John Justin GORMAN v John Patrick Gorman & Anor; Estate of the late Jeanette Mary GORMAN

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2862/02 John Justin GORMAN v John Patrick GORMAN & Anor JUDGMENT 1 MASTER: On 8 December, 2000 Master McLaughlin approved a settlement reached between the parties in the proceedings. The orders made by the Master included the following:- "1. In lieu of the provision given to him by and in the will bearing date 2 July 1993 of Jeanette Mary Gorman, now deceased, the plaintiff, John Justin Gorman, received provision out of the Estate of the said deceased for his maintenance etcetera pursuant to s 7 of the Family Provision Act 1982 and that, subject to the order in paragraph 2 below, such provision be the greater of a lump sum payment of $270,000.00 or 40% of the net distributable Estate as realised by the defendants; 2. In addition to the order for provision to the plaintiff as provided in paragraph 1 above, the plaintiff is to received one-half of the net value of the assets in the farming partnership known as J P & J M Gorman." 2 The orders made by the Master were the result of a Deed of Settlement and Release entered into between the parties. The Deed included the following clauses:- "2. The Parties of the first and second part shall forthwith do all acts and things and sign all documents necessary to effect a sale of properties known as: i) Farm 550 Field Road, Coleambally in the State of New South Wales, being the whole of the land in folio identifier 181/756457 and being solely owned by the Estate. ii) Farm 535 Graham Road, Coleambally in the State of New South Wales, being the whole of the land in folio identifier 163/756457 owned as to one half share by the Estate and the remaining one half share by the party of the first part. iii) Real property being strata title home unit known as Unit 508/115 Macleay Street, Potts Point in the State of New South Wales, being the whole of the land in folio identifier 61/SP39734 and being solely owned by the Estate. In relation to the sale of properties referred to in Clauses 2(i) and (ii) it is acknowledged and agreed that the party of the first part shall have the right to purchase such properties either by private treaty or at auction in accordance with the provisions hereinafter contained notwithstanding his office as a Trustee of the Estate. 3. The parties of the first and second part shall agree on a price at which the properties shall be listed for sale by private treaty with licensed real estate agents as agreed by the parties. In the absence of agreement as to the sale price, the sale price shall be the average of two valuations made by valuers who are members of the Australian Institute of Valuers.

4. That if the properties shall not have been sold by private treaty by 18 February 2001 then the parties shall cause the properties to be sold by public auction and shall do all things necessary to facilitate a sale by auction including appointing an auctioneer and agreeing as to a reserve price. If there is no agreement as to the reserve price, the reserve price shall be advised by a valuer nominated by the President of the Real Estate Institute of New South Wales. 5. In the event that the property is not sold by auction or by private negotiation within 14 days after the said auction then the parties shall furthermore, do all acts and sign all necessary documents as necessary to procure a second auction within a further 8 weeks of that date, otherwise upon the same terms and conditions as applied to the first auction. 6. That if either the parties to the first and second part refuse or neglects to execute any document required to give effect to this agreement, within 14 days after service of the document upon him or her, the Registrar of the Supreme Court of New South Wales shall be empowered to execute it in his or her name." 3 It can be seen from clauses 3 to 6 of the Deed that it was intended by the parties that the properties would be sold by mid 2001. All the parties to the Deed are members of the same family. The plaintiff is the father of the defendants who are the co-executors of the deceased's Estate. The deceased made provision for the plaintiff, her husband and her four children namely, the two defendants and her other daughters, Andrea Leonie Gorman and Mary Catherine Salvert. 4 The assets in the Estate consist of the following:- Farm 550 Field Road, Coleambally One-half share in Farm 535 Graham Road, Coleambally One-half share in Lot 200 Gilbert Road, Coleambally Strata Title Unit 508/115 Macleay Street, Potts Point Plant and equipment in the farming partnership known as J P & J M Gorman and various shares, loans and monies held in various accounts. 5 Although the beneficiaries and the executors are all from the one family, that fact has caused significant problems in the administration of the Estate. After twelve months of correspondence between various parties and their legal representatives, the plaintiff instructed his solicitor to seek an order for the proper administration of the Estate. On 14 December 2001 a Notice of Motion was filed on behalf of the plaintiff seeking orders that the defendants do all things necessary to give effect to the order of 8 December 2000 and further an order that the defendants be directed to furnish and verify their accounts relating to the administration of the Estate from 8 February 1999. 6 Whilst it was not clear, it seems that the proceedings have now in principle settled. The only outstanding matter was a question of costs. As I understand the current position, the property is to be sold and contracts exchanged sometime during the week of 18 November. There is however, still the farming machinery to be settled although this matter was not pursued by the parties during the course of the hearing. I therefore assume that some regime has been put in place which is acceptable to all parties in respect of the machinery. The first defendant sought to have the Notice of Motion dismissed on the basis that there was now settlement between the parties and an order for costs against the plaintiff. The second defendant and the plaintiff also sought an order for costs and in particular that the first defendant pay both their costs and those be costs be paid personally by the first defendant with no right of indemnity from the Estate. 