Callaway v Callaway; The Estate of Aileen Margaret Callaway [2019] NSWSC 1275 | Case summary

Martin and Trevor Callaway: A Contest for Probate

Applicable Legal Principle. The applicable legal principles give sound guidance as to the level of detail which is required in the Court's analysis of the present contest between Trevor and Martin Callaway for probate of their mother's will. Each says that the other should be passed over and probate given to only one of them. As the authorities show, it is not necessary for the Court to resolve every one of the disputes between Martin and Trevor, in order to determine the question to whom probate or administration of the estate should be granted. Rather, the Court must decide what is best for the orderly administration of the estate.
The Court will pass over a named executor where to appoint that executor would place the administration of the estate in jeopardy: Bates v Messner (1967) 67 SR (NSW) 187; (1967) 86 WN (Pt 2) (NSW) 35. There are many established grounds for passing over an executor, including: bad character; attempts to delay the proper investigation of the deceased's affairs; time wasting and neglected duties; conflicts of interest; extensive absences abroad; but, authority also suggests there are no limits to the grounds upon which an applicant may be passed over as each case depends upon its own facts and the Court's overriding concern is promoting the orderly administration of the estate and the welfare and best interests of the beneficiaries: Miller v Cameron (1936) 54 CLR 572; [1936] ALR 301; [1936] HCA 13. The primary concern of the Court will be to ensure the estate will be efficiently and properly administered according to the terms of the will: Mavrideros v Mack (1998) 45 NSWLR 80 (at [107] and [108]); (1988) NSWCA 286.
But a testator's choice of a designated person as executor or co-executor is important and implies that the deceased reposed trust in him or her, and considers them to have been both suitable and capable of performing the duties required so such a person is not passed over lightly: Uniting Church in Australia Property Trust NSW v Millane [2002] NSWSC 1070, at 9. Some degree of latitude is to be expected in relation to conflicts of interest in the appointment of family executors. It should be borne in mind that the deceased can be expected to have known of relationships and circumstances during the deceased's lifetime which might lead to a conflict of interest, but has nevertheless made the choice of the appointing the person as executor in that knowledge. But conduct or circumstances which have arisen since the death of a testator, or about which the testator could not have expected to have had such knowledge, will not necessarily be treated with the same flexibility.
In this case, the Court can determine, especially from Martin and Trevor's conduct in the many years that have passed since their mother's death and their oral evidence to the Court, that the appointment of either of them is likely to jeopardise the due and proper administration of their mother's estate according to her will. The Court already has before it seven years of bitter correspondence, after October 2012 between these two brothers and their legal representatives. The course of this correspondence gives the Court ample grounds to conclude that it should not give either of them a grant of probate of her estate over the other.
Some Relevant History. The relevant history starts some time ago, indeed during World War 2. Aileen and Frederick Callaway married in 1943, and had their three children, Gregory, Trevor and Martin between 1946 and 1953. By all accounts, Martin and Trevor Callaway have had a strained relationship for a long time. Their eldest brother, Gregory, appeared to be above much of their disputes.
Frederick Callaway died in 1994. Martin Callaway became closely involved in Aileen's financial affairs after Frederick's death. This led to an increase in tension between Martin and Trevor.
Many disputes have broken out between Martin and Trevor both before, and after, Aileen's death. Before considering the oral evidence these reasons first consider a sample of the prominent disputes. The more noticeable disputes concern the following matters: the sale of Aileen's Wahroonga property; a line of credit secured over the Wahroonga property, a property in Harden; Martin's absences from Australia; whether Aileen made a will eliminating Martin as a beneficiary, and whether Martin destroyed that will; who retains, and has failed to give up, Aileen's diaries; and, the financial management of the Wahroonga property after Aileen went into a nursing home.
These are now explained in more detail. After Frederick died, Trevor formed the view that Martin became too controlling and was pressuring Aileen to sell her home in Wahroonga, in part so he could have access to the capital it represented. Martin denies he mismanaged his mother's affairs, or that he had any such intention.
