(ii) Obstruction of administration of estate
101 There was evidence by the executor as to the difficulty in exercising his role on behalf of the estate viz-a-viz the shareholding of Lavender Estates. It is not disputed that Ms Gibson was in sole control of Lavender Estates (or at least its bank account) at all relevant times. Mr Haselgrove became a director in September 2008 but Ms Gibson has refused to sign a document giving the executor access to the company's cheque books and funds (saying he is in Adelaide and has no functional role in the company's operation). The evidence is that Ms Gibson has also obstructed the efforts of the executor to appoint an alternate director, at least insofar as the particular alternate director the executor was seeking to appoint (he being the deceased's brother-in-law and someone with whom Ms Gibson has refused to deal - she saying this arrangement was, for personal reasons, highly unworkable). I should note, however, that Ms Gibson was apparently prepared to nominate other suitable alternative directors.
102 I think it is a matter of concern that the affairs of the company have reached this apparent impasse. Certainly, whatever the position Ms Gibson and the deceased may have adopted prior to his death in relation to the company, it is not appropriate for Ms Gibson to continue to pay funds out of Lavender Estates for her personal benefit or (without the consent of the executor) otherwise than in the ordinary course of the company's business as properly understood.
103 It was submitted that Ms Gibson had adopted a deceptive attitude in correspondence with the executor and the beneficiaries, in order to obstruct the executor and the beneficiaries from seeking, or obtaining, any control over the Lavender Estates funds so that she could continue to expend company funds on personal matters. This submission was made first by reference to a letter dated 8 May 2007, in which Ms Gibson's lawyers had responded to the executor's lawyers that the finance to carry out the works in respect of Bobra Glen had been obtained by her (rather than by Lavender Estates) and was in the order of $140,000, the renovation being expected to cost $80,000, (whereas in fact as at May 2007 at least $293,000 had been paid out by Lavender Estates in relation to those works) (see pages 18 and 27 of the Haselgrove bundle). Clearly, this was misleading by omission. Whether it was for the purpose suggested by Mr Harris is an inference available to be drawn.
104 Similarly, it is said that deception was practised on the solicitor acting for the beneficiaries insofar as Ms Gibson's lawyers wrote that the debts of Lavender Estates incurred in the deceased's lifetime were in excess of $2 million whereas the balance sheet for Lavender Estates (Ex P2/D) showed debts as at June 2008 of $1.62 million (a sum significantly less than the $2 million) and these had not been debts incurred during the deceased's life, at least insofar as some $293,000 had been incurred in relation to the Nana Street property renovations in the period from November 2006 to May 2007. Ms Gibson conceded that this was incorrect. Again, it seems there would be an available inference that Ms Gibson was seeking to present an incomplete picture of events.
105 I think an inference might be drawn that a less than complete picture was being put forward in order to stave off attempts by the executor/beneficiaries to ascertain the precise position with Lavender Estates, at least until the work on the Nana Street property was completed. Certainly, Ms Gibson had no intention of stopping work on the Nana Street property (and made that clear to Mr Haselgrove's lawyers), she seeing it as vital that it be made "viable", describing it as a building site (T 46).
· Credit
106 Mr Wilson submitted that insofar as any submission was made against Ms Gibson as to the diminution of the assets of the estate in this respect, the court should also take into account the significant voluntary unpaid contribution Ms Gibson had made to the management of Broadview Apartments and the affairs of the company since the date of death. (The executor himself said in cross-examination that he appreciated Ms Gibson's efforts, but maintained she should have paid tax as an employee if she was to be treated as an employee.) Mr Harris points to the fact that the Lavender Estates' accounts show that moneys were paid for a property manager/consultant by way of management fees and for staff wages and that it could not be assumed that Ms Gibson had made a substantial contribution to the property. Moreover, Ms Gibson stood to receive a personal benefit from such a contribution.
