in cross examination, asserted that the 1991 Power of Attorney did not accord with Percy's instructions in 1991. That assertion was made notwithstanding that Mr Grieve did not cross examine Mr Cannington to that effect.
(4) Warrick's assertion that he did not read or have regard to the content of the power of attorney that he submitted to the Maitland City Council when applying for building approval, and that he treated it simply as a piece of paper to be furnished, was implausible unless he had already read the power of attorney.
(5) His evidence that he was a director of PCBPL "in name only" was unconvincing and his assertion that he never did anything for the company (see T914.39 - 40 and T918.45 - 48) was disproved by the fact that, as a director, he signed the annual returns for PCBPL in 1997 and 1998.
(6) Warrick was aware, at least by 1996, that a 486 megalitre water licence was attached to portions 69 and 70 of Anambah, land owned by Percy and situated at Rutherford, New South Wales. He had the licence put into his own name and some time later sold 400 of the 486 megalitres to a third party for which he received $100,000. The water licence was the property of Percy (and hence the estate) and Warrick had no right to have the licence assigned to him. Later when Rodney and Deborah discovered what had happened, they demanded that he compensate them. A deed was entered into and he did pay $35,000 to each of Rodney and Deborah. Warrick's explanation that he did not understand the licence to have any value because it had never been used was implausible and made even more implausible by the fact that when he did receive the $100,000, he did not disclose that fact to his siblings. He also, on his own evidence, in 1996 falsely informed an official of the Department of Land & Water Conservation that he had inherited portion 69 of Anambah: see Exhibit W. As at 1996, Anambah had been bequeathed to the three siblings jointly and Warrick had not inherited portion 69 at all, although I accept he had a strong expectation that it would be his because he had built his home on that portion.
(7) Warrick claimed in his affidavit that he did not know what was expected of him or the duties he was required to perform: see par 84 of his affidavit of 15 April 2011 in Exhibit D at p491 (Court Book 3). He asserted that he had "numerous" conversations with Mr Cannington seeking advice: see T902.15 - 16. He set out no such conversations in his affidavit and Mr Cannington gave evidence that Warrick did not seek any advice from him as executor: see T606.6 - 12.
(8) In October 1995, Warrick purchased a tractor for $40,008 (see Exhibit V) using effectively money of PCBPL: see Exhibit D at p2403 (Court Book 8). The problem for Warrick about this purchase was that either the tractor belonged to Percy (and Percy therefore owed PCBPL $40,008) or it belonged to PCBPL. The account of PCBPL showed that Percy owed PCBPL $40,000. The tractor was not recorded in the assets of Percy for probate.
(9) Warrick would not admit that he could read and understand the balance sheets of PCBPL (T920.1 - T921.11), yet he signed the accounts for PCBPL and then he admitted that, as a director of L J Hooker Maitland for a number of years, he had signed accounts.
(10) Warrick asserted that he had nothing to do with the deregistration of PCBPL in 2000 - he was at the time a director and had one share in the company and was also company secretary and the only other shareholder was his mother who was 79 years of age at that time. PCBPL was owed $165,518 by the estate and in my view it ought be inferred that Warrick knew that that was the position. Not only was he a director but his accountant, Mr Newhook, who acted as accountant for PCBPL (and had been Warrick's accountant for a number of years), said he received most of his instructions from Warrick: T354.25.
(11) As with Rodney, Warrick's affidavit states that he was aware that proceeds of sale cheques were made out to P C Bird and, as with Rodney, he asserts that he only learnt this fact after the commencement of the proceedings.
(12) Warrick said that he had a conversation with Mona in mid-1994 in which he was provided with a bank statement for Account 0275 which had a net balance of $100,000: see par 111 of his affidavit of 15 April 2011 in Exhibit D at p505 (Court Book 3). The bank statement in Exhibit D at p2160 (Court Book 7) reveals that the account had a net balance in it of $91,055.46 at the end of May 1994. On 10 May 1994, the statement revealed that a cheque for $193,976.60 had already been paid. That demonstrates that:
(a) Mona did not pay the tax liability out of the proceeds of sale of Bonnington (which were paid into Account 6307);
(b) the tax liability was not $350,000 as Warrick (and Rodney) say they believed it was; and
(c) to assert that Mona had used Bonnington proceeds to pay tax liabilities was false and false to Warrick's knowledge if he saw that page. This might be why Warrick then asserted that he had seen the account at a later time: see T944.49 - 945.32.
(13) His evidence explaining that he and Mona overstated to hospital staff Percy's condition in order to ensure admission of his 90 year old father to a nursing home was highly implausible, particularly since the statements were made at the time of admission, and the staffs' notes show independently that Percy was confused, incontinent and frail. The evidence of Warrick and his wife Mrs Roslyn Denise Bird ("Roslyn") to the same effect, smacked of a concoction reinforced by the fact that nothing to that effect had been said by any of them in their affidavits and Rodney and Warrick had exhibited the hospital notes to their affidavits. Rodney's wife Mrs Wendy Ann Bird ("Wendy") admitted that, in view of the observations of the hospital staff, there was no need to overstate anything in order to obtain a nursing home admission for Percy.
(14) Warrick's assertion in cross examination that Percy had said that Mona could look after the development applications for Anambah (T896.47 - T897.18) had never been mentioned in any of his affidavits.
(15) Mr Drummond points out in par 87 of the Plaintiff's Closing Submissions ("PCS") that:
"Rodney gives evidence that it was Warrick who sought to dispose of Vile's Paddock in 1995 (par 28 of his affidavit sworn 15 April 2011 in Exhibit D at p370, Court Book 3). Warrick gave evidence (T883.33) that the proposed disposal of Vile's Paddock was to provide a means to pay the legacy to Mona. The application to subdivide Vile's Paddock was lodged on 28 July 1995 (Exhibit D at p1083, Court Book 5). The auction for the sale of Vile's Paddock was listed for September 1996. As the proposed subdivision and auction of Vile's Paddock was arranged prior to the death of Percy the sale could not have been for the purposes of providing a legacy to Mona. When confronted with this difficulty Warrick gave evidence that the sale was to meet his parents' financial needs (T883.36 - 39). Upon receipt in August 1997 of the proceeds of Vile's Paddock Mona gave away $170,000 out of the $222,000 to her three children."
That last fact, and Mona's later failure to insist that the proceeds of Account 6307 be paid to her until Mr Cannington encouraged her to seek the payment of the balance of the legacy, point to the unlikelihood of her having significant financial needs at the time of entry into the sale of Vile's Paddock, there being no particular financial needs of Percy or Mona generally other than a tax liability which had already been paid and a modest fee for nursing home care and see Exhibit D at p853 referred to in (16) below.
(16) As Mr Drummond points out in par 84 of the PCS:
"Warrick, like Rodney, asserts that the sale of Marks Point and Bonnington were required to meet the cost of the renovations to Carrington, the absence of sufficient money to pay the employees managing the grazing properties (par 39 of his affidavit sworn 15 April 2011 in Exhibit D at p 475, Court Book 3) and the need to pay Percy's liability for taxation (par 88 of his affidavit sworn 15 April 2011 in Exhibit D at p 497, Court Book 3). As at 25 August 1993 Mona had available cash in the sum of $562,133.62 (see Exhibit D at p853, Court Book 4). The suggestion that the sales of Marks Point and/or Bonnington were necessary to meet expenses is unsupported by the evidence. The sale proceeds from Bonnington were not used to pay Percy's income tax liability nor were they used to replenish the account from which that expense was met. As at 3 May 1994, Account 0275 (the farm account) had a balance of $303,000. Following the payment of that tax liability it had a balance of approximately $105,000 (see Exhibit D at p2160, Court Book 7)."
(17) I think Warrick's attempt to minimise his involvement in the grazing business after Percy's admission to the nursing home - he described himself as simply a "go between" for his elderly mother and the farm manager - was implausible. In part the contrary is demonstrated by Mr Cannington's evidence of his meeting on 30 May 1997 with Mona when he records her saying that "any suggestion that Warrick has looked after cattle for nothing is not correct. Perc[y] and I paid money on his behalf and told him that this is for looking after the cattle": see Exhibit D at p624 (Court Book 3) and see Mr Canington's notes of 30 May 1997 in Exhibit D at p1320 (Court Book 5).
(18) A similar point in relation to Rodney at 31 applies to Warrick.
33I have had regard to the "Notes of Argument" provided on the last day of the hearing to the Court by Mr Grieve in answer to the trenchant attack on Rodney and Warrick's credit.
34With regard to Note 1 and Note 23, responding to the attack made in par 49 of the PCS, which reads:
"It is submitted that the evidence of Rodney was littered with prevarication and internal inconsistencies. When pressed on a specific matter he was unable to provide any detail of the source of his information or belief. Rodney was a most unsatisfactory witness in respect of whom the Court could place little or no reliance. He was prepared to make assertions without foundation, to deflect blame to either Mr Cannington, Mr Ward or in some cases his brother, Warrick. His evidence was generally directed to exculpating himself from any knowledge regarding the receipt of the sale proceeds, knowledge that either the 1991 Power of Attorney or the 1994 Power of Attorney contained a prohibition against the donee accepting a benefit and the ownership of the properties the subject of the proceedings. His evidence should not be accepted unless otherwise corroborated by creditable evidence."
I do not accept that such a submission could only be made if the witness "has made concessions which are irreconcilable with significant aspects of his evidence in chief or where that evidence has been plainly contradicted by objective material". I agree with Mr Grieve's submission that Rodney gave his evidence "carefully and in a quite deliberate manner" but that does not mean it was credible. I think that par 49 of the PCS is an attempt to summarise matters elucidated in pars 26 to 48 of the PCS and, rather significantly, Mr Grieve did not deal with those paragraphs at all. I accept the broad thrust of Mr Drummond's submissions on Rodney's credibility.
