DJ Singh v DH Singh

[2022] NSWSC 704

Supreme Court of NSW|2022-04-29|Before: Kunc J, Mr P

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2022-04-29

Before

Kunc J, Mr P

Source

Original judgment source is linked above.

Judgment (20 paragraphs)

[1]

Summary

In the course of hearing separate proceedings, the Court became aware of conduct that appeared to be in breach of trust by Andrea Haberl in her role as administrator of the estate of her late ex-husband, who had died intestate. The sole beneficiary of that estate is the minor daughter of the marriage. Without intending any disrespect, Andrea and others shall be referred to by their given names in these reasons, which represent the outcome of the Court's exercise on its own motion of its supervisory jurisdiction over trusts and trustees.
These probate proceedings were initially commenced by Andrea in May 2020 for letters of administration of the Estate of Gerhard (known as Gary) Haberl (the Estate). On 24 March 2021, letters of administration were granted to Andrea.
Gary was Andrea's former husband. At the time of his death, they had a young daughter, Isabella, who was born in 2015. Isabella is the sole beneficiary of the Estate.
It later emerged from separate proceedings between Andrea and Gary's siblings, Robert and Karin Haberl, that Andrea had engaged in a course of conduct as administrator which cast serious doubt on her ability to manage the Estate on behalf of Isabella (see: Haberl v Haberl [2022] NSWSC 192 ("Haberl (No 1)"). Accordingly, I made orders on 16 March 2022 which had the effect of relisting the probate proceedings for the purpose of considering Andrea's suitability as administrator of the Estate.
The Court's initial hope was that the interested parties would reach agreement as to how it could be ensured that the Estate would be applied for Isabella's benefit. This would avoid the need for any third party to be appointed if the Court could not be satisfied that Andrea remained a suitable administrator. Unfortunately, agreement could not be reached on critical matters.
For the reasons that follow, the Court has determined that Andrea is not an appropriate person to continue to manage the Estate on Isabella's behalf. This is because she has demonstrated that she is either unwilling or incapable of separating Isabella's interests from her own. She also exhibits a troubling lack of insight into her conduct. Accordingly, the Court has determined that, despite any misgivings regarding the associated fees, the NSW Trustee and Guardian should be appointed to administer the Estate.

[2]