107 It was submitted by Mr Harris that I should make adverse findings in relation to Ms Gibson's credit insofar as there were many things which were incorrect in her affidavits and which he said demonstrated at best a "cavalier" attitude towards the preparation and placement of evidence before the court. Ms Gibson's evidence was that the documents, or a number of the documents, which were exhibited to her affidavit had not been seen by her at the time that she swore the affidavit. In a number of instances there were discrepancies on the documents that were exhibited to the affidavits (such as whether her sister remained a shareholder of Pitlochary (as the recent ASIC search shows) or had been paid out of that company). (In that particular instance, Mr Wilson notes, that insofar as the Janette Gibson material is concerned, this would be a submission against interest on the part of Ms Gibson since if Janette Gibson still owned an interest in Pitlochary it would mean that Ms Gibson's financial position was even worse than she had stated.) It is a matter of concern that it would seem Ms Gibson initially affirmed her affidavit without having before her some or all of the very documents said in the affidavit to be exhibited to her.
108 There were a number of errors and inconsistencies between her affidavit evidence and the documents to which Mr Harris took Ms Gibson in the witness box and she conceded in a number of instances that her affidavit evidence was incorrect (see T 24 re sale price of her sister's house; T 26 as to the dates of the deceased's bankruptcy - though I note that her evidence seems to be consistent with that of Mrs Delmont in this regard; T 31 as to the amount paid from the Pitlochary sale proceeds into Broadview; T 36 as to her full time wage over the period from 1999; T 65 as to the date her sister sold out of Pitlochary; T 77 as to her explanation for the response to the request for information as to Nana Street construction costs; T 79 as to the response to the lawyers acting for the beneficiaries). Moreover, her evidence as to the loans taken out and moneys expended on various properties was at times contradictory (see T 83/85).
109 It may be that the inconsistencies and vagueness in her accounts of the financial details are a product of the fact that the deceased (not Ms Gibson) had previously been responsible for administrative matters, rather than of any intent to mislead the court. However, it seems to me that I am unable to place reliance on Ms Gibson's generalised assertions as to what money come from, or went to, where; nor can I necessarily place much weight in the accountants' loan entries - loan accounts seemingly being re-named (and debts discharged), as Counsel put it, apparently on the stroke of a pen. That is not to say that there was no contribution by Ms Gibson to the deceased's property accumulation, but it does make it difficult to be clear as to precisely how much of the expenditure which was channelled through Lavender Estates was expended for its benefit as opposed to Ms Gibson's personal benefit at the end of the day.
110 For example, the evidence as to the payment out of Ms Janette Gibson was based solely on assertions as to the taking out of an ANZ Bank loan by the deceased and Ms Gibson jointly (see T 67/68) - there being no documentary material in support of that. The evidence was put by way of affidavit having been filed only on 20 May 2009, too late (as Mr Harris pointed out) for there to be any sensible opportunity to issue subpoenas or notices to produce in relation thereto. No evidence was given by Ms Janette Gibson, who was in court during the hearing.
111 In terms of credit generally, however, I should say that Ms Gibson gave what I considered to be a fair (and empathetic) account of the deceased's relationship with his family; she acknowledged and respected the ongoing familial obligations of the deceased.
112 Whatever else be the case however, it seems clear that Ms Gibson has already received a significant benefit out of estate moneys. While the estate does have a half interest in Nana Street property, there seems to me a real question as to how much the amounts paid in respect of Nana Street renovations have gone beyond asset preservation and in fact amount to over-capitalisation; and, in relation to the mortgage repayments, as the estate's interest in the company is 62% (whereas liability for the mortgage was only 50%) any moneys expended out of Lavender Estates for the mortgage fees exposed the estate to a disproportionate burden of those mortgage payments.
113 Therefore, while I do not regard Ms Gibson's actions in this regard as falling within disentitling conduct, as that is understood in this context, nevertheless I consider it relevant in assessing what provision should now be made for Ms Gibson that she appears to some extent to have diminished the assets of the estate by diversion of funds from Lavender Estates accounts to her personal use and in relation to the Nana Street property (albeit that the estate might obtain some benefit out of the latter). She did so knowing (as she accepted in cross-examination) that the position had fundamentally changed since the deceased's death and she appears to have continued to expend funds (for example on Nana Street and Broadview Apartments) even over the executor's objections.
