MATTER : In the matter of the Estate of ANASTASIOS KERIACULES CHALLIS late of 112 Sydenham Road, Doubleview, Western Australia, deceased

Probate and administration - Advice and directions to administrator regarding potential claims by estate - Turns on own facts

Administration Act 1903 (WA), s 45

Rules of the Supreme Court 1971 (WA), O 58 r 2(e) and (g)

Trustees Act 1962 (WA), s 6, s 92

Administrator : Mr R R Cywicki (5 October 2010) Mr P A Monaco (19 October 2010)

Estate of Erminia Agnes Rogers v Rogers [2009] WASC 358

Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66

Public Trustee re Estate of T [1999] NSWSC 1027

Re Atkinson deceased [1971] VicRp 73; [1971] VR 612

Re Estate of Vitalina Ferrari; Ex parte the Public Trustee as Plenary Administrator of the Estate of Vitalina Ferrari [1999] WASC 50

Szabo v Balogh [2007] VSC 232

Union Bank of Australia v Harrison, Jones & Devlin Ltd [1910] HCA 44; (1910) 11 CLR 492

1 This is an application in the estate of Anastasios Keriacules Challis. Mr Challis died on 17 July 2002. He died intestate.

2 Letters of administration were not obtained until 14 October 2008. The grant of administration followed orders made by Master Sanderson on 16 September 2008 including:

1. The court directs the Probate Registrar to issue a grant of letters of administration in common form in favour of Vic Vasil Challis of 129 Harborne Street, Wembley in the State of Western Australia, Company Director, and Ourania Challis of 4/41 Ord Street, West Perth in the State of Western Australia, Restaurant Worker, as joint administrators.
2. GV Lawyers are to be appointed the solicitors to act on behalf of the administrators to the estate.
3. GV Lawyers are to:

(a) seek clarification from A & T Challis in relation to the partnership debt owing to the estate;

(b) seek clarification from Pialligo Pty Ltd in relation to the debt outstanding to the estate;

(c) obtain sworn valuations from registered or licensed valuers for the properties at:

(i) 26 Kiro Street, Carabooda;

(ii) 543 Beaufort Street, Highgate;

(iii) Harold Street, Highgate.

(a) the accountant, Muriel Oliver, regarding debts owed to the estate; and

(b) Theodore Challis, in relation to the property situated in Carabooda and the debt owed to the estate.

1. GV Lawyers to obtain a rental valuation for the properties at 543 Beaufort Street and Harold Street, Highgate from 17 July 2002 to September 2008.

3 The reference to properties at Beaufort Street and Harold Street is confusing. It is the one property and is generally referred to as 543 or 545 Beaufort Street. I will refer to it as 543 Beaufort Street in these reasons.

4 The orders of 16 September 2008 included an order for liberty to apply. Pursuant to the liberty to apply, on 13 August 2010, solicitors for Ourania Challis (the applicant) applied for the following orders:

1. The court directs that Ourania Challis may take such action as an Administrator of the deceased's Estate as from time to time she may be advised to take with respect to the following:

(a) a debt allegedly owed to the Estate by Pialligo Pty Ltd;

(b) an application for an order to partition land and pursuant to Part XIV of the Property Law Act, 1969 (WA) against Olga Challis in respect of the property known as 543 Beaufort Street and Harold Street, Highgate;

(c) rental allegedly payable to the Estate in respect of 543 Beaufort Street and Harold Street, Highgate by the Ozymandias Unit Trust t/a Highgate Drycleaners,

and that she need not refer or report to Vic Vasil Challis with respect to such matters other than to from time to time inform him as to their status.

1. Freehills are to be appointed the solicitors to act on behalf of the Estate with respect to 1(a), (b) and (c).
2. Neither copies of nor the substance of any communications passing between Freehills and Ourania Challis with respect to 1(a), (b) or (c) shall be made available or communicated to Vic Vasil Challis until further order.

5 On 19 August 2010, programming orders were made, including an order that Vic Challis have leave to file any affidavit in opposition to the orders sought by the applicant by 7 September. The court file does not show whether any respondent appeared on the application for those orders. The matter was listed for a special appointment before the master, and was heard before me on 5 and 19 October 2010. On each occasion, Mr Penglis appeared for the applicant. On 5 October, Mr Cywicki appeared on instructions from GV Lawyers for the administrators; Mr Monaco of GV Lawyers appeared on 19 October. GV Lawyers also prepared and filed an affidavit of Vic Challis, which in substance opposed the orders sought.

