Carrington v Wallace

Will

1. The deceased's last Will was dated 18 April 2015 (Ex A at p 59). An email dated 23 August 2016 from Matthew (see below) suggests that Matthew himself had a role in drafting the Will in early 2015 (see Ex A at 100), which may explain his apparently firm belief in how it was to be construed and applied).
2. Under cl 2 of the Will, as noted above, Matthew and Ashley were appointed as executors and trustees.
3. After specific gifts provided for in cl 4 of the Will, cl 5 provided for the division of the balance of the deceased's estate into one or more equal parts or sections, to be held on trust in accordance with Part B of the Will (that Part headed "Administrative Provisions"). Clause 5.2 provided that each of the deceased's three children was to receive one equal part of the balance of the estate "subject to clause 6".
4. Clause 6 of the Will, headed "Request Provision", provided as follows: I request that my Executors distribute the residue of my Estate to my beneficiaries by paying to each of my beneficiaries distributions (to be determined by the Executors in their absolute discretion) up to a maximum total amount of $50,000.00 per annum until there are no funds remaining.
5. Robb J concluded that the proviso in cl 5.2 ("subject to clause 6") qualified only the circumstances in which each child's beneficial share of the residue would actually be distributed to that child (and did not qualify the existence of each child's entitlement to a beneficial interest in the equal part of the residue held on trust for that child) (see [93]-[102]). His Honour attached significance to the fact that cl 6 was described as a "request provision" and that the wording of the clause was in terms of a request, not a direction (being precatory in nature). His Honour said (at [100]): … Subject to the application of any principle of law that governs how the defendants must exercise the discretion given to them by clause 6, the effect of the request is that the defendants are free to act on the request or not. It may be that, provided the defendants exercise their discretion in conformity with the will, their actions could not be attacked as a breach of trust, because the request in clause 6 constitutes an authorisation to them as to how they may distribute the residue of the estate. However, the defendants could ignore the request. In that event, the only residual course available to them would be to distribute to each surviving child the equal part of the residue held by the defendants on the trusts created by clause 5.1.
6. His Honour concluded (as noted above) that on the proper construction of the Will each of the surviving children became absolutely presently entitled beneficially to an equal one-third share of the residue of the estate held on trust for them by Matthew and Ashley ([102]).
7. Clause 11 .1 of the Will relevantly empowered the executors and trustees: … (g) To hold, use, surrender, let, lease, take and grant options or rights in, or otherwise deal with any real or personal property and including, but not limited to, shares, units, debentures or securities of any company or trust on whatever terms as the Trustee thinks fit; (h) To sell, lease, exchange or otherwise dispose of assets in my Estate on whatever terms they consider expedient as if they were the absolute beneficial owner; … (q) To purchase all or any part of an Asset of my Estate at a value determined by a qualified valuer and on terms that would be granted to an arm's length purchaser from my Estate;