114 In summary, it appears that Bobra Glen was purchased with a National Australia Bank loan to Ms Gibson and the deceased jointly for $250,000 and the balance from Lavender Estates. Lavender Estates paid for renovations, mortgage repayments and the couple's living expenses while at Bobra Glen. As at June 2006, the Lavender Estates' accounts showed a $403,000 loan in respect of Bobra Glen (which would, it seems, include the original $250,000 National Australia Bank loan).
115 The Nana Street property was purchased in November 2006 (at a time when the Lavender Estates expenditure on Bobra glen was shown as $400,000) by way of a loan from National Australia Bank to Ms Gibson and the deceased drawn down to $350,000 (Ms Gibson in evidence said this was "extended … with the loan over Bobra Glen" (T 83) and by way of the $270,000 private Coombs/Varga loan, although Ms Gibson also says some of that went into Broadview Apartments development).
116 Lavender Estates paid the mortgage repayments and at least $293,000 on renovations for Nana Street (although Ms Gibson's evidence was confusing about the source of all moneys for these renovations, that seems ultimately to have been accepted by her - see T 82-84).
117 When Bobra Glen was sold the proceeds of sale were paid to Lavender Estates' National Australia Bank account and in its books the Bobra Glen loan was thereafter shown as a loan - Fawcett Street (ie Broadview Apartments). Therefore, after the date of the deceased's death any indebtedness of Ms Gibson and the deceased to the Bank remaining in relation to the Bobra Glen/Nana Street borrowings seems to have been treated in the Lavender Estates accounts as referable to Broadview Apartments.
118 While I accept that the estate may have gained a benefit out of Ms Gibson's managerial efforts in relation to Broadview Apartments, the value of those efforts would be very difficult to quantify (and were also for her benefit). Further, it is by no means apparent that had the executor been given any role in determining whether Ms Gibson's services were required he would have agreed to them. In any event, the bulk of the company expenditure since the deceased's death seems to have been on the Nana Street property.
· Conduct of Executor
119 Complaint was made by Mr Harris as to the manner in which the executor had conducted matters. There was significant delay in the initial appointment of the executor (only a small portion of which could have been referable, contrary to the executor's suggestion in the witness box, to the uncertainty as to whether Mrs Delmont would renounce probate - since she did so in July 2007).
120 It would appear that part of the reason for the delay in the appointment of the executor (as was accepted or acknowledged by Mr Haselgrove), and perhaps a significant part, was his wish to ensure that arrangements were put in place for payment of his fees before any steps were taken in relation to his executorship. Mr Haselgrove suggested that the delay arose due to the need for him to ascertain Mrs Delmont's position as to acceptance of the executorship. However, he was notified of her position close to 12 months before he applied for probate; during which time it would seem he was occupied carrying out research in relation to the company "investigating the whole matter of the estate and the ability of me to act as director" (T 121), his role and the interpretation of the will (that being straightforward in its terms) (T 124) and what needed to be done in relation to the estate, seeking agreement as to his fees, and engaging in correspondence with Ms Gibson's solicitors in his capacity as a prospective executor. Mr Haselgrove explained this as being on the basis that in an estate involving assets outside South Australia where he resided it was necessary for him to make those arrangements in advance. That may well be prudent for him personally from a business perspective. However, I do not consider that his evidence reflected well on him in this regard. The fact is that Mr Haselgrove accepted that there was some urgency in an executor being appointed to the estate because he knew at the time that the major asset of the estate was its majority shareholding in Lavender Estates that Ms Gibson was in control of the company funds, and that a substantial asset of the estate was at risk (insofar as he believed there was inappropriate expenditure by her) in those circumstances and yet there was a significant period of delay before Mr Haselgrove sought appointment as a executor. There is of course an ability for executors to claim commission in the ordinary course without any need for consent by the beneficiaries or potential claimants.