35In relation to Note 6 (responding to pars 65 to 71 of the PCS), an attack is made on Mr Drummond's failure to apprise the Court that Warrick did enter into a settlement deed with Rodney and Deborah concerning his appropriation of the water licence. No claim is made by Deborah in respect of the water licence but the issue does have relevance to Warrick's honesty and reliability. Warrick gave his explanations for his conduct which I do not accept as plausible. He did not compensate his siblings or advise them of the sale by him until he was contacted by Mr Ian Sheriff by letter: see Exhibit 12.
36Dealing now with Note 7 (responding to pars 72 to 76 of the PCS), whether one agrees with it or not, I do not regard Mr Drummond's submission that the purchase of the tractor in Percy's name was intended to strip PCBPL as "absurd", as Mr Grieve put it. However, what I think is significant about the tractor is that it was not listed for probate purposes when it should have been.
37With reference to Note 17 (responding to par 121 of the PCS), it is submitted by Mr Grieve that had the executors met to consider whether they should sue Mona, they would have had to consider what each knew about what conversations had been held with Percy and Mona. I accept that they would have had to do so but to consider what should have occurred I need to consider not what versions of events Warrick and Rodney now put before the Court but what they could truthfully have said to each other and to Mr Cannington (and he to them).
38With regard to Note 18 (responding to par 123 of the PCS), I think that the failure of Warrick, Rodney or Mona to provide a single instance of having sought Percy's involvement in any transaction after his admission to the Hospital in September 1993 and before his death in 1996, other than the execution of the codicil and the 1994 Power of Attorney, is a relevant matter.
39With regard to Note 19 (responding to par 124 of the PCS), dealing with the reason why Percy's involvement was not sought, this is a Browne v Dunn (1893) 6 R 67 point. In the context of the clear contest of fact in the affidavits about Percy's mental competence and questions put to Warrick about Percy's capacity, the point is not precluded by Browne v Dunn; the point does not, in my view, "border on the ridiculous", as Mr Grieve put it.
40With regard to Note 20 (responding to par 125 of the PCS), the plaintiff's criticism of the defendants' failure to show any of the contracts of sale to Percy for his consideration and execution does not demonstrate "clear and obvious confusion" between administrative convenience and control of financial matters.
41I will deal with Note 21 later in these reasons.
42With regard to Note 22 (responding to par 131 of the PCS), whilst I accept that the conduct of the defendants should not be measured too fully with an overly legalistic approach, I think the plaintiff's submission are not unrealistic.
43With regard to Note 23, see [34] above.
44With regard to Note 24 (responding to par 143 of the PCS), Mr Drummond contends that:
(1) Rodney and Warrick were aware that Mona had no assets of her own (I would add, other than Carrington);
(2) Mona's only source of income was cash provided by Percy; and
(3) Warrick and Rodney said they had no knowledge of any account operated solely or jointly by Mona or the balance of money in those accounts.
Mr Grieve does not challenge those points but contends that there is no evidence that Rodney and Warrick knew that Mona had placed the money in an account in her sole name, a matter to which I shall return.
45Given that Mona did have access to joint accounts, including Account 0275 (the farm account), I do not think it is correct to say that Mona's only source of income was cash provided by Percy. Percy would not have been providing cash each week to Mona once he went into hospital and the nursing homes. If Mona did have access to other monies (as I think it is clear she did), payment of money could not be deduced to have necessarily come from the proceeds of sale.
46With regard to Notes 14 and 15 (responding to pars 104 and 110 of the PCS), the question which I have to determine is whether there is sufficient evidence to establish that Warrick and Rodney "knew" in one of the senses that that has been accepted to mean in Consul Development Pty Ltd v DPC Estates Pty Ltd. One issue relevant to this is the question of whether the plaintiff can gain any support from the conclusion that Rodney and Warrick have not been truthful in their evidence. Proof that a lie has been told does not establish that the opposite of the lie is a fact (see Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 694 - 695 per Gibbs J, Raso v NRMA Insurance Ltd (New South Wales Court of Appeal, Mahoney CJ, Priestley and Handley JJA, 14 December 1992, unreported), R v Heyde (1990) 20 NSWLR 234, and Thompson v GIO (Supreme Court of New South Wales, Rolfe J, 15 June 1994, unreported) but an inference can be drawn from the fact that a witness has told a false story, for example that the truth would be harmful to him, and false statements by an accused person may sometimes be regarded as corroboration of other evidence, even in a criminal case: see R v Lane [2011] NSWCCA 157.
47Rodney and Warrick sought to justify Mona's receipt of the proceeds on the basis that she had simply used the sale proceeds to:
(1) pay liabilities that Percy had, namely the tax liability and the expensive nursing home fees;
(2) buy the Ashtonfield property;
(3) fund renovations for Deborah; and
(4) pay $90,000 and other amounts to Deborah.
48It has been established that:
(1) the tax liability was not paid out of the sale proceeds;
(2) the nursing home fees were not expensive and were not paid out of the sale proceeds;
(3) an amount of $66,267.90 out of the proceeds was used to renovate Carrington but not $350,000 as Warrick and Rodney by their affidavits sought to portray; and
(4) Rodney, not Deborah, actually received the $90,000 and the only amounts which Deborah received out of the sale proceeds were $26,223 for a vehicle and a further $6000 of expenses paid on her behalf.
49I am not prepared to accept the evidence of Warrick or Rodney unless it is independently corroborated.
Wendy Bird and Roslyn Bird
50Wendy, who gave evidence about her having witnessed Percy's signature on the codicil, was shown to have no recollection of any matter relevant to the circumstances. She cannot now recall what document she was told she would be witnessing before she went to the Hospital at the request, she says, of Mona, even though in her affidavit she had said she was told that the document related to the house at Ashtonfield. She now could not recall if Mr Cannington was present, although in her affidavit she had said she believed he was, and she asserted that Mr Cannington had said nothing at the Hospital. So far as the hospital notes were concerned, she asserted she could not recall being present when things were said which indicated Percy had had a long history of confusion and dementia, even when the hospital notes in Exhibit S at p5 referred to a sister-in-law having said something and she was the only sister-in-law of Warrick likely to be present at the hospital in connection with Percy. I do not regard her evidence as having much weight. She did say that Rodney had told her that Mona had said to him that she was concerned about paying the stockmen on the farm, which was put into evidence to counter the plaintiff's contention that Rodney's recounting that Mona had said that to him was false. I gained the distinct impression that Wendy had very little genuine recollection of any matter which occurred more than 10 years ago and that she was not a reliable witness.
51Roslyn was even less impressive. I think that cross examination demonstrated that she was completely unreliable. Her evidence that Warrick had been told to overstate Percy's condition in order to ensure he obtained a place in a nursing home was, I think, shown to be a concoction.
Mona's evidence
52Mr Drummond mounted an attack on the reliability of Mona through her affidavits sworn 5 February 2008 and 2 September 2008 by pointing out that:
(1) she was quite inaccurate in her description of what she had given Rodney;
(2) she was very selective in presenting benefits given to Deborah without reference to benefits bestowed on Rodney and Warrick;
(3) she said nothing in her affidavits about the proceeds cheques, the arranging of the sales or her sons' involvement (or lack of involvement);
(4) she was 88 years old at the time of the affidavits;
(5) she was giving evidence of conversations with Percy in very general terms and in circumstances where Percy was not able to contradict her evidence (Mr Drummond made reference to Plunkett v Bull [1915] HCA 14; (1915) 19 CLR 544, Varma v Varma [2010] NSWSC 786 and R v Inwood 17 LR (NSW) 100 and also to Watson v Foxman (1995) 49 NSWLR 315 at 319 emphasising the caution which should be taken in respect of evidence concerning what was said in a conversation many years before);
(6) there are items of evidence which suggest that Mona had very little knowledge of what was happening with the sale proceeds, for example Mona asserted that Deborah had received $90,000 by way of payment to the NAB when in fact that had been paid on behalf of Rodney; see also Deborah's evidence (see par 17 of Deborah's affidavit sworn 27 February 2012 in Exhibit D at pp317 and 325 (Court Book 2) and Exhibit E) and Mr Cannington's evidence (see Exhibit D at p1320 (Court Book 5) and T622);
(7) Mona said she had given Deborah money for the pool and other land near Carrington being waterfront land when it had been shown she did not;
(8) Mr Cannington says that he had told Mona that the cheques were Percy's cheques and she had to keep them separate and Mona says nothing about that topic;
(9) although Mona says that by reference to her financial records she was able to identify the accounts to which the sale proceeds were deposited, she did not say that she recalled the depositing of monies to Account 6307: see pars 6 and 7 of her affidavit of 5 February 2008 in Exhibit D at p333;
(10) there is nothing in the notes of Mr Ward to indicate that Mona was warned that there was a potential conflict between them and herself;
(11) there is nothing in Mona's two affidavits which assists Rodney and Warrick's claim that they had no knowledge of Mona's accounts and no involvement in where the proceeds were deposited;
(12) Mona says nothing about Percy's health or comprehension or about the hospital notes or what she said to the Hospital;
(13) she does not say that she had understood that the powers of attorney permitted her to do what she did; and
(14) Mona did not say that Marks Point had been sold to fund Carrington renovations and that Bonnington had been sold to meet a tax liability.
53Items 52 - (14) above are matters which assist the plaintiff's case rather than undermine Mona's credibility.
54I have noted that Deborah has made no claim against Mona in these proceedings and her belief that Mona had herself done nothing wrong is a curious aspect of the case - I think there can be discerned in the case of the plaintiff an underlying strand which would characterise the steps taken by Mona as really steps orchestrated by Rodney and Warrick without full or any comprehension by Mona of what was being done in her name, all to the benefit of Rodney and Warrick. There are some aspects of the evidence which might lend support to that theory if it had been appropriately articulated, namely:
(1) Deborah's evidence that Mona told her that she did not know about the proceeds of the sales of Bonnington and Lots 161 and 163;
(2) the involvement of Warrick and Rodney and of Rodney's real estate agency in the sales of all four properties;
(3) the assertion by Mona of factual matters in her affidavit which have been shown to be false when it has been said by all siblings that Mona was not a dishonest person and there is evidence that she did not actively pursue money due to her and gave away a significant amount of what she received when it was paid to her; and
(4) the fact that a letter sent to her by Deborah was never responded to by her but rather that the response made by Mona was a letter from Warrick and Rodney's solicitors and the character of that letter, which was prepared by Warrick (see T797.25 - 50 and T802.17 - T803.9), reflected the same charges against Deborah of greed and indolence that reflect the Bird brothers' allegations in this case.