Chronology of events

1. The deceased died on 19 December 2015.
2. On 8 January 2016, Matthew (who as noted above is an accountant, not a solicitor) sent an email to the residuary beneficiaries (Dean, Mischa and Ashley) attaching the Will, and including the following: Commencing next week, Ashley and I will identify a solicitor in NSW to assist us, seek market valuations for Manyana and compile a list of assets which will give an estimate of the value of the Estate. As soon as this is completed we will report to the beneficiaries. The majority of the Will is dealt with in clause 6. The discretion contained in the clause was discussed at length with Joe [the deceased] and his clear intent is that the beneficiaries utilise these funds, up to $50,000 p.a. to create/buy assets for long term wealth creation. It was not Joe's wishes that any of these funds would be utilised on everyday living costs or consumables. Once we have engaged a solicitor, we will also outline both the process and timeframes for asset realisation and distributions in accordance with the Will. In the meantime, please give Ashley or I a call to discuss any matters.
3. On 15 January 2016, a valuation report was obtained from Blake McKenzie of MVS National South Coast Pty Ltd (the MVS valuation) in respect of the Manyana Property (see Ex A at p 3). The MVS valuation was obtained on Ashley's instructions but, he says, for the estate (see at T 109.14) because he says that he was not sure at that stage if he was in a financial position to purchase the property. The stated valuation purpose was for "Family Law Asset Value Determination" (and the report inexplicably contained a declaration made in accordance with the Family Law Rules 2004) but it was also noted in the report that the valuation may be relied upon by the estate of the deceased.
4. The Manyana Property was inspected by the valuer on 15 January 2016 and valued, on the basis of an assessment of "Market Value assuming sale with vacant possession" (expressed to be prepared on an unencumbered fee simple basis), including fixed floor coverings and standard fittings and fixtures but excluding items of furniture and furnishings, at $480,000 (see Ex A at pp 6-18).
5. On 16 January 2016, a valuation was obtained from South Coast Auctions Pty Ltd of a motor vehicle, household furniture and associated items (at $6,535) (see Ex A at p 22).
6. On 30 January 2016, Matthew sent another email to the residuary beneficiaries, stating: Well its been a busy three weeks since we last emailed and Ashley and I (particularly Ashley) have achieved a fair bit. We have identified what we believe to be all the assets of the Estate and the attached provides a detailed summary of assets, the estimated value of the assets and any related costs. We have sourced a solicitor [Ms Anne Brown of Marriott Oliver] and are in the process of finalising the cost agreement before we engage, their costs are currently noted at $8,737.47 (including approximately $2,000 of out-of-pocket expenses for filing and related fees). The next steps involve obtaining probate, then realising the assets, paying the gifts to Seaham [the deceased's partner] and the grandchildren and then having the remaining funds available for the beneficiaries (Michelle, Dean and Ashley). It seems that probate is a longer process than envisaged and it is likely to take 12 weeks (6 weeks to prepare the application and receive documents from relevant parties and 6 weeks for the Court to approve). It will then take a further 3 weeks for parties involved to transfer assets. On this basis the Estate should have all the assets recognised [sic; realised] May/June 2016. In respect to the house, Ashley is still considering whether he wishes to purchase it and if this occurs this will expedite things considerably. In the event Ashley wishes to purchase the house, (which was Joe's wish as communicated to Seaham, Ashley and I, both collectively and individually) I would seek your agreement. [My emphasis] If Ashley doesn't purchase the house then there is a bit to do to have the house completed and building compliant before it is placed on the market. …
7. By letter dated 2 February 2016, Ms Brown of Marriott Oliver provided Matthew and Ashley with her initial advice in relation to various aspects of the estate, including the following: Ashley's plan to purchase the property We note that Matthew recently informed us that Ashley is considering purchasing the estate property based on a valuation which was obtained recently. We confirm that the law of equity prevents an executor from purchasing any property from an estate unless all of the beneficiaries agree to the purchase, including the purchase price. [My emphasis] In order to work around this problem, Ashley can renounce his position as executor, however, in our view, even if this occurs, Matthew, as executor would still leave himself open to risk from legal challenge if he sold the property to Ashley at the valuation amount without testing the open market, regardless of whether Ashley was an executor or not. This is particularly poignant in this matter where there are possibilities of the Will being challenged for two other reasons, being: 1. Any of the beneficiaries could challenge the Will on the basis that they should receive their share of the estate absolutely without any trust limiting their entitlement. 2. Any of the beneficiaries can make application to the Court that they should receive more than their 1/3 allotted share, on the basis that they are in more need financially than the other beneficiaries. This jurisdiction [here seemingly referring to family provision matters] is not about equality, and there have been matters where the Court has changed the terms of a Will which has left an estate equally to family members, and has instead provided more funds to one member of the family because of their particular financial need. As there are already grounds for a possible Will challenge, in our view it would be risky for the property not to be sold on the open market. An alternative path would be as follows: 1. Write to Michelle and Dean enclosing a copy of the valuation. 2. Explain to Michelle and Dean that there is a significant amount of work to be done on the property for the renovation work to be completed which may adversely affect the number of interested purchasers which would result in a lower sale price. 3. Explain to Michelle and Dean that if the property is sold at auction or through normal sale processes then advertising and commission costs will further reduce the total amount available for the beneficiaries at the end of the process. If you can get Michelle and Dean to agree to sell the property to Ashley for the valuation amount then we suggest that all the parties sign a Deed of Family Arrangement which will protect you as executors from any future Michelle and Dean [sic] in relation to the sale of the property. If you went ahead and sold it to Ashley without consent (in our view, whether he is the executor or not), the executors would be personally at risk for any challenge from Michelle or Dean for potential loss of estate funds and loss of opportunity. [Emphasis as per original] …
8. I interpose to note that Senior Counsel for Matthew and Ashley has here contended that this advice was wrong; as I understand it, on the basis that informed consent was not necessary if the sale of the Manyana Property to Ashley conformed with cl 11.1(q) of the Will (see at T 186.17-34). It was further submitted that the rule against self-dealing (notwithstanding its absolute nature as recognised in academic writing in the area - to which I refer in due course), is not absolute in the sense that there are exceptions thereto and it is subject to equitable defences and the doctrine of election (see at T 168.20). That, however, is not to my mind the significance of this initial advice - rather, its significance is that Matthew and Ashley are here squarely being told (correctly or otherwise) that agreement from all the beneficiaries is necessary for a sale to an executor and (which Ms Brown herself emphasised) that, even if Ashley were not an executor, the executors would be personally at risk if the sale was not to occur on the open market. The giving of that advice informs the reasonableness of their later conduct (which was inconsistent with that advice), although (as I note in due course) the defendants' position is that their later conduct was in accordance with advice subsequently given by Ms Brown.
9. By letter dated 26 February 2016, Ms Brown gave Matthew and Ashley further advice, confirming advice given previously and providing further information concerning the process in relation to the estate. As to the Manyana Property, the letter stated: We note that Ashley may be purchasing the property. We have previously advised that Ashley would need the consent of the residuary beneficiary to purchase the property. We note that Ashley is in the process of ascertaining whether he is in a financial position to proceed with the purchase and when this is confirmed, then we will further discuss obtaining consent from the beneficiaries. If the property is not sold within one year of the date of death there could be Land Tax implications If the property is not sold within two years of the date of death there could be Capital Gains Tax implications
10. Thus, it is clear that, prior to the sale to Ashley, the defendants had been advised by the estate's solicitors that the beneficiaries' consent was necessary for a sale to an executor and in any event should be obtained prior to any sale to Ashley (and Matthew gave evidence at the hearing that he understood that advice and sought to follow it - see at T 46.30-47.14).
11. Meanwhile, Ashley has deposed that in or about February 2016, after receiving the MVS valuation, he made enquiries of the National Australia Bank (NAB) as to whether he would be able to borrow sufficient funds in order to purchase the Manyana Property (see his second affidavit at [26]) and that, in or about early February 2016, he obtained pre-approval from NAB (see his second affidavit at [27]). In cross-examination, Ashley was unsure whether this pre-approval was for $480,000 or $465,000 (see T 109.37-44).
12. Ashley has also deposed that, given he was both an executor and beneficiary of the estate, he and Matthew decided that it would be best if Matthew took responsibility for liaising with Mischa and Dean about the sale of the property on behalf of the estate (see his second affidavit at [28]).
13. On 8 April 2016, Dean sent an email to Matthew and the other residuary beneficiaries, "[j]ust checking to see where everything is at" and asking "[w]here are we at with the house, has this been 'realized' as yet?". In that email, Dean said: As to ALL of Dad's assets and the fact that a dollar value was put on his car, this then needed to been [sic] independently valued on a proper letterhead once an interest was shown, I feel it is only appropriate that ANY of Dad's assets receive the same treatment and are disclosed to all as an act of fairness and transparency, agreed? [Emphasis as per original]
14. On 9 April 2016, Matthew sent an email to Dean and the other residuary beneficiaries, saying, among other things: Probate is a slow process and consistent with last email of 30 January the last few months have been all about probate and nothing can happen with any of the estate assets until probate has been granted. … In addition to the probate processes, Ashley has been dealing with the NAB to get pre-approval for the purchase of Manyana. Once he has pre-approval (which should be this week) he will then put an offer forward for consideration. As noted previously, if Ashley wishes to purchase Manyana I will seek your agreement. In any event, settlement cannot occur until after probate is granted. [My emphasis] … There won't be much to report until we have been granted probate and can begin to realise the estate assets. I expect probate will be late May/early June as previously advised.
15. On 27 April 2016 at 10.26am, Mischa sent an email to Matthew asking "what's the latest, where are things at?". At 10.44am on the same day, Mischa sent Matthew an email (apparently responding to an earlier email from Matthew sent on 26 April 2016 at 1.32pm which read "Nothing much, probate still in progress and I understand that Ashley now has conditional approval from the NAB and he is putting an offer together for consideration"), Mischa asking in her email "Ok. What is the time frame looking like, what exactly are we waiting on in the probate process?".
16. Matthew responded at 2pm on 27 April 2016 to say that probate was with the Court, and that the timeframe was "what it was when we first got legal advice and per my initial email of 30 January"; that it had taken a fair bit of input to keep it on track to this timeframe; and that "it seems you are expecting a different timeframe?".
17. Mischa then responded at 2pm that: No, I didn't indicate I was expecting a different time frame, just wanted to gain a clearer understanding of what's happening and where it's at. With regards to dads house are you seeking at least 2 private and independent valuations from qualified valuers who know the Manyana area well?
18. Matthew's response, at 3.11pm on 27 April 2016, was that: It took some time to find a "local" credible valuer (from Ulladulla) and that value was recorded and noted as an independent valuation in the statement of assets provided to you on 30 January 2016. The NAB will also have the property valued and hopefully we will get access to that valuation as well. If not, we can consider a second valuation.
19. Pausing here, the suggestion that it took "some time" to find a credible valuer for the Manyana Property seems somewhat curious - since the deceased died on 19 December 2015 and the MVS valuation was less than a month later (on 15 January 2016), so the time taken cannot have been more than about three to four weeks. Moreover, in cross-examination, Matthew professed to have kept a general eye on the property market in Manyana (T 94.12) (which makes surprising the suggestion that it was hard for him to find a credible valuer in the area). However, perhaps the explanation for this is that it was Ashley who arranged the initial MVS valuation (see at T 109.1-10).
20. At 7.47pm on 27 April 2016, Ashley sent an email to Matthew, copied to Dean and Mischa, with Ashley's initial proposal to purchase the Manyana Property (and all the assets pertaining to the house excluding a Pajero vehicle) for $450,000: I have considered the valuation report, noting the current valuation of $480,000 (copy attached) I have considered the auctioneers report noting all of Dad's household effects with a value of $3,535.00 excluding the Pajero (copy attached) I have considered the building inspection report prepared N.R. Wallace building inspections, noting total repair costs of $35,540.00 (copy attached) and there are obviously things that need immediate attention. I put my offer forward to you taking into consideration the above reports and also noting that costs associated with a sale would be in the order of $20,000. My offer incorporates all of Dad's assets pertaining to his house as included in the above reports (excluding the Pajero) and my offer is $450,000. If my offer is accepted I will be ready to settle once probate is obtained. In respect to Dad's household effects, if there is anything in particular that you would like then we can sort through this together.
21. Matthew gave evidence at the hearing that he considered this initial offer to be too low (see T 49.30-37). It also appears (see below) that Ashley may have been notionally factoring in room for negotiation with his siblings about the price when he made that offer. Ashley has deposed (see his second affidavit at [30]) that his initial offer was based on: the MVS valuation; his understanding of the costs of rectification of non-compliant building works and other repair work (that he then incorrectly understood had not been taken into account in the valuation); the saving of agent commission and selling costs if the estate sold the property to him; and an allowance for household contents which he would acquire with the property (see his second affidavit at [30]-[31]). In cross-examination, Ashley's evidence was that he "sort of misconstrued" the MVS valuation report (see T 109-111) in that he now understood that the Property was valued "as is" (i.e., in its then current condition whereas he seems to have thought that if further work needed to be done on the property that would reduce the price).
22. It also appears that there was some discussion between Ashley and Matthew as to the making of that initial offer - at T 111.49-112.3, Ashley said that this offer "was discussed" because the estate had to be no worse off but then, at T 112, Ashley clarified that what he discussed (with Matthew) was the amount for selling agents' costs ($20,000), not the figure of $450,000.
23. As adverted to above, Ashley also appears to have envisaged a process of negotiation with his siblings (rather than a sale at the stated valuation figure) in that he gave as an explanation for his first offer that when he had purchased his first property on the Gold Coast his father told him he was an "absolute dickhead" for offering the full price and so he said he did not offer the full price (for the Manyana Property) "due to the repairs" (T 112.21-29).
24. In any event, the plaintiffs did not agree to a sale to Ashley at that price. By email sent on 16 May 2016 to Matthew and the other residuary beneficiaries, Dean said: I have still to scrutinize all content of the latest email but my initial reaction is I do not agree. The value placed on the house by the assessor is for the house as it stands, the builders report is what should be done, therefore you by [sic] the house at it's [sic] assessed value knowing what additional moneys need to spent [sic]. The value of the house is exactly that, not minus what repairs may or may not be needed to be done.
25. Similarly, by email sent on 19 May 2016 by Mischa to Matthew, Mischa referred to "our recent discussion" and said that she thought she should put some of those points in writing, saying that: With regard to Ashley's email 26 April 2016 [sic; presumably 27 April], I have a couple of concerns regarding valuations and building reports but my main concern is that an offer is being made on the house which is being based on the valuation of the house minus the cost of repairs to the house. You and I both know that a valuation from an accredited valuer takes into consideration the condition of the property and any significant amounts of money that may need to be spent on that property and/or any subsequent defects/repairs that may be needed. The other factors that have influenced my thoughts are, • Only one valuation • Property price will not be tested by market • Property presentation is very poor • Household contents valuation is extremely low • Very rare to buy into a fully furnished home and fully operational workshop with significant water views 500m from the beach in a popular coastal town for under $500,000 I believe the purchase price for the property given what we know is the valuation of $480,000. The only way to realise the true value is to test the market and that would probably be by way of auction where Ashley can bid with other purchases [sic]. This is the only real way of achieving a true and transparent result.
26. Mischa also there indicated that she had no interest in any of the household contents or other saleable items.
27. On 18 May 2016, at 1.45pm, Matthew sent an email to Dean and Ashley's email addresses, copied to Mischa, asking Dean and Mischa if they had any further comments regarding: 1. What is a fair price for the house. 2. The potential saving of selling costs if the house is purchased by Ashley 3. The inclusion or otherwise of all or any of the household contents and personal effects
28. Mischa's response to this (at 11.09am on 19 May 2016) was: 1. As indicated already I believe that $480,000 is a fair price for the property 2. It is debatable that there will be savings in selling costs as we will never really know the true sale price unless the property goes to market. So the answer is zero 3. Can you be more specific on this, I am not sure exactly what you mean.
29. Matthew then responded at 2.13pm, saying that "in respect to the household and personal effects, I note you are not interested in any of them so what is the value you would attach to them ...current assessment/auction value is $3,535", to which Mischa replied "Well I guess that is what it is then. It seems quite low but as I have said I am not here to debate, argue or delay the process".
30. Meanwhile, on 19 May 2016 at 12.59pm, Matthew sent an email to the plaintiffs (not on its face copied to Ashley) headed "Sale of Manyana" in which he proposed that the Manyana Property be sold to Ashley for $465,000. The email read as follows: Just thought it was worth summarising my thoughts. As Trustee I need to make sure I am honouring Joe's wishes as well as realising assets for the benefit of the beneficiaries of the Estate. In respect to the house, there is no doubt in my mind that Joe wanted Ashley to end up with the house but ultimately that was Ashley's decision to make. We spoke specifically about this in July 2015 when I was at Manyana. Joe also spoke to Seaham about Ashley ending up with the house. In respect to price, I think $480,000 per the valuation is the easiest place to start. The house does need some work as identified in the building report and not all of that work that needs to be done will add value to the house. Items like fixing wiring would add no value but replacing the deck would add value to the property. If we go to market there is an additional cost of agents commission (say $15,840 at 3% + GST) and advertising (say $3,600), totalling [sic] This is just an estimate but would be in the ball park. In respect to the household contents and personal effects, there appears little of any significant value and the auction value of $3,535 seems a reasonable staring point. In summary, based on the information we currently have, the Estate is no worse off if we accept $464,095 made up as follows:- House $480,000 Selling costs saved ($19,440) Contents and effects $3,535 $464,095 If we don't sell to Ashley then we have to go to market. Although I am happy to do this if we need to, this is no small exercise and I am concerned there will be significant additional time as well as additional costs. Additional costs would include getting the house ready for sale and making sure we had all Council approvals etc. My advice as to the best options from here are:- 1. Offer the house to Ashley for $465,000 (this is a non-negotiable amount) on the basis it is sold as is where is with all defects (including any boundary defects) with settlement 45 days from receiving Probate. We need 45 days as it will take 2 weeks for Land titles to change the Title into the name of the Estate and then 30 days for the Bank to be ready. This should see settlement sometime in July. 2. The Estate obtains a second valuation and we offer the house to Ashley based on the average of the two valuations. If the second valuation is $480,000 then the price is still $465,000. If the second valuation is $470,000 then the offer to Ashley is at $460,000 and if the second valuation is $490,000 then the offer to Ashley is $470,000 etc. All other matters noted in point 1 remain. Option 1 or 2 leave me feeling I have honoured both my obligations to your Dad and also to you as the beneficiaries. If you are agreeable to one of the 2 options above then I will commence the process so I can make the offer to Ashley. If Ashley accepts then we will go to contract. If he does not accept the price increase then I feel (unless you both change your mind and accept $450,000) we have little choice but to go to market. …
31. There are a number of noteworthy features about this communication. First, although there is a reference to "any boundary defects", it is not apparent that any issue had been raised as to boundary defects, so it is not clear what this adds to the estate's position or its relevance to the sale to Ashley. Second, Matthew accepted in cross-examination that at this stage he had taken no steps to make enquiries of property agents as to how the property might fare on the open market(T 48.49-49.12); and he agreed that he thought he had some discretion to vary the price as long as it was something that might be offered to an arm's length purchaser (T 51.3-7). Matthew's understanding of the second part of cl 11.1(q) (i.e., the reference to "and on terms …") was that this was to deal with selling costs (although in my opinion the clause does not make that clear in its terms).
32. Matthew's evidence (at T 53.37-49) was that by April or possibly early May he had made enquiries of one of the local agents as to the possibility of listing for sale (though did not refer to this in his affidavit sworn on 5 October 2021 - see at T 54.8). Matthew said that the conversation with the agent was "around commissions".
33. Of course, if the sale of the Manyana Property were to be effected pursuant to the authorisation under the Will, the relevant question would be whether the sale was "at a value determined by a qualified valuer and on terms that would be granted to an arm's length purchaser" (see my consideration of this requirement in due course).
34. In the meantime, a kerbside valuation was undertaken on 17 May 2016 by NAB (for internal, presumably mortgage, purposes). This valuation of the Manyana Property also arrived at a value of $480,000. A copy of that valuation (which Matthew said he had received from Ashley on the night of 19 May 2016, following the email sent by him to Dean and Mischa on the afternoon of 19 May 2016 set out above) was forwarded to Dean and Mischa by email from Matthew at 9.01am on 20 May 2016. There is a copy of an email of 19 May 2016 at 2.45pm from an NAB banking adviser to Ashley's wife attaching the valuation, saying "Please note; that valuations are normally for bank purposes only but I hope this helps". It is not clear what real estate or valuation qualifications were held by the author of the NAB valuation (i.e., whether this would satisfy the description in cl 11.1(q) of the Will of a "qualified valuer" but ultimately nothing turns on this).
35. Probate was granted, as noted above, on 27 May 2016.
36. On 30 June 2016, Ms Brown, from Marriott Oliver, wrote to Matthew and Ashley. Among other things, the letter stated: Can you please advise whether Ashley still intends to purchase the property and if so when that will occur? If Ashley does intend to purchase the property you will need to obtain a formal registered valuation of the property which you will need to provide to the beneficiaries. The beneficiaries must then consent to Ashley purchasing the property for an agreed price. We note in earlier correspondence, you indicated that you were arranging a valuation of the property and were going to provide it to us. Our file indicates that we have not received the valuation to date. Can you please provide us with a copy of the valuation, if one has been done, at your earliest opportunity?
37. Ms Brown's letter also raised the issue that if Ashley was going to purchase the property he would need to arrange for a conveyancer or solicitor to act on his behalf, particularly if he would be borrowing money to purchase the property; and indicated the intention to do the transfer by way of a transfer document instead of a contract for sale (which it was said would save both Ashley and the estate property related expenses). It appears from other statements in the letter that the specific gifts provided for under the Will had not yet been distributed. There was also reference to a debt owing by Matthew and Michelle (Mischa) to the estate. (There was an issue raised about this loan for some time - Mischa's position being that, as part of her Family Law settlement, Matthew was to take responsibility for this loan and that there was no evidence that it had been repaid to the estate; but ultimately it was resolved and a claim in this regard against Matthew in the present proceeding was not pressed.)
38. Ashley responded to this letter on 3 July 2016 by email at 7.47pm, stating that his intentions were to purchase the Manyana Property; that he had had a valuation done on the property which he had forwarded to the other beneficiaries (Mischa and Dean) and that he was awaiting their reply to see if they agreed on the purchase price for the property and for him purchasing it (in fact it was Matthew who had sent the valuation to Mischa and Dean - and who had put forward the offer proposal to them, which rather suggests that Ashley regarded this as a joint process).
39. On 8 July 2016, a solicitor (Ms Bridget Rheinberger) from a Hobart firm of solicitors (Tremayne Fay Rheinberger Lawyers) sent an email to Matthew in relation to the deceased's estate, attaching a letter. It is not clear what letter that was (since the letter appearing in Ex A at p 96 after this email is dated 29 July 2016 and in its terms responds to a 13 July 2016 email from Matthew - that email presumably being the email at 1.55pm by which Matthew attached a copy of the probate Will and list of assets and liabilities and said "I am keen to deal with the major asset, the property at Manyana, and to date this has been a little frustrating with little/no response from Dean and Michelle").
40. I interpose to note that Ms Rheinberger appears to have been the first of a succession of lawyers who advised Mischa (some of whom also advised Dean). From about June 2016 to December 2016 Ms Rheinberger (from a firm in Tasmania) advised Mishca and Dean. From April to May 2017 a barrister in Tasmania, Mr Fernandez, advised Mischa (but was not apparently acting for Dean at the time). Later in 2017, Malcolm Robinson of Robinson Locke Litigation Lawyers (RL Lawyers) in Queensland acted for Mischa (and, it seems also for Dean); and Mischa said that he had referred her to a David Simmons (now deceased) and Stuart Bell (see T 24/25). (Mischa said that she had initially engaged RL Lawyers in a litigation matter with Matthew.) SR Law in New South Wales acted for Mischa from about July 2018 to November 2019 (overlapping with RL Lawyers). RL Lawyers were involved again from December 2019 to January 2021. From about February 2020 the plaintiffs' current lawyers (Glass Goodwin) became involved. Mischa also referred to advice sought from a Greg Mellick but she said that she did not engage him (see at T 24.25-29). (Little wonder, one might think, that Mischa has said that her resources had been depleted by legal fees - see below.)
41. Ms Brown responded to Ashley's 3 July 2016 email (see above) by email sent at 11.54am on 13 July 2016. In that email, among other things, Ms Brown advised that Ashley would be required to pay stamp duty on the share of the property which was not bequeathed to him under the Will (i.e., stamp duty on two thirds of the value of the property as indicated on the valuation). Ms Brown also sought information as to, among other things, the debt owed to the estate by Matthew and Mischa. (Matthew's response to this, at 12.46pm, was that the loan was forgiven prior to the deceased's demise but that he was honouring the loan and, based on previous discussions with the deceased, it was repayable by 18 December 2018; and Matthew said that the specific gifts would not be made until the house was sold and proceeds received into the estate.)
42. There was a series of emails sent on 13 July 2016 by Matthew to Ms Brown, apparently updating her on the property negotiations. At 12.50pm, Matthew sent a copy of Ashley's initial proposal to purchase the property; at 12.53pm on 13 July 2016, in separate emails, Matthew forwarded to Ms Brown a copy of Michelle's 10.15am 19 May 2016 email to him (seemingly as part of an email chain commencing with the 27 April communications) and Dean's email of 16 May 2016 (again as part of an email chain); and at 2.55pm on 13 July 2016, again in separate emails, Matthew had forwarded to Ms Brown a copy of his email sent on 19 May 2016 to Dean and Mischa as to the sale (putting forward the $465,000 proposal); and the 20 May 2016 email sending them the NAB valuation. In cross-examination, Matthew said that he had forwarded these emails to get advice from Ms Brown (T 64.5-10) and that he had subsequent telephone conversations with Ms Brown. There was no reference in Matthew's affidavit to any telephone conversation with Ms Brown on 13 July 2016 but, when pressed as to this, Matthew said he did not just send emails to her "with no background" - T 64.45).
43. By email on 13 July 2016 at 2.09pm, Ms Brown noted that, with the exception of the property (i.e., presumably the conveyance), Matthew and Ashley would be dealing with the remainder of the estate issues themselves. Thus, by this point, Ms Brown at least appears to have regarded her retainer as to estate issues effectively to have been concluded.
44. I have referred above to Matthew's 13 July 2016 email to Ms Rheinberger in which he complained of frustration at the "little/no response from Dean and Michelle". The relevant timeline at this stage seems to have been that Ashley made his first offer by email on 27 April 2016. That offer was rejected on 16 and 19 May 2016, by Dean and Mischa respectively. Matthew (who denied in the witness box that he was seeking to get a "good price" for Ashley) had sought Dean and Mischa's opinion on a fair price on 18 May 2016 and Mischa had immediately responded on 19 May 2016. Matthew's proposal of a $465,000 figure was sent on 19 May 2016. The period of delay in response from Dean and Mischa to that letter was thus about six to seven weeks (Matthew suggested around two months - see T 66.26-34). The relevance of any such delay is that Matthew's position appears to have been that Mischa and Dean were the ones responsible for delay in the administration of the estate (see below).
45. By letter dated 29 July 2016 to Matthew and Ashley, responding to Matthew's 13 July 2016 email, Ms Rheinberger set out her clients' instructions in relation to various matters. As to the sale of the Manyana Property, those instructions could not have been clearer: I am instructed that my clients do not consent to a sale of the property for less than the full registered valuation of $480,000. The valuation takes into account the current state of the property and any work required. My clients will consent to a sale to Ashley at this price including household effects only.
46. Matthew accepted in cross-examination (T 66.49) that if no consent (i.e., to the sale to Ashley at the lesser price) was obtained then the only option was to place the property on the open market. His recollection was that he considered that going to the open market was going to be a long process (see at T 67.7-18).
47. It appears that on 1 August 2016, Matthew arranged a teleconference with Ms Brown on 17 August 2016 at the tentative time of 11am (see Matthew's affidavit at [41]). There is no reference in Matthew's affidavit to what was said in the 17 August 2016 conversation with Ms Brown (assuming it took place as tentatively scheduled by him).
48. On 23 August 2016 (around 3 weeks after the 29 July 2016 letter), Matthew responded to Ms Rheinberger's 29 July 2016 letter, copied to Ashley's email address. Relevantly, that response included the following: Estate property Given Ashley's interest in the property, I am acting as sole Trustee on this matter. The property has been valued by independent valuer in January 2016 (copy attached) at $480,000 and by NAB in May 2016 (copy attached) at $480,000. I sent an email to Dean and Michelle on 19 May 2016 (copy attached) outlining what I think is the best way to proceed, being a sale to Ashley at $465,000. I am conscious of the average time on market for properties to sell in Manyana being in excess of 150 days. Holding and maintenance costs continue to be incurred. Most importantly, it was Joe's wish that Ashley buy the property and although it was not in the Will, it was regularly discussed. Joe discussed with me in July 2016 [sic] that if Ashley wanted to proceed with a purchase of Manyana then the process should be an independent valuation then deduct the selling costs so the Estate was no worse off. Given Joe's wishes, I feel compelled to advocate for a sale to Ashley at $465,000, can you please seek agreement from Michelle and Dean. [My emphasis]
49. I interpose to note that it appears from the later communications by Ashley in relation to the sale (notwithstanding Matthew's explanation of his role as being the "interface" between Ashley and his siblings - see at T 52.33) that it was not wholly accurate to suggest that Matthew had been acting as sole trustee in the matter of the proposed sale of the Manyana Property. Further, the reference to the deduction of selling costs appears to be Matthew's understanding of what he discussed with the deceased (and which is what he seems to have understood to be meant by the second half of cl 11.1(q) in the Will - see his affidavit at [12]). Tellingly, in this email, Matthew appears to acknowledge that his role was as advocate for Ashley; but, as noted, he denied in cross-examination that he was trying to get a good deal for Ashley.
50. On 13 September 2016, Matthew emailed Ms Rheinberger (copied to Ashley's email address) advising that he was on leave from 23 September to 10 October and saying that if Mischa and Dean wanted him to progress the estate before his return from leave then ideally he would need their input that day.
51. On 14 September 2016, Ms Rheinberger sent a letter to Matthew (who presumably by then was not yet on leave given that his leave was only said to commence on 23 September; however, in cross-examination Matthew thought he may have already been in Thailand and not necessarily able to receive email communications - see at T 68.42) and Ashley, relevantly advising that: My clients agree to the sale to Ashley Carrington for $465,000 but only on the basis that net sale proceeds are distributed to the beneficiaries upon settlement. As co-executors must act jointly in any matter my clients do not accept any position that Ashley is not involved in this negotiation nor can he avoid his duty to act in a way to avoid loss for the beneficiaries.
52. That letter also raised as an issue of concern the position in relation to the (disputed) $50,000 loan, it being said that Ms Rheinberger's clients did not accept that any forgiveness was promised; and that there was a serious conflict of interest; and full repayment of the loan was requested within 60 days.
53. By letter dated 30 September 2016, Ms Rheinberger sought a response from Ashley to the matters that had been raised in her earlier correspondence "particularly in relation to the property". The letter stated: Given my clients agreed to the sale to Ashley for $465,000 on the basis that net sale proceeds are distributed to the beneficiaries upon settlement; would you please advise: 1. Whether Ashley is proceeding to purchase; and 2. If so, what is the settlement date.
54. On 4 October 2016, Ashley responded: Our father left clear and concise instructions to myself and Matthew in relation to the disbursement of funds from the estate. This is our fathers last wish which he has put into his will, don't forget that this is a GIFT given to each of us under his terms and this needs to be realised and respected. As one of the executors I have an obligation to fulfil. Therefore the sale of the house can have no conditions attached and the proceeds will be received by the estate to be administered in accordance with Dads will. Can you please confirm the condition that all proceeds be distributed is now removed. When this matter is clarified we will proceed with the sale and inform you of a settlement date.
55. The response to this, by letter dated 21 October 2016 from Ms Rheinberger, was: Ashley's email advised your position is to refuse my clients' offer to allow the sale of the property under market value on the basis of an immediate distribution of sale proceeds. I bring to your attention clause 11.1 q of the Will. This clause sets out that any purchase of estate property by an executor of the estate is to be at "...a value determined by a qualified valuer on terms granted to an arms' length purchaser ..." The qualified valuer determined the value on 15 January 2016 was $480,000. Noting your original proposal was for $30,000 below valuation, my clients have been more than reasonable in agreeing to a reduced price of $465,000.
56. The letter referred to the loan to Matthew (requesting full documentation as a matter of priority) and summarised the advice that had been given to the clients as to their entitlement under cl 6 of the Will to their share of the estate; and noting that even if the terms of cl 6 were found to be mandatory it would be open to all parties to reach an agreement.
57. The letter then set out the following proposal: In order to move this forward towards a resolution, and on a without prejudice basis, my clients make the following proposal: 1. Sale proceeds to be distributed to all beneficiaries on settlement of the sale of the estate property. This assumes that Ashley Carrington will use his entire interest in the property to assist his purchase. If Ashley does not agree to distribution to all beneficiaries then my clients will only agree to $50,000.00 being attributed to the sale price and Ashley will be expected to fund the remaining purchase by his own funds or bank loan. 2. The remaining estate assets to be distributed by 31 January 2017.
58. Matthew's evidence was that (at T 73.18-24) he understood the concept of the making of a conditional offer and Matthew said that if the condition was something that could normally be satisfied then, if the condition was not met or agreed to, there would be no offer. However, he appears to have been of the view that, if the executors were not legally able to comply with the condition as to distribution of the sale proceeds (as was his belief), that meant he could simply disregard the condition and proceed on the basis that there was an agreement on price (T 73.31-74.3). Tested on this in cross-examination, Matthew said that his view was that they needed unconditional consent (T 74.21); and he agreed that they (i.e., he and Ashley) never received "confirmed unconditional consent" or indeed any unconditional consent at all; and thus he agreed they could not proceed (T 75.6-12); but then (inconsistently with this apparent acknowledgment of the position that they could not proceed with the sale), Matthew said that the sale was based on the legal advice at the time (see below).