121 Costs were incurred over a substantial period of time in correspondence on behalf of Mr Haselgrove which it was suggested had been a complete and utter waste of time (such as complaints made at the fact that Ms Gibson had (quite properly) notified ASIC of the deceased's death) it being suggested that she had "wrongly removed" the deceased as a director of the company - something which Mr Haselgrove sought in evidence to explain by suggesting (inconsistently with what had been written, presumably on his instructions) that he had been raising a complaint as to the company being carried on as one director company.
122 Mr Haselgrove also complained in relation to the circumstances in which the Broadview Apartments land was listed on a number of occasions by Ms Gibson for sale (without consultation with him). Apart from the fact that the time at which this complaint was first made was before Mr Haselgrove had accepted the position as executor and sought probate in respect of the will (it being asserted that Mr Haselgrove had no duties at that stage and Mr Haselgrove making a point at the time of the fact that he had not yet accepted probate), nevertheless there was correspondence and threats by Mr Haselgrove in relation thereto. Mr Haselgrove's affidavit said that his solicitors had written instructing the property to be removed from the market, although when reference was made to the terms of the letter in fact it did not go so far as that.
123 It was submitted that I should take this course of conduct into account in determining whether any costs or the level of costs should be recoverable by the executor. In particular, it was stated that the executor should not recover from the estate his costs of the affidavit sworn by him on 15 October 2008 which itemised the correspondence between the parties in some detail in respect of the conduct of Ms Gibson which it was alleged had caused a diminution (albeit unspecified in quantum) in the value of the estate. Mr Lawson, in response, contends that this was evidence which was filed in the context of an earlier expedition application and that it is not appropriate for there to be any reduction in the level of costs recoverable by reference to this.
124 It seems to me that Mr Haselgrove was in a position of some difficulty in balancing the interests of the estate and the wishes (seemingly changing from time to time) of the beneficiaries. Insofar as criticism is made of his conduct and in relation to delay in effecting the sale of the Broadview Apartments, some of this appears to be explicable by the fact that at least at some stage one or more of the beneficiaries was (or were) not in favour of the sale of the Broadview Apartments. I note also that as executor and trustee he was given the ability, amongst other things, to postpone any sale of the assets and to transfer the property in specie.
125 On balance, I do not propose to make any deduction from the costs which would ordinarily be recoverable by the executor on an application of this kind. However, I note that these should not include any costs in relation to the administration of the estate. In due course it may be necessary for the reasonableness of some of the costs apparently incurred by Mr Haselgrove to be considered by the court.
126 One matter, in relation to the executor's position, which does seem to me to be relevant in considering the substantive application before me is the suggestion by the executor (T 136/137) that, before finalising the estate he would need thoroughly to investigate the affairs of Lavender Estates (in particular, to verify all cheques drawn on the Lavender Estate accounts from the date of the deceased's death) and that this might then cause him to make further investigations (it would seem as to any claims the company may have against third parties, presumably including Ms Gibson, in relation to the running of the company's affairs while she has been in control of the funds of the company). Counsel for the executor in fact opened by submitting that any order for provision for Ms Gibson should be conditional upon her providing a full accounting to the estate in relation to her dealing with company or estate funds, to ascertain the benefits obtained by her personally. Ms Gibson was cross-examined by Mr Lawson as to whether she would be in a position to comply with such an order.
127 Mr Haselgrove also apparently intends "to research the legal avenues available in order to obtain control of, or access to, the company's bank accounts if the cooperation of Ms Gibson is not forthcoming following the hearing" and would need full details of all cheques "that might lead to me wanting to know other things" (T 132, T 134).
128 Mr Haselgrove was quite adamant that, as executor, he had to take on board the beneficiaries' interests and said with great emphasis that "I don't propose to sign off on any of the accounts for this company until I've satisfied myself that they are in proper order".
129 In circumstances where it seems likely that all creditors' claims will be able to be met out of the sale of the Broadview Apartments, and where neither Mrs Delmont nor Ms Gibson (nor for that matter at least one of Mrs Delmont's sons, who was present in court and able to give instructions) is keen to see the costs of administration of the estate escalate in a lengthy fact finding mission for which Mr Haselgrove (whose accounting skills are said to come from the "knocks of hard life" (T 137)) will no doubt wish to be remunerated, I see merit in the suggestion put forward by Senior Counsel both for Mrs Delmont and for Ms Gibson, that an order for provision should be made out of the estate so as to allow Ms Gibson to retain all benefits obtained personally by her through the company (provided that does not prejudice any creditors).