55The errors in Mona's affidavits are errors which Rodney and Warrick have sought to maintain in these proceedings, and the theme of the letter from Mona in 2007 and of the defendants in these proceedings through their counsel is that Deborah is "greedy". I think that there is room for doubt as to whether the letter and affidavits are the views of Mona, as opposed to those of Rodney and Warrick. The letter was prepared by Warrick, according to Rodney: see T797.25 - 50 and T802.17 - T803.9. If Mona was an honest person (which all her children thought she was), the assertion by her that the nursing home was costing or had cost a lot of money may well have been something she was told by Rodney and Warrick rather than her own view. That possibility would give support to Deborah's case that Mona was not really in charge of the account in her name and money.
56The difficulty with this theory which is advanced by the plaintiff is that it would require proof that Mona's affidavit did not contain her evidence, but rather evidence that had been prepared for her by Rodney and Warrick, and Rodney and Warrick would need to have been confronted directly with all the elements of the theory. So far as the first part is concerned, there were tendered in the plaintiff's case the notes of Mr Ward of his conference with Mona in connection with the affidavit. Those notes appear to be very brief and far less extensive than the affidavit. Rodney and Warrick did not have put to them the proposition that they had concocted the evidence either alone or in conjunction with Mr Ward and nor was it put to them that they in fact had established Account 6307 with or for Mona.
Mr Cannington's credibility
57Mr Cannington's credibility was not the subject of attack by any party. He is of advanced years and not in good health, I was informed. He candidly made admissions relating to his role as one of the executors, i.e. failing to bring to the estate's account Percy's grazing business (T607.22 - 41), leaving it to Rodney and Warrick to inform him as to whether any water licences attached to the land (T610.30 - 48), failing to do anything about Warrick's failure to provide him with information (T613.10 - T614 and T615) and, having seen that the balances in Percy's accounts were small, not considering enquiring what had happened to the proceeds of cheques handed by him to Mona; Mr Cannington admitted that an executor fulfilling his duties would have made enquiries of Warrick, Rodney and Mona (T619.17 - T621.26).
58In 2004, when he had been asked by solicitors acting on behalf of Deborah to provide information about the powers of attorney used to empower Mona to execute documents, a letter sent from his office advised that no power of attorney had been utilised (see letter of Arnold Lawyers dated 9 November 2004 in Exhibit D at p1548A), an entirely incorrect statement.
59I will now deal with the questions at 22 - (13) above.
In depositing those monies to Account 6307, was Mona acting in breach of the powers of attorney?
60There were two arguments in relation to this: the first was the assertion that Percy had approved or ratified the payment of the proceeds to Mona's account, which I deal with in [61] - [67] below, and a second argument that if Percy didn't approve or ratify the payments, any wrongful conduct by Mona in depositing the proceeds to her own account or her sole account was outside of the power of attorney, which I deal with in [68] below.
Did Percy approve or ratify the payment of the sale proceeds to Mona?
61Mona, by her affidavit of 5 February 2008, admits receipt of the sale proceeds and the deposit of those proceeds into an account operated in her name. By par 9 of her affidavit she asserts that she told Percy of the fact of the sales of the four properties:
"Although I can no longer remember specific occasions or the specific words used in relation to each of the sale transactions...:
9.1 I informed my husband Percy that I was going to sell the property with words to the effect of:
"I have arranged for the sale of ****."
9.2 After each property was sold I informed my husband Percy of this with words to the effect of:
"has been sold."
9.3 I told Percy that I had received the sale proceeds using words to the effect of:
"I have got the money from the sale of ****."
I had no reason to believe that I acted other than in accordance with my husband's wishes or that my husband did not accept the actions I took concerning the sale of the properties. "
62Even accepting Mona did tell Percy about the sales, the plaintiff makes no complaint about the sale of the properties per se - what is attacked is the payment of the proceeds into an account in Mona's own name (and solely in her name).
63I focus now upon 9.3. The first problem with 9.3 is that it is ambiguous, even if said. I do not think it is an adequate explanation of what in fact has occurred sufficient to permit the conversation to amount to a ratification of a clear breach of the power. The second problem is that Mona records no response from Percy, making it impossible to determine whether Percy did understand what Mona says she said to him in the way that would legitimise what Mona had done or indeed at all. I shall say more about Percy's capacity later.
64I accept that care needs to be taken in relation to assertions made against the interests of a deceased person, as summarised in Varma v Varma [2010] NSWSC 786 by Ward J, but in view of the deficiency in the evidence to which I have referred, I do not think it is necessary to consider the issue of whether or not Mona's evidence is sufficiently reliable or not.
65Leaving aside for the moment the question of the use of some of the proceeds to purchase the Ashtonfield property, there being no doubt that Mona's payment of the proceeds into her own account was a prima facie breach of her obligations to Percy, the onus to establish approval of the payment of the proceeds to herself or ratification rests on the defendants: see Taylor v Smith [1926] HCA 16; (1926) 38 CLR 48 per Higgins J at 59, and per Knox CJ at 54 who spoke of the need for the principal to have had full knowledge of all the material circumstances if ratification is to be established and per Starke J at 61. In Petersen v Moloney (1951) 84 CLR 91, the High Court noted per Dixon, Fullagar and Kitto JJ at 101 that "only unequivocal words or acts will suffice to establish ratification". Ms Champion in her submissions asserted that the onus lay on the plaintiff but cited no authority for her contention.
66Although the defendants contended that it should be inferred that Percy had endorsed the cheques for payment to Mona's sole account, Mona did not say that he had done so and there was no evidence to support the contention. Percy had no reason for doing so given that he had established joint accounts with Mona.
67The defendants have not established ratification or authority in Mona to receive the proceeds for herself.
68The defendants ran a further argument in the context of the powers of attorney. The assertion was that because Mona had sold the four properties pursuant to the power of sale and was entitled so to do, what she did with the cheques and their proceeds was something "outside" the power of attorney and did not involve a breach of the power of attorney, even assuming what she did was wrongful. In my view, it is artificial to assert that Mona was not in breach of the powers of attorney by applying the proceeds to her own benefit in breach of the powers. Mona's conduct involves the conversion to her own use of trust property received by her by virtue of the powers of attorney and the act of depositing the proceeds to her own account did involve a breach of the powers of attorney. There was also a submission made by the defendants that the Court should infer that Percy had endorsed the cheques over to her. I do not think that such a finding is open, particularly when Mona said nothing to that effect in her affidavit.
Did Percy have the capacity to approve or ratify the payment of the sale proceeds to Mona?
69I do not strictly need to deal with this topic, given my conclusion in [67] to the second question, but shall deal with the topic.
70Percy was admitted to the Hospital on 24 September 1993 after a fall. The hospital notes, which were exhibited to the affidavits of Rodney and Warrick and are now Exhibit S, contain a record of him being found by Mona and being confused, and in hospital, "confused but alert and interactive": see p1. This quotation and the quotations through to [75] below are taken from the Exhibit S as interpreted with the assistance of Wendy and are not the subject of dispute. The possibility of dementia was noted together with a note that Mona had noticed "deterioration" and "intermittent confusion over [the] last 1 - 2 years": see p1. The emergency care notes for 24 September 1993 record a note of "disorientated to place - time" (p3) and similarly in the report on p4 Percy is observed as being "confused". On p5 there is recorded a note that the sister-in-law felt Percy was his normal self. There is a note that Warrick said Percy had a "long history of dementia" and Mona said he had "urinary incontinence", "shuffling gait" and was "confused persistently" and that she "cannot cope anymore": see p5. There is another reference to dementia below these comments on p5. A nurse notes "confused of place" on p6, "confused" is noted on a neurological observation sheet (p9) and on p12 it is noted that Percy "remains confused - unable to remember - people looking after him / - where he is" and "[experiences] increased difficulty [in] following commands".
71On 25 September 1993 a note records "dementia and falls and incontinence - long standing" and "presumably multi-infarct dementia": see p14. On 28 September 1993 a nurse notes "Perc[y] attempted once overnight to get out through fire exit - he believed it was the toilet": see p15. On the same day, at a meeting with social workers it is noted that "son stated that Mr Bird [Percy's] memory has become noticeably worse in the last 2 years": see p16. That night it is again noted that Percy is "confused [as] to time and place, unaware he was in hospital and what time or day it was": see p17.
72The brain scan reveals "changes consistent with generalised cerebral atrophy" and "lesions consistent with multiple small non-haemorrhagic infarcts": see p65.
73On 2 October 1993, Dr Filiptschuk, a geriatrician, saw Percy and at p58 is a report documenting the notes that he made at the time:
"90 year old man admitted [on] 24 September 1993 with confusion, fall, 1-2 year history of memory problems, urinary incontinence, wife (72) stating she can't cope. Patient undoubtedly has memory problems not aware of whereabouts, knew that recent problem leading to current whereabouts was fall. Patient at present aware of age, date of birth, knew it was 1993, thought it was September. When nursing home placement and wife not coping with him mentioned, patient['s] response was wife is never at home and of course he can cope at home. Gait small shuffling steps, no evidence of Parkinson's disease, no convincing focal neurological signs. ? Has normal pressure hydrocephalus been excluded, ? is history from family indeed suggestive of multi-infarct dementia. Suggest:
- If wife really can't cope, then there is little choice bar nursing home placement. I have corrected the Respiratory Control Index, patient is Category 4.
- I need to speak to wife and family, perhaps waiting at home with increased community support might be an option.
- Pulse rate 56 AF, suggest review Dig dose."
The corresponding handwritten notes dated 2 October 1993, also form part of Exhibit S at p19.