Facts

Many of the relevant facts in this matter unfolded in a non-linear fashion. There was much that came to light as a result of the Court's own inquiries of the parties, without which many of the true circumstances would have remained unknown. For ease of understanding, I will set out the Court's findings of fact chronologically in what follows.
Gary and Andrea divorced in July 2019. As part of the divorce proceedings, they obtained orders by consent (the Family Law Orders) under s 79 of the Family Law Act 1975 (Cth) ("Family Law Act") that stipulated: 1. The matrimonial home at Nulkaba, NSW (the Property) was to be sold with the proceeds divided 56% to Andrea and 44% to Gary. 2. Andrea, Gary and Isabella could reside jointly at the matrimonial home. However, in the event Andrea underwent IVF treatment, she and Isabella were to vacate the property until it was sold. In the event this occurred, Gary was to pay 50% of Andrea's rent until the sale of the Property.
The Family Law Orders also included this notation: "B. The parties have, for the purpose of finally determining the financial relationships between them and to avoid further proceedings between them agreed as follows: … iv. The respondent and the applicant acknowledge the terms of this agreement and that they have taken into account the position of the other in the event of the death of the other …"
Gary also paid maintenance for Isabella and the former couple shared other expenses for her (such as the costs of her education).
In May 2019, Andrea commenced IVF treatment and vacated the Property with Isabella, in accordance with the Family Law Orders. Gary paid 50% of their rent.
Tragically, Gary died by suicide in November 2019. Because Gary died intestate, Isabella inherited the Estate in its entirety. This included Gary's share of the proceeds from the sale of the matrimonial home.
In addition to the Estate, Isabella was entitled to funds from Gary's life insurance policy in the amount of $157,790.
Immediately following Gary's death, his siblings, Robert and Karin, took on responsibility for managing the Estate as executors de son tort, including making funeral arrangements.
Andrea gave affidavit evidence that, immediately following Gary's death, she struggled financially. She was unemployed and her main source of finance was rental assistance and a single parent payment from Centrelink.
In January 2020, solicitors on behalf of Andrea sent an email to Karin which stated: "I note that I hold instructions on behalf of Ms Andrea Haberl. I act on behalf of Ms Haberl in the context of a family law settlement entered between herself and your late brother. I further note the parties entered into property Orders under Section 79 of the Family Law Act in early 2019. I am instructed that in the recent period, your brother deceased having suicided (sic). In the circumstances, and noting that the Consent Orders as entered into between the parties in early 2019 have not been implemented, my client believes that these Orders no longer represent a just and equitable outcome given the exceptional circumstances which now gives rise following the death of your brother. Specifically, my client is now shouldered with the absolute responsibility to care for the parties' child who has just turned 4. My client will no longer be able to recover any child support from your brother now that he is deceased. Pursuant to s 79A(1C), my client is seriously considering making an Application to the Family Court to have the existing Orders set aside. To obviate the requirement or protracted and extensive litigation, my client would be prepared to resolve the matter with the Estate of your brother by reason of her receiving 90% of the proceeds of sale of the former relationship home. My client considers that such an amount properly and justly reflected the future need that is now bestowed upon her. If my client and the Estate of your brother can resolve this issue by consent, pursuant to Section 79A(1A) the parties can consensually amend the Orders. Should the Estate of Mr Haberl not be prepared to consent to the proposal as put by my client, my client will be left with no alternative but to commence litigation."
In May 2020, Andrea commenced these probate proceedings seeking letters of administration.
In June 2020, Andrea made arrangements for the Property to be put on the market.
On 9 October 2020, the Property was sold resulting in net proceeds of $912,356.70 and the Estate was entitled, prima facie, to 44% of that amount (being approximately $402,000 excluding liabilities for Council and water rates). Andrea was entitled to 56% for her own benefit. The proceeds, along with the other assets of the Estate, were held in the trust account of Tranter Lawyers.
Also in October 2020, Andrea gave birth to a daughter, Ruby, who was conceived by IVF. Gary was not biologically related to Ruby. The matter of Ruby's birth is largely peripheral to the proceedings except insofar as she was also under Andrea's care, but was very rarely mentioned by Andrea.
Andrea was granted letters of administration for the Estate on 24 March 2021.
Sometime in early 2021, presumably after the grant of letters of administration, Andrea met with solicitors for the purpose of ascertaining whether she could obtain further funds from the sale of the Property. In her sworn affidavit dated 11 March 2022, Andrea made the following admissions: "18. In early 2021, I obtained further advice from [Chris White of Powe & White Solicitors] in relation to the Family Law orders. Mr White advised me that the 2019 Family Law orders could be varied by consent but that I could not consent on behalf of the estate as it would be a conflict of interest. Mr White also advised me that it was possible for someone else to be appointed as trustee of Isabella's entitlement to the estate and, if that person was willing, they could consent to any changes to the 2019 Family Court orders. 19. I had previously been advised by Sarah Young at Tranter Lawyers in relation to the application for Letters of Administration that it was possible to appoint NSW Trustee & Guardian as trustee for Isabella's entitlement in the estate but that there would be fees associated with that role that would be deducted from Isabella's funds. As the funds would be held in trust for approximately 14 years until Isabella attained her majority, an estimated calculation of the fees indicated that Isabella could potentially lose as much as 20-25% of her fund in fees that would be deducted by NSW Trustee & Guardian. As this meant about $80,000-$100,000 in fees, I did not consider it to be in Isabella's best interests that she completely lose the benefit of such a significant sum. 20. After discussions with my family regarding the options available to me, my brother Tony Campbell, indicated to me that he would be willing to become trustee of the trust for Isabella and would get advice on the proposal to change the 2019 Family Law orders. … 24. I am aware that my brother obtained advice from Sarah Young at Tranter Lawyers regarding the proposed changes to the 2019 Family Law order, but I am not aware of the specific details of that advice. 25. Following the receipt of the advice, my brother confirmed he would accept the role of trustee of Isabella's entitlements in the estate and was willing to consent to the proposed changes to the Family Law orders."
On 6 May 2021, in her capacity as administrator of Gary's estate, Andrea commenced the proceedings in Haberl (No 1). Andrea sought to recover from Robert and Karin monies they had expended as executors de son tort, including funeral expenses. By the time the case was heard, Andrea was seeking an amount of $15,838.39 and the return of an Olympic torch belonging to Gary that was displayed in the home of his mother.
On 9 June 2021, while the proceedings in Haberl (No 1) were on foot, a deed of retirement of trustee and appointment of new trustee (the Deed) was signed by Andrea and Anthony. The Deed purported to confer upon Anthony the status of trustee of the Estate, to hold "the assets, monies and property subject to the trusts contained in and imposed by the Will of the deceased to hold the said assets, monies and property upon the terms and conditions set out in the Will of the deceased". It should be noted that, as stated above at [13], Gary died intestate. In the Court's view, the Deed was a nullity or of no effect because there was no "Will of the deceased".
On 22 June 2021, shortly after the Deed was signed, Andrea and Anthony lodged an application at Maitland Local Court to vary the Family Law Orders. In that application, Andrea sought 100% of the proceeds of sale of the Property transferred to her.
Andrea justified the application on the basis that, had Gary not passed away, he would have contributed equally to Isabella's maintenance until she attained her majority. What Andrea failed to appreciate is that, upon Gary's death, she was not left without any additional source of funds for Isabella's maintenance. Any money received from Gary in the form of child support had effectively been replaced by the Estate, the funds of which were available to Andrea to apply as administrator for Isabella's benefit.
Andrea claimed that she intended to use the additional proceeds obtained from the application to purchase a plot of land in Wagga Wagga, where her family resides, and build a house on it for herself and Isabella (and presumably Ruby, though she was not explicitly mentioned).
Although it bore his signature, the application did not refer to Anthony by name. The forms stated only that the proceedings were between Andrea Haberl and the Estate (as opposed to Anthony as trustee for the Estate). Nor did it include any mention of the circumstances of his appointment as trustee. On its face the application gave the impression that it was between completely independent parties.
The application also appeared to misstate the proportion that each party was to receive from the sale of the matrimonial home, incorrectly claiming that Andrea and Gary had each been entitled to a 50% share.