59. By email sent at 3.27pm on 4 November 2016, Matthew responded to Ms Rheinberger's 21 October 2016 letter (in an email copied to Ashley's email address). Inconsistently with the suggestion in Matthew's earlier email that Matthew was acting as "sole trustee" in the sale process, the email made clear in its terms that the response was from both Matthew and Ashley. Relevantly, it stated: Ashley and I have taken some time to respond to your letter dated 21 October 2016 in the hope that this response enables us to now get on and deal with the estate. We note that the proposal contained in your most recent letter and instructions in respect to the payment of estate distributions are both inconsistent with the Will, and more importantly, inconsistent with the wishes of the Deceased. On that basis they cannot be agreed to by the Trustees. The Will and Joe's intentions have been made abundantly clear to the Trustees and at Joe's direction, these are not to be varied by the Trustees. It was expected that some beneficiaries would seek to meddle in the affairs of the estate, this was discuss [sic] at length with Joe prior to his demise and the Trustees are clear on Joe's wishes and will honour those without waiver. The direction of the Will and Joe's wishes have been previously discussed with the beneficiaries in early January at Manyana. In order to move forward with the Estate we need to deal with the house. To recap, the house is to be sold to Ashley at a price that leaves the Estate with the same net proceeds. Ashley's initial offer was not in accordance with the Will and made by him, without consultation and expecting to be forced to negotiate the price with his siblings. The price of $465,000 including contents is the correct price and this is in accordance with the Will and his Father's wishes. I note your reference to clause 11.1(q) and advise that part B of the Will contains "standard" provisions and "To purchase all or any part of an Asset of my Estate at a value determined by a qualified valuer and on terms that would be granted to an arm's length purchaser from my Estate" is a standard clause. However, this clause is consistent with the current price of $465,000 (including contents) because sale to an arm's length purchaser would see the Estate incur additional costs which have been deducted to arrive at the price of $462,000 for the house. Please provide consent to sell the house and contents to Ashely [sic] for $465,000 so we can progress with a sale. Such consent is invalid if it comes with any conditions. I expect that settlement of the house is now likely to be 60 days after I receive unconditional consent from the beneficiaries as valuations and loan approvals are now all out of date. Once the house is sold and proceeds received into the Estate, the Estate will deal with the specific gifts under clause 4. The Estate will then deal with the beneficiaries under clause 5 and 6. Although you note that the meaning of clause 6 is unclear, it is not at all unclear with the benefit of discussion with Joe. The "history" of clause 6 also sheds light on Joe's intentions and directives as this is one clause in the Will that changed from the first draft by solicitors to the final Will. The initial draft of the Will simply provided for $50,000 paid lump sum per annum to each beneficiary. This was not Joe's wish and the final Will has several important changes from the draft which go to the nub of Joe's intent and the clear direction he gave the Trustees. The final Will notes "distributions" (plural and not necessarily a single payment), to be determined by the Executors in their absolute discretion (distributions are only to be utilised to acquire assets for wealth creation, distributions should supplement beneficiaries contribution to assets, and ideally the assets should be left intact for the next generation) and up to a maximum of $50,000 per annum (not a fixed amount … but the intention is $50,000 for appropriate acquisition of assets). We note you have assumed Ashley is utilising his entire interest to assist the purchase of Manyana. I can confirm this is not the case as Ashley is entitled to distributions on exactly the same basis as the other beneficiaries and in accordance with Joe's wishes. I further confirm that there is not an agreement by all beneficiaries (as Ashley is not in agreement) to call for the estate to be distributed. Importantly, and it would be good if we could move on and deal with the task at hand, the Trustees are committed to carrying out Joe's wishes and directives and any request by any beneficiary to the contrary will be refused. In respect to the other assets of the estate, in accordance with Joe's instructions, these assets will be realised as the estate requires funds (during the 3rd year). Once realised, the funds will sit in an interest bearing bank account but given current interest rates this is unlikely to result in any significant earnings. We note a request to repay the loan within 60 days of 14 September 2016 and advise that this request is without substance. In respect to the financial affairs of the estate, we confirm that there are no material movements since the initial estimates provide [sic] late January 2016 and all monies have now been deposited into specific estate bank accounts held at either the solicitors or the NAB. You would appreciate that the estate administration is being undertaken by the Trustees, honouring a commitment made to Joe, and neither Trustee is being remunerated. It would be good to get on with the administration of the estate, for the benefit of all. In summary, can you please provide unconditional consent to sell the residence to Ashley so we can proceed to sale and then to specific gifts and distributions to beneficiaries. We look forward to your positive response.
60. Significantly, there is no evidence to suggest that Matthew ever sent to Ms Brown a copy of that 4 November 2016 email (in which he had sought unconditional consent from Mischa and Dean to the proposed sale). Matthew was not sure if he had sent Ms Brown the email (T 77.46) and agreed that if it had been sent then a copy could have been produced. This is highly relevant when one comes to consider the advice said to have been given by Ms Brown in January 2017 (see below).
61. By email on 5 December 2016 at 10.50am, sent by Matthew to Ms Rheinberger and copied to Ashley's email address, Matthew noted that over four weeks had passed without a response to "our email dated 4 November", saying that: Costs continue to accrue to holding the house and in order to mitigate future costs, the house will now be sold to Ashley with settlement in January. [My emphasis] In accordance with your previous letter dated 21 October and our email of 4 November, Ashley is utilising $50,000 from the estate to assist with the acquisition of the house. This is in accordance with both the discretion given to the Trustees of the Will and Joe's wishes that the beneficiaries are to use the funds for wealth creation and acquiring assets. Upon settlement of the house, funds will be available to satisfy the gifts made in accordance with the Will. The beneficiaries are now invited to apply to the Trustees for any funds they require, up to a maximum of $50,000. The application to the Trustees must include the purpose for which the funds are required. Funding for approved applications will be available upon settlement of the house.
62. By email sent on 16 December 2016, Ms Rheinberger advised Matthew that she no longer acted in the matter and asked that he deal directly with Mischa and Dean from then. At Matthew's request, Ms Rheinberger confirmed those instructions by email, in which she also confirmed that the 5 December email had been forwarded to Mischa and Dean.
63. Ashley has deposed that, in about December 2016, he had to re-apply for approval from NAB for finance in order to purchase the Manyana Property (as it had lapsed due to the delay in the process of attempting to agree on the purchase price with his siblings (about which he candidly acknowledges he was frustrated) (see his second affidavit at [37]). Ashley has deposed that the finance was subsequently re-approved by NAB (see his second affidavit at [38]). There was no copy of any further valuation by NAB at the time; nor of its re-approval of the finance for the purchase.
64. According to Ashley (see his second affidavit at [40]), on or about 25 January 2017 he had a discussion with Matthew (as to what they should do as they had not received a response from Mischa and Dean from about 4 November 2016 to their requests for unconditional consent) in which Matthew told him that he would call Ms Brown that afternoon to seek advice on what they should do in respect of the sale of the Manyana Property.
65. There was in evidence a copy of an electronic diary calendar entry for Matthew with an entry with the subject "Anne Brown" apparently recording a meeting or telephone conference on 25 January 2017. The duration of that meeting or telephone conference (according to Matthew - see at T 85.33-38, although this is not clear on the copy of the electronic calendar in evidence) was 1pm to 1.30pm. The entry appears to have been created at 3.56pm on that day, which suggests that this may have been a retrospective entry (perhaps for time-keeping purposes). Matthew explained in cross-examination that the electronic diary was akin to a "to do list" and that the 3.56pm entry was when it was edited (T 85.33-35). In his affidavit evidence (see at [58]) Matthew deposed to the effect that this was an entry reminding him to speak to Ms Brown (see T 85.27-38) (which leaves unanswered why the entry would then need to be amended after the conversation had taken place). Matthew's timeline of events, as explained in the witness box, was nevertheless that the conversation with Ms Brown was at 1pm - 1.30pm before he sent the email to Mischa and Dean at 3.24pm (see below) (and hence before he last edited the calendar entry). Matthew was adamant that he did not draft that email (or the part of the email giving notice of the impending sale); rather, he says that Ms Brown "dictated" this (see at T 81-83).
66. Ashley has deposed (at [41] of his second affidavit) that later on 25 January 2017 (immediately, he says, after Matthew's conversation with Ms Brown), Matthew called him and said words to the effect: I have spoken with Anne and explained the negotiation process with Mischa and Dean and where things were at. Anne told me to give Mischa and Dean final notice that we were proceeding with the sale and if they do not respond to this, we have done everything we can and should proceed with settlement.
67. Such advice (at least in those terms) seems implausible in light of the strong advice earlier given by Ms Brown as to the need for beneficiary consent to any such sale (at least if Ms Brown understood at the time that no unconditional consent had been received - as opposed to Matthew's perception which seems to have been that there was consent to the sale but just not as to the distribution of the proceeds of sale after it completed). Thus, it would be necessary to know exactly what instructions Ms Brown received or what she understood to be the actual position in relation to the beneficiaries' consent before assessing the advice. In any event, any suggestion that a lack of consent could be addressed simply by giving the beneficiaries notice of the intended sale (presumably, so that they could seek an injunction to stop the sale) is no answer to a claim for breach of trust or the prohibition on self-dealing arising out of the sale. Moreover, there is a real issue as to the reliance that could be placed on any such advice in circumstances where it is clear that Ms Brown was not appraised of all of the correspondence relevant to the issue of consent, including the terms in which the conditional consent was communicated.
68. Matthew's account of the conversation with Ms Brown (see at [59] of his affidavit) was that Ms Brown said words to the effect: In circumstances where there has been no response since 4 November, you should give Mischa and Dean 14 days' notice that the estate intends to proceed with the sale of the Property to Ashley for $465,000, which will give them the opportunity to respond. Failing a response from them, you should proceed with settlement of the Property as that is all you can do.
69. In cross-examination Matthew said that the word "respond" in the above quote probably should have been "object". Either way, I do not accept that the provision of 14 days' notice of intention to proceed with the sale (even if this is what the email had said, which is not in fact the case) addresses the fundamental problem of lack of unconditional consent to the sale.
70. For completeness, I note that any suggestion that this was all that the executors could do would simply have been wrong - a trustee may make an application to the Court for consent prior to purchase (see Campbell v Walker (1800) 5 Ves 678 at 681 per Sir R P Arden) and it has been said that the Court retains the discretion to allow a sale of which the beneficiaries do not approve in exceptional circumstances (see Re Tabone [1968] VR 168 at 171 per Winneke CJ), including where no other purchaser can be found or where the sale "appears advantageous to the beneficiaries" (see J D Heydon, M J Leeming, Jacob's Law of Trusts in Australia (2006, 7th ed, Lexis Nexis Butterworths) (Jacob's) 416). That said, it has also been noted by the authors of Jacob's that a court "would be reluctant to approve a sale in the face of objections from any of the beneficiaries" (see at 416).
71. Returning to the chronology of events, by email sent from Matthew at 3.24pm on 25 January 2017 to Dean and Mischa (copied to Ashley's email address), Matthew advised, by way of "quick update", that: In accordance with previous emails, I am currently working towards settlement of the house and contents to Ashley for $465,000. I expect settlement to occur in the next 2 weeks and the proceeds will then be available to be dealt with in accordance with the provisions of the Will.
72. This is the email that Matthew says was dictated to him by Ms Brown (see T 80-81). If so, there is an obvious inconsistency between Matthew's account of the advice (which was to the effect that Mischa and Dean should be given an opportunity to object to the sale) and the manner in which the email was couched ("I expect settlement to occur in the next 2 weeks"). Matthew did not, however, accept this - see T 80-81 - he maintains that the email reflected the advice that Ms Brown gave him and that this is what Ms Brown 'dictated' and told him to write. The suggestion that the email sent to Mischa and Dean clearly put them on notice that they had a two week window of opportunity to object to the sale is in my opinion optimistic to say the least.
73. Certainly, by 25 January 2017, Mischa and Dean could be forgiven for thinking that Matthew (at least) was treating the sale to Ashley for the lesser sum (of $465,000) as a fait accompli, despite the fact that they had given only conditional consent thereto. In the witness box, Matthew's evidence (as noted) was that this email reflected advice that Ms Brown had given him. There is no suggestion that any such advice was in writing (which leaves open the possibility that there was a misunderstanding or misinterpretation of Ms Brown's advice, although that does not sit comfortably with the account that Ms Brown dictated the relevant part of the email). In any event, the terms in which this email was sent do not make clear that there was a two week period in which there was an opportunity to take steps to protest or enjoin the proposed sale - simply that there was an expectation that settlement would occur in the next two weeks.
74. On 5 February 2017, at 2.39pm, Mischa sent an email to Matthew (copied to Dean and to Ashley's email address), stating: Can you please tell me the settlement date of dads house. Your last correspondence whilst vague in detail indicated it would be in early February.
75. The email also stated that "unfortunately due to your tactics and lack of meaningful response resulting in a long drawn out and expensive legal bill", they (Mischa and Dean) no longer had Ms Rheinberger acting for them; and Mischa pressed for information within seven days as to the current status of various matters including the loan to Matthew. (The defendants emphasise that there was no objection made in this email to the proposed sale.)
76. The sale of the Manyana Property to Ashley for $465,000 completed on 6 February 2017 (although Mischa and Dean were not notified of this at the time). There was no contract for sale. On settlement, Ashley paid the estate $415,000, being the purchase price less a credit of $50,000 allowed to him as a part distribution to him under the Will.
77. Marriott Oliver acted both for the estate and for Ashley on the conveyance (see Matthew's affidavit at [52]). It appears that, as at December 2016, it was not contemplated that further advice would be sought on the estate issues (hence Ms Brown's email - see above).
78. On 9 February 2017, Mischa again emailed Matthew (copied to Dean and to Ashley's email address), seeking confirmation by close of business the following day the amount that would be deposited into the trust bank account as a direct result of settlement of the Manyana Property. Pausing here, this is consistent with Mischa proceeding on the assumption that, if the sale was indeed going ahead (and at this stage Mischa does not appear to have had confirmation that the sale had completed) or had already completed, it was on the basis of the condition to their consent being satisfied (even though she was aware that that condition had not been accepted by Matthew and Ashley).
79. Matthew responded by email at 2.48pm that day (9 February 2017) saying, among other things, that he was waiting on the settlement statement to confirm the exact proceeds but that they were "circa $415,000" (which I note would be $465,000 less a notional $50,000 contribution via a distribution to Ashley of $50,000 from the estate). The email asserted that: … firstly, all delays to date have been caused by yourselves as you have tried to circumvent the clear intentions Joe expressed both in his Will and to Ashley and I as Executors.
80. The suggestion that all delays to that time had been caused by Mischa and Dean seems at least an overstatement in light of the chronology set out above.
81. By letter dated 9 February 2017, Marriott Oliver advised Matthew that settlement of the Manyana Property was effected on 6 February 2017 and that settlement moneys had been paid as set out in an enclosed vendor settlement statement. That statement recorded the purchase price of $465,000, no deposit, an allowance by the vendor for beneficiary payment of $50,000, the amount payable by Ashley on settlement as $415,000, with a deduction for the solicitors' fees' invoice and the balance payable to the estate of $414,813.00.
82. Matthew then sent an email to Mischa and Dean (copied to Ashley's email address) at 9am on 10 February 2017 advising that the house had "settled" and that notification was received the previous day of the total proceeds, being $414,813. Mischa emailed Matthew at 10.40am on 10 February asking "What date was the house settled and how much for. Please advise today". That is consistent with Mischa (and Dean) not having been appraised of the details of sale by that stage.
83. On 14 February 2017, Mischa sent an email to Ashley, copied to Matthew and Dean, in effect complaining of a lack of response from Matthew and seeking advice as to the settlement date for the Manyana Property, Mischa observing (somewhat tartly one might think) that "Shouldn't be too difficult to answer given you purchased it". That seems to have prompted a response from Matthew, suggesting that requests for a response "today" on every email Mischa sent were not reasonable and confirming that "the property settled last week".
84. On 16 February 2017, Mischa and Ashley exchanged emails; Mischa querying why the total proceeds of the house settlement were only $414,813 and Ashley sending a breakdown of the settlement figures. Mischa then sought advice as to the distribution of gifts (including copies of bank statements showing Ashley's "gift").
85. On 27 March 2017, Matthew emailed Mischa and Dean, advising that, now the house had settled, the majority of funds had been put on term deposit and seeking advice by return email of "the likelihood and amount you may be requesting from the Estate during the next 60 days".
86. Mischa responded to this by email on 3 April 2017, advising that she and Dean were in the process of preparing a formal letter; that they had engaged a barrister (Leonard Fernandez); and, "as beneficiaries", suggesting that he not put any funds on term deposit "as we will be seeking access to our distribution".
87. Mr Fernandez then sent a letter dated 5 April 2017 to Matthew, advising that he acted for Mischa; that his client requested the "annual payment of $50,000" consistent with cl 6 of the Will and would be making that request each year from the date probate was obtained. The letter noted that Ashley had acquired a benefit in respect of the sale of the estate's property asset (without renunciation of his position as executor) and had achieved a $50,000 distribution from the estate to assist with the purchase; and asserted that Ashley had intermeddled in the estate (by obtaining a trust asset) and required either the leave of the Court or to renounce probate.
88. The letter went on to assert that Ashley (an executor and beneficiary) had procured an agreement from the other beneficiaries for the "under market sale of the property on the basis of distribution of the sale proceeds upon settlement, to each beneficiary in equal shares" and, instead of addressing the issue of any disadvantage to the other beneficiaries, Matthew determined to ignore that agreement. The letter took issue, among other things, with the assertion that the beneficiaries were to use funds for wealth creation and acquiring assets (a condition that it is said did not appear in the Will) and asserted that Matthew was conflating the alleged wishes of the deceased with the terms of the Will (and effectively re-writing the Will or engaging in speculation as to the testator's intentions other than as discerned from the Will itself).
89. The letter demanded payment of the $50,000 requested by 4pm that day (5 April 2017) and distribution forthwith of one-third of the sale proceeds in accordance with the agreement that it was said Ashley had procured from the beneficiaries. (Though the evidence does not support the conclusion that there was an agreement between the beneficiaries as to the sale, this is arguably consistent with an understanding that, if the sale had proceeded - without unconditional approval from the beneficiaries, it could only have been on the basis that the condition had now been accepted. In other words, just as Matthew and Ashley rely on silence and demands for payment of distributions out of the sale proceeds as some kind of implied consent to the sale; so too might Mischa and Dean have regarded the fact that the sale had proceeded as an implied acceptance of their condition as to distribution.)
90. In any event, no such payment was made. Instead, on 20 April 2017, there was a lengthy email in response from Matthew, including the statement that all correspondence to the executors should be addressed to both executors and indicating an apparent concern that the barrister might be seeking to claim his costs from the estate or any future distributions paid to beneficiaries; as well as making a request for proof of identity (in respect of the change of name from Michelle to Mischa) and clarification as to whether Mr Fernandez was acting also for Dean. More substantively, the email asserted the following: 5. There is not an unfettered entitlement to an annual payment of $50,000 per clause 6 of the Will. Clause 6 allows for distributions (plural), to be determined by the Executors in their absolute discretion, up to a maximum of $50,000 per annum. 6. The date for the annual payment is not the date probate was obtained, rather it is the date the estate had sufficient funds to commence distributions (February 2017). This has previously been communicated to Michelle and Dean (refer emails). 7. The price for the sale of the residence was based on two independent valuations and importantly, agreed by all parties (refer emails). 8. Your client has been treated equally in having access to up to $50,000 for the purposes dictated by the deceased. Ashley has received $50,000 for the sole purpose of acquiring an appropriate asset, an asset which was discussed with the deceased prior to his death. Michelle and Dean have had access to the same opportunity of acquiring an appropriate asset. 9. Our advice is that leave of the Court was not required, all parties agreed to the sale. … 11. There was no agreement to distribute the sale proceeds upon settlement (refer to relevant emails). 12. To date, all adult beneficiaries have not agreed to alter the distributions. 13. The basis for distributions are well known to the Executors and others who were close to the deceased, involved in the drafting of the Will and numerous discussions thereafter. [my emphasis] To infer that the Executors are now conditioning the distributions is totally untrue. The basis for any distribution(s) were clearly articulated by the deceased and the Will was drafted to enable the Executors to carry out the deceased wishes. The wording of clause 6 "determined by the Executors in their absolute discretion" are intended. The intent, wishes and clear directive of the deceased, and clause 6 of the Will, have previously been discussed and conveyed to your client. 14. Wealth creation was a term used, the intent and direction of the deceased was quite narrow but very clear. If the beneficiary is working, earning an income, get a loan, buy a house, start paying it off and use the Estate over a 3-4 year period. It would have assisted the Executors if the deceased had this conversation with your client but they were not on favourable terms for the last years. … 16. For all the reasons previously communicated, some of which are noted above, the Executors are unable to pay the requested $50,000. 17. Legal action is not in anyone's best interest but that is ultimately a matter for you and your client.
91. The email concluded: Change to distributions We are aware that all adult beneficiaries could agree to change the distributions mandated in clause 6 of the Will and confirm there has been no such agreement to date. As the Executors are solely focussed on the wishes and directive of the deceased, should different distributions be required to enable a beneficiary to achieve the purchase of an appropriate asset (residence) then the request for an alternative distribution, together with the appropriate supporting information, would be considered by the executors and put to the beneficiaries for agreement. Summary In summary, the Will provides the Executors the discretion to deal with distributions and the Executors are solely focussed on the wishes and directives of the deceased being respected. The gift to the beneficiaries comes with the condition of an acquisition of an appropriate asset. Should a different distribution pattern be required to facilitate such an acquisition then this will be considered. Importantly, the asset must be "protected" and kept for the long term and the Executors will consider payment to a beneficiaries [sic] nominated Trust if that Trust is being utilised for asset protection. The Executors would also consider a joint acquisition by the beneficiaries. In closing, the Executors are respectfully carrying out the wishes and directives of the deceased and would be delighted to see Joe's last wishes be honoured … but ultimately this is up to the beneficiaries.
92. In an exchange of emails with Dean on 28 April 2017, Dean confirmed to Matthew that the barrister was acting for Mischa (i.e., not jointly for him as well); and Matthew queried whether, in requesting the $50,000, Dean had found a unit or house he wanted to buy (i.e., raising again, if only implicitly, the wealth creation condition that Matthew and Ashley maintain applied to the cl 6 distributions).
93. By email on 14 May 2017 to Matthew (copied to Dean and to Ashley's email address), Mischa (apparently also there writing on behalf of Dean) accused Matthew and Ashley of disregard of their fiduciary duty and stated, among other things, that: they (Mischa and Dean) were now preparing to commence proceedings in this Court; that they would be seeking costs and that both Matthew and Ashley be personally liable for those costs "as a result of your blatant misconduct as Executors"; that Mischa and Dean's costs to date were in excess of $10,000; that Ms Rheinberger and Mr Fernandez now both no longer acted for them and they had secured NSW representation for the Court proceedings. (In cross-examination, Mischa was unsure to whom the reference to NSW representation applied but thought it was David Simmons or Stuart Bell, on a recommendation from RL Lawyers.)
94. The email stated: We stand by our initial proposal regarding the sale of dads house to Ashley, the seriousness of selling an asset without the consent of all the beneficiaries, the conflict of interest, combined with various other misconduct as Executors is enough evidence to have you both struck off as Executors in the Supreme Court and the Estate called in immediately and without notice. If you would like to proceed without Supreme Court Action in NSW, Dean and I request that you abide by the original proposal of distributing the funds of the sale of dads house equally between the beneficiaries.
95. On 16 May 2017, Mischa sent another email, requesting a response to the above. The response to this, sent at 4.59pm that day by Matthew (explaining that Ashley did not receive the first email as it went to junk email and they had now only just briefly discussed the matter), was, among other things: to take exception to the "flavour" of the email and attachment (it being said to be selective and self-serving in its content); to assert that they (i.e., Matthew and Ashley) took their role (as executors) very seriously and had only acted appropriately; to say that their "current dilemma" was the deceased's clear and firm directives to them as trustees for the use of his moneys under the Will "and your refusal to comply with your Dad's wishes"; and to advise that, as trustees, they were giving this "some serious thought".
96. The above email provoked a heated response from Mischa (sent on behalf of Dean as well) on 19 May 2017, Mischa taking issue with the suggestion that the executors had only acted appropriately, and including as examples of misconduct: withholding information; banking estate funds into Ashley's personal account; "rephrasing" a sworn estate asset from a loan to a gift (in relation to Matthew); selling the major estate asset without consent from all beneficiaries to an executor; and an executor (Ashley) trying to secure an estate asset for a price significantly less than a qualified valuation. Mischa requested (on behalf of herself and Dean) that the executors honour the proposal as per her 14 May 2017 email and deposit the equal amount of funds from the sale of the house into their accounts without delay (expecting this to be in the vicinity of $150,000); and advised that failing a response by close of business that day proceedings would be commenced in this Court on 22 May 2017.
97. Matthew responded by email on 21 May 2017, advising (amongst other things) that they had consulted Minter Ellison in respect to cl 6 of the Will; and asserting that the fundamental issue was "your continued unwillingness to adhere to the deceased's directives as incorporated in the discretion given to the Trustees in clause 6 of the Will". The email repeated the understanding that the Will could be varied by a Deed of Family Arrangement agreed by all parties and said that if they wished the trustees to consider such a Deed the trustees would consider an appropriate mechanism to facilitate this but also said that "If we are to consider such a Deed, at the outset the directives of the deceased must be respected and so any such Deed must include the acquisition of suitable assets", inviting Mischa and Dean's thoughts and comments in respect to this.
98. On 24 May 2017, Matthew sent an email addressed to Mischa and Dean, copied to Ashley's email address, which (amongst other things) asserted that: Our key focus has been the administration of the Estate, limiting all avoidable costs and ensuring we have funds available to meet the beneficiaries requests. The delay in the sale of the house was really caused by both of you, your lack of response and attempts to re-write the Will. This ultimately caused the finance approval to lapse and the whole process to be re-commenced by Ashley to enable settlement to proceed.
99. Reference was again there made to the possibility of a Deed of Family Arrangement (though it may be noted that it is clear from the various communications that Matthew was only prepared to contemplate a Deed that accorded with his view of the deceased's wishes - and it appears that was also Ashley's position).
100. On 28 May 2019, Matthew sent another email to Mischa and Dean in relation to a Deed of Family Arrangement (in which it was made clear that the "relaxing" of the Will on the executors' perspective would only be on the basis that the remaining funds be used for the acquisition of "appropriate assets").
101. There appears then to have been an hiatus in the communications until November 2017, when Mischa again raised issues of breach of fiduciary duty (in relation to the alleged failure to realise the loan Matthew had from the deceased) and sought information in that regard.
102. By email to the two executors on 13 December 2017, copied to Dean, Mischa again complained of failure to realise the loan made to Matthew and again asserted an intention to commence legal proceedings. The email included: Ashley, you should be aware that as a result of purchasing [the Manyana Property] without the other 2 beneficiarys [sic] consent, you may find yourself in a situation where this property is repossessed and remarked [sic] and sent to auction. The fact that you tried to pay less than the valuation as an executor and proceeded to purchase without the consent of the 2 other beneficiaries has its own penalty. We agreed to the "under valuation" purchase price to you only on condition that funds from the sale of [the Manyana Property] were distributed equally to the 3 beneficiaries upon settlement. This never happened as you know, yet, you went ahead with the sale with the knowledge there was no consent to do so. A serious conflict of interest and not a good look for an Executor. We now have almost 2 years of correspondence, costs, wrong doings, illegitimate sales, inappropriate behaviour, denied access to bank statements, non compliance and a failure to honour various requests from 2 of the beneficiaries. The emotional and mental cost as well as the Financial costs to engage lawyers and barristers has definitely taken its toll on both Dean and myself.
103. The email "strongly" suggested serious consideration to a "sizeable distribution" before Christmas; and preferably the realisation and distribution of the entire estate. Pausing here, by December 2017, Matthew and Ashley were therefore on notice of Mischa's contention that their conduct in relation to the sale might give rise to a circumstance in which the Manyana Property had to be re-marketed (so any suggestion that this was raised only much later in the course of the present proceeding is not correct).
104. Matthew's response to this, on 13 December 2017, by email expressed to be signed on behalf of both him and Ashley, was that there was no basis for a sizeable distribution before Christmas; that they would continue to act in accordance with the deceased's wishes; and that in respect of the sale of the house "we followed our legal advice step by step". (Confirmation was also sought from Mischa that she was not likely to be forced into bankruptcy.)
105. Mischa responded by email on 19 December 2017, asserting that she was not about to go into bankruptcy and that her financial affairs were none of Matthew's business. The email again included complaint as to the purchase of an estate asset without the full consent of all the beneficiaries concerned and, in a "last ditch attempt to avoid all action", a request that the executors honour the consent of the conditional sale of the house and distribute the equal amount of funds from the sale into Mischa and Dean's respective bank accounts.
106. On 31 December 2017, Matthew sent a response to Mischa and Dean by email signed on behalf of him and Ashley, reiterating much of the assertions previously made as to the administration of the estate (including the by now familiar assertion that funds would only be distributed in accordance with the wishes of the deceased). The email sought to justify the confirmation requested of Mischa as to any potential bankruptcy on the basis of an asserted obligation on the part of the executors to ensure that gifts from the estate did not end up being paid to creditors via a bankruptcy (and said that Mischa would need to satisfy them in respect of all possible creditors - listing a variety of potential creditors) (an extraordinary request to my mind, particularly coming from an executor who was Mischa's ex-husband and therefore might well have had a personal interest in such information).
107. The email also contained a lengthy (said to be verbatim) account from Ashley of the deceased's words about the Will, including the deceased's exhortation to ensure his wishes were carried out to the letter and not to waste money on legal expenses (in hindsight, clearly a forlorn hope). The account also included a prediction that Ashley would "encounter difficulties" with Mischa and Dean (which, I interpose to note, makes it even more remarkable that Matthew and Ashley proceeded with the sale to Ashley of the Manyana Property in the absence of unconditional consent thereto, but I address this in due course).
108. This correspondence culminated in a formal letter of demand dated 6 February 2018 from RL Lawyers, acting on behalf of Dean and Mischa. The letter asserted that (as Robb J ultimately found), Dean and Mischa had an absolutely vested entitlement (albeit that the letter also stated that the entitlement was postponed by cl 6 of the Will). The letter invoked the rule in Saunders v Vautier (1841) 41 ER 482 and requested distribution to each of Dean and Mischa of their respective shares of the trust funds (asserting that amount to be $168,869.01) saying that, in the interim, in case there was any delay, a payment of $50,000 should be made now to each of Dean and Mischa in accordance with cl 6.
109. This met with the again (by now predictable) response from Matthew (by email on 8 February 2018) that the deceased's wishes were very clear and that cl 6 of the Will was drafted to reflect those wishes and directives, giving absolute discretion to the executors. The email said that this was the fourth solicitor to have demanded on behalf of Mischa and Dean the unconditional distribution of the estate. Matthew suggested a teleconference to discuss the matter.
110. The response to this, by letter sent by email on 12 February 2018, was that RL Lawyers were not instructed to participate in a teleconference. The letter asserted that failure to distribute was a breach of trust; referred to a previously foreshadowed application to obtain orders to facilitate the distribution of the trust (and said that personal costs orders would be sought and on the basis that there was no right of indemnity out of the trust estate); and called upon the executors to reconsider their refusal or failure to distribute the estate. Unsurprisingly perhaps, given the history of the communications set out above, the executors thus 'stuck to their guns', in colloquial terms (see Matthew's email sent on 19 February 2018).
111. After a further communication from Matthew on 6 March 2018, RL Lawyers confirmed that they had recommended commencement of proceedings and said that they were awaiting funding.
112. In evidence there was an email chain forwarded by Mischa to Mr Robinson of RL Lawyers apparently in July 2018, comprising a communication on 18 July from Mischa and Ashley, which referred to the Supreme Court proceedings and included: Ashley, given your lack of input, I'm unsure as to wether [sic] you see everything or are in fact aware of just how serious this situation is and have simply been spun a "she'll be right mate" story. Trust me, it's not alright, and it's not going to be alright for you. The proceedings in the Supreme Court against the Executors, yourself and Matthew Wallace are going to impact on both Executors, particularly on you I guess, as you are not in the same financial position as Matthew Wallace. First up, as you are clearly, lawfully, "in breech of trust", all costs for both parties, which will be expensive, will be the borne by the Executors. There is absolutely no escaping this so get ready to kiss goodbye to a significant amount of your hard earned cash. In the event you try and avoid this, you simply can't, either your wages will be garnisheed or your property will be ceased [sic], good thing you have a few that can be utilised. And then of course there is the whole issue regarding the undervaluation and unlawful sale of [the Manyana Property]. It may well be that the house is put back on the market. … I felt it was important to touch base as you may not really be totally aware of the depth of shit you are in.
113. Also there is an email chain apparently from Mischa to Ashley and Matthew on 22 July 2018 referring among other things to the purchase of a house "unlawfully, without consent, involving a provisional agreement of sale by the other 2 beneficiaries, myself and Dean, once again with full disregard of your fiduciary duties".
114. Ashley has deposed to having incurred various costs associated with the purchase and relating to maintenance/upkeep, loan costs and other renovation expenses that he says are not easily ascertainable since purchasing the Manyana Property in February 2017 (see his second affidavit at [59]). Those appear to include the replacement of the entire back decking; wiring issues; and replacement of windows (see his second affidavit at [70]-[79]). Ashley refers to a building inspection report that estimated the cost of rectification and upgrading works at $52,090 (see his second affidavit at [58]).
115. Ashley has deposed that he currently lives at the Manyana Property with his wife; and has lived there since around November 2020 (see his second affidavit at [60]). At [63] of his second affidavit he has deposed that, because the property was not an investment property (although, as I note in due course, it was operated as an Air BnB for some period - at least over holiday seasons - see at T 143.24), he had not kept records and receipts in the same way that he would have done had he known there was going to be a challenge to his ownership or had he been required to do so for tax reasons.
116. Ashley has estimated spending costs at a total of $8,810 prior to his father's death (see his second affidavit at [62]); and from the date of purchase of the property costs as follows: $15,077.23 in 2018 (back decking) plus costs of around $22,000 on other items and repairs; in 2019, costs of around $10,000; in 2020, costs of $43,202.34 plus $286 for pest control; and in 2021, costs of $18,848.32.
117. Ashley has deposed that all of the renovations and maintenance works from the date of purchase amount to approximately $113,112.08 (see his second affidavit at [78]); and that he has incurred costs of insurance, rates, electricity and gas in that period.
118. It should be noted that of those costs, a substantial portion were incurred at a time after the present proceeding had commenced - and after Ashley was well and truly on notice (via Mischa's communications) that at least one possibility was that the house might have to be "remarked" (presumably, re-marketed) - something to which his attention was drawn in December 2017 and again, more plainly, in July 2018.