130 Moreover, insofar as Mr Haselgrove seemed quite unmoved in the witness box by his acknowledgement (T 131) that he and Ms Gibson had been "at loggerheads" in relation to the sale of the Broadview Apartments for quite some time (something for which Mr Haselgrove apparently blames Ms Gibson but where there seems to me to be some fault on both sides) and made the rather surprising suggestion (T 141) that a decision as to which of the prospective agents' commissions should be accepted could be deferred and made once a sale was imminent and a prospective purchaser located (a course of action highly likely to result in competing, if not double, claims for agents' commission), I also consider it to be in the interests of the parties (and beneficiaries) for steps to be taken to break, so far as possible, the current impasse in relation to the listing/marketing of the Broadview Apartments for sale.
· Conclusion as to second stage test
131 The primary submission by Mr Wilson, was that Ms Gibson should obtain the deceased's interest in the Nana Street property and that, because the Broadview Apartments enterprise was commenced and carried on during the course of the relationship between Ms Gibson and the deceased, she should obtain the whole of the deceased's interest in the shares in Lavender Estates. This would leave the only other asset in the estate being the estate's shareholding in Kuthanara Pty Limited, which both Ms Gibson and Mrs Delmont submit should be to the benefit of the deceased's youngest son. This would leave almost nothing for Mrs Delmont.
132 Counsel for the executor, Mr Lawson, submitted that an appropriate way in which to address the competing claims of Ms Gibson and Mrs Delmont, if I were to be of the view (as I am) that inadequate provision had been made for both under the will is that an award be made in Ms Gibson's favour for the transfer to her (encumbered as it presently is) of the estate's interest in the Nana Street property and, as part of the provision made for her out of the estate, she be entitled to retain all benefits derived to date from Lavender Estates (assuming that company's creditors had been paid out in full). (As noted earlier, both Mrs Delmont and Ms Gibson were, I think, understandably (though perhaps for different reasons) concerned at the suggestion, raised for the first time in the evidence given by Mr Haselgrove, that Mr Haselgrove might be seeking (at the cost of the estate) to enter into further litigation in relation to the conduct of the affairs of Lavender Estates by Ms Gibson, particularly given the delay in finalising the estate to date.) An award of that kind it was submitted should be conditional upon Broadview Apartments being in the hands of trustees for sale.
133 In response, it was submitted by Mr Wilson that if a half share of the Nana Street property were to be transferred to Ms Gibson carrying the National Australia Bank debt, then on the likely available assets of the estate, this would leave Ms Gibson with the Nana Street property (and in due course with funds out of her shareholding in Broadview Apartments from which she would be in a position to meet the debt on that property) but with only a small amount of cash available to her and that she should not be left in a position of having a house with very little in the way of cash savings. It was eloquent, Mr Wilson suggested, that no real attempt had been made to quantify any diminution to the estate said to have been caused by Ms Gibson. Certainly, Mr Haselgrove's affidavit, while setting out in detail the correspondence in which he had engaged (and in some cases at best incorrectly paraphrasing what was therein set out), makes broad assertions but no attempt to quantify the alleged diminution in value suffered by the estate. (It was suggested, for example, that merely listing the property for sale might have caused a diminution in value - a proposition impossible to sustain on the material before me, if at all.)
134 Mr Harris submitted that Ms Gibson has already the benefit of payment by Lavender Estates of electricity, telephone, car expenses and the like (as well as, or so he says I should infer, the increase in the deceased's credit card debts paid out of Lavender Estates); and the benefit of substantial renovations carried out (at Lavender Estates' expense) to the Nana Street property which had been intended to be her home.
135 Quarantining the Kuthanara shares, and assuming that legal costs were to be allowed in full in these proceedings, Mr Harris' initial submission was that Mrs Delmont should have provision in the order of $770,000 to allow her to purchase a home and have an additional fund.
