This is an application to further amend a Cross Claim to seek to revoke a grant of probate in common form and prove an earlier Will in solemn form.
It is necessary to have regard to the procedural history of this matter and, indeed, events which preceded the commencement of the proceedings. In setting out these matters, I do so on the basis of the evidence before me on this interlocutory application, noting that the evidence at final hearing will inevitably be more expansive and tested in the usual way.
[2]
Factual Background to these Proceedings
As the parties often referred to one another in these proceedings by their first names, the Court will, without intending any disrespect to the members of the family, do the same in these reasons.
Henry Photios was born in 1934. Together with his father Basil and his brother Constantine (known as Con), Henry conducted a business of supplying beading and craftware through a company Photios Bros Pty Ltd. Since the 1950s, the business operated from Druitt Street, Sydney ("the Druitt Street property"). That property was owned by Henry (one third), Con (one third) and Henry and Con together (one third) as tenants in common. Henry and Con were also directors of Photios SFT Pty Ltd, the trustee company of the Photios Bros Employee Superannuation Fund ("the superannuation fund"). Henry and Con were beneficiaries of the fund.
In 1958, Henry married Helen and they had three children: Michael, David and Catherine. This marriage came to an end and, in 1980, Henry married Lana, who herself had two children from a former marriage, Simone and David Cohen.
David worked in the family business.
In about 1997, Henry came under the care of General Practitioner Dr Barry Solomons. In 1998, Henry instructed Timothy Lynch to prepare a Will, and continued to instruct Mr Lynch to prepare further Wills until his last Will was executed on 11 December 2012.
In 2002, Con passed away, leaving 20 per cent of his shares in Photios Bros Pty Ltd to David. These shares were valued at $78,000. Con left the residue of his estate to Henry, including 80 per cent of Con's shares in the company and Con's one-third interest in the Druitt Street property.
In 2003:
1. Henry transferred the shares in Photios Bros Pty Ltd which he had inherited from Con to David. These shares were valued at $311,000. This had the result that David became the majority shareholder of the company, owning 67 per cent of the shares whilst Henry held 28 per cent. Henry and David signed a Share Certificate certifying the transfer.
2. Henry transferred the one-third interest in the Druitt Street property which he had inherited from Con to David. This interest was valued at some $233,333.
3. Henry transferred the one-third interest jointly owned by Henry and Con to the trustee of the superannuation fund. As I understand it, matters were re-arranged so that Henry and David each had one share in the trustee company and Henry, David and Lana became directors of the trustee.
In about 2006, it is alleged in the substantive proceedings that David took control of the family business but reduced the rent paid on the Druitt Street property from about $100,000 a year to some $25,000. David says that this was due to a verbal agreement with Henry.
In 2007, Henry ceased to be a director of Photios Bros Pty Ltd. David became the sole director of the company.
In January 2010, Henry was admitted to Royal North Shore Private Hospital for the insertion of stents. As summarised by David's expert, Dr Chanaka Wijeratne, Henry was described as experiencing periods of confusion, nocturnal agitation and paranoia. Lana informed nursing staff that Henry's agitated behaviour was "not usual". This was the first - in the evidence before me - of a series of significant health problems which Henry suffered. He was then 76 years old.
On 12 August 2010, Henry made a Will, being the thirteenth Will which he had made since he retained Mr Lynch in 1998. It is this Will which David now seeks leave to prove in solemn form. Under this Will:
1. Lana and David were appointed executors;
2. Henry left his interest in the Druitt Street property to David along with Henry's shares in Photios Bros Pty Ltd; and
3. Henry made several other specific gifts, including $100,000 to Michael, and left the residue to Lana.
From April 2011, Henry was admitted to Macquarie University Hospital where a craniotomy was performed. He was transferred to Lady Davidson Hospital for rehabilitation. In June 2011, Henry scored 23 out of 30 on a Mini-Mental State Examination (a normal score is 24 plus). In July 2011, Henry was discharged.
In July 2011, after being discharge from rehabilitation, Mr Lynch received various telephone calls from Henry and Lana. Mr Lynch recorded:
"David has been asking Henry to transfer Henry's one-third share in the city building to David now so that David can avoid the risk of losing part of that one-third share in a challenge to Henry's will by his brother or sister…Henry said that he did not want to transfer the property to David because he might need it for his own purposes but that he did want David to receive it on his death because David had worked in the business and Henry regards the building as part of the business".
