Eastlake v Eastlake

Supreme Court of NSW|2015-11-04

Solicitors: Hall Partners Pty Limited (Plaintiff) Higgins Lawyers (Defendant) File Number(s): 2014/175707

(a) The sale of the testator's home

So far as the house is concerned, the testator owned a fibro asbestos house in Oberton. The evidence shows that the Defendant obtained two market appraisals from local estate agents. First National of Oberon reckoned the market value as between $130,000 and $140,000, with a recommended listing of $150,000. They commented that "the age and poor condition of the home reduces the price on the property considerably. The land realistically could bring up to $180,000 but the home would need to be demolished and cleaned up for this to happen. Clean up on the property could cost anywhere from $30,000 to $40,000 as the home is made of asbestos, making it a very costly exercise." Ray White Emms Mooney of Oberon gave their opinion of the market value as between $110,000 and $120,000.
The Plaintiff says that his life partner, a Mr Davis, had cash as a result of an insurance claim and those funds were available to purchase real property, including the testator's property.
On 2 May 2014 the Plaintiff's solicitor wrote to the estate's solicitors: "We are instructed also that the executors are suggesting that the property may be worth $200,000. If that is so, our client would be anxious to acquire it. Please inform the executors."
Actually, there is no evidence before me that the sum of $200,000 was ever mentioned by the executor. Notwithstanding this, the Plaintiff puts forward this letter from the solicitors as an offer to purchase for $200,000. It was never accepted. The executor sold the property to a Mr Adams, a friend of the parties' sister, Rhonda, for $160,000 in April 2015. I will use first names for the various witnesses for convenience and certainly not intending any disrespect. The property had been on the market for over a year before it was sold to Mr Adams. Mr Davis denies that either he or Gregory knew that the property was on the market for that length of time. However, there is a letter from the Defendant's solicitor to the Plaintiff's solicitor of 8 October 2014 letting the Plaintiff and Mr Davis know that the property was on the market. Thus, I do not accept Mr Davis' evidence on this point.
In cross-examination the Plaintiff agreed that neither he nor Mr Davis followed up their proposal that the property be sold for $200,000.
The whole of the evidence suggests that there were difficulties in communications between the parties. It was seen that Gregory and Graeme were not on speaking terms and that most communications took place between Gregory and Noelle, one of the parties' sisters, and between Noelle and Graeme. Noelle says that she had great difficulty in ever contacting Gregory and on a couple of occasions actually left a message with Mr Hall, Gregory's solicitor, to be passed on to him.
The background evidence also is that there was no willingness on the part of Graeme or, it would seem, Noelle, to let Gregory have any part of the estate at all. Although they deny it, it would seem that there is a consistent pattern of conduct to try and ensure that Gregory got nothing out of the estate.
A good illustration is the attitude that Graeme and Noelle took when Gregory asked for some of the deceased's furniture. It is acknowledged on all sides that the furniture had virtually no value. Although both Graeme and Noelle said in the witness box that as far as they were concerned, Gregory was able to get a truck up to the deceased's house and take what he wanted, the background evidence and the evidence of Gregory himself show quite the contrary.
It would seem, again though they deny it, that the fact that Gregory was in a same-sex relationship with Mr Davis offended Graeme. On a couple of occasions, Gregory gives evidence that "the poofter is not going to get anything", meaning that if the property passed to Gregory it would also benefit Mr Davis. Gregory gives evidence of this sort of attitude on a number of occasions and, it seems to me that I should accept what he says. It is unlikely that Gregory was making this up as it has no direct bearing on the result of the case and is consistent with the general attitude of the executor.
For instance, it is admitted that at the time of the funeral Graeme made it clear that Gregory and "the poofter" were not to come anywhere near the deceased's house or he would have the Police called.
Although the evidence of the competing parties was dramatically opposed, and was supported by their privies, it is difficult to say that any witness, other than Graeme and Mr Davis, was giving evidence which I should not accept. Mr Davis was forced into disowning part of his affidavit and I have already dealt with my problems in accepting Graeme's evidence.
There was a very strange lack of corroborating documentation. I was led to believe that it was impossible for any bank records to be produced in respect of the testator's accounts before May 2013. This is most odd but there was no contrary evidence. On one occasion the testator's wallet went missing with $8,000 in it and when it was found Graeme says that he persuaded the testator to put his money in the bank. The impression that Graeme wanted me to take was, that after the loss of the $8,000 and its recovery, large sums of money due to the testator were put in his bank. This is unsupported. I think that some of the inconsistency in the evidence is affected by the fact that members of the family only had intermittent contact with the testator and some are confused as to the period about which they were giving evidence.
Returning to the matter of the house, when asked about the "offer" of $200,000 the executor seems to say that he did not believe that Gregory had $200,000 and it was certainly never made clear in correspondence that the real buyer was Mr Davis and not Gregory. That is believable. However, the main answer that was given by the executor is that he refused to consider the offer of $200,000 unless his brother supported it by a proper formal valuation.
The only explanation for that attitude is malice towards Gregory.
First, the executor himself had never got a formal valuation. When asked what he meant by a proper formal valuation in cross-examination he said "a valuation by a valuer". He never obtained this, he just obtained two market appraisals from local estate agents. Then in cross-examination he made the incredible statement "why would I sell the place for $200,000 if it was not worth $200,000?". This seems to totally ignore the executor's duty to get the best price for the property whether it was worth it or not.
Furthermore, the executor himself tried to buy the property for something like $125,000 or, on his version, $130,000. Gregory declined to be involved in that.
Accordingly, the executor should have treated the offer far more seriously than he did and, perhaps, even sold the house for $200,000. Under the Will, the property was left to the children equally. There is a deceased son, Allen, otherwise, there are the present parties, Noelle, Helen and Rhonda, so that, had the house been sold for $200,000, as opposed to $160,000, ignoring for the moment costs of the sale, the Plaintiff's share of the proceeds would have been $40,000, as opposed to $32,000 on the sale price for $160,000. However, had the Plaintiff or his friend purchased the property for $200,000, he would have had to pay over $40,000 more than the property was actually worth, on the best evidence of valuation.
In any event, the Plaintiff agreed in cross-examination that neither he nor Mr Davis followed up the proposal that they purchase the property for $200,000. The offer was made in May 2014, the property was not actually sold until April 2015, they knew that the property was on the market, at least in October 2014, and they did nothing to follow up their offer.
It could be said that the executor would be justified in considering that the offer was no longer open.
In all the circumstances, I do not consider that I can say that the executor breached his duty by selling the property for $160,000 despite some suspicious matters along the way. I should have mentioned that one other suspicious circumstance is that the property was placed in the hands of Ray White to sell, and then taken out of the hands of Ray White. The sale only came about through the parties' sister, Rhonda, in producing Mr Adams.