Commencement of proceeding

1. On 3 August 2018, as noted above, the plaintiffs commenced proceedings in this Court by summons, seeking as the principal relief declarations and orders for the distribution of the estate; and, in the alternative, removal of Matthew and Ashley as executors, based in part upon allegations concerning the improper refusal by the defendants to distribute the residue of the estate.
2. On 2 August 2019, the proceeding came before Robb J for hearing, at which time (as adverted to above) the parties agreed to limit the issues in dispute to those concerning the proper construction of the Will and the plaintiffs' application for relief concerning the distribution of the estate. Robb J delivered judgment on 27 September 2019 and made orders on 28 November 2019.
3. At the directions hearing on 28 November 2019, Mischa (then without legal representation) handed to Robb J a document titled "Relief and Orders Sought by Plaintiffs" (Ex B) (a document that Mischa said in the witness box had been prepared by lawyers in Queensland). Matthew and Ashley note that Robb J described as "very worrying" the proposition that the case "now just expands into a complex administration suit" and that his Honour noted that the plaintiffs would need to amend their existing summons formally to claim the additional relief.
4. Matthew and Ashley point out that when Mischa, who was unrepresented, demanded "immediate distribution of the estate", the transcript records Robb J having observed that "It can't happen because you are running this case. You will not get a penny until this case is finished". The defendants complain that, despite his Honour's observations, the plaintiffs (through new solicitors appointed after the directions hearing) continued to make demands for moneys to be distributed to them from the estate (the principal asset of which consisted of the proceeds of the sale of the Manyana Property to Ashley). (Ironically, had Matthew and Ashley been prepared, contrary to what they understood to be the deceased's wishes, to disburse funds representing a two-thirds' share of the net proceeds of the sale to Ashley, it seems likely that the ongoing costs of the litigation could still have been avoided; however, by then their position seems to have been entrenched (and no doubt costs issues even then were a looming consideration).
5. On 31 December 2019, the plaintiffs filed a statement of claim which sought relief including: per prayers 2-4, orders requiring Matthew to account to the estate for a loan alleged to be owed to the estate (claims that the defendants say were eventually abandoned, about a year after it was pointed out to the plaintiffs that the existence and quantum of the (admitted) loan owed by Matthew to the estate had been the subject of (consent) orders made by Robb J on 28 November 2019, and that the loan had been repaid); per prayer 5, an order that Ashley account to the estate for $55,000 (being the alleged difference between the current market value of the Manyana Property and the purchase price paid by Ashley, together with rental income since acquisition of the Manyana Property; or alternatively, the amount of $15,000 "being secret profit" made by Ashley; and per prayer 6 an order requiring the defendants to pay to the plaintiffs their respective shares of the residue of the estate within seven days of the provision of the final account of the estate.
6. The defendants emphasise that the initial statement of claim did not seek any orders to have set aside the sale of the Manyana Property to Ashley, or to have the Manyana Property declared subject to a constructive trust in favour of the estate; they say that, instead, the plaintiffs still pursued immediate distribution of the estate (within seven days of Matthew repaying the "loan", Ashley paying to the estate the sum of $55,000 (or $15,000) and the provision of final accounts).
7. On 21 February 2020, an amended statement of claim was filed. This amended pleading sought a varied form of the orders previously sought in the statement of claim but no longer sought an order for distribution of the residue of the estate. Matthew and Ashley note that the amended statement of claim again did not seek any order to have set aside the sale of the Manyana Property to Ashley, or to have the Manyana Property declared subject to a trust.
8. On 13 March 2020, the defendants' solicitors (Minter Ellison) wrote to the plaintiffs' solicitors, explaining why the estate could not be finalised and distributed until the conclusion of the proceeding, including because: costs orders had been made in the proceeding but the quantum of those costs and their effect on the estate was unknown (and some costs had also been reserved); and that two firms of former solicitors of the plaintiffs had separately claimed a fruits of litigation lien over the plaintiffs' proceeds from the proceeding.
9. The 31 March 2020 letter contained an open offer to settle the proceeding by making a distribution to the plaintiffs in the fixed sum of $308,000; to cap the estate's liability for the defendants' legal costs at $25,000; to forego any claim for reserved costs; and to forego any claim for commission. This offer was not accepted.
10. On 5 August 2020, the proceeding was fixed for hearing on 28-29 April 2021.
11. On 23 April 2021, the hearing dates were vacated on the plaintiffs' application. The plaintiffs were ordered to pay the defendants' costs thrown away by reason of the vacation of the hearing. The plaintiffs were granted leave to file a further amended pleading.
12. On 14 May 2021, the further amended statement of claim was filed. As noted above, this was the first time that the plaintiffs had sought to have the sale to Ashley set aside or the Manyana Property declared to be held on trust for the estate.

Distribution of estate funds

1. As at the time of the hearing, the estate held approximately $320,000 in cash plus some minor assets worth approximately $10,000. In his affidavit of 4 May 2022, Matthew has deposed to the defendants' inability to distribute the estate until the proceeding has been determined.
2. As noted above, distributions totalling $150,000 have already been made to Ashley (two tranches before the proceeding commenced and one tranche after the proceeding commenced but prior to the existing claim being filed). Ashley accepts (and has previously advised the plaintiffs) that when the residue of the estate (if any) is finally distributed, the amounts received by Ashley will need to be taken into account so as to equalise the amount distributed to each beneficiary, which may require Ashley to remit funds to the estate to achieve that result.

Mischa

1. As noted above, Mischa was cross-examined as to her animosity towards Matthew. Although Mischa denied that she hated him with a passion, it is evident from the voicemail recorded by Matthew (referred to above) that there is a depth of feeling on Mischa's part towards him. That may well explain the tenor of various of the communications but it is largely irrelevant to the determination of the issues now before the Court for determination. In particular, the fact (as may well have been the case) that Mischa may have been difficult to deal with or unreasonable in her demands for information or the time in which responses to requests for information was sought (or that the deceased anticipated that Matthew and Ashley might encounter difficulties with Mischa and/or Dean or that there might be challenges to the Will) says nothing as to whether the actions taken by Matthew and Ashley were authorised under the Will or consented to by Mischa and Dean.
2. Mischa was blunt in her answers and her account of events was credible. In particular, her evidence that she felt "beaten" and "helpless" rang true (see at T 22.25-28) (and indeed this is relied on by Matthew and Ashley as suggesting that she had "yielded" to the sale). What is consistent, however, is that Mischa has complained throughout about the sale to Ashley being at a undervalue and that she did not give her unconditional consent to it. I accept that Mischa was also consistent in her demands for distribution of her share of the estate to her. However, Matthew and Ashley were uncompromising in their rejection of this condition (the most that they would contemplate was a distribution dependent on Mischa satisfying them as to what she intended to do with the funds - and that they were for purposes that the deceased had intended; and Matthew seems also to have contemplated a condition that Mischa not be susceptible to bankruptcy).
3. In particular, I accept that Mischa's evidence to the effect that, until her current junior Counsel was retained, she was unaware that she could seek an order for the sale to be set aside (previously only having had her own researches - as a non-lawyer - on which to rely for the propositions that she had asserted in her email communications to that effect).

Ashley

1. Ashley has deposed (at [34] of his second affidavit) that there was never any dispute with Mischa and Dean concerning the sale of the Manyana Property to him for the price of $465,000; however, that there was an issue in relation to how the estate was to deal with the proceeds from the sale. Therein seems to lie much of the problem - in that it is clear from the communications that the consent to a sale at that price was conditional on immediate distribution of the sale proceeds. Therefore, if (as Ashley asserted) it was his belief that the sale proceeds could not be distributed immediately (due to the terms of the Will and his father's verbal wishes to him), that logically meant there was no operative consent; it did not mean that he had consent to proceed and could then disregard the condition to which that consent was subject.
2. There is a similar problem with Ashley's account at [39] of his second affidavit as to his understanding of his siblings' position (and see also his second affidavit at [51]-[52] in which he deposes that after settlement he understood Mischa's complaint regarding the sale to be that she had not received her share of the net sale proceeds upon settlement and was not an issue relating to the purchase price or that she considered the sale had proceeded without her consent - which is inconsistent with the letter dated 5 April 2017 and other communications) (see Ex A at pp 136, 143, 146, 155, 186).
3. Further, the suggestion that it was only when the further amended statement of claim was served on 14 April 2021 that Mischa and Dean claimed that the sale should be undone is untenable having regard to Mischa's communications to Ashley in mid 2018 and is inconsistent with the tenor of the earlier communications (in which complaint was consistently made as to the sale being at an under value and without their consent).
4. Ashley has deposed that he believed Mischa and Dean had consented to the sale because: they consented to the sale price; they did not object prior to settlement occurring (when given notice); and they then (though I note this is after the sale) demanded payment of the sale proceeds (see his second affidavit at [45]). Ashley has deposed that he believed at the time that the estate's options were to proceed with the sale to him or to market the property for sale in the ordinary way (not being aware that he could have approached the Court for judicial advice) (see his second affidavit at [46]) and that the first option was preferable for many reasons (see his second affidavit at [47]), including that it gave effect to his father's preference that he have the property.
5. Ashley has also deposed that, had he been advised at the time of the purchase that proceeding with it could be a breach of trust, or had he known that Mischa and Dean were going to challenge the purchase on the basis that he required unconditional consent from them, he would not have proceeded with the sale; and that had he been advised that he was able to approach the Court for advice he would have instructed the solicitors to do so (see his second affidavit at [49]).
6. Ashley, with no disrespect to him, was not a sophisticated witness (as his Counsel emphasised in oral submissions). Ashley is a stone mason by trade; he has no legal qualifications; and he clearly had little familiarity with legal concepts (as evidenced by his suggestion that he had ceased to be an executor when in truth he had simply agreed with Matthew for the latter to handle the discussions with his siblings in relation to the proposed sale and even then he continued to be involved in communications as to the sale) and with the legal process (Ashley explaining in cross-examination that this was his first experience in the Court). It is understandable that Ashley would have relied heavily on Matthew to deal with the estate issues (though that does not of itself necessarily excuse any breach of duty on his part).
7. In the witness box, Ashley exhibited a degree of stress at the process of cross-examination (indeed on one occasion I adjourned to allow him to collect his thoughts). There were a number of times where Ashley appeared to be confused in the witness box as to the questions he was being asked. I accept that Ashley was attempting to be a cooperative and truthful witness but his recollection of events was not always reliable (and he had a tendency to refer to conversations or events that were not referred to in his affidavit evidence, which made them difficult for the plaintiffs to test - and for me to assess). Ashley also (as obviously so also do Mischa and Dean) clearly has a personal interest in the outcome of the proceedings, which means that I exercise caution in accepting his account (as I do theirs) of oral conversations (because his recollection may well have been influenced by his perception of family issues and his discussions with Matthew about matters relating to the estate).

Matthew

1. Matthew deposed in his affidavit that the deceased had regularly said to him that "Ashley doesn't have to buy the house, but if he wants to then I want him to have every opportunity to do so. However, he has to buy it in the ordinary way and not funded by his share from the estate" and that the deceased had also said that "Ashley should buy the house at independent valuation less any selling costs avoided. Ashley should not have to pay one cent more than he needs to ensure the estate is not out of pocket" (see his affidavit at [12]). Pausing here it is ironic that given the insistence of both Matthew and Ashley on adhering to the deceased's wishes, in fact that purchase was partly funded by Ashley's share from the estate (in that the first distribution of $50,000 was applied to the purchase price). However, Matthew accepted in cross-examination that the deceased was effectively wanting Ashley to have an option to buy the house (not mandating that this occur); and that the deceased did not choose to leave the house to Ashley in his Will.
2. As to Matthew's account of conversations in which the deceased made reference to Ashley being able to buy the house for a price "less any selling costs avoided", this was not something expressed as such in the Will (Matthew - who seems to have had a role in drafting the Will - seems to consider that this is achieved by reference to the "terms that would be granted to an arm's length purchaser" but that is not in my view the construction of cl 11.1(q) as I explain below). Moreover, it does not appear that Matthew has documented any enquiries as to selling costs that might have been incurred.
3. Matthew has (similarly to Ashley) deposed to his belief that Mischa and Dean had agreed to the price of the sale to Ashley at $465,000 (see his affidavit at [50]) and that no objection or complaint was received from either Mischa or Dean in response to his email of 25 January 2017 advising that the estate intended to proceed with the sale to Ashley for that price in the next two weeks (see his affidavit at [60]). Yet Matthew seems to have well understood the concept of a conditional consent (and his request for unconditional consent makes this clear).
4. Matthew has deposed that he took Mischa's email of 5 February 2017 (asking when was the settlement date for the deceased's house) to be an agreement that the sale could proceed to Ashley for $465,000 (see at [61]) and that, in circumstances where no negative response or objection was received from Mischa and Dean "and in accordance with the legal advice received at the time", it was his belief that they could proceed with the sale to Ashley "as we considered that we had done everything we could, and as far as we were concerned there was an agreement on the most important aspect of the sale - the price" (see at [62]).
5. Like Ashley, Matthew has deposed that at that time he was not aware that, as executors, they could approach the Court for advice concerning the sale (see at [63]). Matthew says that he believed at the time (and he believed this was his solicitors' advice as well) that he had done everything he could to fulfil his obligations (see at [63]).
6. In similar terms to Ashley's affidavit, Matthew has deposed that had he been advised at the time of the purchase that proceeding with it could be a breach of trust and there was personal risk for the executors, he would not have proceeded to sell the property; and had he been instead advised that he was able to approach the Court for advice to confirm the proper course, he would have given instructions to do "exactly that" (see at [64]).
7. Again, in similar terms to that of Ashley, Matthew has deposed that at the time he considered that the estate's options were to proceed with the sale to Ashley or to market the property for sale by public auction (see at [65]). Matthew has deposed that the decision to sell the property to Ashley was for the following reasons (see at [66]): that all the beneficiaries agreed to the sale price of $465,000; he considered the sale in line with the market value as per the valuations and that it took into consideration the works and other matters that needed to be attended to at the property; it avoided selling costs and what were likely to be considerable delays in selling to a third party purchaser; there was no certainty that they would obtain the price in the valuations from a third party purchaser; he believed that selling the property to Ashley was in accordance with the deceased's wishes as to what he wanted to happen to the property; and it avoided putting the property on the market in circumstances where it did not have appropriate Council approvals for the back deck and avoided the estate potentially incurring costs to rectify those issues if it were sold to a third party purchaser.
8. At [67], Matthew has further deposed that, when he first engaged Marriott Oliver, they advised him that he and Ashley were required to obtain the consent of Mischa and Dean to sell the property to Ashley at an agreed price; that Marriott Oliver were "fully aware of the status of the negotiations with Mischa and Dean and ultimately acted on the conveyance"; and he deposed that the fact that they did reinforce his view at that time that proceeding with the sale was permitted and consistent with his duties owed to the estate and its beneficiaries.
9. Matthew is in a different position from Ashley in that he has had considerable experience in business (over 30 years as an accountant at a major accounting firm) and one would expect much more familiarity dealing with lawyers and in commercial transactions. On his own evidence he was well aware of (and kept an eye on) the property market in Manyana (which he said was "slow").
10. This makes Matthew's evidence as to his understanding of the advice received from Ms Brown in January 2017 and the steps taken to sell the property in February 2017 when he knew that there was no unconditional consent to the sale by the other residuary beneficiaries all the more surprising. Matthew's evident desire to honour what he understood to be the deceased's wishes is laudable. However, the stance adopted by Matthew (and Ashley) has ironically contributed to a situation where those wishes ultimately may not be able to be fulfilled (given the issue as to costs of the proceedings at the very least).
11. It is difficult to avoid the conclusion that there has been an element of autocratic behaviour on Matthew's part - seeking to lecture the residuary beneficiaries on what they should do and how they should behave in relation to their entitlements under the deceased's estate. While I do not suggest that Matthew was seeking to achieve a good deal for Ashley to the detriment of the estate, there can be little doubt that he sided with Ashley in the decisions to be made in relation to the estate. Moreover, the tenor of some of his communications with Mischa bespeaks some ongoing acrimony between them (which again may have subconsciously influenced his perception of events).

"Missing" evidence

1. In submissions, it was emphasised for Mischa and Dean that no evidence was adduced by Matthew and Ashley from Ms Brown (though they both rely on the advice said to have been given orally by her to Matthew - and then communicated by him to Ashley; thus Ashley was relying at most on a second-hand account of that advice); and Matthew indeed was adamant that Ms Brown had dictated to him the words of the email he sent on 25 January 2017 (on which he relies for the assertion that Mischa and Dean were put on notice of the impending sale and were given an opportunity to reject to the sale). Nor does it appear that any attempt was made to produce any documents from Ms Brown's file (such as, for example, any file note of the advice she gave in the conversation in January 2017 to which Matthew has deposed).
2. A Jones v Dunkel (1959) 101 CLR 298 (Jones v Dunkel) inference is clearly available here in my opinion. Ms Brown was the solicitor acting for the estate and (through others in her firm) acting on the conveyance to Ashley (at least in the sense that Matthew made clear that he regarded Ms Brown as his contact with the firm and did not accept that her involvement had come to an end by the end of December 2016 - and prior to the January 2017 conversation).
3. In circumstances where there was clear written advice (in emphatic terms) at the outset by Ms Brown as to the restrictions on sale of estate property to an executor (i.e., the need for consent from all the beneficiaries) and recommended an open market process even if Ashley renounced his position as executor - which he did not do - it might well be expected that Ms Brown would be in a position to shed light on what advice she subsequently gave (and on what instructions) in January 2017, which seems to have led Matthew (and, through Matthew, Ashley) to believe that they could properly proceed to transfer the property to Ashley even though there had not been unconditional consent to the sale. The particular instructions that Ms Brown received in January 2017 would be critical to the assessment of the quality or reliability of the advice that Ms Brown gave at that stage (and the reasonableness of any reliance by Matthew and Ashley on that advice).
4. Ms Brown, to Matthew's knowledge, was still practising in Tasmania as a solicitor at the time of the hearing. There was no explanation for the fact that she was not called to give evidence. Thus, I accept that a Jones v Dunkel inference (that her evidence would not have assisted the defendants) would be available. Such an inference would not of course permit the filling of missing gaps; nor would it permit an inference that the missing evidence would be positively damaging to the defendants' case. Rather, it would enable me more comfortably to draw inferences that would otherwise be available on the evidence.
5. That said, in the present case, it is not necessary (for me to reach the conclusions I have reached) to rely upon an adverse inference from the absence of evidence from Ms Brown as to the instructions she received and the advice that she gave in January 2017. That is because, even on the account given by Matthew, it does not appear that Ms Brown was given the full picture as to what had occurred in relation to the request for unconditional consent and in those circumstances reliance on any advice that Ms Brown gave at that stage does not appear to me to be reasonable.
6. The plaintiffs further submit that an inference of the kind drawn by Handley JA in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 (Ferrcom) at 418 can be drawn from the defendants' failure to examine Matthew as a witness in chief about what he said to Ashley regarding Ms Brown's advice in January 2017 (see at T 158.29-39). For the reasons already given, it is not necessary for me to rely upon an adverse inference from the absence of evidence from Matthew as to the instructions he received from Ms Brown and relayed to Ashley.
7. The other "missing" witness, on the defendants' submissions, is Dean himself. The defendants argue that an inference can be drawn on the issue as to the plaintiffs' (or perhaps only Dean's) consent to the sale to Ashley at the price of $465,000 by reference to the fact that Dean did not give evidence. While I accept that such an inference might arise if Dean's subjective understanding or views at the time were relevant; or if there were competing inferences available as to his consent to the sale; the difficulty I have is that there was a very clear written communication from Dean himself refusing his consent to the sale, followed by the communication of a conditional consent from his solicitor. There is nothing to suggest that Dean by his conduct had communicated a withdrawal of that condition. Therefore, I do not accept that such an inference can here properly be drawn that he did, notwithstanding that he did not give evidence in the case.

