GONZALES v CLARIDADES

[2003] NSWCA 227

Court of Appeal (NSW)|2003-08-08|Before: Mason P, Beazley JA, Campbell J

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Court

Court of Appeal (NSW)

Decision date

2003-08-08

Before

Mason P, Beazley JA, Campbell J

Source

Original judgment source is linked above.

Judgment (32 paragraphs)

[1]

CITATION : GONZALES v CLARIDADES [2003] NSWCA 227 HEARING DATE(S) : 8 August 2003 JUDGMENT DATE : 18 August 2003

[2]

JUDGMENT OF : Mason P at 1; Beazley JA at 54; Foster AJA at 55 DECISION : Appeal dismissed with costs

[3]

CATCHWORDS : Succession - Wills - son charged with murdering parents and sister - where son sole beneficiary under his parents' joint will - forfeiture rule - whether son entitled to access funds from his father's estate to defend committal proceedings - Administration of estates - incomplete administration - whether Court has power to make orders under Pt 68 Supreme Court Rules - "emergency" situation - public policy considerations Forfeiture Act 1995 LEGISLATION CITED : Supreme Court Rules Pt 68 Criminal Assets Recovery Act 1990, ss10(5), 16A, 16B Trustee Act s 44 Dietrich v The Queen (1992) 177 CLR 292 New South Wales v Canellis (1994) 181 CLR 309 Attorney General for New South Wales v Milat (1995) 37 NSWLR 370 Public Trustee: Re Estate of T [1999] NSWSC 1027 Blackman v Permanent Trustee Co Ltd [2003] NSWSC 305 Re Benson Estate (1998) Carswell Alta 1378 In re Estate of Glenn (1973) 299 A 2d 203 Gonzales v Claridades [2003] NSWSC 508 Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694 Official Receiver v Schultz (1990) 170 CLR 306 Barns v Barns [2003] HCA 9, 196 ALR 65 McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 David v Frowd (1833) 1 My & K 200 In re Royle (1890) 43 Ch D 18 Hudson v Gray (1927) 39 CLR 473 CASES CITED : In re Hazeldine's Trusts [1908] 1 Ch 34, 40-1 Templeton v Leviathan Pty Ltd (1921) 30 CLR 34 In re New [1901] 2 Ch 534 McCarthy v McCarthy (1919) 19 SR (NSW) 122 Re Oygevault International BV (in liq) (1994) 14 ACSR 245 In re Tollemache [1903] 1 Ch 955 Riddle v Riddle (1952) 85 CLR 202 Brown v Brown (1924) 24 SR (NSW) 495 Chapman v Chapman [1954] AC 429 In re Downshire Settled Estates; Marquess of Downshire v Royal Bank of Scotland [1953] Ch 218 New South Wales Crime Commission v Fleming (1991) 24 NSWLR 116 New South Wales Crime Commission v Younan (1993) 31 NSWLR 44 Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552 A v C (No 2) [1981] 1 QB 961 Helton v Allen (1940) 63 CLR 691 Troja v Troja (1994) 33 NSWLR 269 Rivers v Rivers (2002) 84 SASR 426 PARTIES : SEF GONZALES v AMELITA CLARIDADES

[18]