In 2002, a line of credit was established in Aileen's name for her use; secured over the Wahroonga house. Increases in the amount outstanding on this line of credit have become contentious between Trevor and Martin, both before, and after, Aileen's death. The liability on this line of credit is still a significant liability of her estate.
In 2004, Aileen funded the purchase of a property in Harden, in country New South Wales, at a location which, according to Martin, was really only to Trevor's advantage. Trevor acknowledges that this is estate property. Martin has long disputed the wisdom of this purchase in Aileen's best interests.
Martin moved to Thailand in 2005; spending more time in that country than in Australia. According to Trevor, on Martin's visits to Australia he strongly pressured his mother to lend him, or give him, money. Martin denies any misconduct of this kind. But according to Trevor, Martin's pressure on Aileen became so bad that Aileen had told him in 2009 that she wanted to change her will: to remove Martin as executor and to delete him as a beneficiary. According to Trevor, Aileen declared in mid-2009 that she had changed her will in this way.
Aileen died in October 2012. An amended will of the kind Trevor describes was never found. Trevor strongly believes that his mother made another will but Martin found it and destroyed it after her death, so he could inherit from her estate. Martin denies these allegations. They may be right. They may be wrong. But the Court is comfortably of the view in this case that whatever conclusion it reached on the very limited evidence available, the losing side would not readily accept it.
Martin certainly seems to have taken possession of parts of his mother's diaries and business records, parts of which he subsequently shared with Trevor. But Martin says that Trevor has some of Aileen's diaries and other business records. Aileen did keep detailed diaries throughout much of her life, which recorded her attitude to family members and her business dealings. Obtaining them would be of real significance in working out what monies were owed by each of her children to her estate. Suspicions that the diaries are being withheld compounds suspicions of concealment of moneys owed to Aileen's estate. Mutual notices to produce calling for these diaries have been issued in the proceedings. Acrimonious disputes presently exist between Trevor and Martin about who holds these diaries and what has been done with them.
Within a few months after Aileen's death, tensions between Martin and Trevor escalated, not only over the diaries, but over the financial management of Aileen's house property at Wahroonga. Long before her death, Aileen had gone into a nursing home and the Wahroonga property had been let out.
There is some independent evidence that, within a few months of Aileen's death Martin presented himself at the Office of the Managing Agents of the Wahroonga property, and made accusations of serious mismanagement of the rental proceeds of the property. These allegations were not obviously based on objective evidence, and are strongly contested both by Trevor and by the Managing Agent. Trevor says that the rental proceeds of the property have been applied to pay land tax on the property, and pay interest on the line of credit secured over the property.
Disputes also emerged about who had authority to speak on behalf of Aileen's estate. Aileen's solicitors, Messrs Hamer and Hamer, could not get a coherent joint instruction from Gregory, Trevor and Martin. Eventually, by early 2013, Trevor and Gregory had engaged Colquhoun & Colquhoun Solicitors to act for them, and Martin had engaged L Rundle & Co Solicitors to act for him in relation to the estate. Between early 2013 and August 2017, correspondence between the parties' solicitors continued about various subsidiary matters including: alleged loans by Aileen to Trevor and Gregory, and whether these were assets of the estate; the production of the diaries; disputes about the release of the original will; and, periodic demands by each party for probate, and threatening Court action if the demands were not met. But it is also clear that there were long periods of inactivity and non-communication between the brothers, occasioned in part by the obvious difficulty that they had in dealing with one another.
Gregory's Estate. It must be said, in looking at this correspondence, that Gregory Callaway, the eldest brother of the three, did not seem to initiate acrimonious correspondence with his brothers. He seems to have acted in a role as a mediator in much of their disputation. But Gregory died in August 2017, leaving two children. But as Gregory survived his mother by five years, his share of Aileen's estate passes to his executors.
