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The administration of Nelly Aston's estate - 2016 to 2024

1. Nelly Aston had two children, Anne, and David, and four grandchildren. Nelly Aston's will dated 13 November 2015 provided a simple structure. After a number of legacies to her grandchildren, she gave the residue of her estate to David (as to 70%) and Anne (as to 30%).
2. Nelly's son, David, had two children, Riley and Ric. By her last will Nelly appointed neither her daughter, Anne, nor her son, David, as her executor. She appointed her grandson, Riley, to be her executor. Riley applied for probate and administration of the estate. Riley swore an affidavit attaching an inventory of Nelly's estate on 22 February 2016 and probate was granted on 2 March 2016.
3. David did not survive his mother very long. He died on 20 September 2017. And Riley too was unable to complete the administration of the estate before he died on 4 April 2020. Riley appointed his brother, Ric, as his executor and sole beneficiary. With his executorship of Riley's estate, Ric inherited Riley's role as executor of Nelly's estate: Darrington v Caldbeck (1990) 20 NSWLR 212 and Imperial Application Act 1969, s 13.
4. Born of distrust between family members, the administration of Nelly's estate evolved into unnecessary procedural complexity, driven by conflict between Anne on the one side, David, Riley and ultimately Ric on the other. But that complexity may be compressed to expose the question now at issue.
5. The parties have been engaged in various unsatisfactory disputes concerning the passing of accounts in Nelly's estate. These have led to motions for the passing of accounts in Nelly's estate and Riley filing accounts. But Riley died before the administration of Nelly's estate was completed. Anne has continued to question those accounts after Riley's death. Ric, his executor, has sought to defend them. But the main complaint underlying the contest about the accounts is not an accounting issue but a factual and legal issue arising in the administration of Nelly's estate.
6. The Court has power in general administration proceedings to decide a question of whether something is an asset or a liability of an estate, such as whether a debt is owed to or by Nelly's estate. The Court is now empowered under Uniform Civil Procedure Rules 2005, r 54.3 to grant relief on any question arising in the administration of an estate without general administration proceedings being commenced.
7. When this matter came into the Probate List the Court offered to determine this issue and whether the monies advanced by Nelly to Riley were a loan or a gift on a final basis. The parties expressly agreed to that course on the available evidence and materials filed in relation to the various disputes on the passing of accounts and without cross examination. This was a highly efficient and sensible course. The parties had defined the issues well in written submissions so oral submissions were able to be dealt with briefly.
8. Mr Gokani of Gokani Associates Legal ("GAL") was Nelly's long-term solicitor. He had advised her since 2009 when she was 87 years old. His first legal task for her was to prepare a new will. Mr Gokani also acted for her son David in relation to various matters, including drafting his will and setting up a self-managed superannuation fund ("SMSF"). In 2014, Mr Gokani first met Riley, when Nelly wanted to change her will in 2009 to remove David as executor because of his diminished capacity and to replace him with his son Riley who was also appointed her attorney.
9. Mr Gokani is very clear that Nelly did not have a good relationship with her daughter Anne at this time. The friction between Nelly and her daughter, Anne, was exacerbated when Anne commenced proceedings in the Guardianship Tribunal seeking that a financial manager and guardian be appointed in relation to Nelly's financial affairs. On 19 February 2015, the three-member Guardianship Tribunal found that Nelly had capacity and that there was no substance in Anne's allegations that Riley had mismanaged Nelly's affairs under the power of attorney granted to him.
10. The contemporaneous correspondence from Nelly shows in the clearest terms that she was very displeased with Anne in bringing the Guardianship Tribunal proceedings. The contemporaneous evidence also clearly shows that throughout this period Riley remained in Nelly's affections.
11. Mr Gokani recalls and the Court accepts that he, Nelly and Riley all met at his office on 23 February 2015 to develop a plan to ensure that Anne could not again attempt to come and take away control of Nelly's assets. A few days later, Nelly instructed Mr Gokani that she had approximately $620,000 in cash in the bank, but she only needed $100,000 for her own purposes. According to Mr Gokani, Nelly "wanted to gift the balance of approximately $520,000 to Riley when the term deposits in which funds were held expired". Mr Gokani explains that he received instructions to the effect that Nelly was gifting monies to Riley but if Nelly required funds in the future Riley was to return them to her. The documentation that followed commencing in early March 2015 basically follows these instructions although in the form of a loan.