Mr Lynch suggested that a lease could be established in favour of the business so that, whoever ended up owning the Druitt Street property, David's occupation for the business would be secure.
In March and April 2012, Henry was again admitted to Macquarie University Hospital following an acute stroke. Henry became wheelchair bound. Dr Carolyn Orr diagnosed Henry with vascular dementia. Henry was discharged to a Residential Aged Care Facility.
In June 2012, Henry was admitted to Royal North Shore Hospital after a fall. He was prescribed various antidepressant medications and discharged to the nursing home but re-admitted the next day with behavioural disturbance. It appears from the medical records to which I have been taken that Henry was experiencing hallucinations. This appears to have been caused by the medication which had been prescribed to him on his admission to Royal North Shore Hospital after the fall. Henry was seen by a psychiatrist and, according to the discharge summary, the delirium resolved completely. Henry went back to the nursing home.
On 10 October 2012, Lana contacted Mr Lynch reporting difficulties obtaining financial statements for Photios Bros Pty Ltd from David and arranging a valuation of the Druitt Street property for the purposes of the superannuation fund's accounts. Henry's accountant had obtained a company search of Photios Bros Pty Ltd, which revealed that David was the majority shareholder. Henry was apparently surprised by this. It would appear that Henry did not then recall the transfer of shares to David made some nine years earlier. According to Mr Lynch's file note, Lana reported:
"David said that if he was to let [Lana] carry out the valuation there was something she had to do for him and that was sign the lease which he had prepared. One hour later David turned up at the nursing home presenting a lease and insisting that Henry sign it…Henry told David that he wanted to run it by Mr Lynch but David pressed repeatedly. Eventually Henry got up and went to dinner saying he was sick of it and David asked if he could come to dinner if he didn't talk about the lease to which Henry and Lana agreed. David said 'Don't you want to protect me from Cathy and Michael? You should both sign the lease' ".
The lease was 24 pages long and proposed rent of $31,200 per annum (including GST) plus outgoings. Whilst Mr Lynch had suggested a lease be executed, it would appear that the manner in which David sought execution of the lease by Henry caused some upset.
Mr Lynch suggested to Lana that a good solution would be for David to buy Henry's one-third share in the Druitt Street property for a fair market price, which would enable Henry to pay his retirement village bond.
On 2 November 2012, Henry attended a conference with Mr Lynch and signed a codicil removing David as an executor of his Will. He was otherwise happy with the contents of his Will of August 2010 but added that, "David [has] been difficult and [I am] worried about how David might cause Lana trouble". He also expressed dismay that David was a majority shareholder of Photios Bros Pty Ltd, which, as I have said earlier, indicates he did not then recall the events of 2003. Henry, Lana and Mr Lynch discussed the possibility of selling Henry's one-third share in the Druitt Street property to David for market value. The property had recently been valued at $1 million.
On 26 November 2012, Henry, Lana and their accountant met with David to discuss transferring Henry and the superannuation fund's interest in the Druitt Street property to David. Lana reported to Mr Lynch, "David's attitude was why would I invest in the building if dad is going to leave it to me anyway and why would I put my super in the building?" According to Mr Lynch's file note (emphasis added):
"Lana put Henry on the phone and Henry said to me that 'David is going on with all this nonsense so I have decided to give my third of the building to my wife and he can deal with her…I have been with her for 33 years and I feel it is the only thing I can do to protect her'...Henry told me that David had said to him he couldn't change his Will because he didn't have the capacity to do so. Henry said that he felt upset by that and that he had no difficulty understanding what he was doing".
What is clear from Mr Lynch's file note is that, by 27 November 2012, David had formed the view that his father lacked testamentary capacity.
David's comment prompted Mr Lynch to obtain a medical report from Henry's General Practitioner, Dr Solomons. On 5 December 2012, Dr Solomons opined that Henry had mental capacity to understand the nature and effect of a Will, that it could be challenged by eligible persons after his death, and that he could revoke or amend the Will at any stage as long as he had the mental capacity to do so.
On 10 December 2012, Henry and Lana attended Mr Lynch's offices. Henry executed a Will which gave the residue of his estate, including his interest in the Druitt Street property and his shares in Photios Bros Pty Ltd, to Lana. In a lengthy file note, Mr Lynch recorded Henry's decision to transfer his interest in the Druitt Street property to Lana. Mr Lynch challenged Henry's decision to leave the shares in Photios Bros Pty Ltd to Lana, but recorded that Henry was insistent on this and said that David could buy his shares from Lana. Henry also said he felt that Michael was able to support himself.