The various disputes already recounted continued after Gregory's death, between Trevor and Martin. No representative of Gregory's estate appears to have been formally appointed for the purposes of the proceedings. It was possibly for such an appointment to be made, in part to bind Gregory's estate to the outcome of these proceedings, but in part also to introduce a third force of reason and moderation in the contest between Trevor and Martin. The Court proposed the making of orders for the appointment of one or other or both of Gregory's sons, or some other person as representatives of his estate for the purposes of these proceedings under Uniform Civil Procedure Rules 2005, r 7.10 ("UCPR"), but only if they wished. UCPR, r 7.12 makes clear that a beneficiary of an estate certainly need not be joined.
Gregory Callaway's estate has a strong interest in the orderly administration of Aileen's estate. The beneficiaries of his estate have had the proper administration of Aileen's estate and the derivation of any benefits through Gregory much delayed. They have an interest in moving these proceedings along to promote the proper administration of Aileen's estate. Gregory's representatives have the advantage to all concerned of being potentially neutral parties, which will assist in the furtherance of a reasonable outcome in Aileen's estate's administration. In the end this was not pursued and Gregory's estate will be administered in its own way but it is hoped in a manner that will also promote the orderly administration of Aileen's estate.
The Pleadings and the Proceedings. About the time of Gregory's death, Martin commenced these proceedings, seeking probate of Aileen's estate. This is followed in May 2018 by Trevor's cross-claim also seeking probate. Meanwhile, the contest concerning the diaries and other issues continued unabated. But Messrs Hamer and Hamer were finally able to lodge Aileen's original 1998 will with the Court in February 2018.
The existing pleadings show the wide range of disputes still alive between these parties. Martin alleges against Trevor that he: is in a position of conflict of interest; has intimidated Martin; has delayed in obtaining probate and refused to cooperate in producing the original will; has failed to account for rental income from the Wahroonga property; has failed to pay nursing home fees when the deceased was alive; used the deceased's resources to acquire a property in Harden for his own benefit; has denied Martin legitimate access to the financial information concerning the estate; and, has refused to cooperate with Martin.
Trevor's cross-claim also makes serious allegations against Martin. Trevor alleges that Martin: was prepared to make serious, but unfounded, allegations against the Managing Agent of the Wahroonga property; has improperly interfered with the estate's banking arrangements; has a past history of financial mismanagement; intimidated the deceased during her lifetime, to diminish her asset pool, and provide him with money; has spoken about himself and his achievements in a delusional or dishonest terms; and still spends much of his time outside Australia, so that he cannot be relied upon to be in the country to administer the estate.
It is not necessary for the Court to decide these allegations. They cannot be decided quickly. But their existence, their entrenched nature, and the fact that they will take a long time to resolve, is sufficient, with the oral evidence, for the Court to conclude that neither Martin nor Trevor should be appointed as executor of Aileen's estate. The grant of probate would be interpreted by the brother who did not receive the grant as disapproval of him, and the creation of ascendancy over him by the brother who was made executor. In the history of the correspondence in this case, such a grant is likely to produce a round of subterranean warfare against the appointed executor and is inherently incompatible with the orderly future administration of the estate.
The Oral Evidence and Analysis. The oral evidence in these proceedings was unusually illuminating. Both Martin and Trevor were cross-examined effectively for about an hour each. The cross-examination allowed the Court to capture a good picture of how they would interact in the course of the administration of this estate.
In the end, because of Martin's concession that he no longer wished to seek his principal relief, of a grant of probate himself, and was content for anindependent solicitor such as Mr Richard Neal to act as administrator cum testamento annexo, the cross-examination was directed on both sides to a scenario in which Trevor might be the executor administering the estate with Martin as a beneficiary.
The cross-examination was truncated in the circumstances. It did not really attack the credibility of either witness and the Court does not judge either witness to be either dishonest or unreliable. The real point of the cross-examination on both sides was to test out what would happen in the event of various estate administration scenarios and the prospects for conflict that might arise with particular issues. Counsel carefully addressed themselves to these issues, which enabled the cross-examination to be conducted within a short compass.
The Court will make a number of short general observations about each witness here, but then make other observations in the course of analysis of their evidence. The two surviving brothers are both men of firm views about one another and about themselves. This is not to say their judgments are wrong, but what is clear is that they are very firm.