74The discharge summary sheet for 12 November 1993 (p55) records:
"History of dementia, recurrent falls and urinary incontinence. Dementia probably due to multi-infarct dementia. Placement in nursing home arranged"
75The nursing discharge form of the same day (p56) records:
"Pleasant man; good sense of humour, disorientated at times, needs directions pro re nata for personal hygiene".
76The notes of what Warrick and Mona said suggests that Percy not only had dementia, but had had it for quite some time. The observations of staff at the Hospital are consistent with that history. The evidence of Warrick and Rodney was supportive of Percy having sufficient mental capacity to approve of the deposit of monies by Mona to her own account and the evidence of Deborah was that he had very little.
77In par 15 of his affidavit dated 5 December 2008, Mr Cannington said that when he had seen Percy about the codicil in 1994, Percy had seemed to him "lucid" and see also pars 16 - 17 where he dealt with his subsequent attendances. When asked about whether he had notes of these meetings, Mr Cannington said he did not. Although he did have notes of his meeting with Percy in 1991 and of his meeting with Mona in 1996, he said that much of his file had been destroyed before 2003: T594.26. The incorrect assertion contained in the letter referred to in [58] above that no power of attorney had been utilised in the sales casts doubt on the reliability of the details of Mr Cannington's memory of his dealings with Percy in 1994, even by 2004, but in any event in cross examination about his meeting with Percy in 1994, Mr Cannington did say that his recollection was based on the fact of the codicil (see T602.41 - 44).
78There is no evidence from Warrick, Rodney or Mona of them having obtained any input from Percy on any topic connected with his business or property other than Rodney saying that he thanked Percy for paying off his mortgage and that Mona was selling Lot 161 so she could move to Maitland (i.e. close to the nursing home). There is no clear evidence of what was said to Percy at the time he signed the codicil or the 1994 Power of Attorney.
79Given the hospital notes and Deborah's evidence, which I accept, I am quite dubious about Percy's ability to understand anything about his affairs and I am not satisfied that he did have the requisite capacity to ratify the breach by Mona of her powers as donee, had he been informed by her in clear terms of what had occurred, which, as I have indicated, has not been established
Did Mona use any of the sale proceeds for Percy's benefit?
80It has not been established that Mona used any of the sale proceeds for Percy's benefit.
81As I have noted, the sale of the four properties by Mona is not criticised. The defendants' submissions assert that any assistance given to Mona in selling the properties is irrelevant because that did not involve a breach. The plaintiff relies on the assistance in respect of the sales in two ways. First, the plaintiff argues that in respect of the two properties Marks Point and Bonnington, Warrick and Rodney knew that the purpose of the sale was to enable Mona to pay money for her own purposes. If that contention is made good, she relies on the fact of sale and assistance provided not because it was per se a breach of any obligation but because of the purpose to which it was directed. The second way in which the plaintiff relies on this material is as one of the elements in proving knowledge of the fact that Percy owned the properties, that proceeds would be payable to him alone and that they received gifts of money at a time very close to the sales of which they had knowledge.
82There is in Ms Champion's closing submissions on behalf of Mr Cannington (see pars 22 - 44) a number of contentions concerning the issue of joint accounts. It needs to be borne in mind that whilst Mona and Percy did hold joint accounts, Mona did not deposit the sale proceeds into any of those - rather, she deposited them into an account held in her own name. Given that fact, I cannot see that much is to be gained by considering what would have happened if she had put the money into one of the joint accounts except to note and accept that had the money gone into one of the joint accounts, any proceeds in that account would have gone to Mona on Percy's death.
What amounts are established to have been received by Warrick from the sale proceeds (i.e. out of Mona's account, Account 6307)?
83There is no dispute that Warrick received at least $79,000 from the sale proceeds. There was an issue as to whether the amount of $5000 paid by Mona to Mr Andrew Bird ("Andrew"), Warrick's son, should be treated as an amount received for Warrick's benefit or arranged by Warrick. I do not think it can be so treated as there is no evidence to support that contention. There is also an issue as to the unallocated amounts. There are quite a number of withdrawals in cash by Mona. There is no direct evidence which links those withdrawals to payments to Rodney and Warrick. I agree with Mr Drummond's submission that it is unlikely that Mona, given her lifestyle and age, was likely to be spending such monies on herself and there is no evidence as to any such expenditure from Mona or the brothers, but whilst it is possible that Rodney and Warrick received those funds, there is insufficient evidence to find on the balance of probabilities that that is where those cash withdrawals went, and there is no means of determining who of the two got what and when.
What amounts are established to have been received by Rodney from the sale proceeds (i.e. out of Mona's account, Account 6307)?
84There is no dispute that Rodney received $265,000 from the sale proceeds and Exhibit Q supports the amount of $274,000. I find that the payment of $10,000 by Mona to Rodney (which was not paid to Rodney's real estate agency but to him) was a gift. There is again also the issue of unallocated amounts, which I have dealt with above at [83].
What amounts are established to have been received by Deborah from the sale proceeds (i.e. out of Mona's account, Account 6307)?
85Deborah received the amount of $26,223 for a motor vehicle and other monies totalling $6000 for some other expenses. A question arises as to whether the $6000 and monies paid by Mona out of the proceeds towards renovation of Carrington should be treated as money received by Deborah as the $26,223 clearly was. To understand the issue better, it is necessary to say more about Carrington.
86Carrington was inherited by Mona from her parents. From 1983 Deborah lived in Carrington and in 1996 Mona was proposing to transfer title to Deborah but Deborah decided that, due to marital issues, she did not want to own Carrington at that stage. It was agreed that Deborah and Mona had until 2005 a very close relationship. In 2005, Mona did transfer title in Carrington to Deborah. In the period 8 December 1993 to 14 November 1994 Mona paid $66,267.90 towards renovations at Carrington. Carrington was Deborah's family home and Mona would often visit Deborah and stay at the house. It seems to be agreed that it was always Mona's intention (at least until 2005) to transfer Carrington to Deborah when Deborah wanted that to occur. In this context, it should be noted that, many years before, Percy had purchased a property known as Bingleburra for Warrick and Rodney.
87In my view, whilst the money expended on Carrington by Mona out of the proceeds was technically not given to Deborah, at the relevant time the expenditure was for Deborah's benefit as she resided in the home rent-free and had an understanding that in due course the house would be hers (as in fact occurred). I think that in any calculations of what Deborah would be entitled to as a share of money recoverable from Warrick and Rodney or by the estate from Mona, the total of the monies spent on Carrington and the other monies paid to or for Deborah (such as the vehicle), being $98,490.90, needs to be taken into account as monies for Deborah's direct benefit.
88It should be noted, however, that even if Deborah is treated as having received the benefits to which I have referred, there is no evidence that she knew that payment made to her or on her behalf constituted a breach of trust by Mona.
Did Rodney or Warrick know that Mona had deposited Percy's money into her account and did they know that the monies paid to them came out of the sale proceeds?
89In the PCS at pars 23, 24 and 25, the breach of trust by Mona is dealt with. Reference is made to Consul Development Pty Ltd v DPC Estates Pty Ltd per Gibbs J at 397 and Warman International v Dwyer (1995) 182 CLR 544 at 557 - 558 and 561 in relation to intermingling.
90The claim against the brothers on the "knowing receipt" basis is dealt with at pars 142 - 147 of the PCS, which assert:
"142.Each of Warrick and Rodney were aware of the sales of Marks Point, Bonnington and Lots 161 and 163. Each of them played a part in the sale of those properties. Each was aware of the approximate date upon which the contracts for sale were settled.
143.Each of Warrick and Rodney were aware that Mona had no inheritance, had never been employed, and that her only source of income was the cash provided by Percy and deposited under the telephone each week. Each of Warrick and Rodney gave evidence that they had no knowledge of any bank account held by Mona, either solely or jointly or the balance in those accounts.
144.Rodney conceded in respect to the payment of $90,000 received on 19 November 1993 that it was "connected" to the sale of Marks Point which settled on 10 November 1993 (T702.35-50). That concession was given reluctantly and only after repeated questioning.
145.Warrick gave evidence of a conversation with Mona in which it is claimed that she was to provide $65,000 to each child from the sale of Marks Point (par 88C of his affidavit sworn 15 April 2011 in Exhibit D at p497, Court Book 3). That evidence is clearly in error as Rodney had received $65,000 on 27 June 1992 (Exhibit P) some 15 months prior to the sale of Marks Point.
146.An examination of Exhibit P discloses that shortly following the receipt by Mona of the sale proceeds from the sale of Marks Point, Bonnington and Lots 161 and 163 or within a short period thereafter each of either Warrick or Rodney received substantial sums of money.
147.The Court should therefore conclude that by reason of their assistance in prioritising the sale of these properties, the retention of the agents to act on each of the sales and their attendance at the auction sales together with their knowledge regarding the financial circumstances of Mona support the conclusion that each of Warrick and Rodney knew at the time that they received the payments referred to in Exhibit P that the funds had come from the sale proceeds received by Mona in breach of trust."
91The pleadings assert knowledge and assistance but no reference was made to "knowing assistance" in the PCS and although Mr Drummond mentioned that the plaintiff's claim was for both, nothing was said in support of the knowing assistance claim. I am conscious that some writers have questioned whether there ought be a distinction in approach (see D S K Ong, Trusts Law in Australia, 3rd ed (2007) Federation Press) but I think it is clear that Consul Development Pty Ltd v DPC Estates Pty Ltd and Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 require the two limbs to be considered separately.
92The requirements for establishing liability under the first limb of Barnes v Addy are summarised in Young, Croft and Smith, On Equity (2009) Thomson Reuters at [6.890], namely that:
(1) trust property, or property acquired through breach of fiduciary duty, has been received by the defendant;
(2) knowledge of the defendant that such property was received in breach of trust or fiduciary duty.