7 There was some debate over the true nature of the relief sought by the plaintiff. It was submitted on behalf of the first defendant that it was unclear what the plaintiff wanted as the plaintiff had at various times described the application as an administration suit, an application under s 84 of the Wills Probate Administration Act and an application for enforcement of the orders made on 8 December 2000. In my view, there has not been any confusion caused by the plaintiff in articulating the relief that he seeks. Paragraph 1 of the Notice of Motion, in my view, makes it clear that the plaintiff seeks to enforce the order of the Court made in December 2000 by way of an application under Pt 68 of the Supreme Court Rules, namely an administration suit directing the executors to perform their executorial duties. Similarly, order 2, is clear that it is an order for taking of accounts. Once again, an administration suit. It would seem to me however, that the application under s 84 of the Wills Probate Administration Act would fail in respect of order 1 as the plaintiff is not entitled to have conveyed to him a property nor are there currently liquid assets which would enable the Court to make an order under s 84 of the Act. However, it is clear that order 2, namely the giving of accounts is an order within s 84 of the Act, see the will of York (1894) 15 LR (NSW) BP 24. 8 Ono 6 March 2001 the plaintiff's solicitor wrote to the solicitor for the executors requesting details of the Estate's accounts. It is at this point when a paper chase begins and continues over the next two years. At the time the orders were made Nagle & Maguire acted for the co-executors. They had, at an earlier time, taken over from the solicitor who managed the affairs of the deceased. The plaintiff, not un-naturally, was expecting that by March 2001 steps would be in place to enable the order of December 2000 to be performed. However, the letter merely wished to have details of the Estate's accounts. It seems to me that it was not unreasonable for the plaintiff, in the circumstances, to request the accounts. At least one of the farming properties and the Potts Point unit at the death of the deceased and from time to time had been leased. The position was, therefore, that leaving aside the cash and the shares in the Estate there were liabilities being incurred by the Estate and there was income coming in from the leases. One of the terms of the settlement was that the plaintiff would receive an amount of $270,000.00 or 40% of the net distributable Estate, whichever was the greater. Therefore, it seems reasonable, in my view, for the plaintiff to request the defendants supply the accounts of the Estate so that he was in a position to know the current value of the Estate. The correspondence that passed between the solicitors over the next two years runs into several hundred pages. It is not productive for me to go through chapter and verse identifying most of the correspondence during this period. For the purposes of a cost argument I propose to deal just in broad terms with the history of the matter over that period. 9 The plaintiff's solicitor's letter of 6 March 2001 was ignored until 18 June 2001 and then it merely made reference to the sale of the properties. No mention was made of the accounts. In fact, the position is that accounts have never been presented to the beneficiaries. There is now an agreement between the parties that on the sale of the farming properties the executor will render a full set of accounts for the beneficiaries. It seems to me that having regard to the requests made by the plaintiff that the position in relation to the accounts is wholly unsatisfactory. 10 There has been constant disagreement between various members at various times and concerning the sale of the properties. The second defendant had made it clear, although perhaps naively, that as the beneficiaries were all members of the same family, she wanted to keep them informed of what was being done and to have their involvement in part of the decision-making process. Whilst that was a laudable position to take, it was one that was completely unworkable. Throughout the previous eighteen months various members of the family have sought to either prevent a sale or place an unreasonable price on the properties and refuse, notwithstanding the terms of the agreement, to allow the first defendant to bid for, or purchase the properties. There has also been a side issue raised concerning the daughter, Mary. The plaintiff's solicitor raised with the defendants' solicitor that as Mary was not a party to the agreement she was not bound by it. That, of course, is the position but once again it shows how this family finds it impossible to work in harmony with one another. 11 By 21 August 2001, a period of some five months, the plaintiff had still not been supplied with accounts. However, on that date the executors' solicitor sent accounts to the plaintiff. Those accounts did not meet the request of the plaintiff as they were merely the partnership accounts and not the Estate accounts. In the second half of 2001 attempts were made by the executors to sell the property. However, by this time the executors had also fallen out and the first defendant had fallen out with the solicitors who, up to that time, had acted for both executors. There was a period of time thereafter where he acted for himself, thus further complicating proceedings. There were disagreements between members of the family over who should market and sell the property; what the reserve price should be; how the farming property should be sold. 12 The Potts Point property, however, was in fact sold. There was no evidence before me concerning the net proceeds of sale from that property. There was evidence before me that the plaintiff tried to influence the proposed sale price of the property when it was marketed by Wesfarmers. This in turn created confusion for Wesfarmers as to whom they were responsible to in setting the price. Correspondence between the plaintiff's solicitor and the second defendant's solicitor reached the point where the plaintiff's solicitor was directing the defendants to do their duty as executors and sell the property. The matter had reached a stalemate because of these matters and because of the refusal of the plaintiff and Mary to allow the first defendant to bid for the property. It would appear that the potential conflict of interest that the first defendant had as a result of the agreement entered into in December 2000, had by late 2001 become insoluble. 