(b) The executor has not accounted for the testator's cash monies

Secondly, the evidence showed that the testator was very lax with security of his money. The incident involving the loss, and subsequent recovery, of the wallet has previously been mentioned. Graeme uses this and other evidence to show that the testator, after the loss of his wallet incident, did not leave money around the house.
However, the evidence tends to deny this. For instance, the testator's mustard coloured boat was sold to a Mr Burgess on 2 May 2013, eleven months before the testator's death. We do have the testator's bank records from 2 April 2013, but there is no trace at all of the purchase monies for the boat. Mr Burgess' evidence says that he paid the deceased $2,500 in cash for the boat.
Graeme's answer to this is "I am not my brother's keeper. I do not know what happened to that money." Whether that is so or not, it does not prove that the money was still in the testator's possession on his death in May 2014.
Gregory says that the testator had a wardrobe, which appears to be a built-in wardrobe. The base was on a plinth and there was a loose board in the bottom of this wardrobe which the testator removed and put his cash in the resultant aperture. Graeme denies this. According to Graeme, there was no money in the wardrobe at the date of death.
Finally, there is evidence that on a date which I took to be shortly after the testator's death, some Meals on Wheels volunteers found that a dog had taken the testator's trousers together with his wallet, and his wallet and $530 were found in the yard of his dwelling. The incident about the dog was not mentioned in the affidavit, but came out during cross-examination and Mr Hall strongly suggested that this had been made up. It does, I must confess, add to my impression which I found starkly in the witness box, that Graeme was not a witness that should be relied upon unless corroborated. I have already mentioned his rather absurd behaviour in connection with asking for a valuation in connection with his brother's offer of $200,000 for the house and his remark that he wouldn't sell an asset in the estate if it wasn't worth what he was getting for it. Furthermore, he gave evidence that he didn't know what colour the boat that was sold to Mr Burgess was, until he saw a photograph of it. This was strange because it was a black and white photograph he was shown. When taxed with this he then said that, as a result of seeing the photograph, he went around to the Burgess' place and saw the colour of the boat. As I say, I am not impressed with Graeme as a witness.
There does not seem to be any accounting for the $530 found by the dog. On the other hand, it is a relatively small amount and could well have been absorbed in the expenses in running the estate. Those are the facts of the claim about the loose cash. I will deal with the consequences later.