93The learned authors note that there is no requirement under the first limb that the defendant's conduct is dishonest - acting with notice that property was received through breach of trust or fiduciary duty will suffice: see Consul Development Pty Ltd v DPC Estates Pty Ltd and Tara Shire Council v Garner [2002] QCA 232; [2003] 1 Qd R 556. The knowledge must be:
(1) actual knowledge;
(2) wilfully shutting one's eyes to the obvious;
(3)wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; or
(4) knowledge of circumstances which would indicate the facts to an honest and reasonable man.
94The list of matters set out in the PCS appears to be founded on actual knowledge that the funds had come from the sale proceeds, and nothing was said about categories - (4) above.
95I have referred, in dealing with Mr Grieve's Notes of Argument about credibility, to the issue of whether Rodney and Warrick knew that Mona had deposited the money to an account in her own name. There is no direct evidence that:
(1) Rodney and Warrick knew that Mona had deposited the sale proceeds into an account solely operated by her;
(2) they assisted Mona to set up Account 6307; or
(3) they were informed by either Percy or Mr Cannington that the powers of attorney were in fact limited.
96In relation to , I do not believe Rodney and Warrick when they say they did not read the powers of attorney. However, whilst I am prepared to find that they did read the powers of attorney, I am not convinced that on reading the powers of attorney, they must have appreciated that the powers of attorney were limited. I say that because, without legal training and, I would add, some knowledge of powers of attorney, the route to understanding that the power of attorney is subject to a limitation requires:
(a) a reading of what had been struck through in the two powers; and
(b) regard to be paid to s 163 of the Conveyancing Act 1919.
In this connection it will be observed that under the heading "Limitations" in the powers of attorney the word "Nil" appears and it would be more productive of clarity if in these forms reference were made under that heading to a limitation on benefit to the donees of the power, rather than striking through words prior to that, which words having been struck through might not be read even by a prudent person.
97Warrick said in cross examination that he did notice the word "Nil" under the heading "Limitations". It was not put to Rodney and Warrick that they had read the powers of attorney and that, having read them, they then appreciated the powers of attorney were limited or that, had they read them, it would have been clear to them that they were limited or that they knew they were limited and I am not able to conclude that not only did they read them but that having read them, it was or would have been clear to them that they were limited.
98Mr Grieve pointed out at T1083 and T1085.1 - 11 that it was not put to Rodney or Warrick that they knew that Mona had placed the money in an account operated solely in her name and Mr Drummond did not challenge that contention in his submissions.
99Warrick and Rodney assert that given the closeness of Deborah to Mona until 2005, her assertion that she did not know:
(1) the terms of the powers of attorney;
(2) Mona's banking arrangements and whether or not joint accounts were held with Percy;
(3) about Mona's accounts at the Newcastle Permanent Building Society other than in a general sense;
(4) how much Mona had in her bank account at the time of construction of Ashtonfield;
(5) the fact that Mona or Percy made payments to the builder; and
(6) whether or not Percy held the properties in only his name;
supports their contention that they did not know these matters either. The fact that X did not say something to A does not demonstrate that X did not say it to B, but given the close relationship between Mona and Deborah at this time, it does provide some limited support to the defendants' evidence that Mona did not tell them about the accounts she held.
100Whilst it is true that Rodney's evidence was that "[Mona's] only source of income was the cash provided by [Percy] and deposited under the telephone each week" (see par 15 of Rodney's affidavit sworn 15 April 2011 in Exhibit D at p467, Court Book 3), that was the position before Percy transferred monies from his sole account into accounts in their joint names, and the amounts were substantial. Whilst Rodney and Warrick said that they had no knowledge of any bank account held by Mona either solely or jointly or the balance in these accounts (and the PCS relies on that evidence to make out the claim), it does not follow that they therefore knew she had no money other than what she received from Percy each week before he went into hospital.
101I find that:
(1) Rodney and Warrick were aware of the sales by Mona of each of Marks Point and Bonnington and the approximate date of settlement;
(2) Rodney and Warrick were aware that the properties were owned by Percy;
(3) Rodney knew that $90,000 was paid to him by Mona on 19 November 1993 was consequential on the sale of Marks Point; and
(4) Warrick knew that the $65,000 paid to him on 19 November 1993 was consequential on the sale of Marks Point;
but even if, contrary to my conclusion in [97], they were aware that the powers of attorney precluded Mona using them for her own benefit, I am not able to conclude that they were aware that the various amounts paid to them were paid into an account in Mona's sole name, then paid out of that account and hence that they were received by them as a consequence of the breach of the powers of attorney by Mona.
102Mr Drummond also submitted on behalf of the plaintiff and as an alternative ground, that the evidence of Warrick and Rodney established that they had discussed the sale of Marks Point and Lots 161 and 163 and been told that Mona needed those funds for a purpose which was a purpose of hers and not Percy's. In the first case, the purpose identified was paying for renovations to Carrington. The second was the purchase of the Ashtonfield property. The problem with both these claims is that neither of them involve Warrick or Rodney receiving funds, so that the Barnes v Addy claim can only be a knowing assistance claim in respect of those proceeds. The knowing assistance can only be in helping Mona to sell the properties (there being no evidence that they assisted her to receive the funds into her account) but the plaintiff has expressly eschewed any claim that there was any wrongdoing in Mona selling any of the properties. The claim in respect of Lots 161 and 163 suffers from the additional problem, in my view, that with the purchase of Ashtonfield Mona reduced the liability of the estate to pay her another $200,000.
103If the claim is one based on knowing assistance, the additional requirement of knowledge of dishonest design would need to be addressed and since there were no submissions on that topic I do not think it is appropriate to embark upon it, save to reiterate that the assistance given to Mona in selling the properties is not of itself sufficient to establish a case of knowing assistance since no case is made that the sale of the properties infringed the relevant power of attorney. No allegation was made that Mona's placement of funds was dishonest conduct on her part and it is difficult to see how, if her conduct is not alleged to be dishonest, Rodney and Warrick's assistance could be so characterised.
As executors, should Warrick, Rodney and Mr Cannington have become aware that money owed to Percy had been paid by Mona to her own account?
104There is no dispute that executors are under a positive duty to call in and collect the assets of the deceased: see Re Whelan (Deceased) [1961] VR 706 at 719 per Sholl J. The executors, if necessary, must bring proceedings to that end but can, in the alternative, set off a debt owed to the estate against a legacy due to a beneficiary: see Cherry v Boultbee (1839) 4 My & Cr 442; (1839) 41 ER 171. The executors have the same remedies available to them as the deceased to recover monies due to the estate: see Dalrymple v Melville (1932) 32 SR (NSW) 596 at 602. An executor, in relation to a debt due to the estate, is required to demand payment and, if payment is not made, to take proceedings to recover the debt, even if that involves taking action against relatives of the deceased (and the executor): see In re Brogden; Billing v Brogden (1888) 38 Ch D 546 per Cotton LJ at 546, Fry LJ at 570 and Lopes LJ at 574. The rule in Cherry v Boultbee referred to above does not in terms apply where there is no "debt" owed by the legatee, but it seems to be accepted here that Mona had received funds of Percy to which she was not entitled and which the executors could set off. That is the plaintiff's claim and the defendants have not asserted otherwise.
105Once it is established that there is a debt owed to the estate, it is incumbent on the executor to "show why he did not get it in": see Stiles v Guy (1848) 16 Sim 230 and In re Brogden; Billing v Brogden per Cotton LJ at 568. An executor who fails to call in a debt is liable in devastavit: National Trustees Executors & Agency Co of Australasia Ltd v Dwyer (1940) 63 CLR 1 ("National Trustees v Dwyer") per Latham CJ. Devastavit or "waste" includes both the wrongful distribution of assets depriving the estate of funds to meet the other beneficiaries' needs and the failure to get in assets, debts or liabilities and failure to preserve. As is explained by Perram J in Bovaird v Trustee of Bankrupt Estate of Frost [2010] FCA 1159, the approach of equity that "wilful default" is required has prevailed. What is required to constitute "wilful default" however is "a want of prudence": see J R Martyn and N Caddick, Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 19th ed (2008) Sweet & Maxwell at [55-13].
106The defendants' case has been that:
(1) they did not know that Mona had obtained the sale proceeds for herself;
(2) they did not know that the powers of attorney prevented Mona from obtaining the proceeds for herself; and
(3) even if the powers of attorney did prevent Mona from receiving the proceeds, Percy ratified her conduct.
107The defendants also point out that an executor, in performing his office, must conduct the business of the trust estate with the same care as an ordinary prudent businessman would apply to his own business affairs: In re Speight, Speight v Gaunt (1883) 22 Ch D 727 per Jessel LJ at 739 - 740 and see Williams, Mortimer and Sunnucks on Executors, Administrators and Probate at [55-07]. The executor will be exonerated if he proves that the steps would not have been effective (or there are reasonable grounds for thinking the steps would not have been effective), and secondly, personal representatives have wide powers to compound, compromise and release liabilities to the estate and by the estate.
108There also appears to be two further strands to the defence, which are that:
(1) Deborah had received more than her share of her parents' bounty, having regard to how much she received from Mona and how much Mona spent on Carrington, even before receipt of the proceeds of sale; and
(2) if Mona had placed the sale proceeds into one of the joint accounts held by her and Percy, there could have been no complaint about Mona's conduct, and on Percy's death Mona would have succeeded to it by survivorship.
I have dealt with the second point at [82]. The first point does not seem to be factually correct, having regard to benefits received by Rodney and Warrick but, even if it were, it is not relevant to either claim made by the plaintiff save insofar as the benefits received by Deborah came out of the sale proceeds.
109This topic is dealt with on the assumption that Rodney and Warrick did not appreciate before they became executors that Mona had placed the proceeds of the cheque into her own account, and that the gifts made by her to them came from the sale proceeds.
110In Austin v Austin (1906) 3 CLR 516, the High Court per Griffith CJ, Barton and O'Connor JJ, held that a trustee, including an executor, "sufficiently discharges his duty if he takes in managing trust affairs all those precautions which an ordinary man of business would take in managing similar affairs of his own", applying the dictum of Lord Blackburn in Speight v Gaunt (1883) 9 App Cas 1 at 19. In Austin v Austin at 526 - 522 the High Court held that executors cannot be sued for a technical breach of trust where no loss has ensued.