Critically, the application omitted that Andrea remained administrator of the Estate at the time of the application and therefore had obligations to manage the Estate for Isabella's benefit.
Notwithstanding these matters, the application did excite some concern in the Local Court. On 5 July 2021, correspondence on behalf of Magistrate Chicken was sent to Andrea which stated: "HH Magistrate Chicken is not satisfied it is appropriate to make the consent orders sought in this matter. HH is concerned this is an attempt to avoid more proper Family Provisions Application. HH invites the parties to make submissions about why it is appropriate in the circumstances to issue further consent orders."
On 2 September 2021, joint written submissions were made by Chris White and Sarah Young on behalf of Andrea and Anthony to the effect that it was open to the Local Court to vary orders under s 79A(1C) of the Family Law Act where one party had died.
On 23 September 2021, the Local Court made orders varying the earlier Family Law Orders (the Local Court Orders). Order 1(a) stated that, subsequent to the finalisation of any liabilities of the Estate, "the balance of the net proceeds [for the sale of the Property] shall be paid wholly to ANDREA MARY HABERL".
The Local Court Orders noted that, in bringing the application, the "Trustee of the Estate of the husband agrees with the wife".
Andrea's signature appeared for herself as the applicant on the consent orders. Anthony's signature appeared on behalf of the Estate. The signature of Sarah Young of Tranter Lawyers, who assisted Andrea in the proceedings to obtain letters of administration, proceedings in Haberl (No 1) and these proceedings, appeared as solicitor for the Estate.
The effect of those orders was to transfer almost the entirety of the funds of the Estate to Andrea absolutely, which she could then apply however she saw fit and without any binding legal obligation to act solely in the interests of Isabella.
On 14 October 2021, Westpac wrote to Sarah Young of Tranter Lawyers that Gary's life insurance claim had been paid by two cheques for $157,500 and $290. This money is currently held on trust for Isabella in a Westpac Life bank account. A trust deed between Andrea and Westpac Life Insurance Services Ltd for the "Isabella Sophia Haberl Trust Fund" appointing Andrea as trustee was executed. Although the proceeds of the insurance policy did not fall into the Estate, in the exercise of its supervisory jurisdiction the Court will make some orders to offer Isabella a measure of protection in relation to Andrea's future management of that fund, given the reasons why the Court has determined to remove Andrea as administrator of the Estate.
On 4 November 2021, Andrea authorised Tranter Lawyers to disburse the proceeds from the sale of the Property from their trust account. Three transfers were made out of the account to separate accounts in Andrea's name under the description "Distribution of Estate". These transfers were in the amounts of: 1. $290,000; 2. $290,000; and 3. $297,921.48.
Bank account statements for separate accounts with Westpac, St George and the Commonwealth Bank held in Andrea's name showed corresponding deposits to those above at [39].
In accordance with her undertaking to the Court, Andrea has refrained from dealing with those funds. She provided evidence that she is preparing to purchase a block of land for $250,000 and construct a house on it for $510,000 but has not yet done so.
After the transfers were made, the trust account retained a balance of $48,423.41 which was ostensibly what was leftover in the Estate.
On 24 February 2022, the Court delivered an ex tempore judgment in Haberl (No 1). Andrea's case against Robert and Karin was largely unsuccessful. She ultimately obtained repayment of only $3,000 plus interest of less than $200, and the return of the Olympic torch. In bringing the proceedings, she accrued legal costs totalling more than $55,000.
After the Court had delivered its judgment, I had the following exchange with Mr Simpson on the issue of costs (Tcpt, 24 February 2022, p 79(9-17)): "HIS HONOUR: … [T]he real question in my mind is, your client in my view should not be allowed, subject of course to anything you want to put, should not be allowed to gain indemnity for the costs that have been incurred from her daughter's fund. She's the trustee of a fund, and my associate I think would have sent an email this morning because quite apart from this litigation, I am very concerned about this fund. It's less than half a million dollars, isn't it? How much is in the estate? SIMPSON: It was 460 on my review of the material, your Honour."
I understood Mr Simpson's answer to mean that the Estate, as at 24 February 2022, comprised approximately $460,000.
The following day, on 25 February 2022, the Court made orders in chambers disposing of Haberl (No 1), including that Andrea was not entitled to indemnity from the Estate for her legal costs incurred after 6 August 2021.
At 3:59pm on the same day the order relating to costs was made, Mr Simpson sent an email to my Associate which stated: "Since appearing before his Honour yesterday, it has been brought to my attention that a second set of Family Law Orders were made by the Local Court of New South Wales on 23 September 2021 … "My submissions to the Court indicated that the Estate was worth $460,000 based on the Letters of Administration and early Family Law Orders that appeared in evidence. Based on the more recent Family Law Orders, that submission was clearly wrong and I wish to withdraw it."
Attached to Mr Simpson's email was a copy of the Local Court Orders which had not previously been brought to this Court's attention and which suggested that there was little, if anything, left in the Estate. I should make clear that I am not suggesting that the Local Court Orders should have been brought to attention earlier. They were not relevant to the issues in Haberl (No 1). However, it was solely due to Mr Simpson's entirely proper withdrawal of his submission that the Court became aware of the conduct that has given rise to this judgment.
On 28 February 2022, in light of this new information, the Court made orders requiring Andrea to provide a complete accounting of the Estate. She was also required to provide further information pertaining to the location of any of the funds of the Estate, the circumstances in which the Local Court Orders were obtained, and the details of any funds she had received pursuant to those orders.
Finally, the Court invited Andrea to undertake to the Court that she would not deal with, transfer or dispose of any part of the Estate or any funds of the Estate that she had received pursuant to the Local Court Orders. On 28 February 2022, Andrea provided the undertaking by way of an email from Sarah Young of Tranter Lawyers.
On 11 March 2022, Andrea provided an account of the funds remaining in the Estate (less those funds which had been converted for her benefit pursuant to the Local Court Orders). As at that date, the Estate comprised $12,578.48 with an additional $8,449.06 plus interest to be quantified.
On the basis of a Trust Account Statement from Tranter Lawyers dated 10 March 2022, it appears that legal fees totalling $35,550.91 were paid by the Estate on 4 November 2021 and 2 March 2022. Pursuant to this Court's orders related to costs, if these monies have been paid using the funds of the Estate then they will have to be reimbursed. That will be a matter for the NSW Trustee and Guardian (TAG) to pursue.
On 14 March 2022, the Court contacted Mr Luke Williams, who is a principal solicitor at TAG, by email to ascertain whether TAG was prepared to accept an appointment as administrator of the Estate. By way of reply email on the same day, Mr Williams confirmed that TAG would be prepared to accept such an appointment if the Court saw fit to do so.
On 16 March 2022, the parties appeared before this Court. Present on that day was Mr Simpson on behalf of Andrea, Mr Williams on behalf of TAG, and Anthony on behalf of himself as purported trustee of the Estate. Robert and Karin Haberl were also present.
For all that various persons at that hearing did not agree with each other, they were united in their concern regarding any fees to be charged by TAG if it was appointed administrator, and how this might diminish the value of the Estate.
On 17 March 2022, at the request of the Court, Mr Williams provided a written estimate of TAG's fees to administer the Estate. Presuming the Estate would be worth $559,226.94 (being a combination of the proceeds from the sale of the Property and the life insurance policy), the fees would include: 1. A one-off trust fee of $9,675.74; 2. Ongoing management fee of 0.77% per year on the value of the trust being $4,304.08 per annum (noting that the value of the Estate and therefore the fee would fluctuate over time); and 3. Yearly fees for a trustee tax return ($297), investment planning fee ($165) and account keeping fee ($132).
Following the hearing on 16 March 2022, the Court was not satisfied that Isabella's interests were properly represented. On 17 March 2022, my Associate wrote to the NSW Bar Association asking whether a member of the Bar might volunteer to appear pro bono as amicus curiae in the interest of Isabella. On 20 March 2022, Mr P Bambagiotti of Counsel was granted leave to appear in that capacity by the Court.
By affidavit made on 23 March 2022, Andrea attested that she had used some of the Estate funds, and funds from the Isabella Sophia Haberl Trust, to pay Isabella's school fees and other expenses related to her maintenance.
At a directions hearing on 25 March 2022, it was further disclosed that Andrea had used funds from the Isabella Sophia Haberl Trust to purchase a new car for $39,500. This information had allegedly not been included in her earlier affidavit because Andrea feared that it would incite criticism from Robert and Karin Haberl.
As at 28 April 2022, Andrea attested that there was a total of $114,693.66 remaining in the Isabella Sophia Haberl Trust.