Henry also executed a transfer of Henry's one-third share in the Druitt Street property to Lana. Mr Lynch showed Henry and Lana a draft letter to David inquiring as to the whereabouts of the Certificate of Title and suggested that the letter may serve a secondary purpose of prompting David to buy Henry's share in the Druitt Street property, so as to provide Henry with the funds he would need to pay an accommodation bond. They agreed not to send the letter until after Christmas so as not to cause any upset in the family.
Later that day, Henry had a change of heart in respect of the shares in Photios Bros Pty Ltd. The next day, on 11 December 2012, Henry and Lana returned to Mr Lynch's offices to amend the Will and restore the gift of the shares to David. Henry executed the Will, in respect of which a common form grant of probate has since been made. The Will differed from that executed in August 2010 in three respects:
1. David was no longer an executor;
2. Henry no longer left his interest in the Druitt Street property to David; and
3. the gift of $100,000 for Michael was deleted.
On 16 January 2013, Mr Lynch wrote to David asking for the Certificate of Title for the Druitt Street property, advising that Henry intended to transfer his interest in the property to Lana. This apparently had the desired effect, in that David made a counter offer, offering to pay half the market value of Henry's share in the property. Lana apparently called Mr Lynch, with Henry by her side, with Mr Lynch's note recording that "Henry wanted Lana to ask me to write a letter to David saying that if he wanted to buy Henry's share in the building he needed to pay the full market price". The next day, Mr Lynch received a call from Henry objecting strenuously to David's actions. His file note records Henry saying:
"I can see there will be disturbance when I die and I don't want him disputing the Will. I want to see that Lana gets [the Property] now. When I tell Lana that I want to leave something for David, Lana is always for David."
My Lynch further recorded that "[Henry] also said that he would happily undergo another assessment to prove that he has the capacity to understand the effect of what he is doing".
A review of Henry's solicitor's file notes over the years does indicate that, from time to time, Henry was concerned about developments in his children's lives and the appropriate arrangements which he should make in his Will as a consequence. It is apparent from the solicitor's file notes that Lana left these decisions to Henry and, on occasion, interceded on behalf of Michael, David and Catherine to ensure that Henry's decisions were temperate and measured. Henry's changes of mind over time in respect of his children do appear to have been perceived by Henry's children as Henry being manipulated by Lana, but the contemporaneous file notes of Henry's solicitor do suggest that Henry was the driving force in these decisions.
David declined to produce the Certificate of Title and so the transfer of Henry's interest in the Druitt Street property to Lana did not proceed. Rather, on 13 February 2013, David's solicitor Tress Cox Lawyers wrote to Mr Lynch:
"We are instructed that our client has concerns that your client does not have capacity and is therefore not competent to sign a transfer in relation to his share of the property. Please provide any medical evidence that confirms your client's capacity".
It is fair to say that the relationship between Henry and David deteriorated further after this. Mr Lynch responded to Tress Cox Lawyers informing them that, notwithstanding Henry having been diagnosed with early stage vascular dementia, he was satisfied that Henry had capacity to understand his decision to transfer his interest in the Druitt Street property to his wife. Mr Lynch sought unpaid rent on the business premises and Henry's unpaid long service leave.
On 14 March 2013 Tress Cox Lawyers repeated David's concerns as to Henry's capacity and sought a range of medical information. On 28 March 2013, Mr Lynch instructed Dr Susan Ogle to assess Henry's mental capacity in light of the challenge made by David, which she did on two occasions.
1. On 9 April 2013, Dr Ogle examined Henry. Henry scored 26/30 on a Folstein's Mini-Mental Status Examination. Dr Ogle concluded that, although Henry had dementia from his various medical conditions, she could find no evidence of a delusion that might influence his free will in disposing of the property. Dr Ogle observed that Henry was quite clear in his wishes to transfer his interest in the property to Lana rather than dispose of the property through his Will.
2. On 30 April 2013, Dr Ogle saw Henry again and performed frontal testing. Dr Ogle concluded that Henry had insight and thus testamentary capacity.
On 3 June 2013 Tress Cox Lawyers again pressed Mr Lynch for information as to Henry's capacity. On 14 June 2013, Henry sent a letter to David, directing David not to visit Henry again unless and until David had resolved their present disputes to Henry's satisfaction. David says that this caused him to be concerned that his father may have been manipulated by Lana.
