Esplin v Timms

112572/09 KARI ANNE ESPLIN & ANOR v TERENCE HENRY CHARLES TIMMS JUDGMENT 1 HIS HONOUR: By Amended Statement of Claim the plaintiffs seek orders that probate of the Estate of the late Marie Timms ("the Estate"), in favour of the defendant, Terence Charles Timms, be revoked; that the defendant verify and file accounts in respect of his administration; that the plaintiffs be appointed as administrators de bonis non of the Estate; and that certain land be vested in the plaintiffs as administrators. The plaintiffs also seek an order as to costs. 2 The original Statement of Claim, seeking a grant of administration to the plaintiffs, was filed on 23 July 2009. There has been no appearance filed nor have any steps been taken by the defendant to either oppose or participate in these proceedings. The defendant did not appear when the matter was called on for hearing. I am satisfied, however, having regard to the affidavits filed, that the defendant is aware of the proceedings and of its hearing today. Background 3 The deceased, Marie Timms, died on 6 December 1994 leaving property in New South Wales. The first plaintiff, Kari Anne Esplin, is a daughter of the deceased and the second plaintiff, Nicholas Timms, is a son of the deceased. The defendant is also a son of the deceased. In addition the deceased had two other sons, Michael and Roger, each of whom survived her. As at the date of the deceased's death both Michael and Roger had been, or were, bankrupt. 4 Probate of the will of the deceased was granted to the defendant, as sole executor, on 15 July 1996. At the time of the grant of probate the estate of the deceased was estimated to be worth $3,998,590.00. Under the will the deceased bequeathed the whole of the estate to her trustee on trust to sell, call in and convert into money but with power to retain the trust assets in their present state; to hold the proceeds upon trust to pay expenses and debts; and thereafter to hold the proceeds from its sale on trust as to one twenty percent share for the defendant and each of the two plaintiffs. Another twenty percent share was to be held on trust for two infant grandchildren of the deceased, Kenneth Timms and Julian Timms, provided they attained the age of 18 years. These funds would be held as tenants in common in equal shares. The remaining twenty percent share was to be held on the same terms for four other infant grandchildren. As at the date of the deceased's death, none of the grandchildren beneficiaries had attained the age of 18 years. 5 The bulk of the deceased's estate consisted of assets in the form of land situated in Eden, New South Wales ("the land"), valued at around $3.8m. 6 The powers and duties of the defendant, as executor and trustee, under the will, included a power to invest, to change investments and to borrow money and use it for any purpose for which the capital could be used. The defendant was given power to carry on any business in which the deceased had been engaged, and to acquire property and perform other commercial actions in relation to any such business. However, as at the date of her death, the deceased was not engaged in any business which would enliven this power. The defendant, as executor and trustee, has a duty to act impartially in the interests of the beneficiaries as a whole and to conserve the assets of the estate. The defendant did not have authority to borrow or sell, save for the purpose of realising the assets of the estate. Revocation of Grant 7 The Court has inherent jurisdiction to revoke a grant of probate. This jurisdiction is exercisable by reference to the principle that the Court must have regard to what is necessary and appropriate to the due and proper administration of the estate, in the interests of the parties beneficially entitled thereto. In Bates v Messner (1966) 67 SR (NSW) 187 at 191 Asprey JA (with whom Herron CJ and Sugerman JA agreed), said: "I am of the opinion that the essential basis of the exercise of the court's inherent jurisdiction to revoke a grant of probate is that emphasised by Jeune P, namely, that the real object which the court must always keep in view is the due and proper administration of the estate in the interests of the parties beneficially entitled thereto on the part of the person to whom and by whose oath as to the faithful performance of his duties the court has been induced to entrust the office of executor ... I shall make no attempt to define all circumstances which may attract the exercise of the court's jurisdiction, but where circumstances clearly appear to have arisen after a grant of probate which impel the court to the firm conclusion that the due and proper administration of an estate has either been put in jeopardy or has been prevented either by reason of acts or omissions on the part of the executor or by virtue of matters personal to him, for example mental infirmity, ill health, or by virtue of the proof of other matters which establish that the executor is not a fit and proper person to carry out the duties which he has sworn to the court that he will perform, the court may exercise its inherent jurisdiction to revoke the grant ." (emphasis added)