12. On 15 March 2015, Mr Gokani wrote to Riley three letters in relation to 3 loans made by Nelly to him. The purpose of the correspondence was to confirm the terms and conditions upon which the advances were being made to him by Nelly following determinations of the Guardianship Tribunal in applications brought by Anne. The correspondence was also to confirm that a legal relationship was intended to exist between Nelly and Riley by reason of the advances as set out in the terms and conditions in those letters.
13. The terms and conditions of the first loan ("the 6 March 2015 loan") in the sum of $330,645.24 advanced on 6 March 2015 recorded (clause 6) provided that the lender "may request a return of the funds within 10 years of the date of this document by written request" in the form annexed. The annexed form provided for a request for the return of the whole of the funds advanced within 90 days.
14. The terms and conditions of the 6 March 2015 loan were unusual and indicated a not entirely arm's length transaction typical of intra-family arrangements. Under the heading "Use of Funds" the lender stipulated that the borrower should leave the funds in any interest-bearing account held with the Commonwealth Bank of Australia in the name of the Borrower although the Funds may be mixed with other funds held by the borrower. Equally unusual and indicating a less than arm's length transaction was a term (clause 5) under the heading "Interest on Funds" that the Borrower may keep any interest on the Funds and spend such interest in his sole discretion. There was no provision for any interest to be paid to the Lender.
15. Another loan agreement for an advance of an additional $97,944 was executed between Nelly and Riley, about a month later on 7 April 2015 on identical terms and conditions to the 6 March 2015 loan ("the 7 April 2015 loan agreement").
16. Yet another loan agreement was executed between Nelly and Riley on 24 April 2015 ("the 24 April 2015 loan agreement") on identically favourable terms for the advancement of the additional sum of $91,815.82.
17. These amounts added to the sum of advances from Nelly to Riley of $520,405.06 (being $330,645.24 + $97,944 + $91,815.82). After a gap of three months a different transaction was agreed between Nelly and Riley. He is recorded as loaning money to her at the same time as forgiving the loans constituted by these previous transactions.
18. On 30 July 2015, Mr Gokani wrote to Riley recording the terms of an advance which he said was the product of discussions between Nelly and Riley "in relation to various funds advanced to you following termination of the Guardianship Tribunal applications brought by Anne Aston". The letter recorded that GAL "understand the total of those advances to be $520,405.06". There appear to have been additional advances to Riley after the 6 March 2015 loan.
19. Mr Gokani's 30 July 2015 letter then stated: "We also refer to discussions between Nell and yourself in relation to her preference to be accommodated at the Beechwood Aged Care facility and the costs of $275,000 requires a bond for the same ("Bond"). As you are aware, Nell requires the Bond to be paid but does not have sufficient money to do so (given the funds advanced to you). We are instructed by Nell that that you have provided/returned funds to her as and when requested to date and that, provided you agree to meet the cost of the Bond, she does not now require any of the other funds previously advance to you to be returned."
20. The 30 July 2015 letter went on to say that it was being forwarded on behalf of Nelly to confirm "the terms and conditions upon which the previous advances made by Nelly to you may be regarded", the terms and conditions "upon which an advance of $275,000 is to be made by you to Nelly (or on her behalf)", and that a legal relationship is intended to exist as set out in the terms and conditions notwithstanding the family association between Lender and Borrower.
21. The terms and conditions of a signed loan agreement ("the 30 July 2015 loan agreement") were attached to the 30 July 2015 letter this time described Nelly as "the Borrower" and Riley as "the Lender". In the 30 July 2015 loan agreement, the parties agreed (clause 3) as follows: "The parties agree that the Borrower has previously advanced funds totalling $520,405.06 to the Lender ("Funds"). The Borrower agrees that the funds may now be considered to have been advanced on the basis they are a gift to the Lender and, further thereto, specifically agrees not to request a return of the Funds at any time."
22. There is no challenge to the authenticity of the 30 July 2015 loan agreement. It was signed by Nelly and Riley. Clause 3 appears very clearly to bind Nelly's estate to forgiving such of the previous advances of $520,405.06 as may be characterised as loans and re-characterising them as a gift.