On 3 July 2013, the directors of the superannuation fund met over David's objection and resolved to appoint a new accountant, who sought financial records from the former accountant, Economos Chartered Accountants. Henry retained a new solicitor, Phillips Sacks, who wrote to Tress Cox Lawyers proposing to sell the Druitt Street property unless David was prepared to purchase Henry's share. David offered to purchase Henry's interest in the property for $50,000 on the bases that, inter alia, Henry had promised to leave it to him for many years; the company did not have the funds to purchase the interest; and David wished to continue to operate the business from the Druitt Street property. Henry responded by offering to buy David's one-third share in the property for the same amount, that is, $50,000.
On 12 September 2013, Tress Cox Lawyers again wrote to Henry's new solicitor, saying:
"Your clients should be aware that there are serious doubts, which have continued over a period of at least 12 months, as to Henry's capacity to make financial and personal decisions".
Tress Cox Lawyers was instructed to request that Henry be comprehensively assessed if he had not been assessed already.
In December 2013, David applied for guardianship and financial management orders in respect of Henry. At the same time, Economos Chartered Accountants declined to hand over financial records to Henry's solicitor on the basis that Henry did not have capacity. I infer that this was on David's instructions. At about this time, Tress Cox Lawyers wrote to Dr Ogle raising various questions about her earlier reports, and also to Dr Morgan, a neurosurgeon who had treated Henry in the past. It would appear that, by this time, David was in possession of Henry's key medical reports, and was making active investigations as to Henry's capacity.
In January 2014, Dr Ogle responded to Tress Cox Lawyers expressing reservations about her earlier assessments. Dr Ogle said that her testing was limited on both occasions and she expressed some reservations as to how independent Henry's decisions were given that Lana was outside the room and apparently vocal as to what she thought should happen. Dr Ogle considered that, on reflection, Henry may have had poor insight. I note, of course, that Dr Ogle's testing of Henry in April 2013, as reconsidered in January 2014, may not be definitive of Henry's testamentary capacity in December 2012.
In February 2014, Dr Morgan wrote to Tress Cox Lawyers, opining that Henry then lacked capacity to comprehend complex financial matters, attend company meetings or make an informed decision.
In contrast, Dr Solomons continued to opine, in a report of 28 January 2014, that Henry was able to make his own personal and financial decisions.
On 13 August 2014, the New South Wales Civil and Administrative Tribunal appointed Henry's long-time friend and chartered accountant, Leonard Walker, as financial manager of Henry's estate, and dismissed David's application for a Guardianship order. The Tribunal accepted David's sincerity in bringing the application, and I have no reason to do otherwise. However, it appears that it did not improve Henry and David's relationship.
Nor did the appointment of a financial manager resolve the difficulties which appear to have been experienced in obtaining financial information from David as to the family business and the superannuation fund. David declined to provide financial information on the family business on the basis that Henry, as a minority shareholder, was not entitled to it. Likewise, no progress appears to have been made in resolving the dispute as to rent or long service leave said to be owing to Henry. The financial manager experienced further difficulties becoming a signatory on the relevant bank accounts. Concerns were expressed by both parties as to the operation of the bank accounts.
In 2015, David disposed of the family business. David's wife, Therese, became the registrant of the domain name www.photiosbros.com.au, being the domain name at which the Photios Bros website was published. Apparently this was because Therese had designed the website and then licensed it to the family business. In July 2015, Therese incorporated Photios Bros Australia Pty Ltd, a company of which she was the sole director and beneficial shareholder. At some point, the family business appears to have been sold to Embellishments Pty Ltd, although it appears that Lana and the financial manager were not informed of this at the time. In October 2015, Lana wrote to David to arrange for a valuer to attend the Druitt Street property to prepare a valuation. David did not reply. On 28 October 2015, David apparently refused Lana and the valuer access to the property. The next day, 29 October 2015, Photios Bros Pty Ltd vacated the property and informed the financial manager of this.
In April 2016, David retained new solicitors, Bartier Perry. The cooperation between the parties does not appear to have improved as a result. Bartier Perry alleged misconduct by the financial manager. David declined to assist with the provision of tax records or bank accounts and suggested that the family business had, in fact, overpaid rent.
In August 2016, the New South Wales Trustee and Guardian authorised the financial manager to commence proceedings in the Supreme Court to sell the Druitt Street property. According to the financial manager, Henry needed the funds from the sale of the property to fund his retirement village bond.