6 Before dealing with the substance of the application, it is useful to identify the various people and entities referred to. The applicant Ourania Challis is the daughter-in-law of the deceased, Anastasios Challis. She is the widow of his son Kiro Challis, and executor of the estate of Kiro Challis. Kiro Challis died after his father.

7 Mr Vic Challis is the son of Anastasios and Olga Challis. He is the sole director of Ozymandias Pty Ltd (Ozymandias), and he and his mother are the sole directors of Pialligo Pty Ltd (Pialligo).

8 Mrs Olga Challis is the widow of the deceased. She is a director of Pialligo and also co-owner, with the estate, of the property at 543 Beaufort Street.

9 Mr Theodore Challis is the brother of the deceased, and joint owner with the estate of a property in Carabooda. The two brothers apparently carried on a partnership in the name A and T Challis.

10 Ozymandias is trustee of the Ozymandias Unit Trust which trades as Highgate Drycleaners, and operates from the property at 543 Beaufort Street. The shareholders in Ozymandias are Vic Challis and his brother Kiro. Accordingly, the estate of Kiro Challis owns half the shares in Ozymandias. There is no evidence before the court about who holds the units in the Ozymandias Unit Trust.

11 I have been told little about Pialligo. Vic Challis and his mother are the directors, and there are two shares - one held by Vic Challis and the other by the estate of his father. The solicitors for the administrators advised me that Pialligo owns the property in West Perth which is occupied by the applicant. It has no other assets.

12 At the conclusion of the first hearing, I requested the solicitors for the estate to file an affidavit informing the court of the current state of the administration. An affidavit sworn on 14 October 2010 by Mr Pino Anthony Monaco of GV Lawyers, advises:

1. Pursuant to the orders made by Master Sanderson in chambers on 16 September 2008, GV Lawyers have undertaken the following:

(a) written to A and T Challis in relation to the partnership debt owing to the estate. On 16 January 2009, we received a letter from Tolley Challis on behalf of his father, Theodore Challis, one of the partners of the A and T Challis Partnership, advising that there was no debt payable by the A and T Challis partnership.

(b) written to Pialligo Pty Ltd in relation to the debt outstanding to the estate. On 28 May 2010, the solicitors for Pialligo Pty Ltd, Lawton Lawyers, wrote to GV Lawyers and advised that Pialligo disputed the debt and sought full particulars of the debt. To provide the information requested by Lawton Lawyers, the administrators will need to obtain the details of the debt from the deceased's accountant, Ms Muriel Oliver of Forum Accounting.

(c) obtained sworn valuations from Quantia Valuations for the properties at:

(i) 26 Kiro Street, Carabooda; and

(ii) 543 Beaufort Street, Highgate and 3 Harold Street, Highgate.

(d) obtained rental valuation from Quantia Valuations for the properties at 543 Beaufort Street and Harold Street, Highgate for the period 17 July 2002 to September 2008.

(e) wrote to Olga Challis in relation to the property at 543 Beaufort Street and Harold Street, Highgate. Olga Challis owns a 50% interest in the property. GV Lawyers inquired as to whether Olga Challis was prepared to purchase the deceased's 50% interest in the property or join in the sale of the property with the estate. Olga Challis's solicitors, Lawton Lawyers, wrote to GV Lawyers and advised that Olga Challis would be entitled to a greater percentage of the net proceeds of the sale of the property and that she does not wish to sell the property. Lawton Lawyers also advised that there was no rent payable by Ozymandias Pty Ltd pursuant to an agreement between the owners of the property and Ozymandias Pty Ltd.

(f) wrote to Theodore Challis in relation to the property at 26 Kiro Street, Carabooda ...