111On his death, Percy owned no accounts in his own name jointly. Any money held in a joint account by Percy and Mona passed by survivorship to Mona. Given that Rodney, Warrick and Mr Cannington knew collectively that:
(1) there had been sales of property owned by Percy in the three years before Percy's death;
(2) Mona had been given cheques in respect of the proceeds;
(3) Mona had paid money to Rodney and Warrick as gifts; and
(4) Mona had paid money to renovate Carrington out of proceeds of sale;
and given that Rodney and Warrick had (on their evidence) thought that Mona was utilising money due from the sale proceeds to pay tax debts of Percy, nursing home expenses and other expenses, I think that to meet the requirements of a prudent administration of the estate it was incumbent on Rodney, Warrick and Mr Cannington to ascertain out of which accounts such money had been paid and into which accounts the sale proceeds had been paid. Mr Cannington did seek copies of bank statements of Account 0275 and another personal account jointly held by Percy and Mona (see his letters to Warrick and Rodney dated 2 June 1997 in Exhibit D at pp1322 - 1323, Court Book 5) but was only provided with a list of withdrawals from Account 0275 in response. Mr Cannington agreed that he should have followed this up: T613.8 - T621.26.
112A simple examination of the joint accounts to which the executors did have access would have revealed that the sale proceeds were not paid into those. A simple question to Mona as to where she had deposited the proceeds would have no doubt elicited the response which Mona gave more than 10 years later, namely that she had placed the monies in an account in her own name.
113In my view, the executors acting prudently would have become aware by the end of 1996 that Mona had received the proceeds into her own sole account.
Is the fact that some of the sale proceeds were used by Rodney or Warrick to pay for real property relevant?
114The plaintiff's claim, as I understand it, is for repayment by her brothers of money to the estate, not a claim that the estate has an interest in the properties owned by them, so I do not think this is of any relevance, even had I formed a different view about the Barnes v Addy claim.
Assuming that the executors either had or ought to have had knowledge that Mona had received the proceeds of sale and what she had done with those proceeds, what steps should the executors, acting prudently, have taken to obtain the assets?
115Before consideration is given to what steps the executors should have taken, I think it is important to determine what amount in theory could have been recovered from Mona. For that purpose I take as an appropriate date the time shortly before the executors finalised the amount of $445,586.70 to be paid to Mona (see par 55(iv) of the second further amended statement of claim), i.e. in July 1997.
116As at that time, Mona was entitled not to $445,586.70 but $500,000. As at that date, and leaving aside the question of the sale proceeds, PCBPL was owed $165,518 which both sides accept equates to Mona being entitled to $82,759 since she owned 50% of the shares in PCBPL and it had no other debts or liabilities. I do not accept that the plaintiff is entitled to add back in the amount of $104,000 for the Westpac Bond monies Mona received, as that was not the subject of claim and the amendment to introduce that amount was not allowed. Mona could have had a legitimate explanation for that receipt, which she was not given an opportunity to advance. Mona was also entitled (it is agreed) to reimbursement of $14,230 for funeral and legal expenses paid by her on behalf of the estate.
117With regard to Note 21 (responding to par 128 of the PCS), I accept that the codicil was brought into existence in recognition of the possible sale of Lots 161 and 163. As a matter of strict construction, I do not think the codicil recognised or endorsed the retention by Mona of the proceeds of sale of the two lots sold pursuant to the power of attorney, as the defendants contend, but the impact of the codicil meant that if Mona did not have a home at the time of Percy's death, she would receive an extra $200,000. It follows that, as a result of the sale of Lots 161 and 163 and by buying and constructing a home at Ashtonfield, Mona actually reduced the amount payable to her as a legacy by $200,000, which equates fairly closely to the result that Mona should be entitled to the Ashtonfield sale proceeds. Although nothing was said about it, s 22(1) of the Powers of Attorney Act 2003 provides that:
"any person who is named as a beneficiary (a named beneficiary) under the will of a deceased principal who executed an enduring power of attorney has the same interest in any surplus money or other property arising from any sale, mortgage, charge or disposition of any property or other dealing with property by the attorney under the power of attorney as the named beneficiary would have had in the property the subject of the sale, mortgage, charge, disposition or dealing, if no sale, mortgage, charge, disposition or dealing had been made"
which equates fairly closely to the result that Mona should be treated as entitled to the Ashtonfield sale proceeds.
118Further, in my view, whilst it was not authorised by the powers of attorney, the executors would in all likelihood have accepted that $228,328.05 of the proceeds should be deducted from the Property Proceeds of $838,979.75 and with justification. I say this for three reasons:
(1) I think that had the estate been entitled to claim that Ashtonfield was purchased with funds owned by Percy and that Mona should not have the beneficial interest in the house, Mona would then have been entitled to $200,000 in lieu by the terms of the will or she would at least have had a credible case to that effect;
(2) I think that had Deborah's views been sought, she would have agreed that the $228,328.05 should be deducted (see T109 - T110 and T123.32 and see Deborah's letter of 20 October 2006 in Exhibit D at pp1705 - 1710, Court Book 6) and there is no question that would have been the view of the other two residuary beneficiaries; and
(3) although it was not a financial benefit, there was some personal benefit to Percy by virtue of Mona moving closer to the nursing home.
119Therefore, taking the PCBPL shares, the funeral and legal expenses and Ashtonfield into account, the most which the executors in theory could have demanded from Mona was $513,662.70.
120There is, however, the further issue of Account 0275 containing $58,651 to which Mona was entitled by survivorship. Of course, Account 0275 never formed part of the assets of the estate, but since the account was transferred to the three residuary beneficiaries, I think it is appropriate to take the fact of the receipt by the residuary beneficiaries into account in the context of a competing claim by the estate against Mona for having appropriated funds of the estate.
121When the Account 0275 figures are brought to account, they produce a maximum claim of $455,011.70 against Mona, assuming that she was otherwise liable to repay the Property Proceeds to the estate, leaving Mona entitled to the difference of $44,988.30. This shortfall of $44,988.30 is marginally more than the $44,413.30 that was in fact withheld (and withheld for no discernable reason) by the executors. On the scenario examined here, Mona was entitled to $44,988.30 and the three residuary beneficiaries received the benefit of that non-payment.
122By reference to Exhibit Q, and noting the previously unallocated amount of $90,000 which, it has now been accepted by the defendants, ought be attributed to Rodney, it can be seen that between 10 November 1993 and 22 January 1996 Mona paid $275,000 to Rodney and $79,000 to Warrick (excluding the $5000 amount which was paid to Andrew), a total of $354,000.
123It must be recognised, I think, as a practical matter, that had the executors come to the conclusion that Mona was liable or potentially liable to the estate for $455,011.70, Mona would have been able to point out that she had:
(1) paid Rodney $275,000 out of the sale proceeds;
(2) paid Warrick $79,000 out of the sale proceeds; and
(3) paid $98,490.90 for renovations of Carrington and other monies for the benefit of Deborah, including a vehicle;
that is a total of $452,490.90 paid to or for the benefit of the residuary beneficiaries.
124The case has been fought on the basis that Deborah would be entitled to only one third of the monies that the executors should, on Deborah's case, have withheld from Mona, since, were monies to have been withheld (or recovered) from Mona, Rodney and Warrick would have each been entitled to one third of such monies. With that in mind, the maximum amount of Deborah's claim is (excluding interest) $151,670.56.
125There is another twist to all this which is that in August 1997, shortly after Mona was paid part of the balance of her legacy of approximately $218,000 from the sale of Vile's Paddock to bring the total paid to $445,586.70 (she never received the final balance due to her), she gave $50,000 to Deborah, $50,000 to Warrick and $70,000 to Rodney, a total of $170,000: see T1076.
126The defendants' submissions make reference to Robinson v Campbell (No 2) (1992) 30 NSWLR 503 in which the Court reiterated the principle that "Equity will not permit legal rights of contribution or indemnity to be enforced when it would be inequitable to do so", citing inter alia Coulls v Bagot's Executor & Trustee Co Ltd (1967) 119 CLR 460 at 480, 488 and 405. R P Meagher, J D Heydon & M J Leeming, Meagher, Gummow and Lehane's equity: doctrines and remedies, 4th ed (2002) LexisNexis Butterworths deals with the principle that he who seeks equity must do equity: see [3-05] and [5-105].
127There is an issue about whether the payments made for Carrington whilst Mona remained the owner of it should be seen as a benefit to Deborah, but in light of the matters to which I have referred at [86] - [87] above, in my view, it is appropriate to treat the amount spent on Carrington as spent for Deborah's benefit, and added to the $26,223 for the vehicle and the other amount of $6000 paid for Deborah's benefit, bringing the total paid to or for Deborah's benefit to $98,490.90.
128The defendants contend that, in respect of the claim that Deborah maintains should have been made by the executors against Mona, the executors (and the Court) must have regard to the benefits that Deborah received from Mona:
(1) out of the Property Proceeds, i.e. $98,490.90;
(2) $50,000 paid to Deborah out of the legacy that Mona received (i.e. $218,000 approximately) from the sale of Vile's Paddock, part of the estate's assets; and
(3) although not expressly, implicitly the non-payment of the legacy to Mona of the $44,413.30, one third of this being $14,804.43.
129When these are added they total $163,295.33, an amount greater than Deborah's claim against Mona of $151,670.56.
130I do not think that the principle referred to in [126] above has any direct applicability to the devastavit claim since that is an action on the case, but there is a question of what Deborah has lost by the executors' failure to consider holding back part of the legacy from Mona, to which I shall return.
131If the executors had appreciated the true position, in my view they would, in the circumstances, have been required to obtain the views of the beneficiaries. Two of the beneficiaries, of course, were two of the three executors, and the only non-executor beneficiary was Deborah.