[3]
History of these Proceedings
On 7 September 2016, a Summons was filed in the Supreme Court by the financial manager, as tutor for Henry, and by the superannuation fund, against David, seeking a judicial sale of the Druitt Street property.
On 17 September 2016, Henry passed away. Henry and Lana had then been married for 36 years. The evidence before me indicates that their relationship was one of mutual devotion.
On 7 October 2016, the Summons returned before Darke J. David was represented. The Court noted that Henry had died and that Lana would be lodging an application for probate of Henry's Will made on 11 December 2012 shortly. David was directed to file any Cross Claim by 28 October 2016.
On 26 October 2016 a grant of probate was made in respect of Henry's Will of 11 December 2012. The grant was in common form. In accordance with the Will, Lana was appointed executor. David did not lodge a caveat against a grant of probate.
On 28 October 2016, David filed a Cross Claim seeking a declaration that the Estate held Henry's one-third interest in the Druitt Street property on trust for David.
On 4 November 2016, the matter came before Darke J again. David was represented. His Honour noted that probate of Henry's Will of 11 December 2012 had been granted to Lana. The parties agreed to proceed to sell the Druitt Street property, with a reserve set of $3 million. The proceeds of sale were to be paid to the parties forthwith, save for the Estate's one-third share which Lana agreed not to distribute without giving 21 days' notice.
On 25 November 2016, David filed a Statement of Cross Claim seeking a declaration that Lana held a one-third interest in the Druitt Street property on trust for him, or in the alternative, equitable compensation. The basis of the Cross Claim was, it would appear, estoppel and unconscionability. David alleged that Henry made promises to him from 1988 until late 2012 that he would leave Henry's one-third interest in the Druitt Street property to David in return for David continuing to engage in the family business ("the Promises").
On 8 December 2016, the Druitt Street property was sold at auction for $4,050,000, with completion to take place in March 2017.
In February 2017, directions were made for the service of evidence in respect of the Cross Claim. By August 2017, the evidence had been filed. The matter was referred to mediation, which was unsuccessful.
On 1 November 2017, Registrar Walton noted that the parties wished to resume negotiations on 22 November 2017. However, on 17 November 2017, David filed a motion seeking orders to distribute the relevant portions of the proceeds of sale to himself and the superannuation fund, and an indemnity costs order against Lana personally. These orders were sought on the basis that apparently the financial manager had refused to resign as a director of the trustee company, that Lana had refused to authorise payment of the proceeds of sale, and that Lana and the financial manager had paid monies from the superannuation fund without David's knowledge. Lana and the financial manager filed affidavits raising their own concerns and difficulties with the operation of the bank accounts of the superannuation fund.
On 8 December 2017, Mr Lynch wrote to Bartier Perry giving notice in accordance with the orders of 4 November 2016 that, on release of the Estate's one-third share of the proceeds of sale, Lana proposed to pay legal fees of $167,935 and reimburse $16,000 advanced to the Estate for expenses. David considered this course to be inappropriate and advised that he would have the matter referred to a judge.
On 20 December 2017, the matter was brought before the duty judge. By consent, Ball J ordered that the relevant portions of the proceeds of sale be paid to David, the superannuation fund and Lana as executor, and made further orders to regularise the operation of the superannuation fund's bank accounts and for the preparation of financial statements for Photios Bros Pty Ltd and for the superannuation fund. Upon the usual undertaking as to damages given by David to the Court, Lana agreed not to disburse the funds in the manner notified on 8 December 2017.
On 31 January 2018, the matter came back before the Equity duty judge. David amended his motion to seek a freezing order in respect of Lana's proposed disbursements. The motion was heard before Ward CJ in Eq on 2 February 2018. Ultimately, the parties agreed that Lana could partially distribute the Estate. In particular:
"1. The Court Notes that the cross-claimant agrees that cross-defendant as executor of the estate of the late Henry Basil Photios is at liberty to make the following distributions and transfers from the estate to the named beneficiaries in accordance with the will of the deceased dated 11 December 2012 ('the will'):
(a) the legacies in clauses 5, 6, 8 and 9 of the will;
(b) interest on the legacies calculated in accordance with s84A of the Probate and Administration Act 1898 (NSW);
(c) the Bengal Tiger tapestry to Michael Photios in clause 3 of the will;
(d) the shares in Photios Brothers Pty Ltd to the cross-claimant in clause 4 of the will;
(e) the shares in Photios SFT Pty Ltd to herself in clause 7 of the will;
(f) the shares in IAG Ltd and Telstra Ltd to David Albert Cohen in paragraph 10 of the will.