23. The "Monies Advanced" are described in clause 4 of the 30 July 2015 loan agreement as "$275,000, to be advanced on or about 30 July 2015 ("Monies"). The use of the Monies is described (in clause 5) as for the payment of a bond for Beechwood Aged Care facility or any other purpose that the Borrower regards as appropriate "in her sole discretion".
24. The 30 July 2015 loan agreement provided (clause 7 - return of monies) an unusual clause in a loan agreement, as follows: "The Monies are repayable to the lender at the discretion of the borrower. The Lender may not request a repayment of the Monies by the Borrower at any time."
25. The 30 July loan agreement also provided (in clause 8) for what would occur if either the Lender (Riley) or the Borrower (Nelly) were to die or become incapacitated. If Riley were to pass away or become incapacitated his legal representative was prohibited from requesting the return of the monies and the clause 7 continued to apply (clause 8(a)). The same applied if the borrower became incapacitated (clause 8(b)). And finally, clause 8(c) provided for the possibility of the death of the Borrower, Nelly, the situation with which we are now faced, as follows: "Borrower pass away, the Lender shall be entitled to seek return of the monies from the estate of the borrower as the Lender may decide in his sole discretion at any time during which the estate of the borrower is liable to be taxed at concessional rates (being a period of three income years as at the date of document). It is noted in this regard that the Lender is likely to be the legal personal representative ("LPR") of the Borrower should she pass away or become incapacitated so should have control of the Funds and the Monies at all relevant times."
26. The net result of the transactions between Nelly and Riley to this point according to these documents was that Riley owed Nelly nothing, but he had loaned her $275,000.
27. The evidence of Mr Gokani confirms that Riley did in fact pay the $275,000 to Nelly at the time of the 30 July 2015 loan agreement by cheque and that it was applied to satisfy the Refundable Accommodation Deposit (RAD) for Nelly to enter the Beechwood Aged Care facility. After Nelly's death, the Beechwood Aged Care facility refunded the RAD to David's estate. But according to Anne's evidence it was paid into David's superannuation fund rather than to Nelly's estate.
28. Anne argues that the $275,000 advanced by Riley to Nelly under the 30 July 2015 loan agreement is in fact a request by Nelly as Lender under the first loan for repayment by Riley of that same sum. Anne further argues that had this sum been paid into Nelly's estate it would have been distributed as to 30% (that is $82,500) to her. Instead after David's death this sum remained in his superannuation fund and was not collected by his estate and distributed to the beneficiaries. But Anne says the estate did not take control of this sum of $275,000 from David's superannuation fund and the superannuation fund remained dormant. Ultimately, the Commonwealth of Australia collected the balance of the dormant superannuation fund as unclaimed superannuation monies, where the funds remain. They can be reclaimed from the Commonwealth if the person with proper title to the funds applies for their return. Anne says that because of maladministration of David's estate the sum of at least $82,500 is still payable to her.
29. Anne relies upon Riley's sworn inventory of property of Nelly's estate, which Anne claims supports her account. Riley swore an affidavit in support of his application for probate on 22 February 2016, two months after the deceased's death on 22 December 2015, He annexed a "statement of all assets of the deceased of which I am presently aware" and he declared "I will disclose to the court any other asset which comes to my notice". The affidavit can only be taken as evidence of what he was aware of the time that he swore it. On the face of it, the inventory goes some way to supporting Anne's case. It relevantly provides as follows in annexure C, the inventory of assets. "3. Loan to Riley Aston (Net) $225,000 4. Allity Pty Ltd - Beechwood Aged Care - Bond $276,000"
30. Riley ultimately gave instructions to his solicitor, Mr Gokani, inconsistent with this sworn inventory and more consistent with the authentic loan documents set out above. In the Court's view, the authentic loan documents set out above would on their own be enough to displace the contents of the inventory which was capable of formal amendment if required, although it was never formally amended.