Sef GONZALES v Amelita CLARIDADES JUDGMENT 1 MASON P: Mary and Teddy Gonzales had two children, Sef and Clodine. On 10 July 2001 Mary, Teddy and Clodine were killed at their home. Teddy was the last to die. 2 On 13 June 2002 the appellant was charged with the murder of his parents and sister. He pleaded not guilty and has been remanded in custody. Committal proceedings (previously adjourned) are expected to commence shortly. 3 Mary and Teddy made a joint will, which in the events that occurred, appointed the respondent their executrix and left the entire estate to Sef, the appellant. Sef is a young man now in his early twenties. The respondent is Mary's mother. Probate was granted to the respondent on 24 December 2002. 4 Since it appears that Clodine died intestate, the assets of all three estates are payable in due course to the appellant by way of distribution of Teddy's estate in accordance with the will. 5 This will not however occur if it is established that the appellant murdered his parents and sister. The forfeiture rule precludes a murderer from taking advantage of the homicide and inheriting the victim's estate. This is the case regardless of whether a conviction ensues, so long as murder is established. In a civil context the standard is proof on the balance of probabilities, but the court is required to take the gravity of the matter alleged into account (in favour of the person accused) (Evidence Act 1995, s140). I am not sure that this is an aspect of the presumption of innocence in the criminal law, but nothing turns on this. 6 It is possible that it could be established that the appellant murdered only his father. Alternatively, it could be established that he killed his father in circumstances involving manslaughter, not murder, in which event the Forfeiture Act 1995 would allow the appellant to inherit if there was a favourable exercise of a judicial power to modify the forfeiture rule. These hypothetical possibilities are noted, but do not affect the matter under appeal, because the appellant is accused of murdering his father and because this application touches his father's estate. 7 The appellant sought an order in the Equity Division (as recast in submissions) that the executrix pay him sufficient money from his father's estate to be able to finance the committal proceedings and a No Bill application if he is committed for trial. This appeal contests the refusal to make such an order. 8 The appellant has virtually no assets apart from his inheritance. He has access to legal aid (if he applies for it) for both committal proceedings and any ensuing trial. However, he and his legal representatives are dissatisfied with the level of funding likely to be provided. They want access to part of the estate to fund the defence of the committal proceedings outside the constraints of legal aid. The evidence discloses that the Crown brief is large and complex and that legal costs well exceeding $100,000 would be required to do justice to the appellant's case if he is to test the committal proceedings to the satisfaction of the lawyers he has retained. However, it is not suggested that a stage has been reached where his right to a fair trial will be compromised (cf Dietrich v The Queen (1992) 177 CLR 292; New South Wales v Canellis (1994) 181 CLR 309 esp at 328; Attorney General for New South Wales v Milat (1995) 37 NSWLR 370). If the money is advanced it will be spent on legal costs without any realistic prospect of recovery by the estate. 9 The executrix has established that Teddy's estate includes real estate at North Ryde and Blacktown, personal assets in excess of $171,000 and unidentified property of substantial value in the Philippines. Liabilities are estimated at less than $12,000. Obviously there will be additional legal expenses but no one suggests that they will consume Teddy's estate. It is therefore common ground that there will be a substantial balance in the estate. 10 The executrix recognises that the estate will pass to the appellant, but not if it is established that he murdered his father. If murder is established, the respondent will hold the estate on behalf of Teddy's parents as his next of kin. 11 The executrix and her legal advisers regard the administration of the estate as incomplete. 12 At the urging of the appellant's solicitors, the executrix's solicitor contacted Teddy's parents in the Philippines. As indicated, they will be the persons to whom Teddy's estate will pass if it is established that the appellant has forfeited his right to inherit by murdering his father. Mr and Mrs Gonzales senior responded in the following terms: When our beloved daughter-in-law and granddaughter died, our son, Teddy became the sole heir of the Estate we now speak of. And when our son died, we will become his only heirs if Sef is found guilty. As possible beneficiaries of the Estate, we repose the same trust and confidence that our beloved son had upon Mrs Amelita Claridades to protect the Estate. Absolutely no one, neither we nor Sef, can have a claim or interest on the Estate prior to a declaration of the Australian court on the guilt or innocence of Sef. We vigorously reiterate our original position that no part of the Estate, directly or indirectly, be used to shoulder any legal expense of cost for Sef's defense (sic). We are one with Mrs Amelita Claridades in her pursuit to protect and to keep intact the Estate of our dear son, Teddy.