2. The Court Notes the agreement between the cross-claimant and cross-defendant that:
(a) the cross-claimant's consent to the distributions referred to in 1 above is without admission; and
(b) the cross-claimant waives and releases any claim or right against the cross-defendant, the estate or the beneficiaries in respect of the distributions made as referred to in 1 above and in particular the cross-claimant acknowledges that if he is successful in his cross claim he will have no claim against the cross-defendant, the estate or any of the beneficiaries in respect of the distributions and transfers referred to in 1 above."
Further, David agreed that Lana could pay the legal costs earlier notified:
"3. The Court Notes [David] consents without admission to [Lana] paying from the estate funds the legal costs of probate and administration in the amount of $7,493.50, along with the figures in paragraph 4 below.
4. Upon [David] giving to the Court the usual undertaking as to damages, the Court notes [Lana's] undertakings to the Court that in consideration of the matters agreed as set out herein:…Lana will not further disperse Estate funds in payment of legal costs incurred after 31 January 2018 in respect of the proposed Amended Cross Claim [being the Amended Cross Claim filed on 16 February 2018], until further order or as may be agreed with David. This undertaking… does not preclude Lana from:
(a) paying from the estate funds the amounts referred to in the letter dated 8 December 2017 from her solicitors to the solicitors for the cross-claimant;
(b) claiming from the estate her proper costs and expenses up to 31 January 2018 subject to giving 21 days' notice under cl 3A(g) of the orders of 4 November 2016; or
(c) meeting from the estate any other testamentary debts or expenses subject to giving 21 days' notice under cl 3A(g) of the orders of 4 November 2016;…"
Lana undertook to repay any costs to the Estate as the Court directed in the event that David succeeded on the Cross Claim.
Lana submits that, by consenting to the payment of the legacies under the 2012 Will, David thereby made an election not to apply for probate of the 2010 Will. Certainly, the consent orders made on 2 February 2018 are consistent only with an acceptance by David that the 2012 Will was valid. There was no suggestion by David's counsel at those hearings that Henry lacked testamentary capacity to make the 2012 Will.
On 16 February 2018, David amended his Statement of Cross Claim. David added a claim that Henry was contractually obliged to leave Henry's one-third interest in Druitt Street property to David. David pleaded various forms of estoppel.
It should be noted that both the original and the Amended Cross Claim assumed that Henry had capacity until he died. Paragraph 11 in both forms of the Cross Claim pleaded:
"From the date the Promises were made until his death, or alternatively until he lost mental capacity, the deceased was aware that the cross-claimant was relying on the Promises and acting to his detriment in reliance on the Promises".
That is, David put forward the primary position that Henry had capacity until his death or, alternatively, lost mental capacity at some time between when the Promises were made and his death.
On 11 April 2018, the matter was listed for directions for allocation of a hearing date. By then, 19 affidavits had been filed by Lana and David in the substantive proceedings, directed to the Cross Claim as pleaded, that is, whether or not Henry made the Promises, David's role in the family business and the relationship between Henry and David. Lana's counsel was instructed to seek a hearing date. However, David's counsel informed the Court that he wished to further amend the Amended Cross Claim to contest the validity of Henry's Will on the footing of lack of testamentary capacity.
Henry's apprehension that difficulties would arise for Lana on his death have, regrettably, proved to be correct. Lana has yet to receive any distribution from the Estate, although as I understand it, Lana and David will receive monies via the superannuation fund.
[4]
Proposed Amendment
David proposes to further amend his Amended Cross Claim by seeking the following additional relief:
1. An order that the grant of probate No. 2016/290219 granted to the cross-defendant be revoked;
2. An order that grant of probate in solemn form of the deceased's Will dated 12 August 2010 be granted to the cross-claimant; and
3. The matter be referred to the Registrar to complete the grant.
The basis on which David says he is entitled to this relief is that Henry did not have testamentary capacity, or, alternatively, he did not know or approve the contents of his Will by reason of his lack of capacity and the fact that the Will was inconsistent with Henry's previous Wills.
The purpose of the amendment was, as frankly conceded by David's counsel, to add another "string to his bow" in claiming Henry's one-third interest in the Druitt Street property.