[5]

Andrea's second proposal

On 28 April 2022, by way of draft orders, Andrea proposed: "1. ORDER that Anthony Campbell in his capacity as trustee of the Estate of the Late (Gerhard) Gary Anthony Haberl be joined to these proceedings. 2. DECLARE that the document entitled Deed of Resignation and Appointment of New Trustee dated 9 June 2021 be set aside such that it is void ab initio. 3. ORDER that the orders of the Local Court in proceedings number FL123/190014 dated 23 September 2021 be set aside pursuant to section 79A(1A) of the Family Law Act 1975 (Cth). 4. ORDER, pursuant to section 85 of the Trustee Act 1925 (NSW), that Andrea Haberl is relieved from personal liability for any breach of trust arising from the making of the Local Court's orders dated 23 September 2021 and any subsequent steps taken following the entry of those orders. 5. NOTES the following undertakings of Andrea Mary Haberl: a. That she will use $[insert amount] of any monies Isabella Sophia Haberl may otherwise have been entitled to for the purpose of purchasing land located at xxxxxxx (Property) and thereafter constructing a dwelling on it to be used as primary residence; b. That she will do all things necessary to ensure that Isabella holds a [insert amount] percent legal and equitable interest in relation to the Property; c. That she will use and/or invest the balance of the estate (estimated to be the sum of $[insert amount]) and the proceeds from the life insurance policy (as at 26 April 2022 being in the sum of $[insert amount]) in accordance with independent professional financial advice for Isabella's benefit, particularly in relation to the following: i. education/schooling; ii. uniforms; iii. activities; iv. clothing; v. medical expenses; vi. other expenses as required. 6. ORDER pursuant to section 50 of the Minors (Property and Contracts) Act 1970 (NSW) authorising Isabella Sophia Haberl to hold a 15 percent legal and equitable interest in the Property. 7. NOTES Andrea Mary Haberl's consent to the lodgment of a caveat over the Property pursuant to section 74F of the Real Property Act 1900 (NSW) to be held by the New South Wales Trustee and Guardian reflecting Isabella Haberl's 15 percent interest held in the Property for her benefit …"

[6]