Determination of issues

1. That brings me to the determination of the issues that arise, as framed by the pleadings, in the present case.

Rule against self-dealing

1. At the outset, I note the importance historically placed in equity on the rule against self-dealing by trustees and executors. The plaintiffs have emphasised the "absolute nature" of the rule that a transaction by which a trustee purchases an interest from the estate is voidable in equity and liable to be set aside at the election of a beneficiary (referring to academic explanation of the rule against self-dealing in H A J Ford, W A Lee, Law of Trusts (2010, 4th ed, Thomson Reuters) (Ford & Lee) at [9.19030] and the cases there cited; and to Jacob's at [1743] and, in particular, to the authorities at footnotes 342-344, 346 and 351). As the plaintiffs have noted, the rule against self-dealing serves to prevent an obvious conflict of interest; and, relevantly in the present case, it applies even if the transaction is on terms advantageous to the estate.
2. The rule applies to a dealing in the administration of estates (see Kane v Radley-Kane [1999] Ch 274 at 285-287 per Sir Richard Scott VC; see also Hall v Hallet (1784) 1 Cox 134 at 139 per Lord Chancellor Thurlow; Re Chomley [2014] VSC 220 at [8] per McMillan J).
3. In David J Hayton, Paul Matthews and Charles Mitchell, Underhill and Hayton Law of Trusts and Trustees (2016, 20th ed, Lexis Nexis Butterworths) the authors note at 879 that a distribution of trust property to a trustee is "automatically voidable by a beneficiary ex debito justitiae, however fair the transaction may be" (unless, relevantly, under an express or necessarily implied power under the instrument, by leave of the Court or the beneficiaries' acquiescence of "very exceptional circumstances"). This language largely tracks the oft-quoted statement of the rule by Megarry VC in Tito v Waddell (No 2) [1977] Ch 106 at 241 (though absent the descriptor "automatically").
4. The defendants cavil with the emphasis placed by the plaintiffs on the "absolute" nature of the rule (pointing to the availability of equitable defences thereto). However, there is no doubt that (absent the application of such defences in any particular case), the policy underlying the rule against self-dealing is one that holds trustees to high standards in part because of the difficulty of enquiring into such conduct. Hence, Eldon LC in Ex Parte James (1803) 32 ER 385; 8 Ves 337 said, at 345, that such a purchase is not permitted "in any case, however honest the circumstances"; and the authors of Jacob's (at [1743]) observe that the purchase of trust property by the trustee (except with the consent of the Court or pursuant to an express power in the trust instrument or with the assent of all beneficiaries) may be set aside "without any evidence being adduced that the transaction was unfair or that the trustee took an improper advantage of his or her position as trustee, even if the terms were fair and generous" (and see the cases cited at footnote 342).
5. In Clay v Clay (2001) 202 CLR 410; [2001] HCA 9 at [51], the High Court observed in obiter that such a sale is voidable ex debito justitiae however honest and fair the transaction and "even if [the sale] is at a price higher than could be obtained on the open market".
6. Therefore, the fact that Matthew and Ashley may honestly have believed that they were authorised to sell the Manyana Property to Ashley for the price that it was sold; or that the price may in effect have been at market value (taking into account the saving to the estate of selling costs); or that the estate may have suffered no loss as a result, is not to the point (at least insofar as the question is as to whether the beneficiaries - Mischa and Dean - could apply to have the sale set aside as being a sale in breach of the rule against self-dealing (unless one of the exceptions thereto was applicable)), though it is of course relevant to consider in the context of the defendants' application for exoneration from any personal liability for the breaches.
7. The rule has been applied in modern contexts as well - see, for example, Yates v Halliday [2006] NSWSC 1346 at [59]-[61] per Lloyd AJ, where there was a sale of shares held on trust by an executor to a company of which the executor was a director and shareholder; and Re Manormay Investments Pty Ltd [2013] VSC 260 at [51] per Robson J, where directors' actions in breach of their duties as directors were held to be akin to self-dealing by a trustee.
8. I consider in due course the submissions made by the defendants against the grant of the relief here sought for rescission of the transfer but suffice it at this point to say that, unless the sale was carried out strictly in compliance with the provisions of the Will (properly construed) or with the unconditional consent of the residuary beneficiaries, then what has here occurred clearly breaches the rule against self-dealing.

Was the sale transaction authorised by cl 11.1(q) of the Will?

1. The defendants maintain that the sale transaction was permitted by the Will (referring to cl 11.1(q), which I have extracted above). The plaintiffs say that the transfer was not "at a value determined by a qualified valuer", being a transfer for the sum of $465,000 (in circumstances where the valuation obtained was for the sum of $480,000); and hence they say that (even before considering whether the nature and terms of the transaction and the nature and date of the valuation satisfied cl 11.1(q) of the Will), the purchase was not strictly in compliance with cl 11.1(q).
2. The plaintiffs further point out that, where the relevant instrument gives permission for self-dealing, there must be strict compliance with any conditions attached to that permission (referring to the commentary in Jacob's at [1744] and to the authorities at fn 365). That raises an issue as to the construction of cl 11.1(q) of the Will.
3. There is no dispute as to the applicable principles of construction relating to testamentary instruments (the defendants here pointing to the summary of principles set out by Robb J in his first judgment in this matter at [56]-[81]). In particular, the defendants note that it is necessary to construe individual provisions in the Will by reference to their context in the entire will (referring to Robb J at [62], his Honour there citing Fell v Fell (1922) 31 CLR 268; [1922] HCA 55 (Fell v Fell) at 273-275 per Isaacs J) in order to "ascertain what is the meaning of the instrument taken as a whole in order to give effect, if it be possible to do so, to the intention of the framer of it".
4. The defendants argue that, considering the Will as a whole, by cl 11.1 the testator was reposing in the executors very broad powers and the ability to be flexible in the administration of the estate, including the power to sell an asset to the executors (or either of them), provided this was at valuation and on terms that would be granted to an arm's length purchaser.
5. While the defendants accept that, on the face of cl 11.1(q), there are two separate requirements: first, that the purchase of an estate asset by the executor or trustee be "at a value determined by a qualified valuer" and, second, that the purchase be "on terms that would be granted to an arm's length purchaser", the defendants argue for a construction whereby the words following "and" (i.e., "on terms that would be granted to an arm's length purchaser") constrain or qualify the preceding words (i.e., "at a value determined by a qualified valuer").
6. The defendants say that the evident purpose of cl 11.1(q) of the Will is to permit a sale to the executors provided that such a sale does not harm the estate; and they submit that this is achieved by requiring a valuation and terms "akin to an arms-length transaction" but that it permits of the possibility that the sale might be for less than the price at which the property is valued (i.e., less than the full market valuation) if the terms on which the property is sold do not result in a lesser price for the estate than would be achieved if the price were sold at the full market valuation but with the estate incurring selling and marketing costs (i.e., that the reference to the terms that would be granted to an arm's length purchaser encompass a reduction in the purchase price that might be offered to such a purchaser if there were no agents involved).
7. Thus, the defendants postulate the situation where the executors might contemplate a sale to an arm's length purchaser without the involvement of a selling agent and they submit that, in those circumstances, it would be feasible and reasonable for the executors to sell to such a party for a price less than full market value on account of the saving of agent's commission and marketing costs (and potentially also the benefits of achieving a quick sale). It is submitted that such a sale would be permitted under the broad powers given by cll 11.1(g) and (h) (set out earlier) and that it would leave the estate no worse off than if the Manyana Property had been sold to a third party at the full valuation price but selling costs had been incurred in achieving that price. The defendants say that, on such a scenario, the "terms that would be granted to an arm's length purchaser" would include the discounted price.
8. The defendants argue that cl 11.1(q) is designed to permit a sale to an executor that leaves the estate no worse off than under an arm's length transaction to a third party; and that the clause is not intended to confer on the estate a windfall in the case of a sale to an executor, by requiring the executor to pay more than an arm's length purchaser would be prepared to pay (assuming that no selling agent was involved).
9. The defendants emphasise that, in the present case, a valuation was obtained and they maintain that the purchase price paid by Ashley was "directly referable" to the valuation, the difference between the valuation and the purchase price being on account of the agency and advertising fees that the estate would save by selling to Ashley rather than a third-party purchaser if the Manyana Property were to be sold by way of auction or otherwise with the involvement of a selling agent (referring to Matthew's email to the plaintiffs on 4 November 2016, and his evidence in cross-examination at T 51.3-7). Thus, it is submitted that cl 11.1(q) can be reconciled with a sale price of $465,000 because, in these circumstances, the sale to Ashley for $465,000 was on terms that would be granted to third-party purchaser (satisfying the second requirement in cl 11.1(q)).
10. As I understand it, the calculation on which the defendants rely is one that assumes the sale price for the Manyana Property (less the amount attributed to the household contents of $3,535) is $460,640 (after the deduction of the sum of $19,440, which Matthew says - but which there is no independent evidence to sustain - would be $19,440).
11. The defendants accept that (construed literally), the first requirement of cl 11.1(q) would mean that the Manyana Property could only be sold to Ashley for $480,000 but they say that this would then have the absurd result that the second requirement would not be satisfied (i.e., that the sale to Ashley would not be on terms that would be granted to a third-party purchaser, assuming no selling agent was involved. i.e., at a price of $465,000).
12. It is submitted that, in order to give cl 11.1(q) an harmonious common-sense construction that gives effect to the obvious intent of the deceased and the overall scheme of the Will, the second requirement should be regarded as qualifying the first in circumstances where there is an inconsistency between the two (such as in the circumstances postulated in the defendants' submissions as noted above).
13. The defendants say that the alternative construction propounded by the plaintiffs (which the defendants characterise as being that cl 11.1(q) should be read narrowly and literally, with the result that Ashley could only permissibly purchase the Manyana Property at the exact price valued "and not a penny less") does not give sensible effect to the Will as a whole and the obvious intent of cl 11.1(q).
14. The defendants point out that the plaintiffs have led no evidence to establish, nor have they alleged, that the selling costs estimated by Matthew were incorrect, or that he acted negligently in estimating those costs. Instead, the defendants say that the plaintiffs' case is based on the proposition that a sale to Ashley for even one cent less than $480,000 would necessarily involve a breach of trust.
15. The defendants thus argue that, on a proper reading, the Will permits the executors to purchase assets in a manner which does not harm the estate (namely by requiring a valuation and terms akin to an arm's length transaction). To the extent there is any ambiguity in cl 11.1(q), it is said that regard may be had to the expressed intentions of the testator. The defendants note that Matthew gave unchallenged evidence that the deceased before his death told him that Ashley "should not have to pay one cent more than he needs to ensure the Estate is not out-of-pocket" (see his affidavit at [12]). The defendants say that, as that evidence was unchallenged, it should be accepted (citing Precision Plastics Pty Ltd v Demir (1975) 132 CLR 362 at 370-371 per Gibbs J). The defendants argue that the expressed intention of the deceased is consistent with the construction for which they contend.
16. It is noted that, in cross-examination, Ashley similarly gave evidence of a conversation he had with the deceased concerning his desire that if Ashley wished to purchase the Manyana Property, he would not be required to pay one cent more than was required and that the sale price to be paid should take into account the real estate agent's commission, advertising and marketing costs, as those costs were "null and void"; and that Ashley explained the fact that this conversation was not included in the affidavit on the basis that he had understood that the issue concerning the sales costs was not in issue. The defendants say that this evidence should be accepted.
17. As to the suggestion in cross-examination of Matthew that he made no effort to ascertain the fair value of the Manyana Property as at February 2017 (see at T 94.6), the defendants say that any submission that the valuation obtained in January 2016 was not a valuation that could be relied upon by the executors for the purposes of cl 11.1(q) of the Will should be rejected for the following reasons (see at T 172.30-37). (I interpose to note that in cross-examination Matthew suggested that the NAB completed a further valuation of the Manyana Property in January 2017 when Ashley re-applied for his loan approval after the lapse of the first loan - see at T 94.10-20. However, Matthew accepted that he did not refer to the second NAB valuation in his affidavit and said that he did not see the second valuation - see at T 95.25-38.)
18. First, that it is unpleaded and does not form part of the matters here for determination. The defendants say that they were entitled to be fairly notified of the issues in dispute but were not notified that it would be put against them that they had not complied with cl 11.1(q) by failing to obtain a more current valuation. It is submitted that, had such an argument been fairly notified, it may well have been met with appropriate expert evidence. Second, that the plaintiffs' former solicitors on 21 October 2016 accepted that the January 2016 valuation obtained by the defendants was the relevant valuation for the purposes of cl 11.1(q) and asserted their clients' rights by reference to that valuation (see Ex A at p 106). Third, that the plaintiffs (despite every opportunity to do so) have not led any evidence to suggest that the value of the Manyana Property was worth more than $480,000 (noting that the NAB valuation, obtained in May 2016, is consistent with the valuation of $480,000). Fourth, that any suggestion that the Manyana Property was in fact worth more than $480,000 at the time of the sale is inconsistent with the plaintiffs' pleaded case (which they say proceeds on the basis of an assumed value of the Manyana Property of $480,000 at the time of the sale (referring to prayer 5(a), and the allegations at [30] and [37] of the further amended statement of claim). It is said that, given the above matters, it is unsurprising that Matthew understood that the value of the Manyana Property at $480,000 was never in question (see T 95.34).
19. The plaintiffs submit in response that the onus to show that the transaction was authorised by the Will is on the defendants. Accordingly, it is said that if there are deficiencies in the evidence about the timing of the valuation and related issues, that is a matter for the defendants and it is of no moment whether the plaintiffs have so pleaded (see at T 194.12-17).

Determination

1. I do not accept that the construction of the Will is as the defendants contend. I accept that very broad powers have been reposed in the executors; and that the deceased clearly wished that the executors (or, relevantly, Ashley) should be in a position to buy the Manyana Property. However, I see no textual basis to read the second part of cl 11.1(q) ("on terms that would be granted to an arm's length purchaser") as qualifying or removing the requirement that the sale be "at a value determined by a qualified valuer"); nor do I see any ambiguity in the clause in that regard. If the only requirement was that the sale be on terms that would be granted to an arm's length purchaser (including terms as to the purchase price for which it was to be sold) then the first part of cl 11.1(q) would be otiose. And if the deceased had intended that the property could be sold at a market valuation less a deduction for any saved or avoided selling costs (as Matthew and Ashley say he told them) then it would have been a simple matter to draft the clause as such.
2. The conjunction "and" in this clause clearly indicates that there were two conditions to be satisfied in order that the sale to an executor be authorised under the Will: first, that it was at a value determined by a qualified valuer and, second, that the sale would be on terms that would be granted to a third party purchaser.
3. The fact that the defendants can envisage circumstances in which a sale by the executors to a third party purchaser at less than a market valuation would be reasonable is not the test. If it were to be open to the executors to hypothesise terms of a third party sale in substitution for or qualification of the requirement for a sale at market value, then this would effectively leave it to the executors' discretion whether and on what terms to sell the property to one of the executors (because the existence of such a purchaser is only being assumed for the purpose of such an exercise). So, for example, on such an argument a sale to an executor at a price but on terms that postponed the receipt of funds for some extensive period of time could theoretically be justified if it were to be said that a sale on such terms to some hypothetical third party purchaser might be in the interests of the estate (say, on the basis that the property market in Manyana was "slow" and it would avoid the need to make the property building compliant) and hence on such a scenario might be reasonable. That seems to me to point to the flaw in the defendants' argument, which treats the second condition as reading down or subsuming the first and thus deprives it of meaningful operation.
4. I see no absurdity in the proposition that the clause does not authorise a sale at less than the market valuation. It would always be open to the executors to seek the beneficiaries' consent to a de minimis reduction in the purchase price if in their opinion circumstances warranted this or to seek authorisation from the Court. However, the evident protection for the beneficiaries that was envisaged by the Will is the requirement that the sale be at a market valuation by a qualified valuer.
5. Nor do I see this as conferring a windfall on the estate. The focus of the clause is on what the executor is being required to pay. The import of the conversations to which Matthew and Ashley have deposed is that Ashley should not have to pay one cent more than an arm's length purchaser would be required to pay for the property. On the assumption that an arm's length purchaser was required to pay the price determined on the market valuation, Ashley is not being asked to pay one cent more than that if he is to pay the full $480,000 (and he would indirectly benefit from the saving of selling costs in that, as a beneficiary, he would have a share of that increased net recovery from the sale of the house). The requirement that the estate not be out of pocket must be put in the context that (if a sale without selling costs is the premise on which the comparison is made) then the estate is out of pocket by not receiving the entirety of the market valuation.
6. My conclusion as to this issue makes it unnecessary to address the potential difficulty of the fact that, in the absence of any contract of sale as such, it is hard to see how it can be said that the sale of the Manyana Property was on terms that would be granted to an arm's length purchaser; nor is it necessary to enter into the debate as to whether the NAB valuation was from a "qualified valuer" (or whether reliance could be placed for a sale in February 2017 of a valuation of the property carried out in January or May 2016 when the sale occurred in 2017).
7. It is also not necessary to address the lack of any independent evidence of what selling costs for a sale of $480,000 would have been (albeit that I note that if the defendants are asserting that the sale was authorised by the Will they would bear the onus to establish this - and I am not persuaded that the evidence of Matthew as to some unspecified conversations with real estate agents does this).
8. As the sale was not at the market value of the valuation relied upon by the defendants, I have concluded that the sale was not in compliance with cl 11.1(q) of the Will and was (subject to the question of the beneficiaries' consent) in breach of the rule against self-dealing.

Was there consent to the transaction?

1. The plaintiffs accept that a defence to a claim of self-dealing is available if it is established by "clear affirmative proof" that the beneficiaries assented to the transaction with full knowledge of all the circumstances (referring to the discussion in Jacob's at [1743] and Williams v Scott [1900] AC 499 at 508 per Sir Ford North); and see Ex parte Lacey (1802) 6 Ves 625 at 627 per Eldon LC); but the plaintiffs maintain that this is not here the case. The plaintiffs say that there was no assent by them to the sale to Ashley for the sum of $465,000, in circumstances where their agreement to a sale at that price was expressly on the condition that the proceeds of sale were to be immediately distributed between the beneficiaries (and Matthew and Ashley refused to agree to any such condition).
2. The defendants, however, submit that the plaintiffs' conduct amounts to consent or assent to the transaction. It is noted that consent (provided a beneficiary is sui juris and had full knowledge of the facts) may be express or implied (see Spellson v George (1992) 26 NSWLR 666 (Spellson) at 679G; 683D per Young AJA; Our Lady's Mount Pty Ltd v Magnificat Meal Movement International Inc (1999) 33 ACSR 163 at 186 per Muir J) and that consent can be inferred from silence and lack of activity with knowledge (Spellson at 669G-670A). As to knowledge, it is noted that where a party is a solicitor there is no need to establish that party had knowledge of his or her rights (see Spellson at 670G-671A); and the defendants argue that, by parity of reasoning, this must also be the case where a party is represented by a solicitor.
3. The defendants contend that the only issue taken by the plaintiffs to the proposed sale to Ashley was as to the treatment of the proceeds following the sale and place reliance on the lack of any objection raised to the sale after Matthew's 4 November 2016 email (in which they say Matthew articulated the estate's justification for refusing the demand for immediate distribution and indicated that he proposed to proceed with the sale); rather, there was simply an enquiry as to the settlement date and demands for disbursement of the sale proceeds. (Of course, on one view the demands for disbursement of the sale proceeds are consistent with the condition that the plaintiffs had placed on their consent to the sale at less than the market valuation.)
4. The defendants point to Mischa's evidence that, at the time of sending her email on 5 February 2017, she felt "beaten"; her acceptance that she proceeded to make demands for the payment to her of her entitlement under the Will (T 22.23-28) and that neither she nor her solicitors had responded to Matthew's email of 4 November 2016; and Mischa's acceptance that her email of 5 February 2017 did not contain any objection to the sale (T 19.10-14). The defendants maintain that the "conspicuous" omission from Mischa's email of 5 February 2017 of any objection to the sale, or any insistence on the condition as to distribution of the proceeds, coupled with Mischa's knowledge of the terms of Matthew's email of 4 November 2016 and her failure to respond to that email, provide objective grounds for an inference that the plaintiffs were content for the sale to proceed, knowing that the defendants did not agree to the condition (and regarded themselves as unable to agree to the condition) (the defendants here relying on Spellson at 669G-670A).
5. Indeed, the defendants argue that there was more than mere silence, in that they say that the 5 February 2017 email itself suggested that the plaintiffs were content for the sale to proceed (insofar as it enquired as to the settlement date). The defendants again rely in this context on Mischa's evidence that she felt "beaten" on the issue of distribution of the estate (T 22.23-28), suggesting that the plaintiffs had thereby "yielded" on that issue (though Mischa's subjective feelings of being "beaten" do not appear to have been communicated in any way prior to the evidence given by her in cross-examination.
6. The defendants also contend that it should be inferred, from the fact that Dean was not called to give evidence, that any evidence Dean could have given on this topic would not have assisted the plaintiffs. In that regard, while Dean did not give evidence there is nothing in the correspondence that gives rise to an inference that he had removed the condition placed by him (through his solicitor at the time, Ms Rheinberger) on the sale; and I do not accept that a Ferrcom inference would permit a positive conclusion that Dean did consent to the sale on an unconditional basis.
7. The defendants say that the true position is that the defendants wanted the sale to proceed and were content to leave to a later date the resolution of the impasse about the distribution of the estate. I do not accept that this follows from the evidence. The true position, on my review of the evidence, was that the defendants were prepared to consent to a sale at what they thought was an undervalue to Ashley but only on condition that their respective shares of the proceeds be immediately distributed to them; and their silence after the 4 November 2016 email from Matthew did not amount to consent but was explicable by reference to the unequivocal statement of Matthew that the sale was going to proceed (i.e., irrespective of their lack of unconditional consent).
8. I do not accept that the plaintiffs, by their conduct prior to the sale (or the request for details as to when settlement was to occur), signified their unconditional consent to the sale to Ashley for $465,000. (Nor do I accept, as I explain in due course, that the plaintiffs in some way ratified that breach of trust by their later conduct in continuing to demand payment of their share of the sale proceeds - since that was the very condition on which they were prepared to give consent and hence the demands are consistent with an insistence on the honouring of that condition; not with a withdrawal of that condition.) Proving that a trustee obtained consent from all beneficiaries to such a sale is regarded as an onerous task, requiring clear evidence of knowledge at the time of "the real nature of these transactions" and assent "with full knowledge of their nature" (see Rothschild v Brookman (1831) 2 Dow & Clark 188 at 197 per Lord Wynford).
9. Alternatively, the defendants submit that the condition which the plaintiffs placed on their consent to the sale (that the estate was thereafter distributed) was satisfied when Robb J delivered judgment on the Will construction issue and made orders for the estate to be distributed. The defendants say that the only reason the estate has not been distributed to date is because of the plaintiffs' long delay in bringing the claims in the further amended statement of claim.
10. The suggestion that a condition of consent requiring the immediate distribution of the sale proceeds is satisfied (many months later) by an order made for distribution of the residuary beneficiaries' vested entitlements (once ascertained or determined) is to my mind surprising. The orders made by Robb J left open (as his Honour clearly understood) the question as to what in fact was comprised by the residue of the estate and that this might depend on the allegations made as to breach of trust and remedies sought in relation thereto). The defendants made it abundantly clear (based on what has turned out to be their incorrect interpretation of the Will) that they would not consent to an immediate distribution of the sale proceeds to the residuary beneficiaries (though, as already noted, they were seemingly untroubled by the fact that the deceased's wishes also seem on their account of events to have been that Ashley should purchase the property without a notional distribution from the estate - yet that is what ultimately occurred).

Determination

1. For the reasons set out above, I do not accept that the conduct of the plaintiffs (whether in not responding to Matthew's 4 November 2016 email or in not raising an objection to the position stated in the 25 January 2017 email that the sale would proceed or in making enquiries as to the settlement date or seeking orders for the distribution of the estate) amounts to clear affirmative evidence of unconditional consent by Mischa and Dean to the sale to Ashley at the sum of $465,000.