[5]
Evidence in Support of the Motion
In support of the motion, David read two of his affidavits and an affidavit of Dr Wijeratne. Dr Wijeratne opined, after a review of subpoenaed medical records that, as at December 2012, Henry was capable of understanding the nature and effect of making a will but did otherwise not meet the criteria in Banks v Goodfellow (1870) LR 5 QB 549, and as such lacked testamentary capacity at that time. Dr Wijeratne thought it reasonable to conclude that Henry retained testamentary capacity when he prepared his earlier Will of 12 August 2010.
The medical records supplied to Dr Wijeratne comprised three lever arch folders, which were not tendered on this application. A selection from those notes, of some 180 pages, was exhibited to David's affidavit but not tendered. Rather, my attention was drawn to some entries in the nursing notes, supplemented by further medical records tendered by Lana's counsel.
Lana's counsel criticised the report of Dr Wijeratne as omitting critical facts, being potentially inadmissible and simply wrong. Whilst some of those criticisms may be well founded and upheld at a final hearing, it is not for the Court, on an interlocutory application, to determine the admissibility of the report, or the weight which may be attached to it, in the absence of a comprehensive review of the underlying medical documents which are not in evidence before the Court. Likewise, David's counsel submitted that Dr Wijeratne's opinion was bolstered by contemporaneous medical records, but in the absence of a review of all the medical records, I can do no more than say at this stage that Dr Wijeratne's report indicates that there is a prima facie case that Henry lacked testamentary capacity.
Lana read two affidavits of Mr Lynch, setting out the factual and procedural history of the matter, which I have set out earlier in my judgment.
[6]
Revocation of a Grant of Probate
A grant of probate is a judicial act in the character of an order of the Court: Estate Kouvakas; Lucas v Konakas [2014] NSWSC 786 at [228]. As such, an applicant for revocation of a grant (not unlike an applicant for the setting aside of any judgment or order of the Court) must generally persuade the Court that the applicant has a reasonably arguable case for a grant of representation other than that under challenge, and an explanation for delay in advancing a case for that alternative form of grant: Estate Cockell; Cole v Paisley [2016] NSWSC 349 at [53] per Lindsay J.
Any revocation is discretionary, as Powell J explained in Bramston v Morris (Unreported, NSWSC, 20 August 1993):
"It should, however, be noted that, although the power to revoke a grant undoubtedly exists, it is not exercised as a course, or even as a matter of right; rather, the question whether, in a particular case, the power ought to be exercised is one which lies in the discretion of the Court, having regard to all the circumstances of the case."
This principle was adopted by Lindsay J in Estate Kouvakas; Lucas v Konakas [2014] NSWSC 786, at [293] - [294].
The significance of delay in an application for revocation was explained by White J in Dickman v Holley; Estate of Simpson [2013] NSWSC 18 at [135] - [136] (citations omitted):
"It is an inherent feature of a grant of probate in common form that the grant is revocable. The grant does not create a res judicata, but is subject to later challenge … Delay in seeking revocation of a grant of probate in common form can be a bar to such a claim. However, so far as the authorities cited to me show, where a claim for revocation of a grant of probate has been barred by reason of the applicant's delay, there have been other features beyond mere delay. There has been not only delay, but acquiescence in the grant, or the delay has been such that there would be no utility in revoking the grant".
His Honour helpfully reviewed authorities since 1814, which illustrate that applications to revoke a grant of probate in common form may be brought many years later. There is no statutory limitation period for an application to revoke a grant of probate. The question in each case will be whether the applicant is barred by laches having regard to whether the delay has occasioned prejudice or would make it inequitable to pursue the claim. As White J said at [143]:
"The fact that Estate monies have been distributed and spent by beneficiaries has not been considered as a ground of prejudice that should bar a claim for revocation of a grant of probate…The possibility of such revocation was inherent in the decision to seek only a grant of probate in common form".
In that case, White J held that a delay of four years, without other factors, was not sufficient to bar the claim for the revocation of the grant of probate. His Honour considered that, while the plaintiff did not fully explain his delay, it was explained in part by his inability to access the property where the older wills were located. In the absence of any likely prejudice from the loss of evidence, and where the executor of the later will had not disclosed all matters known to him in the probate proceedings, the claim was not barred on the ground of laches. Nor would it be futile to attempt to recover the money that had been distributed under the common form grant of probate.