Isabella's proposal

On 28 April 2022, Mr Bambagiotti as amicus curiae for Isabella, proposed these alternative orders: "The Deed 1. That Anthony Campbell named as the trustee of the Estate of the Late (Gerhard) Gary Anthony Haberl (Deceased) in the document entitled 'Deed of Retirement of Trustee and Appointment of New Trustee' dated 9 June 2021 (Deed) be joined to these proceedings. 2. It declares that the deed is set aside as being void ab initio. Local Court, Family Law Act Orders 3. Pursuant to Family Law Act 1975 (NSW) s 179(1A), the Orders of the Local Court at Maitland in matter: FL 123/210001 made on 23 September 2021 (Variation Orders) be set aside, so that the courts order of 9 May 2019 (Original Orders) operate as if they were never altered or varied. Revocation of Letters of Administration and Replacement of Administrator 4. With respect to the orders below relating to the administration of the Deceased's estate, that the requirements of Supreme Court Rules Part 78, rule 48 be waived. 5. It declares that, by reason of her conflicts of interest and inability to resolve the same, that the plaintiff is not a fit and proper person to carry out the functions of the administrator of the Deceased's estate. 6. Pursuant to Probate & Administration Act 1898 (PAA) sec 66(a) the letters of administration of the estate of the Deceased late (Gerhard) Gary Anthony Haberl (granted on 24 March 2021) are revoked. 7. Pursuant to PAA s 63 and 74, that the NSW Trustee & Guardian be appointed as administrator of the Deceased's estate: a. with those rights and powers provided in PAA s 74A and b. with such administration taking effect from 24 March 2021. The Trust for Isabella 8. Declares that pursuant to Succession Act 2006 (NSW) s 127(1) Isabella Sophia Haberl (a minor) (Isabella), the natural child of the Deceased, is entitled to the whole of the Deceased's intestate estate. 9. Pursuant to Trustee Act 1925 s 6, for the Deceased's intestate estate: a. The plaintiff is removed as trustee; b. The NSW Trustee & Guardian is appointed as trustee in the plaintiff's place, to hold the Deceased's estate on trust for Isabella. 10. That the plaintiff shall submit an inventory and account for the trust arising from the Deceased's estate … Costs 12. Order that each party bears their own costs with respect to this part of these proceedings but that the plaintiff is not entitled to be indemnified from the Deceased's estate or from the trust funds for her costs of or connected with: a. The part of these proceedings connected with the parens patriae questions; b. The formulation or execution of the Deed; c. The formulation or making of the Variation Orders …"

[7]

Andrea's final proposal

On 3 May 2022, the parties having been unable to reach a consensus between them, Andrea made a final proposal: "1. Order that Anthony Campbell in his capacity as trustee of the Estate of the Late Gerhard (Gary) Anthony Haberl be joined to these proceedings. 2. Declare that the document entitled Deed of Resignation and Appointment of New Trustee dated 9 June 2021 be set aside such that it is void ab initio. 3. Order that the orders of the Local Court in proceedings number FL123/190014 dated 23 September 2021 be set aside pursuant to section 79A(1A) of the Family Law Act 1975 (Cth). 4. Order, pursuant to section 85 of the Trustee Act 1925 (NSW), that Andrea Mary Haberl is relieved from personal liability for any breach of trust arising from the making of the Local Court's orders dated 23 September 2021 and any subsequent steps taken following the entry of those orders. 5. Notes the following undertakings of Andrea Mary Haberl to the Court: (a) That she will use a portion of any monies Isabella Sophia Haberl may otherwise have been entitled to for the purpose of purchasing land located at xxxxxxx and thereafter construct a dwelling on it to be used as primary residence (Property); (b) That she will do all things necessary to ensure that Isabella Sophia Haberl holds at least a 15 percent registered legal and equitable interest in relation to the Property as tenants in common, noting that any final percentage recorded as tenants in common will directly reflect the amount contributed to the purchase of the Property by Isabella Sophia Haberl from the Estate of the Late Gerhard (Gary) Anthony Haberl; (c) That she will use and/or invest the balance of the Estate of the Late (Gerhard) Gary Anthony Haberl and the proceeds from the life insurance policy (as at 3 May 2022 being in the sum of $114,693.66) in accordance with independent professional financial advice for Isabella Sophia Haberl's benefit, particularly in relation to the following: i. education/schooling; ii. uniforms; iii. activities; iv. clothing; v. medical expenses; vi. other expenses as required. 6. Order that, because of the undertakings given in paragraph 5, Andrea Mary Haberl be relieved of her undertakings given to the Court on 28 February 2022 through her solicitors of Tranter Lawyers. 7. Order pursuant to sections 30(2) and/or 50(1)(a) of the Minors (Property and Contracts) Act 1970 (NSW) that Isabella Sophia Haberl be authorised to: (a) hold at least a 15 percent legal and equitable interest in the Property or any other percent equivalent to the contribution made by Isabella Sophia Haberl from the Estate of the Late (Gerhard) Gary Anthony Haberl to the purchase of the Property; (b) (if necessary) lodge a caveat in respect of her registered legal and equitable interest in the Property in her name pursuant to section 74F of the Real Property Act 1900 (NSW). 8. In the alternative to order 7(b), order that a caveat be lodged by the Principal Registrar of the Supreme Court of New South Wales pursuant to section 74F of the Real Property Act 1900 (NSW) on behalf of Isabella Sophia Haberl reflecting her registered legal and equitable interest in the Property. 9. In the further alternative to orders 7(b) and 8, Andrea Mary Haberl provides a further undertaking to the Court that she will not take any adverse steps in relation to Isabella Sophia Haberl's interest in the Property (as recorded on title per paragraph 5(b) above) during Isabella Sophia Haberl's minority without first obtaining leave of the Court …"
It was clear from the proposals put forward that there was at least some agreement between the parties on the need to revoke the Local Court Orders and the Deed on which they were premised. This left in dispute the question of who was to administer the Estate once it had been restored to its former position.

