Fairbairn v Varvaressos & Ors [2009] NSWSC 615 | Case summary

1 On 9 April 2009 I gave judgment in proceedings 1198/1995: [2009] NSWSC 272. I will assume that the reader is familiar with the facts recited in that judgment. In those proceedings the Plaintiff sought a declaration as to the construction of the will of the late George Varvaressos, who died on 17 April 1961 leaving a will dated 1 April 1960. 2 The question was, essentially, whether, in the events which had happened and upon the true construction of the will, gifts of residue to a daughter of the deceased, Iris, and son of the deceased, Demetrius, had lapsed because those beneficiaries predeceased a life tenant, Kitty, and fell into residue, or whether the interests of those beneficiaries vested in interest as at the date of death of the deceased, and were subject to defeasance upon a contingency, namely, that Kitty died leaving surviving children. I held that, on the true construction of the will, the interests of Iris and Demetrius had vested in interest, and that, accordingly, the residuary bequests to them did not fall into residue. 3 Joanna has appealed from that judgment and the appeal is pending in the Court of Appeal. The subject matter of the present dispute is a home unit at Rose Bay which was purchased out of the proceeds of sale of a property which had been devised by the deceased upon a life estate to Kitty, thereafter as to one half upon specific bequests and as to the other half upon the residuary bequests. 4 There are two titles to the Rose Bay unit, one for the unit itself and one for the garage. The Plaintiff had placed a caveat on the two titles to the property, claiming an interest as beneficiary under the deceased's will. The Plaintiff's caveats are impeding the sale of the property, which is to be completed on 1 July 2009. 5 When the matter came before me on 15 June 2009, Mr Doherty of Counsel, who appears for Kitty, advised that not only did he oppose the extension of the caveats but that he would be seeking an order that the caveats be removed. On that occasion Mr Doherty handed to me and to Ms Pentelow of Counsel, who appears for Joanna, an outline of his submissions, the essence of which was that as the deceased's estate has not been fully administered, the Plaintiff, as a residuary beneficiary, could not have a caveatable interest in specific realty which may form part of the residuary estate, that is, the Rose Bay unit. 6 I declined to extend the caveats. The caveat in respect of the unit has lapsed because a lapsing notice had been served. No lapsing notice had been served in respect of the caveat on the title to the garage and it is still on the title. 7 The matter was adjourned until today. Ms Pentelow indicated on the last occasion that the Plaintiff complained not only that the First Defendant was dealing with the Rose Bay unit without authority, but that he had sold the property at an undervalue, so that he was in breach of his duty to realise the assets of the estate to their best advantage. 8 The matter was adjourned until today to allow the Plaintiff to put on a pleading enunciating her grounds of complaint and the facts upon which she relied. The matter has come on today for hearing but no such pleading had been filed by the Plaintiff. In those circumstances, I take it that at least as far as today's proceedings are concerned, no ground is put forward to restrain the sale of the Rose Bay unit on the basis that the sale is for an undervalue, or that the First Defendant is not authorised to enter into that contract. 9 The question for debate is this: the Plaintiff says that if the appeal from my earlier judgment is successful, she will be found to have a share of the residuary estate which includes the lapsed gifts to Iris and Demetrius. The principal asset of the residuary estate is now the Rose Bay unit. The Plaintiff says that the sale of the unit should be restrained by caveat because the extent of her interest in the proceeds of sale is not yet clear and will be determined by the fate of the case in the Court of Appeal. The Plaintiff, therefore, seeks to maintain the caveat on the title but, in the alternative, would agree to the sale of the unit proceeding upon the whole of the proceeds of sale being retained in a trust account to await the outcome of the appeal. 10 The First Defendant, on the other hand, is prepared to undertake to the Court to hold in a trust account two-thirds of the proceeds of sale pending determination of the appeal. He says that there is no basis upon which the Plaintiff can claim a greater than two-thirds share of the residue, and, therefore, of the proceeds of sale of the unit, whatever occurs. 11 However, the First Defendant says that the Plaintiff has no caveatable interest in the Rose Bay unit and is not entitled to maintain that caveat on any ground. The First and Second Defendants, therefore, have filed a Notice of Motion, which I have made returnable instanter, granting them leave to withdraw their Submitting Appearances which had earlier been filed, granting them leave to file a Notice of Appearance, dispensing with service and seeking an order that the Plaintiff remove the caveat over the title to the garage of the Rose Bay property pursuant to s 74MA(2)(a) Real Property Act 1900 (NSW). 12 Ms Pentelow concedes correctly, in my opinion, that the deceased estate is not fully administered. This is obviously the case as there is a life tenant still living , who is in possession of the Rose Bay property. The life tenant proposes that the property be sold and that the proceeds of sale be used to provide alternative accommodation for her. While it is clear that the life tenant, Kitty, is elderly, it is by no means clear how long she will live, and it would be speculation to form any view of the life expectancy of Kitty. 