[22]

No present breach of trust 21 In the court below, the appellant contended that the executrix was in breach of duty by refraining from either making an immediate distribution to enable him to fund his defence costs or at least tendering an allegation in the litigation that he is disentitled to the estate by virtue of the forfeiture rule. This submission was rejected by Campbell J and it is not, as I understand it, repeated on appeal. If it is, I would reject it for the reasons given by Campbell J (at [69]) which I set out and respectfully adopt. Sef contends that the Executrix is in breach of duty when she neither makes an allegation in litigation that he is disentitled to the estate, nor makes an immediate distribution to enable him to fund his defence costs. I do not accept that this is so. I consider first whether she is now in breach of an obligation to herself bring proceedings to test whether Sef is disentitled. The size and complexity of the police brief which has been delivered in the committal proceedings, suggests that establishing whether or not Sef killed his parents, will be no easy litigious task. As the evidence in this case shows, it would be very expensive. The committal proceedings will occur soon - while it is possible for both criminal and civil courts to investigate the same question of whether conduct which amounts to a crime has occurred, the court has an inherent jurisdiction to order a stay of the civil proceedings where the conduct of those proceedings may interfere with the fair trial of the criminal proceedings: McMahon v Gould (1982) 7 ACLR 202; Halabi v Westpac Banking Corporation (1989) 17 NSWLR 26. There must be a realistic prospect that, even if the Executrix were to start such litigation, either Sef or the Crown would request her to desist from it while his criminal proceedings were still pending. More to the point, neither of the potential candidates for being beneficiary of the estate, namely Sef and Teddy's parents, have requested her to take any such proceedings. There must be at least some prospect that, once the outcome of the criminal proceedings is known (whether it be an acquittal or a conviction) that will be accepted by the potential candidates for being beneficiary of the estate as deciding whether a forfeiture has occurred, or not. The running of the criminal trial has a realistic prospect of bringing to light evidence not presently available to the executrix -- there is no reason to believe that she has access to all material in the police brief, and some of that material (the telephone intercept material) is evidence she could not acquire through her own resources. The practical commonsense of adjourning civil proceedings until the outcome of criminal proceedings concerning the same issue is illustrated by In Re Raphael [1973] 1 WLR 998, where Goulding J. adjourned, of his own motion, probate proceedings the outcome of which depended upon whether a purported will was a forgery until criminal proceedings concerning that alleged forgery were concluded. As well, the Executrix was appointed only about five and one half months ago. In all these circumstances, the evidence does not persuade me that, in having failed to ask for an inquiry, or start other proceedings to determine whether Sef has unlawfully killed his parents, the Executrix is, today, in breach of her duty. 22 The professed entitlement to the order sought by the appellant therefore cannot rest upon a finding of breach of duty on the part of the executrix in declining at this stage to initiate proceedings to establish positively that the appellant did or did not murder his parents and sister. 23 For similar reasons, the executrix cannot be faulted for refraining at this stage from seeking judicial advice about whether she should commence such proceedings or at least initiate enquiries with that intent. The answer to such putative applications is clear from the above passage from the judgment of Campbell J. 24 How then did the appellant base his application as ultimately refined in the submissions in this Court?

[23]