These principles were applied by the Court of Appeal in Mavrideros v Mack (1998) 45 NSWLR 80 at 101-102. 8 The finding that the due administration of an estate is in jeopardy is one that is not made lightly: see Labraga v Pomfret [2005] NSWSC 973 at [114]. 9 The defendant became the registered proprietor of the deceased's land. The defendant sold two of the lots to the company known as Eden Waters Pty Ltd as trustee for the Eden Waters Unit Trust, by contract dated 20 April 2000. Under that contract, consideration for the purchase price was the allocation of shares in Eden Waters Pty Ltd and units in the Eden Waters Unit Trust. It is apparent from the evidence of the plaintiffs, and the documents exhibited, that after appointment as executor and trustee, the defendant embarked on an extensive project to develop the land by a series of subdivisions over a lengthy period of time. The sale of the two lots of land referred to above was unauthorised. The plaintiffs, as well as the other siblings, purported to give consent to the sale but the other siblings, the parents of the infant beneficiaries, did not have the necessary power to consent because a number of the beneficiaries at that time were minors. The sale took place on what appears to have been the misunderstanding by them that as parents of the infant beneficiaries they were able to consent to the sale on their behalf. The sale of those lots were therefore contrary to the terms of the will. Moreover, there was no power under the will for the defendant to undertake the extensive long-term development in which he engaged. 10 There is evidence that the defendant received legal advice in December 2001 to the effect that the transfer of assets of the estate could not take place without exposing the defendant to liability for breach of trust. As is already made clear, the defendant did not follow this advice. 11 In the course of his administration, part of the estate's assets were transferred to the plaintiffs. There was no power to do this under the will. 12 The defendant encumbered estate assets by way of mortgage to secure a guarantee given in favour of an advance to his brothers, Roger and Michael Timms. The defendant further entered into mortgages with respect to part of the estate land in order to secure certain advances made to him by the National Australia Bank. These actions were also unauthorised. 13 Having regard to the uncontradicted oral and documentary evidence placed before me by the plaintiffs, I am satisfied that the defendant has acted in such a way as to put the due and proper administration of this estate in jeopardy, and, that his actions, omissions and failure to accept legal advice, confirm he is not a fit and proper person to carry out the duties which attach to the office of executor and trustee of this estate. 14 Accordingly, I consider that the grant of probate in favour of the defendant should be revoked. In doing so, I propose to make an order requiring the defendant to verify and file accounts as to his administration of the estate. Appointment of a New Administrator 15 The plaintiffs seek appointment of themselves as administrators notwithstanding that each of them has received benefits from the estate which must be accounted for. Each of them are now aware of and accept that they have a duty to account to the estate for the benefits that they have received. As Young J pointed out in Morgan v MacRae [2001] NSWSC 1017, at [21]-[24], if an executor is removed there must be a consequential order that requires the filing of accounts. 16 The plaintiffs submit that, in addition to being aware of and accepting a duty to account to the estate, all the other beneficiaries, apart from the defendant, have consented to their appointment as administrators of the estate. They are all now adults. 17 There will be some cost advantage to the estate if the plaintiffs are appointed administrators, rather than an outside person. The mere existence of an actual or potential conflict of interest is not, of itself, sufficient to ground a refusal to the appointment of an administrator. However, I am satisfied that in the present case, having regard to the plaintiffs' past consents and the existence of a clear conflict of interest if they are appointed, the case is sufficiently strong to require the appointment of an independent administrator with no conflict of interest. 18 The admitted conflict in this case is substantial because it will be the duty of the appointed administrator to obtain details of, and determine the extent of, any benefits received by the plaintiffs and the administrator will have to require them to account to the estate for the benefits. The conflict of interest apparent in this case is strong and manifest and overrides the economic considerations advanced by the plaintiffs in support of their appointment as administrators. Accordingly, I do not propose to appoint the plaintiffs as administrators of the Estate. I consider that there should be an independent person or persons appointed who are free from any conflict of interest. To enable this, I propose to stand the matter over for two weeks from today, so that the beneficiaries can endeavour to reach agreement on an appropriate independent administrator. Vesting of Property 19 The plaintiffs also seek an order vesting Lots 26 and 27 in Deposited Plan 1107525 in the administrator(s) to be appointed. Having regard to the fact that arrangements must be made for the appointment of an administrator other than the plaintiffs, there will be a period during which the title position in relation to the property can be more closely examined to determine what interests and claims, if any, affect this property. I would like to hear further submissions in relation to any outstanding interests or claims in relation to the two lots which are the subject of the vesting application. When that information is before me, I will be in a position to make a decision as to any orders which may be appropriate concerning vesting of that property. 20 Finally, in relation to the question of costs, I consider that the plaintiffs should be entitled to their costs from the defendant. 21 Subject to further submissions, the type of orders which I foreshadow as appropriate in this matter are as follows:

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