13 Kitty requires the proceeds of sale of the Rose Bay unit to be used to provide more suitable accommodation for her in her present condition. Accordingly, the life estate will have to continue to be administered, probably for some time. What will be comprised in the residuary estate at Kitty's death remains to be seen. 14 It is very well established that a residuary beneficiary does not have a caveatable interest in any asset which may form part of the residue until the administration of the estate is complete: see, for example, the classic passage from Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694, at 707ff; see also Guardian, Trust & Executors Co of New Zealand Ltd v Hall ([1938] NZLR 1020) in which the basis of this proposition is explained. 15 It seems to me quite clear, therefore, that the only interest which the Plaintiff has in the residuary estate is to have the estate duly administered by the First Defendant; that does not confer an interest in a specific asset, namely, the Rose Bay unit, nor in its proceeds of sale. The Plaintiff therefore has no caveatable interest in the Rose Bay property and should be ordered to remove the caveat on the title to the garage of the unit. 16 I deal now with the general question as to whether there should be any restraint on the First Defendant disposing of the proceeds of sale of the unit, which includes the garage, pending determination of the appeal from my earlier judgment. Strictly speaking, as I have said, the Plaintiff has no interest in the proceeds of sale of the unit either sufficient to support a caveat or to warrant the granting of any injunctive relief as to the disposition of the unit or the proceeds of sale. The Plaintiff has only a right, as I have explained, to due and proper administration of the estate. No evidence has been led to suggest that the First Defendant will deal with the proceeds of sale otherwise than in accordance with the terms of the will which he is administering. 17 I have asked Mr Doherty whether, in view of the rulings which I have made so far, his clients continue to proffer an undertaking to the Court to retain in trust pending the determination of the appeal two-thirds of the proceeds of sale of the Rose Bay unit. Mr Doherty informs me that his clients do proffer that undertaking. I have held that the Plaintiff would not be entitled to the retention, pending appeal, of any sum by the First Defendant, but I think it is wise on the part of the First Defendant in the particular circumstances of this case to proffer that undertaking to avoid the possibility of further disputation and unnecessary issues arising. It is better that the issue now pending in the Court of Appeal be resolved without any further complication. 18 In those circumstances, then, I propose to accept the undertaking to the Court proffered by Mr Doherty. I note that that undertaking was proffered prior to the matter coming on for hearing today but that the Plaintiff insisted that the whole of the proceeds of sale be retained in trust pending determination of the appeal. 19 I will make the following orders. I grant leave to file in Court, returnable instanter, a Notice of Motion on behalf of the Plaintiff in terms initialled by me, dated today, and placed with the papers. The original signed by the Plaintiff's solicitor has not yet been filed, but I will proceed on the basis that a Notice of Motion, duly signed, will be filed in the Registry as soon as practicable. 20 I grant leave to file in Court a Notice of Motion filed by the First and Second Defendants, dated today, returnable instanter. 21 I decline to make the orders sought in paragraphs 3, 4, 5 and 6 of the Plaintiff's Notice of Motion. 22 I make orders in terms of paragraphs 4, 5, 6, and 7 of the Notice of Motion filed on behalf of the First and Second Defendants. 23 I should now explain the reasons why I have refused an application for an adjournment made at the beginning of this hearing by Ms Pentelow. 24 Ms Pentelow said that she was not in a position to meet the argument of Mr Doherty which is raised by the Notice of Motion filed today on behalf of the First and Second Defendants. However, I note that on 15 June 2009 Mr Doherty supplied a copy of his written submissions to Ms Pentelow and to myself and outlined the basis of the First Defendant's opposition to extension of the caveat. It is as I have explained and as I have dealt with today. In my opinion, Ms Pentelow was properly put on notice that on this occasion the Plaintiff would be faced with a submission that the interest of the Plaintiff in the residuary estate could not support in law a caveatable interest in the Rose Bay property. 25 The other basis upon which Ms Pentelow applied for an adjournment was that she wished to put on some additional evidence supporting the Plaintiff's claim upon an intestacy under the deceased's will to the whole of the proceeds of sale of the Rose Bay unit. 26 I endeavoured in the course of discussion with Ms Pentelow to ascertain the basis upon which the Plaintiff claimed to be entitled to one hundred percent of the proceeds of sale. I have to say that my endeavours to understand the basis of such a claim were unsuccessful. I still do not understand how it is under the terms of the will, or under intestacy, that the Plaintiff could possibly claim one hundred percent of the proceeds of sale of the Rose Bay unit. 27 I outlined to Ms Pentelow in the course of discussion the nature of the evidence which I would have expected to have been filed in support of a submission that the Plaintiff was entitled to one hundred percent. That evidence would largely concern who would be the next of kin who would take on an intestacy of the residuary bequest. That evidence ought to have been filed some time ago, if any serious claim was to be made by the Plaintiff that she was entitled to one hundred percent of the Rose Bay unit or its proceeds of sale. 28 This dispute as to the administration of the deceased's estate has now been proceeding for a very long time. This matter arose from the earlier matter 1198 of 1995. It is in the interests of justice that the resolution of disputes between those interested in this estate be brought to a conclusion as expeditiously as possible. 