(g) wrote to Muriel Oliver of Forum Accounting regarding the debts owed to the estate being the debt owed by A and T Challis and Pialligio Pty Ltd. On 3 February 2009, GV Lawyers received a letter from Muriel Oliver of Forum Accounting (the accountant for the deceased) advising that she could provide the information requested but she would require her fees to be paid. GV Lawyers forwarded the correspondence to both administrators and was advised by Mr Vic Challis that he was prepared to pay half of the costs to obtain the information but Ourania Challis, through her solicitors, informed GV Lawyers that she was not prepared to meet the costs to obtain such information.

13 The estate has no available cash funds. The two administrators have to date been paying the costs of the administration equally from their own funds.

14 Both the estate and Theodore Challis are willing to sell the property they jointly own in Carabooda. When that can be done, it is likely to realise considerable funds. The solicitors for the estate have written to a number of real estate agents asking them to provide submissions about how they would market the property. The marketing and sale is quite obviously still in very early stages. It is not possible to make an estimation of when funds are likely to become available.

15 Mr Monaco also advises that there is a dispute between the applicant and Pialligo as to the rent payable on the property she occupies in West Perth. He further advised that the West Perth property is Pialligo's only asset and would have to be sold if the estate was successful in recovering a debt against Pialligo.

16 Under s 45 of the Administration Act 1903 (WA):

The Court may make such order with reference to any question arising in respect of any will or administration, or with reference to the distribution or application of any real and personal estate which an executor or administrator or Public Trustee may have in hand, or as to the residue of the estate, as the circumstances of the case may require.

17 The power in s 45 is expressed in very broad terms. Further, unless the context otherwise requires, the provisions of the Trustees Act 1962 (WA) apply to an administrator, by reason of the definition of 'trust' and 'trustee' in s 6 of that Act. Under s 92 of the Trustees Act:

Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.

18 In relation to applications by a trustee for the direction of the court, I adopt the summary of Gillard J in Re Atkinson deceased [1971] VicRp 73; [1971] VR 612, 615:

Where an executor or trustee is in doubt as to the course of action it should adopt, it is always entitled to take the opinion of the court as to what it should do. If in doubt as to whether or not it should take legal proceedings, then it is entitled to apply to the court for directions on the matter: see Halsbury's Laws of England, 3rd ed, vol 38, pp 946 and 1023-1024; in Re Brogden (1888), 38 Ch D 546, at p 556; [1886-90] All ER Rep 927; Chettiar v Chettiar (No. 2) [1962] UKPC 1; [1962] 2 All ER 238, at p 245. If the executor or the trustee then followed the direction of the court, it would be protected from any claim by a beneficiary or creditor arising from its action or inaction in accordance with the court's direction: see Underwood v Hatton [1842] EngR 371; (1842), 5 Beav 36; 49 ER 490; Smith v Smith (1861) 1 Dr & Sm 384; 62 ER 426. In cases of real doubt, the proper course for a personal representative or trustee to adopt is to seek the court's decision as to whether or not action should be brought, otherwise the representative or trustee might find itself paying the costs of any proceedings which a court might subsequently say were not 'properly incurred': see Re Beddoe; Downs v Cottam, [1893] 1 Ch 547, at pp 558 and 562.

See also Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 [61] - [74].

19 The application was brought on under the liberty to apply in the Master's orders of 16 September 2008. The process chosen has caused problems. GV Lawyers were appointed to act for the administrators under the orders of Master Sanderson. In preparing and filing the affidavit of Vic Challis, and appearing on behalf of the administrators, they acted consistently with those orders. On the other hand, the applicant is one of the administrators. She is represented by another firm of solicitors, and is seeking orders inconsistent with GV Lawyers continuing to act on behalf of the administrators, at least in relation to the matters specified in the application.

20 Further, the applicant seeks orders with significant implications for the beneficiaries. The beneficiaries have not been served and were not before the court. In my opinion, should a further application of this nature be made in this administration, it should not be under the liberty to apply, but should be commenced by originating summons under Rules of the Supreme Court 1971 (WA), O 58 r 2(e) and (g). Alternatively, should the applicant seek orders that the grant of administration to Vic Challis be revoked, that application would be dealt with under O 73, dealing with contentious probate proceedings. An application to the court under O 73 would normally be commenced by summons.

21 The orders sought have important implications for the administration of the estate and the interests of the beneficiaries. In the circumstances, had I been persuaded that orders of the kind applied for should be made, I would have required the application to be served on the beneficiaries before making such orders.