The principal attack was over the boat which was bequeathed to Gregory. Gregory and the testator often went fishing together, it would appear mainly in a lake near Mudgee. The last time they went fishing was in 2009.
Gregory says that there was a green and white boat which he describes as a "Savage type", (I must confess I am not too sure what this means), and that it was in the testator's possession when last he saw it. Other witnesses favourable to Gregory also mentioned the green and white boat.
In his affidavit of 23 April 2015, Graeme said this: "In about early 2013, I had a conversation with Dad to the following effect: Dad: "I'm going to sell the green boat. It's too heavy for me." Graeme: "Greg probably expects you to give it to him." Dad: "I'm not leaving the boat to Greg. He'll only sell it for drugs." Dad then sold the green and white boat to our friend, Steve Burgess for $2,500.00 cash. Annexed hereto and marked "A" is a copy of the boat's registration form confirming the transfer to Burgess. Following the sale of the white and green boat to Burgess, Dad bought the smaller red boat previously referred to Registration Number XXX."
The problem with that evidence is that it is clear that the boat that was sold to Mr Burgess was a mustard coloured boat. It is most odd that Graeme would refer to the boat sold to Burgess as a green and white boat if no green and white boat existed. Of course he could be referring to the fact that Gregory spoke of a green and white boat, but this is unlikely seeing that Graeme does not usually accept things that Gregory says. This statement in the affidavit which Graeme now denies, confirms my view that there was a green and white boat, that it probably existed at the date of death, and it no longer exists. It, accordingly, should have passed to Gregory, and it did not.

(d) The executor has not collected the benefit of the deceased's funeral fund

Gregory gave evidence that on one occasion after a boating trip at Mudgee, he and the testator called in at a funeral directors at Lithgow where the testator paid monies, and Gregory was convinced that this was for a funeral fund. However, searches have been made for a funeral fund from the Lithgow funeral directors and the material shows that there never was such a fund. It would seem that the payment that the testator made was a payment for some memorial to himself and his late wife. Indeed, at the end of his evidence, Gregory seems to concede that this claim may have been mistaken.

(e) Was this action merely brought out of spite?