13 The matter seems to have progressed unsatisfactorily throughout 2002. Attempts in late 2001 and early 2002 to settle the matter were made but were to no avail. By late 2002 the properties had still not been sold. The machinery of the partnership was still in dispute and the conflict between the two executors continued. On 13 November Palmer J made orders revoking the grant to the two defendants and appointed the second defendant as the sole executor of the Estate. It would appear that prior to this being done the executors were able to find a buyer for the farming properties. Nevertheless, the impasse only seems to have been overcome with the making of the order by Palmer J. 14 It is submitted on behalf of the first defendant that the application ought to be dismissed, not only for the reason that the parties have now reached an agreement but because the proceedings, in essence, are, an administration suit and should have been brought as separate proceedings. However, in my view, it is not clear from Pt 68 that it is mandatory that proceedings be commenced by way of summons. Whilst Pt 68 r 7 refers to proceedings commenced by way of summons, rules 4-9 generally make no reference to a requirement that the proceedings be commenced by way of summons. Therefore, in my view, it is open to a party in existing proceedings in the appropriate case to make an application by Notice of Motion in those proceedings pursuant to Pt 68. 15 In my view, there has been some justification for the plaintiff commencing the application. However, it seems to me that the plaintiff is not completely blameless in the way in which the proceedings have progressed over the last two years. Had the order been put into effect, the properties in all probability would have been sold by May 2001. I accept, however, that other factors have come into play which may have delayed the sale of the property. Those factors are external to the conflicts within the family group. They are factors of a financial and marketing nature. Whilst it may be easy to sell a residential property in Sydney within a certain period of time, that may not necessarily be the case when one is trying to sell a rural property. However, there is no evidence that the executors attempted to achieve the sale of the property in accordance with the agreement they had reached in December 2000. It was not until June 2001 that the executors' solicitor informed the plaintiff's solicitor that the executors had agreed to the sale of the properties. I accept the second defendant's evidence that she at all times wanted to perform her executorial duties in accordance with the agreement. She wanted the property to be sold and by and large agreed with most propositions that were put up. But nevertheless, she was under an obligation to perform her executorial duties. It seems to me that it was always open to either executor, once an impasse had been reached, to seek the orders which were ultimately sought before Palmer J on 13 November 2002 thus breaking the deadlock and enabling a sole executor to take charge of the administration of the Estate. 16 There has been no satisfactory explanation given why the executors did not furnish the accounts that were requested by the plaintiff. It is now some twenty months since the first request was made. As I intimated earlier, I do not think the request, when having regard to the nature of the assets of the Estate, was unreasonable. Therefore, in my view, the executors have not performed their duties in relation to the accounts of the Estate and have been dilatory in responding to a reasonable request by the plaintiff. 17 In respect of the sale of the property and the apportionment of the farming equipment, the major protagonists in the conflict have been the first defendant and the plaintiff. In my view, it is unfair to sheet home much blame to the second defendant in respect of the stalemate that lasted for so long in respect of the sale of the property. Similarly, the matter of the partnership machinery was really a matter between the plaintiff and the first defendant. By accident of appointment, the second defendant was dragged into that dispute. 18 Had the administration proceeded in an orderly fashion accounts could have been presented within a month to six weeks after the initial request, the properties could have been sold at the latest by the second half of 2001. It seems to me that, although at the auction there was not a bidder, much of the delay was caused by the conflict between various members of the family. Had the executors taken control and sold the property in accordance with the agreement, the sale would have gone through sooner than November 2002. In my view, the plaintiff has contributed to part of the costs in the delay in the administration of the suit. When all beneficiaries are members of the one family I do not think that the intention of the second executor was all that unreasonable, namely to have everybody involved in how the family assets should be sold. However, it was perhaps a bit naïve in the circumstances to expect there to be smooth sailing. Ultimately, she has a responsibility as an executor. 19 Similarly, without the interference by the plaintiff, this would not have become an expensive and drawn out exercise. To some extent I think he should bear some of the responsibility for the costs. 20 I make the following orders:- 1. The first and second defendants pay three-quarters of the plaintiff's costs personally. 2. Half the second defendant's costs be paid personally by the first defendant.

3. The first defendant pay his own costs personally. 4. I make no order for the balance of the second defendant's costs.

Last Modified: 11/26/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.