Administration proceedings and Part 68 25 The appellant invokes Pt 68 of the Supreme Court Rules. 26 Rules 4-9 of Pt 68 deal with the procedure applicable to administration proceedings and to proceedings brought pursuant to rule 2. Rule 8(1) provides that the Court need not make an order for the administration of an estate unless the order is necessary for the determination of the questions arising between the parties. 27 The appellant sought an order for the payment of money. 28 He did not ask the Court to hold an inquiry to identify who is beneficially entitled to the estate. Nor did he seek an order that the respondent herself conduct such an inquiry at this stage. Had either such order been sought then the appellant could conceivably have tendered his innocence in the terrible crimes with which he stands charged. But this was never part of the application before Campbell J. In observing this, I record that it is perfectly understandable why this issue was not put into the ring. Assuming (which I doubt) that the Court would have entertained it at this stage, the issue would have thrown up an inquiry that would have run parallel to the committal proceedings and obviously disrupted them to a considerable degree. It had the potential to open up issues which the appellant was entitled to regard as matter for the Crown to raise and prove to the criminal standard in the criminal proceedings. 29 I return then to the basis of the appellant's reliance on Pt 68 r2. The appellant points to rule 2(3)(d) and (4)(b). The former provision enables the court to order an executor "to do or abstain from doing any act". The latter speaks of "directing any act to be done in the administration of an estate … which the Court could order to be done if the estate were being administered … under the direction of the Court". 30 Part 68 r2 derives from nineteenth century reforms touching the Court of Chancery. It permits the court to regulate the administration of estates without the necessity and complexity of a general administration order under which the court takes over the administration of the whole estate (see generally McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 633-6 per Young J). The particular powers conferred by r2 are broad and extend, literally, to the ordering of an executor "to do or abstain from doing any act" (r2(3)(d)). But like all language, these words must be read in context and that context relates to acts in the administration of the estate that fall within the scope of an administration suit. 31 Fundamentally, the purpose of an administration suit is to give assistance or protection to the personal representatives as well as protecting creditors or beneficiaries of the estate (David v Frowd (1833) 1 My & K 200 at 208, 39 ER 657 at 660). Administration proceedings (and proceedings under Pt 68 r2 and its counterparts) are designed to deal with problems arising within the administration of the estate. Rule 2 does not confer jurisdiction to decide questions which could not have been decided in an administration suit (In re Royle (1890) 43 Ch D 18, Hudson v Gray (1927) 39 CLR 473 at 502). 32 The executrix submitted that the appellant is not a plaintiff entitled to invoke Pt 68 because of the unresolved (and unaddressed) issue of his role in the death of his father. I do not agree. The appellant has standing as a named beneficiary whose disentitlement has yet to be established. 33 In administration suits, the general rule was stated by Farwell LJ in In re Hazeldine's Trusts [1908] 1 Ch 34 at 40-1 (emphasis in original): …if the trustees cannot do it, neither can the Court, for, as Lord Chancellor Law says in Fitzpatrick v Waring (1882) 11 LR Ir 35, 44: "In the exercise of its jurisdiction for the administration of trusts this Court, I apprehend, has no power to make or authorize any leases or other dispositions of the trust property which the trustee could not have made himself. The Court, in such a case, whether it assumes the place of the trustee, or guides him in the discharge of his duties, is still confined within the limits of the trust as constituted by its author, and has no authority to go beyond those limits. Its business is to execute the trusts, not to alter them."

[25]

Judicial sanctioning of administrative acts of trustees in emergencies 35 The appellant did not dispute the general principle. However, he invoked a line of cases stemming from In re New [1901] 2 Ch 534 which attest to an exceptional, inherent judicial power to sanction certain types of conduct not authorised by a trust instrument. The line is shaky, but it stands (see McCarthy v McCarthy (1919) 19 SR(NSW) 122, Re Oygevault International BV (in liq) (1994) 14 ACSR 245 at 248). But the principle it establishes is far too narrow to support the present application. 36 New was a case in which the court authorised trustees to go beyond the express provisions of the trust interest in a matter of investment. An exchange of shares for shares and debentures offered under a reconstruction scheme was sanctioned without resort to any statutory power to alter trusts. All present beneficiaries who were sui juris consented. The case was described as one where the trustees were embarrassed by an "emergency" which had arisen and the order required the trustees to apply again to the Court if they wished to retain the shares longer than a year. 37 The decision was promptly labelled as confined to "emergencies" (In re Tollemache [1903] 1 Ch 955 at 956 per Vaughan Williams LJ and Romer LJ. Romer LJ was a member of the Court that decided New). Cozens-Hardy LJ described it as "the high-water mark of the exercise of the Court of its extraordinary jurisdiction in relation to trusts" (Tollemache at 956). In Templeton the correctness of New was reserved by Knox CJ (at 56) and the narrowness of New was stressed by the other justices (see per Higgins J at 68 and Starke J at 74-5. cf at 76). In Riddle v Riddle (1952) 85 CLR 202 Fullagar J (at 228) and Kitto J (at 235) also stressed the "emergency" requirement involved in New. Kitto J pointed out that New did not permit a court to authorise that which was merely beneficial or expedient, adding that s81 of the Trustee Act 1925 (NSW) was enacted to enable this - to a limited degree. See also Brown v Brown (1924) 24 SR(NSW) 495 at 501, Chapman v Chapman [1954] AC 429 at 455. 38 Of even greater present significance was Kitto J's description of New as relating to "administrative acts of trustees" (Riddle at 235), a description borne out by the context of New which involved a power of investment as distinct from a change in the beneficial interests of the trust estate. In this sense, the inherent power is confined to achieving something beneficial for the estate (not that benefit is sufficient in itself to engage the power: see [1901] 2 Ch at 545). 39 In In re Downshire Settled Estates; Marquess of Downshire v Royal Bank of Scotland [1953] Ch 218 the English Court of Appeal said (at 234-5) that: … the inherent jurisdiction, or the aspect of the jurisdiction invoked in In re New and sought to be invoked in these appeals, is of a more limited character. It is a power or jurisdiction to confer upon trustees, quoad items of trust property vested in them, administrative powers to be exercised by them as the persons in whom the property is vested (notwithstanding that such powers were not conferred by the trust instrument) where a situation has arisen in regard to the property (particularly a situation not originally foreseen) creating what may be fairly called an "emergency" - that is a state of affairs which has to be presently dealt with, by which we do not imply that immediate action then and there is necessarily required - and such that it is for the benefit of everyone interested under the trusts that the situation should be dealt with by the exercise of the administrative powers proposed to be conferred for the purpose. The power or jurisdiction does not, in our view, extend to changes or re-arrangements of the beneficial interests inter se under the trust, as distinct from re-arrangements or reconstructions of the trust property itself.