This matter had its genesis in a conversation between Gregory and Noelle over the testator's furniture.
As to the furniture, it is conceded that Gregory asked Noelle whether he could have some of the furniture. She says she replied that she would have to ask Graeme who was the executor. She says that Gregory then got annoyed and said "fuck you all. If I don't get what I want, I'm gonna tie this whole thing up in the courts. I'll get rid of Graeme and the lawyers can bleed you all dry until nobody's got anything. Fuck you." In his affidavit Gregory admits that he would have said "fuck" to Noelle. He denies the balance. He, however, was known to have had an association with a well-known solicitor, now deceased, so that the allegation that he would be able to tie up the family in the courts is made in circumstances where it is believable. Gregory was not seriously challenged on his version of the conversation in which he denies ever saying that he would tie up the estate if he did not get what he wanted.
There was really no reason why Noelle had to refer the matter to the executor because it was common ground that the furniture was completely worthless. The fact that she did, a point which was exploited in cross-examination, shows her animosity towards Gregory.
However, so far as the furniture was concerned, after speaking to Graeme, Noelle says she tried to contact Gregory but was unable to do so. Gregory did not seem to press the furniture issue. Noelle had told him that it was going to be "given to Vinnies". Whether it was or not, I do not know.
The conversation is put forward as showing that this action is merely brought out of spite. I prefer Gregory's version of the conversation. Even if I preferred Noelle's, it would not seem to me that it was sufficient to make the serious finding that these whole proceedings were brought out of spite.
The allegation that the Plaintiff only brought this claim out of spite is a very serious allegation. It was denied by the Plaintiff and he maintained his denial under cross-examination. The Plaintiff stood up well to cross-examination and I accept his denial.
Having dealt with the major matters of dispute, I should now draw them together and deal with the form of the proceedings and the consequences of my findings.
The proceedings commenced as a case for the removal of the executor, with a backup claim for accounts.
The estate has almost been fully administered. It is a very small estate. The consequences of removing the executor would be that either the NSW Trustee & Guardian, or, alternatively, the independent solicitor proposed by the Plaintiff, would be appointed Administrator CTA. The Administrator would then need to ensure that he or she got a proper account from Graeme and then investigate the estate. This would probably be at a cost of some $300 or $400 an hour which would completely bankrupt the estate.
It is unnecessary in this case to go into the principles of equity and probate law that govern the question as to when one should displace an executor. The leading cases are Bates v Messner (1967) 67 SR (NSW) 187; Mavrideros v Mack [1998] NSWCA 286; (1998) 45 NSWLR 80; and Wight v Robinson [2013] NSWSC 1229 [19]. Although Mavrideros probably lessens the burden of the Plaintiff, as Lindsay J in Wight wrote, "the right of a person to nominate his or her executor and to keep him as executor is a significant matter". However, apart from noting that I re-read those cases and considered them, there is no need to take this matter any further.
After the evidence was completed, the discussion between Mr Hall and myself caused him, very wisely, virtually to abandon the claim to remove the executor and seek an accounting. Again, the formal accounting is not something that need be done; it is a costly exercise and, during the course of the evidence in these proceedings, all the matters have come out which would have come out on a formal inquiry on accounts.
However, the principles applicable on the taking of accounts must be borne in mind.
The law is that on being presented with accounts, the other party may surcharge or falsify those accounts. A surcharge is a statement that there is an omission in the accounts for which credit ought to be given. A falsification alleges that a matter has been wrongly inserted, such as an allegation that a sum said to have been paid was either not paid, or improperly paid. With a surcharge, the onus is on the objecting party. In the case of falsification, the onus is on the accounting party. See Pit v Cholmondeley (1754) 2 Ves Sen 565; (1754) 28 ER 360.
In Ide v Ide (2004) 184 FLR 44, I held that the Court is justified in bypassing the standard procedure for taking accounts where any benefits obtained by adhering to that procedure would be outweighed by the costs and time involved. I adhere to what I said in that case and follow that line by taking this abbreviated approach to the accounts.
All of the four matters to which I have already referred are matters of surcharge. Accordingly, the onus is on the Plaintiff to show on the balance of probabilities that the account should be surcharged.
Taking them one by one, the first question is whether the account should be surcharged by $40,000 because of the executor's disinclination to follow up the "offer" made by Gregory and his partner to purchase the property at $200,000. I have set out the facts earlier. It does not seem to me, in the light of the failure of Gregory and his partner to follow up the initial approach, to allow almost a year to go by, the difficulty in having the property being sold, and the market appraisals of two estate agents, that there is sufficient there to show that the account should be surcharged by the difference between $160,000 and $200,000.
As to loose money, again, there is suspicion, but it does not seem to me that there is sufficient to show that it is more likely than not that there was money for which the executor had not accounted in his accounts or his evidence before me.
However, as to the green and white boat, in my view there is just sufficient material to show that the boat existed and that it was probably in existence as at the date of the testator's death. There is no evidence as to value. However, one must remember that in cases where the facts are peculiarly within the knowledge of the Defendants, only slight evidence is required to establish the opponent's case. See eg Parker v Paton (1941) 41 SR (NSW) 237; Hampton Court Ltd v Crooks [1957] HCA 28; (1957) 97 CLR 367. Additionally, of course, there is the old case of Armory v Delamirie (1722) 1 Str 505; (1722) 93 ER 664. In such a case, the Court is entitled to take the view that the boat in question is of the highest value that a boat of that nature could take. In the instant case we know that the boat sold to Mr Burgess was of a superior style and was sold in 2013 for $2,500. If one deducts 10% because of better quality, it would seem to me that, in the circumstances, a fair value of the boat was $2,250. That should have been put in the accounts and that amount should be paid to the Plaintiff.
No adjustment should be made because of the funeral fund for the reasons that have already been set out.
Accordingly, the case is that there must be an order that Graeme, as executor of the estate of Jasper Eastlake, pay the Plaintiff $2,250. As each side has had some success and some failures, there should be no order as to the costs of the proceedings.

Amendments 01 December 2015 - Paragraph 9 - "neither he nor" changed to "either he or" 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: 01 December 2015

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