22 For the reasons appearing below, however, my opinion is that no orders should be made. The decision I make today would not preclude a further application for directions, or an application to revoke the grant of administration.

23 The substance of the application is that the estate has three prospective claims: against Mrs Olga Challis for partition of the property at 543 Beaufort Street, Mount Lawley which she owns jointly with the estate; against Ozymandias for unpaid rent for its use of the property at 543 Beaufort Street; and against Pialligo for a debt.

24 The applicant draws attention to three areas in which her co-administrator, Vic Challis, has interests that potentially conflict with his duties as administrator in relation to these prospective claims: he is a director of Pialligo; he is a director of Ozymandias; and Olga Challis is his mother.

25 The applicant claims further that Vic Challis has acted in a way that conflicts with his duties as an administrator. In particular, as director of Pialligo, he instructed Lawton Lawyers in relation to Pialligo's response to the administrators regarding the debt said to be owed to the estate by Pialligo.

26 On the basis of these conflicts, the applicant seeks a form of 'quarantine' of Vic Challis, excluding him both from participation in decisions about actions on the claims, and from information and advice about those decisions. The applicant does not apply for an order removing Mr Challis as an administrator. She acknowledges that there would be practical difficulties in the removal of one administrator. In particular, there are beneficiaries who might not want the applicant to be the sole administrator.

27 The application, at least by implication, also affects the position of GV Lawyers as solicitors to the administrators. Again the applicant does not ask for an order revoking the orders of Master Sanderson appointing GV Lawyers. But in submissions, she says that they also have conflicts in acting for the administrators. Because of the view I have formed about this application, it is not necessary to consider these matters in any greater detail.

28 The general position is that one of several administrators or executors may act independently of the other: Union Bank of Australia v Harrison, Jones & Devlin Ltd [1910] HCA 44; (1910) 11 CLR 492; Szabo v Balogh [2007] VSC 232 [12] - [13]; and see Heydon JD and Leeming MJ, Jacobs' Law of Trusts in Australia (7th ed, 2006) [243]. The applicant may act independently. She does not require either the quarantining of Mr Challis, or an order of the court permitting her to do so.

29 The issue in this application is not whether the applicant can act independently of Mr Challis, but whether the court should give directions that she 'may take such action as an administrator of the deceased's estate as from time to time she may be advised to take' (emphasis added) with respect to the three prospective claims. I am not satisfied that orders to that effect should be made.

30 The applicant has not put sufficient material before the court for it to be satisfied that any of the three prospective actions would be for the benefit of the beneficiaries as a whole, and otherwise would be prudent to now pursue. The court is not bound to investigate the evidence and make a finding as to whether the proposed proceedings would be successful: Re Atkinson, deceased (616). The question is whether the litigation is justified: Public Trustee re Estate of T [1999] NSWSC 1027 [7]; Re Estate of Vitalina Ferrari; Ex parte the Public Trustee as Plenary Administrator of the Estate of Vitalina Ferrari [1999] WASC 50. There are competing considerations: the prospect of success; the potential to deplete the estate; costs should the application be unsuccessful; and what will be gained if the action is to succeed.

31 If the court makes the orders sought, the applicant would be protected from any claim by a beneficiary or creditor of the estate arising from her actions in accordance with the court's direction. This is an important protection for the applicant as an administrator. Proceedings for judicial advice have the no less important purpose of protecting the interests of the trust: Macedonian Orthodox Community Church [72]. On the material now before the court, I am not in a position to determine whether the proposed proceedings are justified.

32 More fundamentally, both the Administration Act and the Trustees Act provide for judicial advice and directions. Whether proceeding on any of the particular claims is justified is a question for the advice of the court. It is not appropriate to make orders which would give that function to those who may advise the applicant from time to time.

33 Finally, the limited relief sought of 'quarantining' Mr Challis is unsatisfactory. If he is not capable of acting as an administrator, the grant of administration should be revoked. No one is asking for an order in those terms. Assuming the court has power to remove an administrator of its own motion (see Estate of Erminia Agnes Rogers v Rogers [2009] WASC 358 [14] - [31]), I am not prepared to act of my own motion in the circumstances of this case.