[27]

Competing public policies? 42 The forfeiture rule is one of public policy, being an aspect of the maxim that a person shall not be permitted to profit from his or her own wrong. The rule seeks to deter serious wrongdoing by precluding the unjust enrichment of the wrongdoer and those claiming through the wrongdoer. Its history and rationale are traced in Mason & Carter, Restitution Law in Australia chapter 19. 43 Senior counsel for the appellant pointed to other public policies, including those favouring effective access to justice. These were said to indicate that it might be appropriate to have regard to the appellant's urgent need for litigation funding in this novel situation. 44 Senior counsel cited provisions of the Criminal Assets Recovery Act 1990 as indicative of statutory recognition of the appropriateness of allowing those accused of wrongdoing and facing forfeiture of property reasonable access to their assets for the purposes of testing the case advanced against them (see ss10(5), 16A and 16B and New South Wales Crime Commission v Fleming (1991) 24 NSWLR 116, New South Wales Crime Commission v Younan (1993) 31 NSWLR 44). I find this analogy unpersuasive because it involves a statutory entitlement and because the forfeiture rule is strict and inflexible where murder is involved (Troja v Troja (1994) 33 NSWLR 269. See also Forfeiture Act, s4(2)). 45 The appellants also sought to rely upon a non-statutory analogy relating to Mareva orders. It is not uncommon for asset preservation orders to be qualified by allowing the defendant a reasonable sum for legal expenses out of restrained assets, provided the defendant satisfies the court that it has no other assets from which it could pay these expenses (Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552 at 569). The appellant cannot get much from this practice, because it represents a limit or qualification that judges impose upon a remedy otherwise justified in principle (see A v C (No 2) [1981] 1 QB 961 at 963). 46 In my view, the forfeiture rule is firmly embedded in the Australian common law, certainly as regards murder. It is strict and unbending (Helton v Allen (1940) 63 CLR 691, Troja v Troja (1994) 33 NSWLR 269, Rivers v Rivers (2002) 84 SASR 426). Legislation like the Forfeiture Act was considered necessary to modify the rule, and nothing in that legislation presently applies. The rule is therefore not qualified by reference to any exceptional or discretionary principle permitting a trustee or court to advance money for legal expenses to the person charged with the relevant homicide for the purpose of testing the issue of guilt in criminal or civil proceedings. Nor do the appellant's legitimate interests in the effective defence of his criminal proceedings create any basis for the relief claimed stemming from nothing more than his present need for money to protect his interests.

GONZALES v CLARIDADES

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