132In reaching a decision about what the executors should have done, having regard to Deborah's wishes, I think it would be relevant for Deborah to appreciate that:
(1) Mona had paid $66,267.90 on improvements to Carrington out of the sale proceeds;
(2) Mona paid Deborah $26,223 for a vehicle out of the sale proceeds;
(3) Mona paid $6000 of expenses on behalf of Deborah out of the sale proceeds;
(4) Mona had paid $275,000 of the sale proceeds to Rodney;
(5) Mona had paid $79,000 of the sale proceeds to Warrick; and
(6) that the total of (1) - (5) was $452,490.90 and very close to the amount which was to be paid as the legacy.
133With the information that I have just referred to, I think it is apparent that Mona had in fact paid to or for the benefit of the three beneficiaries equivalent monies to that which she had wrongfully appropriated. Mona's payments to the beneficiaries unfairly favoured Rodney. Had she paid $452,490.90 equally to the residuary beneficiaries, I think it would be difficult to see how the payments could be ignored because in a practical sense the beneficiaries would have received indirectly what they would have received had the monies not been misappropriated.
134This leads me to think that the problem with which the executors would have been faced would have been capable of resolution by an adjustment whereby Deborah would receive another $52,339.40 (plus interest) to bring her share to $150,830.30 (plus interest). That is all that would need to be paid by Rodney, were he acting reasonably, or by Mona, if Rodney would not cooperate.
135I raised this approach with the parties in submissions. Mr Drummond, although making clear that in his view the adjustment would need to have been higher, based upon the contention that neither the $228,328.05 for the Ashtonfield property nor the $58,651 for Account 0275 should be deducted, contended that his client would have accepted an adjustment approach. Mr Grieve did not contend that his clients would have disagreed with an adjustment approach but contended that Deborah would not have agreed to such a proposal.
136I think it is more probable than not that Deborah would have accepted an adjustment which "evened out" the amount which the residuary beneficiaries received out of the portion of the proceeds of sale which Mona would otherwise be required to repay and for these reasons:
(1) Deborah entered into an agreement to partition Anambah and later to resolve the water licence issue when she and Rodney became aware of it;
(2) The acrimony and unpleasantness which came to characterise the relations between the siblings and between Deborah and Mona had not at that point become as trenchant; and
(3) I read Deborah's real complaint as being not that Mona received the sale proceeds but that Rodney and Warrick benefited out of those proceeds to her disadvantage: see T131.35 - 48 and T109.47 - T110.9.
137I acknowledge that the questions of whether the executors would be required to take into account, as a matter of law, the fact that payments had been made by Mona to the beneficiaries out of what she had received, and whether, as part of that process, the payments made for Carrington and even the other payments made to Deborah or for her benefit ought be deducted, are not easy to resolve but I think the executors and the Court would be entitled to look at the matter in a practical sense and to take into account the undesirability of children taking legal action or even making demands on a parent if that could be avoided by a fair resolution of a difficult problem. That problem, I infer, had not arisen out of any desire, on Mona's part at least (as I think all of the parties accept) to cheat Percy, or even Deborah, with whom Mona was very close at all times prior to 2005.
138In the event that Rodney was not himself willing to pay an amount of $65,000 (to allow for interest on the monies) to Deborah to balance the lack of equality of distribution, I think it is more probable than not that Mona would not have contested the withholding of $65,000 from the legacy due to her. I say that for five reasons:
(1) it was Mr Cannington who in May 1997 recommended to Mona that she should insist on payment of the balance of her entitlement, she apparently having done nothing to pursue payment: see par 49 of Mr Cannington's affidavit of 5 December 2008 in Exhibit D at p624 (Court Book 3);
(2) when Mona received $218,000 as part of the payment of her legacy, she paid $170,000 to the three residuary beneficiaries (of which Deborah received $50,000, Rodney $50,000 and Warrick $70,000), a matter to which I shall return;
(3) the executors did not in fact pay Mona $44,413.30 of her legacy and she did not pursue any claim against them for it;
(4) Mona did not seek transfer to her of Account 0275 but appears to have allowed it to be used by the new partnership of the residuary beneficiaries, P C Bird Holdings; and
(5) Mona had very good relations with Deborah at the time the legacy was to be paid.
139On the assumption that the executors should have withheld $65,000 from Mona's legacy for Deborah, there are two further factors which need to be considered in relation to Deborah's claim against the executors. The first is, as I have mentioned, that the executors in fact withheld $44,413.30 from Mona. That withholding benefited all three beneficiaries equally so Deborah received a benefit of $14,804.43 out of that step. The second is that out of the $218,000 paid to Mona as part of her legacy, Mona paid $50,000 to Deborah. That is, out of the very monies that, on Deborah's case, should have been withheld, Deborah received $50,000. When these two amounts are taken into account, I think that although the executors failed to properly consider what they should have done about the monies which they knew or should have known Mona received, Deborah has not suffered any loss by reason of their failure.
140I am conscious that at the same time that Mona paid $50,000 to Deborah, she also paid $50,000 to Rodney and $70,000 to Warrick, but Rodney and Warrick do not make any complaint about the payment of the legacy to Mona and given that Mona did hand over to Deborah $50,000 from the monies she was paid by way of legacy means that to that extent, Deborah did not suffer a loss by the payment out.
141The issue of Carrington and related expenses and the $50,000 gift by Mona to Deborah is also relevant to the Barnes v Addy claims, if it were otherwise maintainable, because her claim would in reality be one for one third of the benefit and the process would, as at [132] - [134] above, produce a need for Rodney to pay $52,339.40 plus interest to Deborah to ensure an equal distribution of the monies disbursed by Mona. In this context, the offset of the proportion of the legacy in fact not paid to Mona and the $50,000 paid out of the legacy to Deborah would be more difficult to characterise as payment which should reduce Rodney's liability.
Limitations and Defences
142The defendants assert that the plaintiff's claims are statute barred in connection with the alleged breach of executorial duties at par 57 of the second further amended defences of the first and second defendants and at par 39 of the further amended defence of the third defendant. Sections 11, 14(1), 47(1) and 48(1) of the Limitation Act provide:
"11 Definitions
(1) In this Act, unless the context or subject matter otherwise indicates or requires:
...
Trust includes express implied and constructive trusts, whether or not the trustee has a beneficial interest in the trust property, and whether or not the trust arises only by reason of a transaction impeached, and includes the duties incident to the office of personal representative but does not include the duties incident to the estate or interests of a mortgagee in mortgaged property.
Trustee has a meaning corresponding to the meaning of "trust".
...
14 General
(1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims:
(a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed,
(b) a cause of action founded on tort, including a cause of action for damages for breach of statutory duty,
(c) a cause of action to enforce a recognizance,
(d) a cause of action to recover money recoverable by virtue of an enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture.
...
47 Fraud and conversion; trust property
(1) An action on a cause of action:
(a) in respect of fraud or a fraudulent breach of trust, against a person who is, while a trustee, a party or privy to the fraud or the breach of trust or against the person's successor,
(b) for a remedy of the conversion to a person's own use of trust property received by the person while a trustee, against that person or against the person's successor,
(c) to recover trust property, or property into which trust property can be traced, against a trustee or against any other person, or
(d) to recover money on account of a wrongful distribution of trust property, against the person to whom the property is distributed or against the person's successor,
is not maintainable by a trustee of the trust or by a beneficiary under the trust or by a person claiming through a beneficiary under the trust if brought after the expiration of the only or later to expire of such of the following limitation periods as are applicable:
(e) a limitation period of twelve years running from the date on which the plaintiff or a person through whom the plaintiff claims first discovers or may with reasonable diligence discover the facts giving rise to the cause of action and that the cause of action has accrued, and
(f) the limitation period for the cause of action fixed by or under any provision of this Act other than this section.
...
48 Breach of trust
An action on a cause of action in respect of a breach of trust is not maintainable if brought after the expiration of the only or later to expire of such of the following periods of limitation as are applicable:
(a) a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims, and
(b) the limitation period for the cause of action fixed by or under any provision of this Act other than this section."
143To the extent that the claim against the executors is put as one of devastavit (or waste), it is governed by s 14 of the Limitation Act and the proceedings must be brought within six years of the date at which damage was first suffered.
144To the extent that the claim against the executors is one for breach of duty as a trustee, that is governed by s 48 and is also subject to a six year limitation period.
145The plaintiff contends that the executors knew or ought to have known by November 1996 that assets of the estate were in the hands of Mona. If they did know or ought to have known that, they were obliged, on the plaintiff's case, to seek to recover the money from Mona or alternatively to withhold payment of the legacy up to the amount owed to Mona.
146The opening submissions on behalf of the plaintiff (par 54) accept that there is a limitation period for devastavit and wilful neglect of six years. In the closing submissions, an argument is advanced that National Trustees v Dwyer establishes that the six years for a claim in devastavit (and wilful neglect) does not commence to run in favour of the executors until the claim against the third person (here, Mona) has itself expired: see par 152 of the PCS. The plaintiff relies on s 47(1) of the Limitation Act to contend that the executors had 12 years within which to bring a claim against Mona. It was submitted that if the executors, exercising reasonable diligence, had discovered breach of trust by Mona shortly after probate was granted in November 1996, they would have had until November 2008 to bring a claim against Mona.
147Ms Champion, relying on Banque Commerciale S A v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 ("Banque Commerciale") at 285.6, contends that since s 47(1) Limitation Act was not pleaded, it cannot be relied on by Mr Drummond, but she also asserts that National Trustees v Dwyer in any event does not support the plaintiff's contention. Since the plaintiff is not asserting that the limitation period is extended by fraud, the considerations detailed in Banque Commerciale are not applicable here. In National Trustees v Dwyer at 18 - 19, Latham CJ held that the claim was really one in devastavit and was statute barred. Justice Starke did not agree that the claim was statute barred because he saw the claim as one "more of the nature of an action to have the estate of the testatrix administered by the Court and an account taken of such estate" (at 30). The characterisation of the case by Starke J, however, has no application here, since the claim is framed as devastavit and not as an application for administration. National Trustees v Dwyer does not support the plaintiff's contention. The approach of Latham CJ , unsurprisingly, accords with English authority: see the summary in T Prime and G Scanlan, The Law of Limitation, 2nd ed (2001) Blackstone and the helpful summary in Bovaird v Trustee of Bankrupt Estate of Frost per Perram J at [19] - [21].