31. But even before considering Riley's and Mr Gokani's evidence these sworn entries in the inventory of Nelly's estate assets are odd at several levels. The entry at line 3 would appear to indicate that there had been a larger loan to Riley which had been partly repaid, leaving a net loan of $225,000 owing to Nelly and that Nelly was additionally entitled to the bond or RAD from Beechwood Aged Care in the sum of $275,000 - the $1000 appears to be an error. But even allowing for that, it is difficult to reconcile where the $225,000 comes from. Rounding and correcting the figures, the difference between $520,000 and $225,000 is $295,000. It is not clear on any of the evidence that Riley ever paid Nelly $295,000. Indeed, the 30 July 2015 loan agreement and covering correspondence is consistent only with the idea that the original $520,000 had not been repaid by that date and there was no reason to pay it after that date given the terms of that loan agreement. And if the $275,000 is deducted from $520,000 the difference is $245,000, another figure without obvious consistency with any of the other evidence. Thus, apart from its $1000 error in Riley's advance, the sworn inventory looks to be untethered from the evidence of transactions with Nelly.
32. Mr Gokani and, Riley before he died, both give affidavit evidence, which the Court accepts, that displace the accuracy of the inventory. Riley says in an executor's updating affidavit sworn on 14 August 2018 that "the asset listed as item 3 in the inventory pursuant to the grant of probate made on 2 March 2016 was a liability of the estate of $275,000 and not an asset of the estate of $225,000".
33. This is quite justifiable. Accepting the 30 July 2015 loan agreement as genuine, it makes a debt of $275,000 payable by Nelly's estate to Riley.
34. Mr Gokani, in an affidavit sworn on 5 February 2024 explains the change to Riley's 2016 executor's affidavit in August 2018. The Court accepts Mr Gokani's evidence that in 2016 Riley initially instructed Mr Gokani to treat the monies given to him by Nelly in 2015 as a loan which explains Riley's first inventory of property. He says that the loan amount should have been $245,000, which is the difference between two loans, one of $520,000 from Nelly to Riley and another of $275,000, from Riley to Nelly. This makes sense if they were both to be treated as loans.
35. Mr Gokani explains that because of Anne's peculiar conduct at his father David's funeral, Riley said that he had been incorrect to have instructed Mr Gokani to treat the money from Nelly as a loan rather than a gift. And then in January 2015 Riley instructed Mr Gokani "that the monies advanced to him from Nelly in 2015 were a gift are not a loan" and should be so treated for the purposes of the administration of Nelly's estate.
36. Mr Gokani's account of the change of instructions was first clearly set out in a letter dated 15 January 2018 which he sent to the solicitors acting for Anne concerning Nelly's estate. Under the heading "Updated Instructions" he said, "We understand that, prior to the death of Nelly Aston, Riley Aston had a discussion with your client [Anne] in which the steps taken by the deceased to protect herself following what she regarded as unwarranted applications to the Guardianship Tribunal were referred to, in particular that Riley Aston held substantive funds. Although the fact that there was documentation executed and the precise terms and conditions upon which advances were made were not revealed, your client was on notice regarding the importance of Riley Aston to the deceased. We are instructed that Riley Aston is no longer prepared to regard the advances by the deceased to him as an interest-free loan but, rather, to treat those monies is a gift that does not form part of the Estate. We further instructed that Riley Aston regards the advances by him to the deceased as a loan for recovery. We profess no view as to that approach save to note it appears to have an arguable basis based on the documentation pursuant to which the various advances were made."
37. Mr Gokani went on to say to Anne's solicitors that based upon these updated instructions there had been an overpayment to Anne of approximately $40,500 and an overpayment to David of approximately $272,000.
38. With this background of findings, Anne's case, that the original inventory of property showing a from Riley to Nelly's estate should be given effect, should be dismissed. It is inconsistent with the evidence and the Court's findings.
39. The various accounting disputes that have taken place on the passing of accounts have not sought to determine the underlying facts of these transactions based on all the evidence as this current hearing has now done.
40. Anne challenges Mr Gokani's evidence as containing different characterisations of these loans. But his evidence is quite consistent with the probabilities and the contemporaneous documents, including correspondence from Nelly about her attitude to Anne in 2015 and the four loan agreements. The change in the inventory is also consistent with the validity of the last loan agreement. The Court finds that the original inventory was incorrect and should have been amended as Riley states in his updating affidavit and as Mr Gokani confirms.
41. Although the Court has not done the precise calculation, on the basis of these findings Anne's argument about payment of the $275,000 RAD apparently by mistake into David's SMSF makes no difference to any distribution from Nelly's estate to Anne. This is because the Court's present findings mean that the estate has an equivalent debt of $275,000, neutralising the position so far as distributions to Anne are concerned.