[8]

Submissions for Andrea

The submissions on behalf of Andrea may be summarised as: 1. There was no actual conflict of interest for Andrea to continue in her capacity as administrator of the Estate. The interests of Andrea and Isabella were effectively aligned as Andrea sought to use the funds from the Estate to purchase land and construct a home for herself, Isabella and Ruby, and to use the remainder for Isabella's education and maintenance. Although the manner in which Andrea had gone about obtaining the funds was unconventional, she had acted in Isabella's best interest. 2. Gary's passing had frustrated the purpose of the Family Law Orders and the maintenance of Isabella. Andrea's actions (which were taken in accordance with legal advice) were understandable given the unforeseen and unfortunate circumstances. 3. The fact that Andrea and Anthony had each received independent legal advice prior to making the application for the Local Court Orders weighed in favour of a conclusion that they had both acted with proper diligence. 4. The funds of the Estate had not been mismanaged. Since the time the funds had been obtained by Andrea, they remained largely untouched except to pay legal fees. 5. Andrea's conduct as administrator of the Estate by pursuing the litigation in Haberl (No 1) was appropriate because the Court's orders as to costs neutralised any negative ramifications. 6. The Estate had been administered in a due and proper manner because Andrea's actions were done in order to avoid the payment of fees to a third party administering the Estate. That is, Andrea sought to achieve the same outcome that she would have sought in any case but on a more cost-effective basis. 7. Andrea had not engaged in concealment when making the application to vary the Family Law Orders at the Local Court because it was known to that Court that the application involved a deceased estate. During the course of argument, it was put to Mr Simpson whether Magistrate Chicken would have formed the same view had he known that Anthony was Andrea's brother who had been appointed to his position as trustee purportedly to ensure there was no conflict of interest. Mr Simpson maintained that, in the context of the intention of the variation of the Family Law Orders, the Magistrate may have reached the same conclusion even knowing this. 8. The fees associated with TAG weighed against their appointment. Given the lengthy period of time TAG would be administering the Estate, the total fees would be significant. 9. If Andrea was forced to repay the funds from the sale of the Property to the Estate, this would disadvantage Isabella because it would imperil Andrea's ability to purchase secure, permanent accommodation for the family. Mr Simpson suggested that, instead, a caveat might be lodged to protect Isabella's interest pursuant to either ss 30 or 50 of the Minors (Property and Contracts) Act 1970 (NSW).
Overall, it was submitted by Mr Simpson that Andrea had acted honestly and reasonably. In such a case, revocation of the letters of administration was unnecessary and she should be released from any potential liability.
Andrea took the opportunity to address the Court on her own behalf. She explained that she had obtained the Local Court Orders on the basis that she wanted to provide for Isabella, and believed the Local Court was cheaper than relitigating the Family Law Orders in the Family Court.
She also expressed that the current proceedings were, in her view, a punitive act against her for pursuing the legal action in Haberl (No 1) which she maintained had been the right thing to do. The extensive legal costs she incurred to the Estate as a result of that litigation were the fault of Robert and Karin Haberl.
She maintained that she did not think she had done anything wrong in her role as administrator. As a (now) sole parent, she was only seeking to buy a house and to provide for Isabella. She had not applied the funds for frivolous things such as taking overseas trips or purchasing luxury vehicles.

[9]

Submissions for Isabella

The submissions made on behalf of Isabella may be summarised as: 1. Andrea's actions in obtaining the Local Court Orders were fundamentally mistaken. Although she claimed to have been motivated by a desire to provide for Isabella's benefit, the ordinary principles applicable to a bare trust for an estate held on behalf of a minor already allowed for the use and disposition of the Estate for the maintenance and education of Isabella. 2. Contrary to Mr Simpson's submission at [67(7)] above, had the fact of Andrea's position as administrator been brought to the attention of the Local Court, together with what Mr Bambagiotti diplomatically described as the "difficulty" of Anthony's purported appointment as trustee, then the Local Court Orders would not have been made. 3. Andrea's actions in respect of both the Estate and the Isabella Sophia Haberl Trust raised serious questions about her management of those funds. Most egregious was the conversion of the Estate by way of the Local Court Orders, which had reduced the Estate to almost nothing. 4. It was not appropriate to relieve Andrea of liability under s 85 of the Trustee Act for three reasons: 1. The conduct in question was of a more serious kind. It involved the procurement, for Andrea's personal benefit, of almost the entirety of the Estate of a minor. Exacerbating this, in the course of doing so she had procured the assistance of others and had proffered to the courts documents that appeared lacking in candour. 2. The explanation provided by Andrea was inadequate. She claimed that Gary's death had radically altered the parties' positions under the Family Law Orders. This ignored the fact that the Family Law Orders explicitly acknowledged that the agreement was reached taking into account the possible death of Gary. Additionally, the Estate already provided an appropriate equivalent to the financial support Andrea would have received from Gary if not for his passing. 3. While Andrea claimed to have relied on legal advice as vindication for her actions, the scope and details of that advice was unclear. Although Andrea was entitled to maintain privilege, she could not rely on it to seek relief under s 85 of the Trustee Act. 1. The Court could not be satisfied that Andrea would not engage in future actions where her interests and those of the Estate would conflict. This was demonstrated by two factors: 1. Andrea's inability to comprehend any distinction between her own property interests and the interests of the Estate, let alone the impropriety of her actions, which was evident in her proposals; and 2. The alleged breaches of trust that gave rise to the current proceedings were only identified due to the Court's own inquiries in Haberl (No 1). 1. In addition to those factors immediately above at [72(5)], it could be inferred that Andrea intended to rely heavily on the funds of the Estate in the near future. This was because Andrea was currently unemployed and apparently had no plans to seek employment in the next 18 months as she studied to obtain a diploma of counselling. At the very least, this would present further pressures that could heighten the likelihood of future breaches. 2. The rate at which Andrea had already depleted funds in the Estate and in the Isabella Sophia Haberl Trust gave rise to an inference that very little, if any, funds would remain for Isabella upon reaching her majority. 3. Andrea's proposal to use the funds of the Estate to build a home was objected to on several grounds: 1. The purchase of land and construction of a dwelling were "highly speculative activities" particularly when undertaken by an unemployed single mother of two children with finite resources at her disposal. 2. The purchase and construction of the house was not a proper or prudential investment given that it would absorb virtually all of Andrea's assets, including the trust property, leaving little for future contingencies associated with real estate construction. 3. The proposed 15% interest to be held in Isabella's name was potentially well below the proportion of funds the Estate would be supplying to the endeavour. 4. Even if a caveat were lodged over any property to protect Isabella's interest, it was not clear that this could be achieved in the manner proposed by Andrea. 1. Overall, it was important that the Estate did not bear a disproportionate amount of the expenses for Isabella's maintenance. Prior to Gary's death, maintenance responsibilities were to be shared equally between Isabella's parents, and the management of the Estate should reflect that. 2. Andrea had not proposed any supervisory mechanism should a conflict of interest arise in future. The Court could not be confident, therefore, that she would abide by the undertakings she proposed to give, or that any future breaches of trust would be detected and addressed. The only appropriate course of action in the circumstances was to revoke her letters of administration and appoint an independent third party to replace her (being TAG). 3. While TAG was not an ideal candidate to administer the Estate in light of the fees that would be charged, there was no suitable alternative in the circumstances. 4. Finally, a full inventory and account of the Estate was necessary.