The other general observation is that the active tension between both of them crackled through the court room. The Court cannot hope to understand the sources of this tension. Indeed, it was apparent from Martin's evidence that he did not really have much insight into it himself. Tentative theories were offered but it was not the Court's function to analyse the origins of their differences, merely the present symptoms. But the tension between them was undoubted and irreducible.
On Trevor's side the tension between the two brothers was closely informed by a strangely patronising view of his brother. Why a man in his late 60s would wish to comment about the maturity of his younger brother in his mid-60s, and about how his younger brother had recently developed some maturity is something of a mystery. But that is what Trevor did. He seemed to have an outlook of correcting and controlling a wayward younger brother. Whatever mistakes Martin had perhaps made, Trevor appeared to have little insight into the resentment that his attitude might engender in a younger sibling.
And Trevor's sense of entitlement to hold and express such opinions did rankle deeply with Martin. Martin genuinely professed that he wanted a better relationship with his brother but how that could ever be possible is difficult to fathom.
The court room is a dynamic environment. As each of Trevor and Martin gave evidence a full and expressive range of human body language was on display, without attributing what body language is identified below to one or other of them, its implications are clear. As one or the other of them gave evidence, the witness would barely look at the non-witness or offer any gestures of conciliation in their direction. The brother not giving evidence would either smirk, laugh or express overt disagreement with the evidence of the other, or simply look impassively away. Neither in the words of their evidence or in their gestures did the Court receive any basis to infer that this pair were on a road to improving their relationship, notwithstanding what Trevor said about Martin's recent improvement in maturity.
And this display comes at the end of a history revealed in the oral evidence that, apart from a brief meeting at mediation in recent months, neither Trevor nor Martin had seen one another for seven years; from shortly after their mother's death in November 2012, until the hearing room today. How the would cope with the regular communication of estate administration is wholly untested.
Trevor is quite intellectually capable of being an executor. But the issue is whether he has the independence of mind, emotional detachment and good judgment to put the interests of the estate and its beneficiaries ahead of his own, at least at the minimal level by avoiding conflict with his brother.
The Court does not have that confidence in Trevor. To be fair to Trevor, it is unlikely that the Court would have had this confidence in Martin either. But it is Trevor whose possible appointment needs to be examined here. Trevor has little or no insight into how his opinions about his brother and his expression of them impair the development of their relationship. The Court sees no prospect of him gaining such insight. In my view, with such a personality, the appointment of Trevor would be likely to lead the estate down a path of unpredictable and uncontrolled conflict.
Trevor is likely to view his appointment as correct judgment of his elder brother's ascendency over Martin, and to reinforce his sense of entitlement to express judgments about his younger brother's way of life and character. His propensity to do this is no better demonstrated than when, after Aileen's death, he issued a number of ultimatums to Martin, so Martin would rein in aspects of Martin's behaviour towards Gregory, of which Trevor and possibly Gregory disapproved. The Court does not doubt that Trevor's outlook at his younger brother's faults are genuinely held opinions. It is just that the expression of those opinions, and what that indicates about his management style, means that he cannot be relied upon to exercise executor's power with appropriate restraint.
In final submissions, Mr Chapple of counsel gave examples of seven areas where conflict was likely to break out between Trevor and Martin, were Trevor to be made administrator of the estate. The seven examples are the most prominent areas of final conflict as expressed in the oral evidence and are worthy of brief analysis.
First, Trevor claimed that he had supported his mother or her estate to by advancing a net amount of $146,000 he had calculated and from which he would seek reimbursement from the estate. But Martin does not accept this figure. The calculation has never been produced. It is a fertile area of future dispute.
Although Martin said he could not identify particular disputes that would emerge, he nevertheless said he was "certain" that disputes would arise between himself and Trevor. The Court accepts that he is correct in this. Trevor's alleged advances to the estate are a prime area of potential for such disputes.