Equitable defences

1. This brings me to the equitable defences on which Matthew and Ashley rely.

Election

1. The defendants refer to the plaintiffs' conduct following settlement of the sale on 6 February 2017, in which the plaintiffs sought confirmation as to the sale and price received; communicated on 14 May 2017 (see chronology above), standing by their original proposal regarding the sale of the house (for distribution of the proceeds to the residuary beneficiaries); and pressed for distribution of the plaintiffs' share of the estate.
2. It is noted that Mischa accepted in cross-examination that, following the sale, she did everything in her power to have the proceeds of the sale distributed to her (T 22.36-40) including as part of the proceeding commenced in August 2018 (T 23.3-14). The defendants prepared (as annexed to their submissions) a schedule setting out the demands made by the plaintiffs for the immediate distribution of the proceeds received by the estate from the sale to Ashley. It is said that the plaintiffs, by their conduct, consistently and deliberately pursued relief inconsistent with the claim for rescission now sought.
3. The defendants say that at no time between the sale of the Manyana Property to Ashley in February 2017 and the service of the further amended statement of claim in April 2021 did the plaintiffs assert that they would seek to impugn the transaction or have it unwound. (This does not take into account the communications from Mischa to Ashley in July 2018 - see above - in which Mischa expressly referred to the possibility that the house would be remarketed.) The reality is that Ashley (and presumably also Matthew) simply regarded Mischa's correspondence as threats that she was unlikely to carry through (see at T 141.35-49; also at T 100.16-30; 101.26-34 as to Matthew). On that basis, there is a compelling argument that Ashley simply chose to take the risk that Mischa might successfully make good her threat (noting that most of the expenditure on the Manyana Property was after that threat).
4. The defendants argue, nevertheless, that the repeated demands for the distribution of the sale proceeds were made despite Mischa accepting that, at the time of the demands (and certainly by the time proceeding was commenced), Mischa was aware that one of the options available to her was to seek to have Ashley's house repossessed and put back on the market (T 27.8-11, 27.33, 29.45-48), pointing to Mischa's evidence that learning of the possibility of such relief, by her own research, was a "profound moment" (T 27.27-33). It is said that, despite knowing that such relief was a possibility, Mischa accepted that what she really wanted was the prompt distribution of the proceeds of sale (T 27.35-38); and it is noted that Mischa accepted that it remained her desire to receive the distribution until about the time the further amended statement of claim was served in April 2021 (T 39.5-8).
5. The defendants say that Mischa's evidence in cross-examination that she did not know that "a house could be set aside" and if she had she would have sought that relief sooner (T 27.16-17) should not be accepted, having regard to the concessions referred to above, which the defendants say make clear that Mischa was aware of the possibility of having Ashley's house repossessed and put back on the market (that being the practical effect of an order for rescission). It is noted that, when shown in cross-examination her email of 18 July 2018, Mischa accepted that, when she said to Ashley that he "may not really be totally aware of the depth of shit [he was] in", she was referring in part to the risk that Ashley faced, if proceedings were commenced, of his house being repossessed and put back on the market (T 29.40-48).
6. The defendants say that there are serious doubts as to Mischa's evidence during cross-examination that, when the proceeding was commenced, she had not received advice concerning any ability to have the transaction set aside, given Mischa's acceptance that, by the time she sent the email on 13 December 2017 in which she refers to the possible repossession and sale of the Manyana Property, she had received legal advice (T 24.19). Similarly, it is noted that Mischa accepted that when she sent her email of 18 July 2018 she had received advice from R Lawyers (T 28.15-18). (Pausing here, I accept Mischa's evidence in this regard. Her response in the witness box as to not knowing of the legal position as to setting aside the sale until she retained her current junior Counsel was plausible and did not seem to me to be embellished as it might be expected to have been had it been fabricated.)
7. In any event, the defendants say that whether or not that evidence is true is irrelevant; that what is relevant is that, at the times on which demands were made for distribution of the proceeds of the sale, Mischa was aware of the facts and circumstances which would ground a claim for the setting aside of the sale, and knew that might be possible, yet exclusively made demands and pursued relief which necessarily relied upon existence of the transaction.
8. In this context, the defendants say that where a party is represented by a solicitor, it should be presumed that the party had knowledge of his or her rights (Spellson 26 NSWLR at 669G-670A) and that the knowledge of the solicitor is to be imputed to the client (Sargent v ASL Developments Pty Ltd (1974) 131 CLR 634; [1974] HCA 40 (Sargent) at 658-659 per Mason J as his Honour then was). The difficulty here is that a presumption that Mischa had knowledge through her previous sets of solicitors of her rights as a beneficiary to elect to set aside the sale is inconsistent with the terms of the communications sent by the solicitors on her behalf and I do not accept that Mischa had received such advice.
9. As to the doctrine of election, there is no dispute between the parties that it applies where a party chooses between two inconsistent legal rights, deciding to enforce one and abandon the other (see Sargent at 641, 656; Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 (Khoury) at 633 per Mason J (as his Honour then was), Brennan J (as his Honour then was), Deane and Dawson JJ).
10. The defendants say (and I accept) that the relief now (they say belatedly) sought by the plaintiffs for the setting aside of the sale is essentially a claim for rescission in equity; and that, where rescission is available to a plaintiff, the plaintiff has a choice of either rescinding the transaction or affirming it and seeking other relief. They note that, in the case of a sale of property in breach of trust, it is noted that a beneficiary has an election: either he or she can treat the property sold as still subject to the trust, and seek to recover it back (i.e., to avoid the sale) or make the trustee who sold the property liable personally for breach of trust; and that the beneficiary must abide by the choice made and cannot obtain inconsistent relief (i.e., cannot both approbate and reprobate) (the defendants citing Ashburner's Principles of Equity (1933, 2nd ed) at pp 139-140). The defendants say that, once an effective election is made, the contrary path cannot be followed (the defendants citing Clough v London & North Western Railway Co (1871) LR 7 Ex 26 at 35 per Mellor J; Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274 at 283 per Fisher, Gummow (sitting in the Federal Court as his Honour then was) and Lee JJ); and they note that a claim for damages will usually amount to an election against rescission (citing Sargent at 642). (Pausing here, when pressed on this in submissions it was accepted by the defendants that merely commencing proceedings does not amount to an election - see at 181.46-50; Sargent at 642 per Stephen J).
11. The defendants say that it is unnecessary for the plaintiffs to have made a conscious choice between the inconsistent relief (although that appears to be the case at present); and that, provided the plaintiffs have the requisite knowledge of the competing claims, then intention and unequivocal conduct will suffice (citing Khoury at 633).
12. As to the elements for an election, the defendants say: first, as to intent, that Mischa's evidence in cross-examination confirmed that her desire was to have distributed to her the proceeds of the sale received by the estate (T 27.35-48) and they point out that Mischa (and Dean) unstintingly pursued that course until April 2021 (T 14.27, 22.36-23.4); second, as to conduct, that each of the informal demands set out in the various emails, the formal demands made on the plaintiffs' behalf by their solicitors and the formal relief sought in the proceeding between August 2018 and April 2021, amounts to an unequivocal choice to pursue relief which would require the defendants to disburse the proceeds the estate received from the sale and thus could only arise if the sale to Ashley was not disturbed.
13. The defendants contend that the plaintiffs elected to affirm the transaction by seeking (and ultimately obtaining) relief which is inconsistent and incompatible with rescission, including: the making of numerous demands by the plaintiffs, over a period of many years, for the distribution to them of the proceeds following the sale; seeking and obtaining declarations and orders compelling the defendants to distribute the residue of the estate to the plaintiffs (which residue consists of the proceeds of the sale to Ashley).
14. The defendants say that the conduct of the plaintiffs following the sale is not consistent with a reservation of rights or a pursuit of incompatible relief as alternatives; that the plaintiffs actively and continuously sought to realise their entitlement to the proceeds from the sale over a period of many years, both before and after the making of final orders by Robb J; and for the whole of that period did not seek any alternative relief.
15. The plaintiffs note that the doctrine of election requires that one party with full knowledge is confronted with two mutually exclusive courses of action between which it must, in fairness to the other party, make its choice; acts in a way that is consistent only with exercising one right and abandoning the other; conveys that election to the other party in clear and unequivocal terms; and there is reliance by the other party such that it would be unjust for the first party not to be held to its election (referring to Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 at 41 per Deane, Toohey, Gaudron and McHugh JJ).
16. Further, the plaintiffs say that, contrary to the defendants' submissions, the commencement of proceedings seeking damages does not act as an election for that remedy and the abandonment of all others. It is noted that in Sargent the reference to suing for damages is suing to a conclusion, which then prevents the later bringing of proceedings for rescission based upon the same breach (reference being made to the citation by Stephen J with approval of the judgment of Jordan CJ in O'Connor v SP Bray Ltd (1936) 36 SR (NSW) 248 at 258-261, including that: ...where a party has alternative rights to obtain relief either at law or in equity, the fact that he commences proceedings in either Jurisdiction is not, of itself, an irrevocable election which prevents him from enforcing his rights in the other … Where a wrong has been committed in such circumstances as to give the injured party the alternative rights to sue either in tort or in quasi-contract, then, although a satisfaction of either right, by judgment or otherwise, necessarily destroys the other, the mere taking of steps to satisfy either, which falls short of obtaining satisfaction, has not this result.
17. The plaintiffs similarly refer to Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 where Gummow, Hayne and Kiefel JJ (as her Honour then was) said at [59]: In many cases about election, the central issue is whether an election has been made or only foreshadowed. So, for example, an election between alternative remedies in contract and in tort is not made merely by bringing one claim rather than the other. An election is not made at least until entry of judgment.
18. The plaintiffs say that this is not surprising since a party may seek to amend its pleading during the course of proceedings, both as to the factual allegations and relief sought; and may delay electing between inconsistent remedies until after judgment has been delivered and at least up to the point where orders are entered.
19. In response to the claim of election, the plaintiffs say: that Matthew and Ashley were advised that they needed the consent of Mischa and Dean to the transaction and clearly knew that this was the case; that Matthew and Ashley did not seek consent for the transaction from the Court or otherwise seek judicial advice; and that Matthew and Ashley explicitly asked for consent to the transaction and (as noted above) did not obtain it. (None of those prepositions can or is here contested - other than the assertion that consent was obtained by way of silence or conduct.) The plaintiffs say that Matthew and Ashley cannot establish that the transfer was for fair value; that, following the transfer, Mischa and Dean pressed for a distribution in accordance with their pre-transfer offers, but that this was rejected and continued to be resisted by Matthew and Ashley; and that Mischa and Dean continued to complain about the circumstances in which the transfer had occurred and, in particular, that it had been done without their consent and was not permissible.
20. It is noted that, although the proceeding in this Court was commenced seeking a determination as to the interpretation of cl 6 of the Will and the removal of Matthew and Ashley as executors, one of the grounds upon which removal of the executors was sought was the circumstances surrounding the transaction; and that Robb J accepted (in his judgment and orders) that issues arising out of the transfer of the Manyana Property would be dealt with separately and subsequently (that being the basis on which the defendants say that they did not press the claim of Anshun estoppel - see at T 33.49; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 (Anshun)). The plaintiffs say that they did not sit silent or acquiesce in the state of affairs continuing; and that they did not indicate, unequivocally or at all, that they were abandoning their complaints as to the transfer of the Manyana Property. The plaintiffs further say that Ashley did not rely (reasonably or at all) to his detriment upon any conduct by Mischa and Dean (in particular, that his maintenance of the Manyana Property was consequence of his acquisition of the property).

Determination

1. I have concluded that the defence of election is not made good.
2. As to the requisite knowledge of inconsistent rights, it must be borne in mind that Mischa and Dean had various sets of solicitors over the relevant period of time and that the manner in which those solicitors expressed their position (in correspondence with the defendants and/or their representatives) and the relief claimed up until the further amended pleading does not suggest that there was an appreciation by those legal representatives (leaving aside the current representatives) of the significance of the rule against self-dealing.
3. Mischa is not a lawyer. Her evidence that she was "gobsmacked" when she discovered in her research that the sale might be able to be set aside (but that she was not a lawyer and did not know that this would be the case) rang true. It was abundantly clear from the fervency of her evidence that Mischa was relieved when the view she had formed from her own research was confirmed by junior Counsel in the present case. I do not accept that the inference should be drawn that she had received that advice from any lawyers prior to the advice received from Mr Morrison of Counsel. It seems wholly inconsistent with the determination shown by Mischa in seeking relief in relation to the sale that she would not have proceeded to exercise her rights as a beneficiary to have the sale set aside at an earlier time had she been advised of those rights.
4. I do not accept that the conduct of seeking judgment and orders in the proceeding before Robb J amounts to an election not to pursue the relief here sought (nor do I accept that there was any detrimental reliance on an assumption that such a claim would not be pressed in the future - simply a belief by Ashley that this was yet another threat that would not be made good).
5. As accepted in submissions, there is no election until the time at which judgment on an inconsistent remedy is obtained. That has not yet occurred.

Acquiescence

1. Similarly, the defendants say that the plaintiffs' conduct amounted to acquiescence in, or ratification of, the sale transaction, or a waiver of the right to seek rescission, such that the plaintiffs cannot now seek to unwind it.
2. Acquiescence is the deliberate and informed "standing by", in a manner which suggests a party has accepted the conduct of another (see, as cited by the defendants, Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26 (Byrnes v Kendle) at [27] per French CJ, [79] per Gummow and Hayne JJ; Archbold v Scully (1861) 9 HLC 360 at 383); that ratification is the retrospective confirmation and approval of an otherwise unlawful act; and that waiver is an intentional act, with knowledge, by which a party abandons or renounces a right or benefit (Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326 per Isaacs J).
3. It is not disputed that, ultimately, the question is whether it would be "fair or right" for the plaintiffs to be granted the relief they now seek, having regard to their past conduct (see Allcard v Skinner (1887) 36 Ch D 145, which was applied by Brereton J, as his Honour then was, in Brown v The NSW Trustee & Guardian [2011] NSWSC 1203 (Brown)). In Brown, his Honour (at [55]) cited with approval the following passage from the judgment of Lindley LJ in Allcard v Skinner at 189: Whether the plaintiff's conduct amounts in point of law to acquiescence or laches, or whether it amounts to an election not to avoid a voidable transaction, or whether it amounts to a ratification or a confirmation of her gifts, are questions of mere words which it is needless to discuss. In my judgment it would not be fair or right to the defendant to compel her now to restore the money sought to be recovered by this appeal. Nor, in my opinion, would such a result be in conformity with sound common legal or equitable principles.
4. The defendants maintain that, in circumstances where, for over four years, the plaintiffs stood by, never sought to set aside the sale transaction but instead pursued and obtained inconsistent relief that assumed the validity of the sale transaction (and sought to enforce and benefit from that transaction), it would not be fair or right for the sale transaction to now be set aside.
5. In response the plaintiffs make in essence the same submissions as those in relation to the claim of election. They note that acquiescence requires not only a standing by, but also that it was deliberate and informed in that the beneficiary must be acting "deliberately and advisedly, with full knowledge of all the circumstances, and of his own rights and claims against the trustee", giving rise otherwise to serious and unfair prejudice to the trustee so that it is not fair and equitable to permit the plaintiffs to pursue their complaint (referring to Byrnes v Kendle at [27]-[30], [30], [79] and [129]-[140]).
6. It is further noted that, in the case of waiver, there must be "a present, fixed intention immediately to release" with full knowledge of all the circumstances and of the equitable remedy and consideration (reference being made to what is said in J D Heydon, M J Leeming, P G Turner, Meagher, Gummow & Lehane's Equity, Doctrines & Remedies (2015, 5th ed, Lexis Nexis Butterworth) at [37030]-[37035]). The plaintiffs say that, to the extent to which ratification may be applicable, it operates on similar principles to the other defences discussed above (referring by way of example to McHugh v Eastern Star Gas Ltd (2012) 265 FLR 124; [2012] NSWCA 169 and Miller v Miller (1995) 16 ACSR 73).
7. In relation to each of the equitable defences raised by the defendants, the plaintiffs emphasise that the conduct relied upon must be clear, precise and unambiguous (referring to Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26); and they maintain that the defences raised cannot succeed in the circumstances of this case against either of the Plaintiffs, let alone both.

Determination

1. For similar reasons to those in relation to the election defence, I consider that the defence of acquiescence and related defences also fail. The fact is that the plaintiffs (largely through Mischa) made clear throughout the relevant period that there was no consent to the sale to Ashley at less than the valuation unless that was followed by an immediate distribution to them of their respective shares of the sale proceeds; and there was ongoing complaint about this in circumstances where it must have been apparent that the plaintiffs were not abandoning a challenge in relation to that conduct (albeit that the relief sought varied in the different iterations of the claim as ultimately pleaded).

Claim for relief under s 81 Trustee Act 1925

1. The defendants say that, if the sale was expedient, but unauthorised by the Will, s 81 of the Trustee Act empowers the Court to confer upon the defendants, either generally or in any particular instance, the necessary power to effect the transaction (and on such terms as the Court thinks fit). The defendants say that the discretion should be exercised here, relying on the following facts and circumstances that it is said demonstrate that the sale to Ashley was expedient in all of the circumstances: the price had been agreed by the beneficiaries; legal costs relating to negotiating a contract for the sale of land, including any special conditions relating to the issues with building defects or unapproved constructions, were avoided; a third party purchaser may have required building defects to be rectified and council approval obtained prior to sale; costs of removing the deceased's personal effects from the Manyana Property were avoided; there is no evidence that the estate would have benefited from attempting to sell to a third party; and that the sale was consistent with the expressed wishes of the deceased.
2. Insofar as the cross-claim includes a claim for a variation of the powers of the trust under s 81 of the Trustee Act, the plaintiffs note that the pleading is limited to a claim for relief from liability under s 85 and say that there is no pleading supporting the claim under s 81.
3. The plaintiffs argue that the power under s 81 is not available retrospectively since it "should not be used impliedly or implicitly as a means of absolving or discharging" what would otherwise be a breach of trust (referring to NSW Masonic Youth Property Trust v Attorney-General (NSW) [2010] NSWSC 333 (NSW Masonic Youth Property Trust) at [77] per Hall J in relation to the power to appoint a new trustee where it is expedient to do so (although they point to the contrary in Re Simpkiss Pty Ltd (in liq) [2018] FCA 2121 (Re Simpkiss) at [32] to [38] per Markovic J and also the discussion in Re Kingston Property Holdings Pty Ltd (No 2) [2017] FCA 974 (Re Kingston) at [16] to [23] per Markovic J). (It is noted that a self-dealing transaction may be authorised by the Court - reference here being made to the discussion in Jacob's at [1743] and [1744]; but that no such application was made here.)
4. The plaintiffs say that, to the extent that it may be available retrospectively, the power should only be used to "overcome procedural difficulties", but not where substantive rights would be affected (citing Thomas Hare Investments Ltd v Hare (2012) 34 VR 656 (Thomas Hare Investments) at [43]-[46] per Habersberger J).
5. The plaintiffs maintain that there is no "absence of any power for that purpose" since clause (1)(f) permits a sale to an executor; and say that expedience must be in relation to the management and administration of the trust and the section does not provide a power to vary the terms of the trust generally (citing Cisera v Cisera Holdings Pty Ltd (2018) 98 NSWLR 747; [2018] NSWCA 286 (Cisera CA)). The plaintiffs contend that the defendants have not established that the variation is expedient; and that the Court would not make an order in the exercise of its discretion in all the circumstances.
6. In further submissions filed pursuant to leave granted on 10 May 2022 (see at T 192.23), relating to s 81 of the Trustee Act, the defendants say that: the plaintiffs' submissions that s 81 does not confer power retrospectively to validate a transaction, and that the section cannot be used retrospectively to cure anything other than a procedural difficulty, are incorrect and should be rejected; and that there is power under s 81 to validate the sale to Ashley for $465,000 (and they argue that the discretion should be exercised, either unconditionally or, alternatively (and as a final fall-back), on terms that the defendants pay to the estate the amount of $15,000 plus interest on that sum from the date of the sale transaction to the date of judgment).
7. It is noted by the defendants that s 81 confers "very large and important powers which depend upon the Court's opinion of what is expedient, a criterion of the widest and most flexible kind" (referring to Riddle v Riddle (1952) 85 CLR 202 (Riddle) at 214 per Dixon J; Arakella v Paton (2004) 60 NSWLR 334; [2004] NSWSC 14 (Arakella) at [78] per Austin J; Application of Tatham [2021] NSWSC 540 at [41] per Henry J) and that the section "is couched in the widest possible terms" (Riddle at 220; Arakella at [79]). It is not restricted by any implications (Riddle at 214; Arakella at [78]); it is not to be construed as subject to any fetters or limitations beyond what is clearly imported by the statutory language (Arakella at [80]).
8. It is noted that, in Arakella s 81 was held to empower a Court to authorise fundamental reorganisation of a trust (see at [84], citing Cachia v Westpac Financial Services Ltd (2000) 33 ACSR 572). It is said that, to be expedient is to benefit the trust as a whole and the interests of beneficiaries, although it is not assessed by sole reference to the best interests of beneficiaries alone (Application of Tatham at [41]).
9. As to the first limitation suggested by the plaintiffs (that s 81 is incapable of being applied retrospectively), the defendants say that this is unsupported by any express words in the section itself; and that to imply such a limitation would be contrary to the above mentioned authorities. The defendants say that a number of decisions in the Federal Court support the proposition that the powers given by s 81 are ample enough to permit a retrospective validation (citing Pleash, in the matter of Suncoast Restoration Pty Ltd (in liq) (2013) 211 FCR 203; [2013] FCA 355 at [62] per Reeves J; Re Simpkiss at [36]-[38] and Re Kingston at [16]-[23]).
10. Insofar as the plaintiffs have submitted that unless such a limitation were implied, the section could be used "impliedly or implicitly as a means of absolving or discharging" what would otherwise be a breach of trust, citing NSW Masonic Youth Property Trust at [77], the defendants say that the passage cited from NSW Masonic Youth Property Trust has no relevance at all; noting that it relates to s 70 (appointment of trustees). In any event, the defendants say that the jurisdiction conferred by s 81 is directed to the question of whether the transaction in question is expedient; that the focus of the enquiry is thus the transaction and not the conduct of the trustees.
11. As to the plaintiffs' second proposed limitation (that s 81, if capable of retrospective operation, nevertheless can only be so used in order to cure procedural difficulties and not to impact upon substantive rights), again the defendants say that this finds no support in the words of the section. It is noted that the only decision cited by the plaintiffs in support of the proposed limitation, Thomas Hare Investments at [43]-[46] related to an application under s 63A of the Trustee Act 1958 (Vic) which is in very different terms to s 81. In any event, the defendants say that the words of s 81 expressly contemplate the power is exercisable notwithstanding that substantive rights are affected (referring to sub-s (1)(a)).
12. The defendants submit that even if the plaintiffs' submission concerning the proposed limitation were correct, authorising the subject transaction nunc pro tunc would not interfere with the parties' substantive rights in circumstances where the plaintiffs have not attempted to mount a case, and have not demonstrated, that the estate has suffered any loss.
13. As to the plaintiffs' further submission (at 9 and T 165.35-40) that s 81 is not enlivened because cl 11.1(q) of the Will permits sale to an executor, the defendants say that this is without substance for the reason that the assumed premise of the debate regarding s 81 is there has been a breach of trust by the executors selling property on terms not permitted by the Will (that is, at a price $15,000 less than valuation).
14. Insofar as the plaintiffs assert that the cross-claim does not include any pleadings supporting the claim under s 81, the defendants say that that submission relies upon an unreasonably literal reading of the cross-claim. The defendants say that it is clear from the relief sought and the contents of the pleading that the defendants allege that the transaction was an advantageous dealing (see at [7]). It is said that the relief sought provides a clear statement as to the intended application of s 81 (namely, to authorise the transaction nunc pro tunc). The defendants say that the practical effect of granting such relief would be to relieve the defendants from any liability in respect of that transaction. They say that, read in context, the pleading at [10] of the cross-claim, in which the defendants allege that they should be excused from any breach of trust found, is an assertion that s 81 should be invoked in the manner sought. Further, it is said that the matter was plainly exposed on the opening submissions and no issue was raised by the plaintiffs prior to closing addresses concerning the nature of the pleadings or any deficiencies in relation to s 81.
15. Thus it is submitted that there is power (which should be exercised) to confer on the defendants power to effect the transaction. The defendants say that the facts are similar to Waine v King (unreported, Supreme Court of New South Wales, Hodgson J, 5 October 1994) (Waine v King) (cited with approval and explained in Re Patros (2007) 16 VR 182 [2007] VSC 83 at [11] per Cavanough J), in which Hodgson J validated a sale to a trustee on grounds, inter alia, that the expenses of an auction would be saved; the parties would in substance receive what they wished; the Will had conferred on one of the trustees an option to purchase the property on a valuation basis; and there was no evidence to suggest that the valuation was not sound.
16. Alternatively, it is said that the Court has power under s 81 to make an order under the section on such terms and conditions as to the Court seems fit. The defendants say that if the Court were not prepared to unconditionally validate the transaction, it would be open to the Court to validate the sale on terms that the defendants pay to the estate the amount of $15,000 plus interest on that sum from the date of the sale transaction to the date of judgment ($15,000 being the difference between the amount of the valuation and the amount at which the property was sold to Ashley). If the Court were not prepared to validate the sale unconditionally, and otherwise not excuse the breach under s 85, it is submitted that the Court should validate the sale on those terms.
17. In additional submissions as to the claim under s 81 of the Trustees Act, the plaintiffs emphasise that in both NSW Masonic Youth Property Trust and the present case, an application was made to validate what was outside of the relevant trustee powers and what ought not to have been done. It is said that there was no general absence of a power that it was expeditious to grant; rather, what was sought in both cases was a retrospective validation of a specific unlawful act. Thus, it is submitted that the dicta cited from NSW Masonic Youth Property Trust are apt in the instant case, namely that: the section "should not be used impliedly or implicitly as a means of absolving or discharging" what would otherwise be a breach of trust. For the same reason as in NSW Masonic Youth Property Trust, the plaintiffs submit that it should be held that s 81 cannot be used retrospectively.
18. In any event, the plaintiffs say that the observations in NSW Masonic Youth Property Trust provide a powerful reason why, even if the power is available, it should not be exercised in this case in the exercise of the Court's discretion. The plaintiffs have clarified that it is not their position that s 81 can only be used retrospectively to cure procedural difficulties but, rather, they say that it should only be used in that way in the exercise of the discretion given under that section.
19. The plaintiffs say that although Thomas Hare Investments Pty Ltd v Hare was a case under s 63A of the Trustee Act 1958 (Vic) (which permits the Court to vary trusts "if it thinks fit") there is no logical reason why a principled limitation (not found in the words of the section) on varying trusts if the Court thinks it fit should not equally apply to conferring powers outside of the trust where the Court thinks it expedient. Further, it is noted that the analysis of Habersberger J in that case on this issue at [40] to [46] relied heavily upon the detailed analysis of Ormiston JA in Hartley Poynton Ltd v Ali (2005) 11 VR 568, from which the plaintiffs say it is clear that the comments about limitations on nunc pro tunc judgments and orders were intended to have general application.
20. As to the submission by the defendants that the power under s 81 is enlivened since it is not available under the Will, the plaintiffs note that s 81, in its terms, requires an absence of power and expedience; and that, in order to determine those matters, the Court must first consider what powers are available. It is in that context that the plaintiffs say that, given the power available under cl 11.1(q) of the Will to achieve a sale of the property to Ashley, there was no relevant absence of power and s 81 was not enlivened.
21. The plaintiffs argue that: it cannot be said to be expedient that the defendants be given the power (retrospectively) to sell to Ashley on different and less advantageous terms to those set out in the Will; there is no expedience in relation to the management and administration of the trust (citing Cisera CA) and, in effect, that the defendants seek to use s 81 impermissibly to vary the terms of the trust.
22. As to the pleading issue, the plaintiffs note that s 81 requires, in order to enliven the discretion, an absence of power and that it is expedient for the Court to grant the power. It is noted that there is no pleading in respect of either of those matters and the plaintiffs say that it is clear from the statement of cross-claim that it is in fact limited to s 85 (referring to [10] which they say makes this explicit). The plaintiffs say that the cross-claimants should not now be permitted to rely upon a wholly unpleaded case, particularly in circumstances where at several points during the hearing the defendants sought to take pleading points against the plaintiffs.
23. As to the reliance placed by the defendants (in their submissions for exercise of its discretion under s 81) on Waine v King, the plaintiffs say that that case is distinguishable from the present case, noting that: the plaintiffs in Waine sought for the power under s 81 to be exercised in advance of the proposed transaction rather than, as here, after it had occurred; the purchase in Waine was to be based upon a price in excess of the two valuations ($875,000 when the valuations were $800,000 and $850,000 (p 10)) rather than, as here, for less than the valuations (and there was no suggestion in Waine that the valuations were other than current and from appropriately qualified valuers); the purchase in Waine was to be on terms more advantageous to the estate than as provided in the express term of the will (the express power in the will presumably not being used because the proposal was for half of the property to be appropriated to the purchaser beneficiaries) rather than, as here, for a price less than what was required by the express clause in the Will.
24. Thus, it is submitted by the plaintiffs that the power under s 81 was not enlivened but that, even if it was, it could not or at least should not be exercised in the circumstances of this case in effect to validate the sale to Ashley.