[15]

The Local Court Orders

The failure to properly confer the powers of trustee upon Anthony means that he never had any authority to consent to the Local Court Orders. This fundamentally undermines those orders such that they should be set aside.
Further, the Court accepts Mr Bambagiotti's submission at [72(1)] above that Andrea's stated motivation in obtaining the Local Court Orders is at the very least misconceived. As administrator of the Estate, Andrea could lawfully have applied the Estate to Isabella's maintenance, advancement and education. In practical terms, the Estate had replaced the support that would have been provided to Isabella by Gary. Additionally, Andrea had entered into the Family Law Orders under the acknowledgment that those orders took into account the possible death of either Andrea or Gary.
Finally on this point, the Court is not persuaded that, had the full circumstances of Anthony's appointment as trustee, and Andrea's position as administrator of the Estate, been made known to Magistrate Chicken, the Local Court Orders would have been made. That information was clearly relevant as it radically alters the perception of Andrea's reasons for applying for the orders.
For the reasons set out immediately above at [86] to [88] the Court is satisfied that the Local Court Orders should be set aside pursuant to s 79A(1A) of the Family Law Act. That provision states: "79A Setting aside of orders altering property interests (1A) A court may, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, and with the consent of all the parties to the proceedings in which the order was made, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside."
The parties to the proceedings in the Local Court were Andrea and, purportedly, Anthony. Anthony gave his consent only to the setting aside of the Deed and not to the setting aside of the Local Court Orders (see [75] above). However, his consent is not necessary for the Court to exercise its power under s 79A(1A) because, as the Deed was ineffective, he was never a party to those proceedings in any real sense. As Andrea has given her consent under order 3 of her proposal at [65] above, the Court may make orders in accordance with s 79A(1A).
If I am wrong in that conclusion, the Court would nevertheless set aside the Local Court Orders pursuant to s 79A(1)(a) which states: "79A Setting aside of order altering property interest (1) Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that: (a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance …"
This Court is relevantly a court for the purposes of either of those sections pursuant to s 4 of the Jurisdiction (Cross-Vesting) Act 1987 (Cth) which empowers this Court to deal with matters instituted under s 79A: Young v Lalic (2006) 197 FLR 27; [2006] NSWSC 18 at [37]-[39] (Brereton J) cited in DJ Singh v DH Singh [2020] NSWCA 30 at [250] (Gleeson JA, Leeming and White JJA agreeing).
The discretion conferred by s 79(1)(a) is a wide one. Andrea's failure to disclose the relevant fact of her status as administrator of the Estate which gave rise to a conflict of interest, and the circumstances of Anthony's appointment as trustee for the principal purpose of evading that conflict, are sufficient to engage the Court's power under that provision. The Court is satisfied that these circumstances caused a miscarriage of justice by converting almost the entirety of the Estate to Andrea's personal property.
The effect of setting aside the Deed and the Local Court Orders is to restore Gary's 44% share of the proceeds from the sale of the Property to the Estate.