Secondly, Trevor says that he is prepared to forgive all the brothers' monies that are said to be owed by the brothers to Aileen's estate and that, as a result of doing so, possible disputes about those loans could be taken off the table. But neither Martin, nor Gregory's estate, have accepted this is an appropriate course in the estate's administration. And indeed, they may well object because the person who Martin alleges would benefit most from such forgiveness is Trevor.
The issue of loans to family members exposed some of the most revealing evidence in the proceedings. Trevor was cross-examined about diary entries that Aileen had made that Trevor had "borrowings" from him in specific amounts. His view was that his mother had mischaracterised the nature of these transactions and they were not borrowings at all. When he was asked the question whether he was "persuadable at all that that view could be wrong" he simply said, "I'm happy to listen to any argument, yes. If I am wrong, I will accept that, but I know I am not". He is not likely to see the other side of this argument.
Thirdly, the sale of the house in Wahroonga is likely to be a fertile area of further disputation. Mr Colquhoun, on behalf of Trevor, said it would be straight-forward for a normal, intelligent person. It would. But issues such as fixing the time for sale, the work to be done before sale, and the reserve price can all be contentious decisions which, in my view, would be likely to create conflict in this administration.
Fourthly, the sale of the Harden property would be likely to create similar issues between the brothers, particularly because its sale might impact upon his own personal interest as a part-owner of adjacent premises.
Fifthly, Trevor has threatened to commence legal proceedings against the aged care facility where Aileen lived before she died on the grounds that she had been overcharged.
Trevor has undoubtedly done work on this claim but whether or not it should be pursued is likely to be a fertile area of dispute between these brothers and places this estate in a category beyond simple administration, where conflict is likely.
Sixthly, accounting for the receipt of rental from the Wahroonga property and its application to the line of credit facility would ordinarily be a matter of simple mathematics, as Mr Colquhoun submitted. But in a dispute has gone on for seven years such simple mathematics has never agreeably passed between these two brothers.
Moreover, the objective evidence indicates that, even for a short period of time, Martin behaved in a very excessive manner with the real estate agents in pursuing this issue, showing the potential for further disputation in relation to it.
Seventhly and finally, the question of personal items, jewellery diaries and the like have not been resolved. Although these are probably unlikely to come back much to trouble the estate it is an area of dispute between the brothers that illustrates the preparedness to blame one another before pursuing other rational alternatives like the diaries or the jewellery having been stolen or lost at the aged care facility. Both brothers seem prepared blame one another for the loss of these items when there are other rational entrances available. These items have not been taken off the table as areas of dispute and are real candidates for delaying the proceedings.
Conclusion. This conclusion does not involve the Court finding that either Martin or Trevor would be individually unfit to have an executorship. Far from it. But the appointment of one, and the resentment of the appointment of the other to this estate, would immediately lead to a conflict which would damage: both of them; Gregory's interest in the estate; and, the estate's orderly administration. It is the combination of these two individuals, and the depth of their conflict, which has become florid after Aileen's death, which is the reason for the Court reaching this conclusion.
The Court will therefore appoint an administrator. The only question now is who that should be. The Court raised with the parties the possibility of either a professional administrator being appointed or another trusted family member. The Court raised with the parties the possibility that Gregory's children, the representatives of his estate and who are adults in their 40s, could be appointed if they were regarded as neutral. But that was not taken up. The parties were both content for Mr Richard Neal of Teece, Hodgson and Ward to be appointed. He has consented to his appointment. He is a well-respected practitioner in this field and the Court has no hesitation in appointing him.
Costs. The Court raised with the parties what costs orders should be made on the various possible outcomes to the proceedings. Both sides indicated through their legal representatives that a fair outcome would be that each party bear their own costs.
These submissions are right. Whether Trevor had been appointed as executor, or whether an independent administrator had been appointed, the better course here must be to order that each party to bear their own costs. The conflict between these two brothers was not created by the executrix but by themselves. Aileen's estate, particularly Gregory's interest, should not have to bear the costs of their dispute. Moreover, involving the estate in a costs dispute would further jeopardise its orderly administration. Subject to any applications for a special costs order, that is the order that the Court will make.

Callaway v Callaway; The Estate of Aileen Margaret Callaway

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