136 In final submissions (in response to my query as to whether an arrangement could be found whereby Ms Gibson could retain the Nana Street property conformably with provision of sufficient funds to enable Mrs Delmont to purchase accommodation of her own), Mr Harris submitted that an amount of $650,000 be awarded to Mrs Delmont which would allow her to purchase a modest 2 or 3 bedroom property in an area near her home and leave her with a small emergency fund; and which would leave approximately $100,000 from which provision could be made for Ms Gibson on top of the interest she already has in relation to the Broadview Apartments.
137 Mr Harris also submitted that if the assets of the company when realised were sufficient to pay out all of the companies' liabilities, Ms Gibson should have further provision in the amount of the benefits received by her from the company and from the deceased's estate from the date of death.
138 It was suggested that any surplus in the estate (which was considered unlikely) should be available out of the estate for Mrs Delmont. This, it was said, would ensure that the money provided for in respect of Mrs Delmont's claim would be subject to a "floor" and not subject to unnecessary costs. There was some debate as to how any trustee for sale might be appointed.
139 In all the circumstances, I think Mrs Delmont's claim should have priority to that of Ms Gibson by reason of the greater position of hardship in which she is and has been for some time. To the extent that it is possible to achieve a position where Mrs Delmont and Ms Gibson have secure accommodation and a reasonably comfortable lifestyle, that seems to me to be the result which would be consistent with community expectations.
140 I considered whether to make orders for the transfer in specie to Ms Gibson of the Nana Street property since it seemed to me this would be a practical division of assets likely to leave both Ms Gibson and Mrs Delmont with secure accommodation. However, in circumstances where the debt position on the Nana Street property is somewhat confused (particularly in relation to the Coombs/Varga loan) it seems more appropriate to make awards of money by way of provision of maintenance out of the estate but to provide a mechanism by which Ms Gibson could acquire that property if she wishes (and hence to retain the benefit of the funds expended on the renovations, some at least of which represent in my view a benefit already received from the company and indirectly from the estate) since the date of death.
141 Accordingly, I think it is appropriate that Mrs Delmont have provision made for her in the form of an order for payment out of the estate (excluding that part of the estate comprised by the Kuthanara shareholding) of the sum of $650,000 and that this payment should be in priority to any payment to Ms Gibson; that provision be made out of the estate (again excluding that part of the estate comprised by the Kuthanara shareholding) to Ms Gibson in the sum of $100,000; that Ms Gibson be given an option to acquire the Nana Street property (by way of offset against her share of any proceeds of sale of Broadview, if that be the most convenient course) on payment of a sum sufficient to discharge in full the estate's liabilities in respect of that property including the Coombs/Varga loan insofar as that may be a liability of the estate); and that, if the assets of Lavender Estates, when realised, are sufficient to pay out all its liabilities, then Ms Gibson should have further provision out of the estate to the extent comprised (and already satisfied) by the benefits received or notionally received personally by her from Lavender Estates since the date of the deceased's death.
142 The Kuthanara shareholding, and any other assets comprising the residue of the estate after the above provisions have been made out of the estate, will fall to be distributed in accordance with the will.
143 I consider that it would be appropriate that it be a condition of the relief so granted that the executor and Ms Gibson, in their capacity as directors of Broadview Apartments, be directed to take immediate steps for the sale by Lavender Estates of the Broadview Apartments so as to permit the winding up of the affairs of that company as soon as practicable. In light of the evident difficulties between the executor and Ms Gibson I would like to hear submissions as to how best such a sale may be effect in an expeditious and cost-effective manner.
144 As to costs, I consider that the plaintiff's costs in each of the proceedings should be paid out of the estate of the late David Delmont on a party and party basis and that the defendant's costs of the proceedings (which are not to include any costs referable to the administration of the estate other than the defence of the respective proceedings before me) be paid out of the estate of the late David Delmont on an indemnity basis.
145 I suggest that the matter be listed on a suitable date for the parties to bring in a form of orders to reflect the above.
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