[16]

Andrea's position as administrator

The Court has concluded that Andrea has demonstrated through her conduct that she is not suitable to remain as administrator of the Estate.
Prior to Andrea's appointment there was already some indication that she would not be an appropriate person to manage the Estate. This was evident when she wrote to Karin Haberl in January 2020, stating that she intended to commence litigation against the Estate unless she was given 90% of the proceeds from the sale of the Property (see [17] above).
Following her appointment, Andrea engaged in three further courses of conduct that cast serious doubt about her suitability to remain as administrator.
First, Andrea misconducted herself by engaging her brother, Anthony, to act as trustee. No evidence was provided to show that he plays any other substantive role in managing what remains of the Estate and the Court is not convinced that he was an independent trustee in any true sense. As such, the Court finds that his purported appointment was undertaken for the principal purpose of obviating any conflict of interest by Andrea in order to allow her to deprive the Estate of the vast majority of its funds.
Second, by obtaining the Local Court Orders, Andrea converted the funds of the Estate for her own benefit. There is little that can be added to this point which is not already obvious. It should be emphasised that the Local Court Orders were granted in circumstances where, had there been full disclosure of the circumstances, the Court is satisfied that it is likely they would never have been made.
Andrea's explanation for having obtained the Local Court Orders is not persuasive. As was put by Mr Bambagiotti, the Family Law Orders already acknowledged the possible death of either Gary or Andrea. In any event, Gary's death did not deprive Andrea of financial support for Isabella's maintenance. As I have already noted at [27] and [87] above the Estate was always able to be applied for that purpose. The sole difference is that in neither case did Andrea have unfettered access to the funds as she now does.
Even again assuming in Andrea's favour that she was acting with the best of intentions towards Isabella, the vice of converting the funds in the Estate to become her own absolutely as opposed to being held on trust for Isabella may be demonstrated by a simple example, which assumes that a large part of those funds were applied to buy a property held in Andrea's name to be the family home. Let it be assumed that Andrea were to become bankrupt or subject to a property adjustment claim by some future de facto partner. Insofar as the funds were trust funds, equity would recognise that Andrea held a proportionate interest in the property on trust for Isabella to the extent those funds had contributed to the purchase price, even if Isabella was not on the title. Isabella would at least be able to contend that interest would not be available to a trustee in Andrea's bankruptcy or in property adjustment proceedings. However, in the events which have happened, where in law "Isabella's money" has become Andrea's absolutely, the value of the money in the form of an interest in the property would be lost to Isabella in either of the eventualities I have hypothesised.
The omissions by Andrea in respect of the Local Court Orders form part of what the Court perceives to be a wider pattern of non-disclosure. The Local Court Orders were made while proceedings in Haberl (No 1) were on foot, yet the true value of the Estate was not disclosed to the Court until after the proceedings had concluded when Mr Simpson withdrew his statement to the Court as to what was left in the Estate. Additionally, Andrea failed to disclose the purchase of a vehicle for $39,500 from the Isabella Sophia Haberl Trust in her affidavits of 11 and 23 March. While it may be argued that she was not required to make such disclosure as the Isabella Sophia Haberl Trust does not form part of the Estate, it nevertheless reflects poorly on her candour as trustee.
Third, by continuing to pursue the Haberl (No 1) litigation even after it became clear that the benefit to be obtained was far outweighed by the cost of that litigation. While it is usually appropriate for an administrator to pursue the assets of the Estate, as stated at [24] above, by the time the matter reached hearing, all that remained to be sought was a claim of approximately $15,000 and the Olympic torch. The legal fees incurred were seriously disproportionate. Had the funds of the Estate (such as they had become) been applied for payment of the legal fees, the Estate would have been almost entirely depleted.
The Court notes that both Andrea and Anthony acted with the benefit of legal advice. However, the Court accepts Mr Bambagiotti's submission that without knowing the true substance of that advice, it cannot cure the defects in the performance of Andrea's duties as administrator.
These matters might have been overcome if Andrea had been able to demonstrate that she would not engage in further misconduct in the future. However, based on her own statements as well as the substance of her proposals in these proceedings, the Court is not satisfied that this is so.
Andrea's adamant assertions that she has not "done anything wrong" (as evidenced by her statements to this Court referred to at [70]-[71]) reveals a serious lack of insight regarding the impropriety of her actions. That she continues to blame the Haberls for accruing significant costs to the Estate, in spite of the fact that, as I recorded in my judgment, they had offered her a better outcome than she obtained by continuing the Haberl (No 1) proceedings, only fortifies the Court's conclusion on this point.
While Andrea may have felt herself to always be acting in Isabella's best interest, the Court is not satisfied that she is capable of properly separating Isabella's interests from her own. If she is allowed to remain as administrator, the Court finds that there is a real risk that she will engage in further conduct that inappropriately diminishes the Estate. The Court's concerns are heightened by this statement in her affidavit of 23 March 2022: "Obviously, Isabella will still benefit from any money that I receive although she will not be the sole beneficiary of it. I will still need to provide for my children and meet all our living expenses."
While Isabella may incidentally benefit from moneys applied to other members of her family, there is a fine distinction between the Estate being applied beneficially for Isabella and Isabella being made financially responsible for her mother and sibling. Put more simply, it is not merely that the funds of the Estate are for Isabella's benefit - they are in fact Isabella's own property. The Court infers from Andrea's statement that she has failed to grasp this fundamental fact.
Andrea's proposals further inform the Court's finding that she is not suitable to remain as administrator. She suggests no oversight mechanism for her conduct as administrator beyond the giving of undertakings in circumstances where she has been less than forthcoming in her dealings as trustee. In the absence of a truly independent third party to oversee the Estate, there is an unacceptable likelihood that future questionable conduct might go undiscovered.

DJ Singh v DH Singh

At a glance

Court

Decision date

Before

Source

Judgment (20 paragraphs)

Parties

Legislation Cited (8)

Cases Cited (4)

Cited By (1)