29 I think that the Plaintiff has been given proper notice of the issues which would be debated today. The fact that the Plaintiff had not filed the evidence which I pointed out to Ms Pentelow would need to be filed is not the fault of the Defendants. It is not in the interests of justice that the matter be further adjourned, particularly as I have held that whatever the interests which the Plaintiff might acquire on an intestacy they would not at present be sufficient in law to support a caveat on the title to the Rose Bay property. 30 For these reasons, the remainder of the Plaintiff's Notice of Motion filed in Court today is dismissed. I have made the orders pursuant to the Defendants' Notice of Motion which I have earlier enunciated. Costs

31 Ms Pentelow resists a costs order on a number of bases. Firstly, she says these proceedings were necessary in order to procure from the First Defendant an undertaking to the Court not to disburse two-thirds of the proceeds of sale of the unit pending determination of the appeal. Therefore, she submits, on that ground alone the Plaintiff should not be ordered to pay the costs of proceedings. I disagree. The proceedings were brought, firstly, to extend a caveat and then, indirectly, to maintain a right to insist upon retention of the proceeds of sale pending the appeal. For the reasons which I have given, those claims fail. 32 The First Defendant has proffered an undertaking to the Court to retain two-thirds of the proceeds of sale, not by reason of compulsion or to avoid some injunction but, as I have earlier pointed out, really as a matter of prudence to prevent further, unnecessary disputation. It is, in other words, a voluntary and precautionary act on the part of the First Defendant, not an act impelled by right or obligation towards the Plaintiff. 33 Ms Pentelow also said that it was not until a very short time ago that the Plaintiff discovered that the First Defendant had obtained Letters of Administration of the deceased estate. She says that the Plaintiff should have some opportunity to investigate that matter. I do not understand what matters require investigation. The grant of Letters of Administration to the First Defendant has been produced to the Plaintiff. There is no evidence to suggest that the grant was improperly obtained or can be set aside for any reason. 34 Another basis upon which Ms Pentelow resists a costs order is that if these proceedings had not been commenced by the Plaintiff, then the Rose Bay property would have been sold, the proceeds paid to the First Defendant and then dissipated so that the Plaintiff would have been left without anything in the estate. I need only say there is not the slightest evidence in support of that assertion. There is no pleading in support of that assertion. It is simply naked assertion. I have no basis upon which to suppose that the First Defendant would deal with the estate contrary to law. Accordingly, it seems to me that no basis has been made out by the Plaintiff's Notice of Motion. The Plaintiff should pay the Defendants' costs of the Motion. I so order. 35 Mr Doherty seeks an order for indemnity costs as and from 15 June 2009 in reliance upon a letter sent by his instructing solicitors, Mervyn Finlay Thorburn & Marshall, to the Plaintiff's solicitor, Mr Stern. In that letter the Defendants' solicitor provides copies of various documents sought by the Plaintiff's Counsel, and makes an offer that the Plaintiff's concerns about the sale of the Rose Bay unit can be addressed by the First Defendant "giving an undertaking to the Court that the net proceeds of sale of that share of the property in his name, that is two-thirds, will be held in trust pending the Court's determination as to entitlement provided that the Plaintiff files her appeal in the required time". 36 The Plaintiff's solicitor responded by letter dated 23 June 2009. He said that the Plaintiff required the whole of the sale proceeds, not just two-thirds, to be held on trust pending hearing of the appeal. It seems to me quite clear that there was an offer to compromise the Plaintiff's application on the basis that two-thirds of the sale proceeds would be held in trust pending a decision by the Court of Appeal. That offer was rejected by a counter-offer made by the Plaintiff's solicitor on 23 June 2009. 37 I do not think that the account given by Ms Pentelow of a conversation between herself and Mr Doherty, even taken on its face, amounts to a withdrawal of the Defendants' offer because, according to Ms Pentelow, the conversation occurred on 26 June, after Mr Stern had already rejected the Defendants' offer contained in the letter of 15 June. 38 The Plaintiff has not achieved in this application any better than the Defendants' offer by letter in their letter of 15 June 2009. In light of the fact that the basis of the Defendants' opposition to the Plaintiff's motion was made plain in written submissions provided on that date to Ms Pentelow, the Plaintiff's rejection of the Defendants' offer was unreasonable. The appropriate order is that the Plaintiff pay the Defendants' costs of the two motions on the indemnity basis as and from 15 June 2009.

Fairbairn v Varvaressos & Ors

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