148In torts (other than continuing torts, such as nuisance), the cause of action accrues on the suffering of some loss or damage, even if that loss or damage is not all of the loss or damage suffered, and time commences to run even if the putative plaintiff is ignorant that a claim of action has accrued: see Winnote Pty Ltd (in liq) v Page t/as Freehill Hollingdale & Page [2006] NSWCA 287; (2006) 68 NSWLR 531 ("Winnote") at [63] - [66] per Mason P, with whom Tobias J agreed at [340], and per Basten JA at [361] and the cases there cited.
149It might be arguable that there was a continuing duty to commence proceedings after the loss caused by payment out. No argument was addressed on this point and I am not sure that it is correct in the present context but I note that, as was pointed out in Winnote (without comment as to its correctness), Glass JA in Hawkins v Clayton (1986) 5 NSWLR 109 at 124 said:
"assuming a continuing duty of care, a fresh cause of action will only arise if a fresh breach causes loss going beyond the loss resulting from the barred cause of action"
and see also Sheldon v McBeath (1993) Aust Torts Reports 81-209 at 62-082 in which Handley JA cited that passage as containing "the applicable principles" and McHugh JA seemed to accept that approach as correct in his dissenting judgment in Hawkins v Clayton when he said at 144, lines F - G:
"[i]f damage to the plaintiff did commence before 22 November 1976, it would have been necessary to determine whether the plaintiff suffered further damage after that date by reason of breaches of a continuing duty on the defendants."
150In my view the claim in devastavit, assuming it to be otherwise available, accrued at the time that the executors failed to hold back the legacy to Mona because the estate suffered loss at that time. The plaintiff had six years to bring an action after that and no proceedings were brought until 2005. I accept that there may be arguments which can be advanced in respect of suspension of a limitation where a party does not know that he or she has rights to claim as a result of the conduct of the defendant (see Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539) but no such arguments were advanced here.
151It follows that the plaintiff cannot succeed against the executors as executors, even if otherwise available.
Defences to the Barnes v Addy Claim
152A statutory limitations defence has also been pleaded in respect of the Barnes v Addy claims against Warrick and Rodney. These claims, which are set out in pars 38A - 41E of the second further amended statement of claim, were met with a defence which responded to pars 17 to 44 of the second further amended statement of claim, asserting that the claims accrued against the first and second defendants more than six years before the commencement of the proceedings on 8 November 2005, and are therefore statute barred by the Limitation Act: see par 47 of the second further amended defences of the first and second defendants.
153The allegation that the claims accrued more than six years before the commencement of proceedings is correct. The question is: does the Limitation Act provide a six year limitation period for the Barnes v Addy claims? There are two potentially relevant sections, ss 47 and 48, which I have set out above at [142], together with relevant definitional sections.
154The plaintiff asserts in pars 149 - 151 of the PCS that s 47(1) applies to its claims for breach of trust. Deborah's claim, as I have noted, is brought in lieu of the claim of the estate, relying on the principle that a beneficiary can bring proceedings against third parties for the purpose of getting in estate assets in special circumstances: Re Atkinson is an examples of this. For the purpose of considering the question of limitation, I proceed on the basis that Deborah's claim must be viewed as a claim by the estate and she can be in no better position than the estate would be if new executors had commenced proceedings against Warrick and Rodney. I shall assume that the executors were aware or became aware as at December 1996 of the transfer of funds of Percy first to Mona's account and secondly from that account to Warrick and Rodney. A claim against Mona would therefore be one for a remedy of the conversion to a person's own use of trust property received by the person while a trustee and therefore would fall within s 47(1)(b) of the Limitation Act, but the claim against the brothers could be characterised as a claim "to recover trust property, or property into which trust property can be traced, against a trustee or any other person", i.e. a claim within s 47(1)(c).
155Although the first and second defendants adopted the third defendant's closing submissions, those submissions do not relate to the Barnes v Addy claim since none is made against the third defendant: see par 39 of the third defendant's further amended defence, where the third defendant pleads the statutory limitations defence only in answer to pars 54 - 56 of the further amended statement of claim. Therefore, the first and second defendants have essentially made no submissions on their pleading that the Barnes v Addy claims are statute barred.
156Even if it had been contended by the first and second defendants that s 48 governs the claim because the claim is one for breach of trust against the brothers in their role as donees of the power, and that section provides a limitation period of six years, the answer would be that provided s 47(1)(b) also applies to the claim, the fact that another section applies does not produce the result that the shorter period applies because s 47(1)(e) provides that it is the later limitation period which applies to s 47(1) claims. It follows, in my view, that the claims against Warrick and Rodney are not statute barred.
157Therefore, on the Barnes v Addy claim, only equitable defences might be available. In par 80 of their second further amended defences, the first and second defendants plead acquiescence, laches with prejudice and estoppel in answer to the whole of the second further amended statement of claim and the third defendant adopts this pleading in par 49 of its further amended defence.
158Laches does not apply to claims that are governed expressly or by analogy to a statute of limitation: see Meagher, Gummow and Lehane's equity: doctrines and remedies at [36-045]; see also Archbold v Scully (1861) 9 HLC 360 at 383 and Re Birch (1884) 27 Ch D 622. Although the defences of acquiescence and estoppel remain available to claims governed by a statute of limitation, it is unclear how acquiescence or estoppel could apply in the circumstances and, in the absence of submissions by any of the defendants on these defences, I do not think I should consider them further.
By virtue of the Trustee Act 1925, are Rodney, Warrick or Mr Cannington entitled to be excused from any breach of trust if otherwise established?
159This question does not arise.
First Cross Claim
160The first and second defendants proffered no submissions in connection with their cross claim against Deborah by which they alleged that Deborah was a constructive trustee of Carrington. I can only assume that there was acceptance of Mr Drummond's point that there was no evidence that Deborah knew at any time before February 2008 that Mona's expenditure on Carrington had come out of the sale proceeds. As Mr Drummond and Mr Grieve both pointed out (in different contexts), the scope for a claim in respect of real estate is very limited (see Farah Constructions Pty Ltd v Say-Dee Pty Ltd at [193] - [197]) and the basis upon which the brothers, rather than Mona or her estate, could make such a claim is entirely unclear. There must be verdict and judgment for the plaintiff on the first cross claim.
Second Cross Claim
161This is a cross claim by which Mr Cannington seeks indemnity from Warrick and Rodney in respect of any liability which he has to the plaintiff by virtue of the deed of retirement entered into between them in 2004; relevance is also placed on ss 59(2) and 85(1) of the Trustee Act which are in the following terms:
"59 Implied indemnity
...
(2) A trustee shall be answerable and accountable only for the trustee's own acts, receipts, neglects, or defaults, and not for those of any other trustee, nor for any banker, broker, or other person with whom any trust moneys or securities may be deposited, nor for the insufficiency or deficiency of any securities, nor for any other loss, unless the same happens through the trustee's own wilful neglect or default.
...
85 Excusable breaches of trust
(1) Where a trustee is or may be personally liable for any breach of trust, the Court may relieve the trustee either wholly or partly from personal liability for the breach."
162Mr Cannington is not liable to Deborah, so there is no foundation for the cross claim.
Third Cross Claim
163Warrick and Rodney claim that, if the plaintiff is successful on her executorial and devastavit claims, then Mr Cannington (1) breached his duty as Percy's solicitor and (2) is a co-executor and so they are entitled to a greater level of contribution from him because Mr Cannington:
(a) had acted as Percy's solicitor on the four sales;
(b) knew that the cheques were drawn in favour of Percy;
(c) knew how much Percy received from the sale;
(d) could readily have ascertained the fate of the settlement cheques on his appointment as executor; and
(5) was well aware of the duties of an executor "whereas the knowledge of Warrick and Rodney was fragmentary".
164Nothing was said in the submissions on behalf of Warrick and Rodney in respect of point (a) so I will treat it as abandoned. So far as (a) to (d) is concerned, Rodney and Warrick are not liable to the plaintiff on the executorial and devastavit claims so there is no foundation for the cross claim.
Deficiencies in Administration
165The material before the Court establishes that there were the following deficiencies in the administration of Percy's estate, valued for probate at almost $4.5 M:
(1) the executors did not open an estate bank account;
(2) accounts of the estate were not prepared until 2006;
(3) Account 0275, which was Mona's on Percy's death, was transferred to the partnership P C Bird Holdings without any proper documentation;
(4) the executors did not give any consideration as to whether the sale proceeds due to Percy had been received by him and what consequences flowed from the fact that they had not been received by him;
(5) the executors did not make any effort to pay PCBPL the debt owed to it;
(6) Warrick obtained a tractor using Percy's loan account with PCBPL and did not include the tractor in its assets for probate purposes;
(7) Mr Cannington purported, with the agreement of Rodney and Warrick, to resign without ever obtaining Court approval for his removal; and
(8) Rodney, Warrick and Mr Ward took the view that, as executors, Rodney and Warrick had no concern with any matter prior to the testator's death: see Exhibit D at p1628 responding to the items at pp1561 to 1564 and see p1667 (Court Book 6). Whatever the limits of enquiry which are imposed on executors, the rejection by Rodney, Warrick and Mr Ward of any need to be concerned with any matters occurring prior to the testator's death for any period is erroneous since it is inconsistent with the standard of prudence required in the administration of an estate and the requirement that all assets of the estate be identified and, where possible, got in. If there is material that suggests that a third person may have wrongfully received property of the deceased, it is incumbent on the executors at least to investigate the matter.
166The matters to which I have referred need to be mentioned in the context of a claim connected to the administration of Percy's estate, the details of which administration have been exposed by the proceedings.
Conclusion
167It follows that the plaintiff's claim and the cross claims should be dismissed. I will hear the parties on the issue of costs.