Determination

1. As to the s 81 claim, it has been held that s 81 is only enlivened if specific power is sought with respect to a particular dealing, or dealings of a particular kind (see Riddle at 220 per Williams J). The principles informing the construction of that section, and the exercise of the discretion conferred thereby, were considered by Parker J in Cisera v Cisera Holdings Pty Ltd [2017] NSWSC 960 (Cisera SC) and, on appeal therefrom, Cisera CA; and Re Country Road Services Pty Limited (2019) 18 ASTLR 44; [2019] NSWSC 779 (Country Road Services) per Parker J. Section 81 only permits dealings related to the management or administration by the trustees of trust property and the focus must be on the interests of the trust (see Cisera SC in this regard).
2. In the present case, it is not necessary to determine whether the power can be exercised retrospectively (although I have concerns as to whether that would in any event be the proper exercise of discretion where this would have the effect of retrospectively absolving the trustees from a breach of trust) because I am not persuaded that there is a lack of power in the present case under the trust instrument (the Will) to dispose of the property; rather, the difficulty for the executors is that they chose not to comply with the strict requirements under the Will for the sale of the trust property to Ashley. Moreover, as a question of expedience, that cannot sensibly be determined after the event. At the time, there may have been a question as to expedience in circumstances where there was delay or doubt in obtaining unconditional consent but that position has long since passed.
3. Therefore, even if there is a power retrospectively to make an order under s 81 of the Trustee Act I would not now exercise the discretion to make such an order in the present case.

Claim for exoneration under s 85 Trustee Act 1925

1. The cross-claim seeks that the defendants be relieved from liability under s 85 of the Trustee Act. The defendants argue that, if it is held (as I have concluded) that the defendants have committed a breach of trust, the defendants seek orders that they be excused from the breach pursuant to s 85 of the Trustee Act or in the Court's inherent jurisdiction.
2. It is noted that, under s 85 of the Trustee Act, the Court may relieve a defaulting trustee of liability where the Court is satisfied that the trustee "has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the direction of the Court in the matter in which the trustee committed the breach".
3. The defendants argue that the test is satisfied in this case. They say that at all times they acted honestly and in good faith (referring to Dalrymple v Melville (1932) 32 SR (NSW) 596; Pateman v Heyen (1993) 33 NSWLR 188 at 199 per Cohen J; Adams v Alemite Lubrequip Pty Ltd [1994] NSWCA 1); that no dishonesty, fraud, malfeasance or bad faith is alleged or established (the essence of the allegation being that the defendants have misunderstood and misapplied the terms of the Will). They further say that they have acted reasonably, noting that a trustee may act reasonably notwithstanding that the trustee's actions proceeded on an incorrect understanding of the will (Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149 at 165 per Williams J). It is noted that Robb J concluded that the defendants acted reasonably in propounding an alternative construction of the Will (describing the competing arguments as "relatively finely balanced").
4. The defendants say that they sought and followed legal advice concerning the sale (I have no little difficulty with that proposition as I explain in due course); and they say that at no time did they receive any legal advice to seek judicial advice from the Court, or that such an option was available.
5. The defendants say that their conduct is consistent with others of a similar professional background (referring to Partridge at 165; Maelor Jones Investments (Noarlunga) Pty Ltd v Heywoord- Smith (1989) 54 SASR 285).
6. In this context the defendants again argue that there has been no loss occasioned to the estate by reason of any breach, or alternatively the loss is small, in fact nil or was at most $15,000. It is said that even if $15,000 was to be paid to the estate to form part of the residue, one-third of that amount would flow back to Ashley in any case. Accordingly, it is said that in the hands of the plaintiffs the maximum loss is only $5,000 each.
7. It is noted that Matthew is a gratuitous trustee (a factor taken into account in Metropolitan Petar v Mitreski [2012] NSWSC 16 at [142] per Brereton J, as his Honour then was); and the defendants say that the sale did not proceed covertly or deceptively; rather, it is said that the defendants gave full disclosure and engaged in bona fide negotiations with the plaintiffs in a quest to obtain their consent to the transaction. Finally, it is said that at all times the defendants proceeded with the purpose and intent of giving life to the testamentary wishes of the deceased as they understood them.
8. The plaintiffs say that the cross-claimants cannot be said to have "acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the direction of the Court in the matter in which the trustee committed the breach"; and hence the relief under s 85(2), is not available (or, alternatively, relief would not be granted in the exercise of the discretion under s 85(1)).
9. Further, it is said that the intervention of equity to set aside a transaction is not a personal liability for breach of trust within the meaning of s 85(1) (the plaintiffs citing Ford & Lee at [18.9250]). Thus, it is said that s 85 is not available to defeat the plaintiffs' claim for rescission but, in any event, such an order should not be made in the circumstances.

Determination

1. It is not necessary to determine whether the power of exoneration applies to a claim for rescission of the present kind (though I consider there is force in the plaintiffs' argument that this is not a personal liability of the kind to which s 85 applies). That is because I do not consider that the power should be exercised in the present case in circumstances where the executors had been advised (in no uncertain terms) that beneficiaries' consent was necessary, they knew unconditional consent had not been obtained, and they proceeded with the sale nevertheless (albeit on the basis of their understanding of later advice said to have been provided by Ms Brown). I accept that they acted honestly. However, I cannot accept that the executors acted reasonably in circumstances where it appears clear that incomplete or inaccurate instructions were given to Ms Brown in January 2017 on which any advice that she then gave was based.
2. I have had some hesitation in relation to the position involving Ashley in this regard because it is clear that he did not have any real understanding of the legal issues and was in effect relying solely on Matthew's account of the advice received from Ms Brown. However, that simply highlights the difficulty for Ashley in proceeding in a sale to himself based on no more than a second hand account of legal advice apparently given orally by Ms Brown. Moreover, it is clear that Ashley was aware of Mischa's complaints, and proceeded to take the risk that she would not carry out the threats that he considered her to have made. Thus, I have concluded that relief under s 85 should not be granted.

Submissions as to relief claimed

1. In circumstances of self-dealing, and in the absence of any exceptions to the application of the rule (or equitable defences), it has been said that the beneficiaries retain the right to have the property reconveyed at the trustee's purchase price, with interest and the trustee accounting for profits, less the cost of any permanent improvements effected by the trustee on the property (see Jacob's at 467-468; Silkstone and Haigh Moor Coal Co v Edey [1900] 1 Ch 167 at [171] per Stirling J; Ex parte Bennett (1805) 10 Ves 381, 394; 32 ER 893 at 897 per Eldon LJ.
2. The plaintiffs contend that an order for rescission should be made, alternatively that the defendants should account for the profit made on the transaction (by reference to the current market value of the property) or alternatively compensate the estate for the resultant loss.
3. In summary, the defendants oppose the relief sought (even if breach is found) for the following reasons. First, the defendants say that it is not open to the plaintiffs to seek to set aside the sale transaction because: the plaintiffs, by their conduct in the four years prior to the filing of the further amended statement of claim (namely, by demanding distributions from the estate and failing to assert any entitlement or desire to impugn the transaction) elected to affirm (or they ratified, or acquiesced in) the transaction; or are estopped from now pursuing the alternative, inconsistent course. Second, they maintain that it would be inequitable to grant the relief due to Ashley's change of position and in circumstances where they say restitutio in integrum is not possible. Third, the defendants say that the estate has suffered no loss. Further, the defendants contend that an account of profits should not be ordered and that any breach should be excused.

Rescission

1. If rescission is ordered, it is accepted by the plaintiffs that Ashley is entitled to an allowance in respect of any permanent improvements to the Manyana Property, although they point out that Ashley must also give credit for any profits or other benefits derived from it, including an occupation allowance (referring to Jacob's at [1748] and Ford & Lee at [9.19030]). The plaintiffs accept that Ashley would also be entitled to pursue a purchase of the Manyana Property in strict compliance with cl 11.1(q) of the Will.
2. The defendants say that the following are powerful discretionary reasons why rescission would not be ordered in this case.
3. First, they point to the lapse of time between the date of the sale (February 2017) and the date on which the plaintiffs first claimed an order for rescission in these proceedings (April 2021), coupled with the prejudicial effect that in order for rescission would now have on Ashley. It is said that, during the four and half year period of delay, Ashley incurred significant costs and devoted countless hours to the repair, maintenance and upkeep of the Manyana Property, which he would not have done if he had known there was going to be a challenge to his ownership of it. Reference is made to the details of the work that he did, the costs of that work and the other costs that Ashley incurred as property owner over the period of delay, in [59]-[83] of Ashley's second affidavit. The total costs incurred by Ashley (including the costs of improvements, utilities, rates and insurance) are said to exceed $139,000.
4. The defendants say that no satisfactory explanation (or any explanation) has been advanced by the plaintiffs to explain the reason for the delay, or why they persisted for 4¼ years seeking a distribution of the estate (which was predicated on the validity of the sale transaction) rather than rescission. It is noted that Mischa gave no explanation for the delay in any of her affidavits and it is said that her attempt to provide an explanation, for the first time in the witness box under cross-examination, was vague, inchoate and entirely unsatisfactory. It is noted that Dean gave no evidence at all on the subject; he was not even called as a witness.
5. The defendants say that the above circumstances are similar to those considered in Fysh v Page (1956) 96 CLR 233 (Fysh v Page), where there had been lengthy and unexplained delay by a beneficiary in seeking to set aside a sale to a fiduciary. There, during the period of the delay the beneficiary "stood by" without attempting to exercise her equity to rescind; and in the meantime the value of the land had doubled or trebled (at 242). In rejecting the beneficiary's late claim for rescission, Dixon CJ, Webb and Kitto JJ (with whom Fullagar J agreed) said at 243-244: When the Court is asked to rip up a transaction years after it has been completed the lapse of time itself is one of the elements bearing upon the equities that exist entitling the plaintiff to relief. If a plaintiff establishes prima-facie grounds for relief the question whether he is defeated by delay must itself be governed by the kind of considerations upon which the principles of equity proceed. If the delay means that to grant relief would place the party whose title might otherwise be voidable on equitable grounds in an unreasonable situation, or if, because of change of circumstances, it would give the party claiming relief an unjust advantage or would impose an unfair prejudice on the opposite party, these are matters which may suffice to answer the prima-facie grounds for relief. See Lindsay Petroleum Co. v. Hurd (1874) LR 5 PC 221, at p 239 et seq and the observation in Lord Blackburn's speech in Erlanger v. New Sombrero Phosphate Co. (1878) 3 AC 1218, at pp 1278, 1279 (at p244) It is obvious that to rip up in 1956 the sale of Brightside made in 1941 would spell great injustice to the purchaser, and would give Mrs. Fysh an advantage which she would owe only to lapse of time and the economic changes that have occurred. Her delay is really unexplained; for she accounted for it on no grounds which could affect the justice of the matter as between the parties. The long period in which Page has been left in unquestioned possession of the Estate, the great change of circumstance that has occurred in the meantime and the unequal situation which rescission would produce, are factors which must be considered with the very slender case, if any there be, for equitable relief open upon the facts proved as they stood in 1942. When these matters are so considered it becomes evident that rescission of the transaction at this date is out of the question.
6. The defendants say that this reasoning applies with equal force here and compels the rejection of the plaintiffs' claim for rescission.
7. Second, the defendants say that the plaintiffs have not demonstrated that restitutio in integrum is possible. It is noted that, in the Reply, the plaintiffs accept that, if the sale is unwound and the Manyana Property re-sold, Ashley will need to be repaid the purchase price and the value of any improvements (see Reply filed 17 August 2021 at 3).
8. The defendants say that it would appear be common ground that Ashley has undertaken improvements to the Manyana Property. The defendants note that the plaintiffs have led no evidence of the current value of the Manyana Property or the value of the improvements undertaken by Ashley. Thus, it is said that the plaintiffs have not demonstrated that if the sale transaction is unwound and the Manyana Property resold, the estate would be any better off once it has satisfied the obligation to repay the purchase price to Ashley ($465,000) plus the (unquantified) value of any improvements. It is submitted that there is thus no demonstrated utility in making the order and it should be refused in the Court's discretion.
9. The defendants say that there is even the prospect that the estate may be worse off if rescission is ordered (say, if the net realisable proceeds of the Manyana Property at its current value - as to which the plaintiffs have led no evidence - are not sufficient to repay the purchase price to Ashley plus the value of the improvements and other costs which Ashley has incurred in holding the land, such as rates, insurances and utilities).
10. The defendants say that in these circumstances the plaintiffs have not demonstrated that restitutio in integrum doing justice to all parties is possible; nor has it been demonstrated that there is any utility in making an order for rescission as it may leave the estate worse off. The defendants say that there is no evidentiary basis put forward by the plaintiffs to suggest that the estate would be better off by the making of an order for rescission.
11. The defendants argue that the failure by the plaintiffs to lead evidence as to the current value of the Manyana Property, or as to the value of the improvements made by Ashley (as distinct merely from the costs incurred by him), is also unexplained; and that there is no reason why the plaintiffs could and should not have led such evidence in support of their application for rescission.
12. It is noted that the plaintiffs have never applied or sought to have any question of liability or any other question determined as a separate question under Pt 28 of the UCPR; and that the further amended statement of claim does not seek relief for the determination of quantum, loss or profits to be determined by way of separate enquiry or reference.
13. The defendants says that it is questionable whether, in a matter such as this, it could ever be appropriate for equitable relief of the nature sought to be granted in the absence of any confidence that the relief would sound in any practical or tangible benefit to the parties or the subject trust. Furthermore, and in any case, it is said that the nature and degree of the loss is a relevant matter in the exercise of discretion in assessing the appropriateness of equitable relief and is not a matter which could sensibly be deferred. In these circumstances, the defendants argue that rescission should not be ordered.

Equitable compensation

1. The defendants say that, if there has been a breach of trust (which is denied but which I have concluded was established), it was a technical breach which has not been shown to have caused the estate any loss. It is said that the question of loss is only relevant to the plaintiffs' alternative claim for equitable compensation, sought in prayer 5(a) of the further amended statement of claim. As noted above, the plaintiffs do not seek equitable compensation in respect of prayer 5(b) but only an account of profits (see the exchange at T 103.38-104.33).
2. The defendants note that the traditional duty of the defaulting trustee is to effect restitution to the estate, but if restitution in specie is not possible, equity awards compensation in place of restitution (McNally v Harris (No 3) [2008] NSWSC 861 (McNally v Harris) at [13] per White J, as his Honour then was, citing Canson Enterprises Ltd v Boughton & Co [1993] 3 SCR 534 (Canson Enterprises) at 547 per McLachlin J as her Ladyship was then - there in dissent but whose reasoning was endorsed by the High Court in Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15 (Youyang) (at [35]; see also at [50])). It is noted that the object of equitable compensation is to restore persons who have suffered loss to the position in which they would have been if there had been no breach of the equitable obligation (reference being made to Target Holdings Limited v Redferns (a firm) [1996] 1 AC 421 (Target Holdings) at 437 per Browne-Wilkinson LJ; O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 (O'Halloran) at 272 per Spigelman CJ; McCrohon v Harith [2010] NSWCA 67 (McCrohon) at [60] per McColl JA).
3. The defendants say that, while the plaintiff is to be put in the same position as he or she would have been in if the wrong for which equitable compensation is awarded had not been sustained, the defendant is not liable to pay compensation which exceeds the loss suffered from such wrong (Target Holdings at 432G, 433H, cited with approval in O'Halloran at 272-273; McCrohon at [60]); and that, in a claim for equitable compensation, the onus of establishing loss rests on the plaintiff (Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 (Farah Constructions) at [200]).
4. It is noted that equitable compensation is ordinarily assessed at the time of trial, with the full benefit of hindsight (Re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd (1966) 84 WN (Pt 1) (NSW) 399; [1966] 2 NSWR 211 (Re Dawson); Canson Enterprises at 555; Youyang at [35]; [50]). Reference is also made to Target Holdings at 438-439 as to the use of hindsight and common sense in determining causation in assessing equitable compensation (approved in O'Halloran at 273).
5. The defendants note that, if considered just, the amount of compensation will be assessed at a different time (referring by way of example to Re Bell's Indenture; Bell v Hickley [1980] 1 WLR 1217; [1980] 3 All ER 425 (Re Bell's) (where it was held that the authorised investment would in any event have been sold, and thus the date when such sale should have occurred will be the relevant date for valuing the loss); and Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1 at [52] per Debelle J (value of rent roll assessed at an earlier point in time). The defendants say that, ultimately, the task is to compensate the plaintiff for what it has lost but no more. It is noted that equity will act flexibility to achieve this outcome (Cole v Miles [2002] NSWCA 150 (Cole) at [63] per Heydon JA as his Honour then was); and that the remedial response of equity can vary considerably depending on the circumstances; it turns not only on the actions of the wrongdoer but also on the need to avoid injustice even to the wrongdoer (Cole at [63]). The defendants also point out that it has been said that a fiduciary is not an insurer (Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at [444]).
6. The defendants say that it follows from the above that, when assessing equitable compensation, the hypothetical situation should be considered as to the counterfactual if there had been no breach of duty; and that, in undertaking this exercise, account will be taken of objective facts to assess the extent to which the plaintiff's losses could be attributed to the defendant's breach of fiduciary duty (citing Nicholls v Michael Wilson & Partners Ltd [2012] NSWCA 383 (Nicholls v Michael Wilson) at [200] per Sackville AJA).
7. Reference is made by way of example to the following cases: Re Bell's at 1232E-F, H, where trust property, sold wrongfully by the trustees, would have been sold in any event and the trustees were only liable to replace the asset at its value at the date it would have been sold rather than at the date of judgment; Hagan v Waterhouse (1991) 34 NSWLR 308, where Kearney J, applying Re Bell's, held (at 346-347) that, although the trustee had sold trust property for a purpose foreign to the power of sale vested in the trustee, no loss had been suffered by the trust (and the trustees were not liable to make restitution), as the trust property would likely have been sold in any event; Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18 (Warman), where the High Court (at 565) took into account the fact that the supplier would have terminated the agency agreement at an early stage independently of any breach of fiduciary duty by the defendant; and Nicholls v Michael Wilson, where equitable compensation was assessed on the basis that the defaulting fiduciaries would have acted lawfully to sever their association with the relevant company without breaching their fiduciary obligations.
8. The defendants say that they were empowered under the Will to sell the Manyana Property; and that, on the findings of Robb J, the defendants were obliged to convert the estate assets into cash and to do so as soon as reasonably practicable (referring to orders 2 and 3 made by Robb J on 28 November 2019). That being so, it is said that the position that would have obtained had there been no breach (and no sale to Ashley) is that the Manyana Property would have been sold to a third party. The defendants say that, on such a sale, transaction costs would likely have been incurred by the estate and that the plaintiffs, who bear the onus on the claim for compensation, have not established the likely amount of those transaction costs. Nor, it is said, have the plaintiffs established that the transaction costs would have been less than the $15,000 difference between the amount paid by Ashley ($465,000) and the valuation of the Manyana Property ($480,000). The defendants emphasise that there was no challenge to Matthew's estimate of selling costs, given at the time of the sale, of approximately $19,440 (see above).
9. Thus, the defendants say that the plaintiffs have not demonstrated that the estate is any worse off by reason of the sale. The defendants argue that if, as it appears, the plaintiffs' complaint is that Ashley should have paid $480,000 instead of $465,000, then the maximum loss is $15,000. However, it is said that that hypothetical loss does not address the savings to the estate realised by selling to a purchaser without the intervention of a selling agent or advertising costs. Hence, the defendants say that there is no basis for an award of equitable compensation.

Claim for account of profits

1. As to the alternative claim by the plaintiffs for an order that the first and second defendants account to the estate for: the amount of $15,000 (being the difference between the amount at which the Manyana Property was valued at the time of sale ($480,000) and the amount paid by Ashley ($465,000)) or, alternatively, an amount representing the difference between the Manyana Property's current value and the amount paid by Ashley (prayer 5 of the further amended statement of claim), the defendants accept that the plaintiffs may elect to seek an account of profits rather than equitable compensation. The defendants point out that the amount recoverable in an action for an account of profits is dependent upon the profit made by the fiduciary, not the loss suffered by the beneficiary (Target Holdings at 440E; United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 (Hospital Products) at 814F, 816E).
2. The defendants say that the remedy of account of profits is generally appropriate where the fiduciary's relevant gain is the derivation of profits from a particular activity rather than by the acquisition of a particular asset: it is directed at revenue rather than capital (referring to Hospital Products at 814 E-F, cited for this proposition in P W Young, C Croft, M Smith, On Equity (2009, Thomson Reuters Lawbook Co) at [16.1220]; also cited with approval by Gzell J in Acme Office Service Pty Ltd v Ludstrom [2002] NSWSC 277 at [40]).
3. It is noted that the purpose of ordering an account is not to punish the defendant, but to prevent the defendant's unjust enrichment (Warman at 557); and that the enrichment is unjust if it was acquired at the expense of the trust (Warman at 557).
4. The defendants say that the conduct of a plaintiff may be such as to make it inequitable to order an account; thus, a plaintiff may not stand by and permit the defendant to make profits and then claim entitlement to those profits (Warman at 559). It is noted that the right to require an accountant from the fiduciary may be lost by reason of the operation of doctrines of equity such as laches, equitable estoppel, or informed consent or in circumstances where it would be unconscientious to assert the right to an account (citing Warman at 559; see also Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36 at 204-205; Edmonds v Donovan (2005) 12 VR 513 (Edmonds v Donovan), where there was unjustified delay amounted to appellants "waiting to see" and then, when the property said to have been "stolen" had proved profitable, acting opportunistically to grasp the benefit).

● The plaintiffs' claim for an account for $15,000 [prayer 5(a)]

1. The defendants say that the Manyana Property if sold at auction to a third party in February 2017 would have realised $480,000. It is said that prayer for relief 5(a) presumes that very fact (the claimed $15,000 being the difference between $480,000 and the $465,000 paid by Ashley).
2. It is said that, although there was a suggestion during submissions for the plaintiffs (at T 57.12) that the plaintiffs' case was that the Manyana Property was possibly worth more than $480,000 as at February 2017, the plaintiffs led no evidence to establish that fact and the case was conducted on the basis of an assumed valuation of $480,000.
3. The defendants say that Ashley did not make a "gain" of $15,000 at the time he acquired the Manyana Property. First, he made no revenue or profit of any kind (noting that a difference in capital values is not properly the subject of an account of profits - see Hospital Products). Second, it is said that although Ashley acquired for $465,000 (a property which it is admitted he could sell to a third party for $480,000), in his hands the Manyana Property was worth less than $480,000, as Ashley would incur selling costs (commission and marketing costs) on any sale.
4. Thus, the defendants say that the net realisable value of the Manyana Property in Ashley's hands was $480,000 less selling costs. As already noted, the defendants' estimate of the selling costs of the time of the sale was $19,440. The defendants say that, once account is taken of selling costs, Ashley acquired an asset the net realisable value of which, in his hands, was worth not one cent more than the price he paid for it. Third, that even if there was a gain made by Ashley, it was not again made at the expense of the estate (see Warman at 557). Thus, it is said that there were no "ill-gotten gains" made by Ashley and this claim should be rejected.

● The plaintiffs' claim for an account to be taken based on current property value

1. Similarly, the defendants say that the plaintiffs' claim for an account based on the current value of the Manyana Property should be refused for the following reasons.
2. First, it is again noted that the nature of the remedy itself is directed not at capital but at revenue; so that disgorging Ashley of any capital gain (which they say has not been demonstrated) is not the purpose of the remedy (see the authorities cited above). Second, the defendants say that the plaintiffs have adduced no evidence of the current value of the Manyana Property (or its value at any other time), and that there is no evidence which establishes whether Ashley has derived a "gain" as matters presently stand.
3. Third, it is said that it would be unconscionable to grant an account in respect of any capital gain realised from the date of sale to date in circumstances where: Ashley undertook improvements to the Manyana Property; at the time many of the renovations were undertaken, Ashley had no notice of the plaintiffs' claim was based on a current value; other renovations were undertaken at a time when this claim was limited to $55,000; and, in their statement of claim filed 31 December 2019, the plaintiffs sought relief for the payment of money representing the difference between the then current value and the price paid by Ashley (that being the first time that the plaintiffs brought a claim with regard to its "current" value). The defendants say that the quantum of the claim at that time was $50,000.
4. It is noted that, in its current iteration, the plaintiffs' pleading does not assert or allege any particular amount as being the current value of the Manyana Property; and that there has been no explanation provided by the plaintiffs as to their delay in formulating its claim as it is presently brought, or as to why the plaintiffs have not adduced evidence concerning the current value of the Manyana Property. The defendants' complaint is that the plaintiffs have unjustifiably "waited to see" whether the Manyana Property would increase in value, whilst not being exposed to any risk (either themselves or the estate) (referring here to Warman and Edmonds v Donovan).
5. The defendants point to Phipps v Boardman [1964] 2 All ER 187 (Phipps v Boardman), where Wilberforce J recognised that if an account is to be taken, the expenditure which would be necessary to enable the property to be realised, including, for instance, experts, is to be considered for the purposes of making allowances to the defendant. The defendants say that the fact that these types of transactional costs are expressly to be taken into account in determining any "profit" which may need to be disgorged to an estate by way of an account, brings into sharp focus the "merely technical" nature of the alleged breach and the reason why equity should not intervene to create an unjust outcome not intended by the doctrine.

Determination

1. As noted earlier, where there is a breach of the rule against self-dealing, the general principle is that the sale is voidable at the election of the beneficiaries (who retain the right to have the property reconveyed to the estate at the purchase price but with account to be taken both of any profits made by the trustee and of the cost of any permanent improvements effected by the trustee of the property; and also taking into account interest).
2. I do not accept that this is a case where the beneficiaries have delayed and then sought to act opportunistically (such as was the case in Edmonds v Donovan); nor was the delay inordinate in all the circumstances (such as was the case in Fysh v Page).
3. In Edmonds v Donovan, the Victorian Court of Appeal considered a claim following the breakdown of the relationships between parties involved in a joint venture and profit-sharing arrangement in relation to a golf-course. The defendants at first instance had been successfully running the golf course venture for many months. The plaintiffs sought an account, which the Court considered to be a tactical decision in light of the defendants' success in operating the golf course. The court considered various remedies for the breach of fiduciary duty there found: a constructive trust (which was determined to be inappropriate due to multiple competing interests and the tactical delay - see at [65] per Winneke P); the taking of accounts (which was considered inappropriate due to the tactical delay and would, in any event, achieve much the same result as equitable compensation in the circumstances - see at [70] per Winneke P); and equitable compensation (which was considered sufficient to compensate the plaintiffs for the loss of opportunity - see at [68] per Winneke P). At [76], the President said: First, there was the matter of delay; for there was no reason for the respondents to have waited so long before attempting to intervene in the appellants' exploitation of what they now say was "stolen". Such delay smacks of their "waiting to see" and then, when the venture proved profitable, acting opportunistically to grasp the benefit. In short, I consider that too much time had passed to justify a simple accounting: the respondents had waited too long before asserting an overriding interest in the appellants' pursuit of the common enterprise.
4. His Honour distinguished between the functions of equitable compensation and an account at [78], as follows: It may be said, in broad terms, that the remedy of an account looks to the gain made by the party in breach while the remedy of equitable compensation looks rather to the loss suffered by the aggrieved party. If, as I think, an account was inappropriate, this was a case for equitable compensation, the aim of which "is to place the party who suffers following the breach of duty as nearly as possible in a position in which he would have stood had there been no breach" … In this case, pecuniary gain was made by the appellants and it was not inappropriate to fashion an award of compensation by reference to that gain. That is in accord with what the trial judge did and, with respect, there was no error in that.
5. The position in the current case is distinguishable in that, in Edmonds v Donovan, the defendants (who continued running the golf-course) were entitled to a share of the profits on account of the initial agreement between the parties and the substantial skill and effort required to ensure the golf course was profitable (see at [81] per Winneke P); and the nature and duration of the delay was substantial. The plaintiffs had "not merely stood by for nearly two years without attempting to intervene but thereby acquiesced in what was happening" (see [82] per Winneke P).
6. Furthermore, Edmonds v Donovan concerned a joint venture arrangement in which neither party had an inherent right to select a remedy; the focus was rather on what would be the most appropriate remedy for the breach of fiduciary duty; whereas, in matters of self-dealing, as noted above, it has been recognised that beneficiaries may elect to have the property reconveyed as the sale is by nature voidable (see Jacob's at 467-468).
7. In the present case, following the sale of the Manyana Property, the beneficiaries sought the fulfilment of the condition upon which their consent to the sale was predicated. That was not forthcoming, which precipitated the litigation. There has not been inordinate delay. Nor can it seriously be said that the plaintiffs were seeking to take advantage of a windfall opportunity in the increase in property prices or the improvement of the property by Ashley. Their attempts to obtain their distributions under the Will have been thwarted for years; and the fact that they were only belatedly advised as to the ability to have the conveyance set aside is hardly a matter about which Matthew and Ashley can complain. The irony is that the considerable costs no doubt incurred in this litigation (which may well have an impact upon Ashley's ability to retain the Manyana Property and the quantum of the residuary beneficiaries' ultimate entitlements) could have been avoided at a much earlier time had Matthew and Ashley not insisted upon their stance (based, as it was, on their view of the deceased's wishes).
8. Nor do I accept that restitution in the requisite sense is not possible. It is certainly the case that one of the circumstances in which the discretionary remedy of rescission may not be available is where restitutio in integrum is not possible (see Lord Goff of Chieveley, Gareth Jones, The Law of Restitution (2002, 6th ed, Sweet & Maxwell) [9-023] to [9-043]).
9. Considerations of restitutio in integrum and practical justice on an application for rescission are summarised by Austin J in Aequitas Ltd v Sparad No 100 Ltd [2001] NSWSC 14 at [426] and [427]: Rescission in equity does not require precise restitution in integrum. A court of equity can require adjustments to be made inter parties of a kind not available to a court of common law … The Court's decree is moulded to achieve 'what is practically just' … Once a breach of fiduciary duty has been established, 'the nature of the case will determine the appropriate remedy available for selection by a plaintiff'. Rescission in equity is a more flexible tool than rescission at common law. The common law required the plaintiff to return in specie that which he had received under the contract, in the same condition as it was in when he received it; equity, having the means the common law lacked to ascertain and provide for adjustments necessary to restore the parties substantially to the status quo, was able to see the possibility of restitution in integrum in a much wider variety of cases.
10. An order for rescission thus requires acceptance that the parties can be restored to their original pre-conveyance position. Consideration must be given to whether rescission, either alone or in combination with other orders, can achieve restitutio in integrum and practical justice - see Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114 at [140] per Leeming JA quoting D O'Sullivan, S Elliott and R Zakrzewski, The Law of Rescission (2014, 2nd ed, Oxford University Press) at p 277: This idea is inconsistent with the way in which the principles governing the relief given upon rescission have conventionally been understood, the central tenet of which is that the restoration of the parties to their original positions is the criterion on practical justice. From this conventional viewpoint the idea that practical justice should be done at the expense of restoring the parties to their original positions is difficult to understand. It is not clear what alternative criterion of justice is being proposed. The proposal may simply be that justice should be done according to the judge's personal conception of what seems fair in all of the circumstances.
11. However, in contrast to rescission at common law, rescission at equity requires a "less precise" form of restitutio in integrum (see Frith v Gold Coast Mineral Springs Pty Ltd (1983) 47 ALR 547 at 581-582 per Fitzgerald J). Consequently, the improvements that Ashley has made to the Manyana Property will not preclude an order of rescission, provided that account can appropriately be made out of the estate for those improvements. Although to my mind the relevant allowance might have been said to be for the cost of any permanent improvements reasonably made by Ashley (since logically the cost of improvements may not be commensurate with the value, if any, attributed to those improvements from a real property perspective - say, for example, if there was over-capitalisation of the property), the plaintiffs in their reply appear to accept that if the sale is set aside then account should be made in favour of Ashley for the value of any permanent improvements and I see no reason why they should not be held to that concession.
12. Circumstances in which rescission has been ordered, and restitutio integrum achieved, include (but are not limited to): rescission of a sale of a business when the respondent had already taken possession of the property, taken over stock, and deteriorated the business (see Alati v Kruger (1955) 94 CLR 216 at [225] per the Court); rescission of a sale of farming land where the purchaser had made substantial repairs and lasting improvements to the land (see Sibley v Grosvenor (1916) 21 CLR 469 at 475 per Isaacs J); and rescission of a personal guarantee of past and future indebtedness insofar as past indebtedness was concerned (see Vadasz v Pioneer Concrete (SA) Pty Limited (1995) 184 CLR 102; [1995] HCA 14). The circumstances of the current matter are no more complex, in terms of restitutio in integrum, than those (in circumstances where account can surely be taken of the cost of maintenance over the years since the date of acquisition and in light of the concession referred to above).
13. To the extent that Ashley complains that he is unable to quantify expenditure incurred on the Manyana Property, apart from the fact that this is met by compensating him for the value of the improvements effected by him, it is relevant to note that the bulk of the renovations occurred at a time when Ashley was on notice of the claim by Mischa (and Dean) that the sale was at an undervalue and with only their conditional consent and (from at least December 2017) of Mischa's assertion that the property might ultimately be required to be resold; and Ashley seems simply to have taken a calculated risk that Mischa would not act on the threats he perceived that she was there making. The difficulty of ascertaining exact costs will not arise if there is an account to Ashley as to the value of the improvements (and nor in those circumstances will there be any windfall gain to the estate arising out of that expenditure). Any increase in value due to market forces in the intervening period is not a windfall in circumstances where Matthew and Ashley have chosen to dispute the claims made, rather than to accede to the claim for equitable compensation in the (perhaps) lesser amount referable to the $480,000 purchase price; and in any event all the beneficiaries will share equally in such a benefit.
14. In my opinion, the appropriate relief is for the sale to be set aside and (subject to one qualification) to order that the Manyana Property be reconveyed to the executors of the deceased's estate to be held by them as an asset of the estate (with Ashley to be reimbursed the purchase price with interest plus the value attributable to any permanent improvements effected by him to the property and the cost of maintenance of the Manyana Property since its acquisition but less any profits earned from the use of the property since its acquisition and less an occupation fee for the period in which Ashley has occupied the property). That accounting exercise should be referred out to a court appointed referee; and there should be an independent market valuation by a suitably qualified valuer both as to the current market value of the property and as to the value of any permanent improvements effected to it by Ashley since its acquisition.
15. The qualification is this. It is accepted by the plaintiffs that, if the sale is set aside, Ashley would be entitled under the Will to acquire the Manyana Property at a price determined by a qualified valuer and on terms that would be granted to an arm's length purchaser. If Ashley wishes to exercise that right, then the appropriate order (to avoid incurring unnecessary conveyancing costs involved in a transfer to the estate and then back to Ashley) would be for there to be a declaration that Ashley holds the property on constructive trust for the estate. There could then be a regime for obtaining an independent valuation from a qualified valuer as to the value of the property and of any permanent improvements; and an assessment of the account required to be made by Ashley to the estate (or vice versa) between the market valuation (adjusted to reflect the allowances as to the matters to which I have referred above).
16. As noted, I do not accept that this provides a windfall to the estate. The cost of any permanent improvements effected to the Manyana Property does not necessarily translate to an increase in value of the property and Ashley will share in any benefit in the increase in value of the property as a result of market increases over time in any event.
17. Thus, in the absence of a consensual arrangement between the beneficiaries at this stage as to any re-sale or marketing of the property, I consider that the sale to Ashley should be set aside; the Manyana Property reconveyed to the executors and trustees of the deceased's estate; Ashley be repaid out of the estate the purchase price paid for the property plus the costs of maintenance and the cost of effecting permanent improvements (to be determined by reference out to an expert valuer); and that Ashley should account to the estate for any profits made by him in respect of the property since its sale to him and pay an occupation fee for the period in which he has occupied the property (to be calculated with the assistance of a professional real estate agent having regard to market rents at the relevant time).
18. There are potentially other ways in which the appropriate relief could be framed (see for example the orders considered in Holder v Holder [1968] Ch 353 per Harman LJ at 390) but this was not the subject of debate or consideration in oral or written submissions. (Hence, the need, as I see it, for the parties sensibly to attempt to arrange an appropriate regime now to rectify the issues caused by the transfer of the Manyana Property to Ashley at less than the then market valuation without the unconditional consent of all the residuary beneficiaries).
19. There is a question to my mind as to whether, in all the circumstances, Matthew and Ashley should now be removed as executors and trustees so that an independent executor can oversee the reconveyance of the Manyana Property to the estate and the obtaining of the necessary valuations and accounting to be carried out. Then, if Ashley does wish to re-acquire the Manyana Property, there will be someone who is independent and has no conflict of interest involved in the sale. If the parties wish to be heard on this issue then I will make directions for submissions to be filed (and, if necessary, a brief oral hearing).
20. Given that there may be complications as to the framing of the relevant orders and that much may depend on whether Ashley now does wish to (re)acquire the Manyana Property (this time on the terms provided under the Will), I consider that the appropriate order at this stage is to direct the parties to file within 14 days proposed short minutes of order to reflect these reasons (and, if there be a dispute as to those orders, brief written submissions, with a view if possible to making final orders on the papers).
21. Although, for the reasons set out above, I consider that rescission is both available and appropriate (perhaps coupled with a declaration of constructive trust), I will deal briefly with the alternative prayers of equitable compensation or an account of profits (the claim for $15,000 in prayer 5(a) and an unquantified amount in prayer 5(b)).
22. As to the claim for equitable compensation, in light of the defendants' evidence that estimated selling costs would have been $19,440 and the plaintiffs' failure to lead any evidence to the contrary, I accept that the plaintiffs have not discharged the onus of proving that the estate has suffered a loss by Ashley purchasing the Manyana Property at a sum of $15,000 below the independent valuation (see Farah Constructions at [200]). Given that the purpose of equitable compensation is "to put the trust estate back into the position in which it would have been had there been no breach" (McNally v Harris at [16] per White J, as his Honour then was, quoting Target Holdings at 437), in the absence of compelling evidence of loss, an award of equitable compensation would not have been available (see also Re Dawson; at 216 per Street J, as his Honour then was, and Hospital Products at 816E per McLelland J as his Honour then was).
23. As to the plaintiffs' alternate claim for an account of profits, the "profit" sought is either in relation to the difference between the price at which the property was independently valued ($480,000) and the price at which the property was sold to Ashley ($465,000), or alternatively for the increase in value between the current market value less the purchase price paid by Ashley.
24. In Hospital Products, McLelland J (at 814F) noted that an account of profits is "generally appropriate where the fiduciary's relevant gain is the derivation of profits from a particular activity rather than the acquisition of a particular asset". However, the High Court subsequently emphasised in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 that the equitable remedy to account is "concerned with 'a profit or benefit' in language divorced from a confined conception of benefit as accrued profit in narrow accounting terms" (see at [24] per Kiefel CJ, Keane and Edelman JJ, their Honours there citing Warman at 557). In that case, Gageler J said at [75]: Although commonly referred to as an "account of profits", there is no reason why a benefit or gain to be made the subject of an account must answer the description of a "profit" in conventional accounting terms. Nor is there any reason why that benefit or gain must answer the description of "property" or must have sufficient certainty as to be capable of forming the subject matter of a trust.
25. This broad approach reflects the principle as set out in Warman that "the purpose of ordering an account is not to punish the defendant, but to prevent the defendant's unjust enrichment", and its application does not depend "upon detriment to the plaintiff or the dishonesty and lack of bona fides of the fiduciary" (see at 557). Accordingly, it is no bar to the plaintiffs' claim for an account of profits that the profits or benefit here relates to the acquisition of an asset, being the Manyana Property (and I further note that the remedy to account was recently held to be available in respect of all rents, profits or benefits received in respect of an acquisition of property by Lindsay J in Ip v Chiang [2021] NSWSC 822 at [327]).
26. I accept the plaintiffs' submission that Ashley's purchase of the property at a value less than the independent valuation provided him with a benefit (though it did not cause loss to the estate), as any advertising fees or associated costs with selling the property would not ordinarily have flowed to Ashley or any arms' length purchaser of the property (and on this hypothesis Ashley acquired the property for less than he might otherwise had to have done had the estate borne those costs). Moreover, there seems no doubt that Ashley has received rents and benefits in respect of his acquisition of the Manyana Property, including profits received by him from use of the Manyana Property (such as through an AirBnB) and his occupation of the property rent-free. It follows that, if restitution had not been available, I would have found that the plaintiffs' claim for an account of profits in principle was made good (but would have referred out to a referee the precise quantification of those profits).

Costs

1. The defendants wish to be heard further on consequential orders, including as to their right to indemnification from the estate and/or in the event that the plaintiffs are successful on any of their claims. Accordingly, I will make directions for costs submissions to be filed, with a view to determining the issue of costs on the papers.

Orders

1. For the above reasons, I make the following orders: 1. Direct the parties to file proposed short minutes of order to reflect and give effect to these reasons, within 14 days, together with brief submissions (if those orders not be agreed) as to the form of orders sought. 2. Direct the parties to file submissions on costs (and any submissions as to the question whether Matthew and Ashley should now be removed as executors and trustees of the deceased's estate) within 14 days. 3. Note that the final orders and costs orders will be made, if possible, on the papers but that if any of the parties requires a brief oral hearing this should be identified in the submissions filed pursuant to the above orders (with a short explanation as to why an oral hearing is necessary).

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 August 2022