In Estate Kouvakas; Lucas v Konakas [2014] NSWSC 786, Lindsay J agreed that the length of delay, though relevant, is not necessarily a decisive factor: at [142]. His Honour emphasised the need to keep estate litigation under a tight rein and, in the case before him, favoured a summary determination of a claim for revocation rather than exposing the Estate to expensive protracted litigation (at [319]-[320]). Lindsay J explained at [284] - [288]:
"…on any application for revocation of a grant, close attention may need to be given to the facts of the particular case, with due regard to its procedural history and the due administration of justice…The decision for the Court is essentially is one of case management, governed by the purposive character of probate jurisdiction, directed towards the due and proper administration of the particular estate and accommodation of affected interest."
His Honour further stated at [302]:
"…A substantial occasion for the application of principles governing the finality of judgments may arise…on an application for revocation of a common form grant where it is established that a person with an interest adverse to the grant did, in fact, stand by and, without taking up an opportunity to intervene, allow the grant to be made".
The plaintiff in that case, the stepson of the deceased, sought to prove an earlier 1993 Will in solemn form, under which he was a beneficiary, on the basis that the testator lacked capacity at the time of a 2011 Will in respect of which a grant in common form had been made. The stepson, however, had actively participated in earlier proceedings which led to the grant of administration of the 2011 Will: he appeared by counsel on at least one occasion, and swore an affidavit which appeared to have been prepared with the benefit of legal advice. The affidavit expressed doubts as to testamentary capacity, but the stepson did not press these concerns and administration was granted "by consent". The stepson was active in the earlier proceedings between November 2012 and May 2013. The stepson had also, before commencing the revocation proceedings, filed a claim for family provision relief in June 2013, on the basis that the 2011 Will had been proved but would be contested in separate proceedings. The revocation proceedings were commenced in October 2013, a year after the stepson's first participation.
His Honour held that the stepson deliberately chose to treat the 2011 Will as valid as a foundation for a family provision claim and should be held to that choice - whether the choice was construed as evidence of an admission of the validity of the Will or a purely forensic tactic: at [339]. His Honour summarily dismissed the application to revoke the grant of probate in common form of the 2011 Will.
Another example of the application of these principles is Bramston v Morris, where there were at least three Wills, made in 1984, 1985 and 1986. In proceedings commenced in 1987, Mrs Naple, the granddaughter of the deceased, sought that the 1986 Will be proved, under which she was the beneficiary of a trust of the residuary estate. The proceedings were abandoned. Later that year, the plaintiffs (the executors under both the 1985 and 1986 Wills) were granted probate in common form of the 1985 Will.
In 1988, Mrs Naple commenced proceedings for family provision relief. The proceedings settled in 1990. During the course of these proceedings, Mrs Naple's solicitor, by a letter of 2 February 1989, "reserved the right" to seek the revocation of the grant. This right was restated on a number of occasions in 1990, but was not acted upon during Mrs Naple's lifetime.
After Mrs Naple's death, the executors of the deceased's estate commenced proceedings in 1992 to seek the grant of probate of the 1985 Will in solemn form with the aim of preventing Mrs Naple's estate later seeking such a grant itself. It was only during these proceedings that the question of testamentary capacity was pleaded for the first time, by Mr Morris, the executor of Mrs Naple's estate, in his defence filed in January 1993. In July 1993, Mr Morris filed a cross claim seeking the revocation of the grant of probate. This was seven years after the deceased's death, six years after Mrs Naple had first applied to the court for relief, and five years since the grant of probate of the 1985 Will.
His Honour concluded that the cross claim seeking to revoke the grant of probate ought not to be permitted to continue as it was bound to fail. He did not regard the evidence which Mr Morris had been able to gather as raising even a prima facie case lack of testamentary capacity and further, as a matter of discretion, the Court should refuse to revoke the common form grant because of the conduct of Mrs Naple. His Honour concluded that the attempt to have the common form grant revoked notwithstanding these matters constituted an abuse of process.
In summary, in deciding whether to revoke a grant of probate, the Court may consider amongst other things:
1. whether there is a reasonably arguable case in respect of the testator's testamentary capacity at the relevant times,
2. whether there has been delay, and any explanation for it,
3. whether the applicant has acquiesced in the grant already made,
4. whether the delay has occasioned prejudice such that it would be inequitable to pursue the claim, such as the loss of evidence;
5. whether there is utility in revoking the grant, and
6. whether, having regard to the procedural history of the matter and the purposive character of the probate jurisdiction, it is consistent with the due and proper administration of the estate and the due administration of justice.
[7]
Reasonably Arguable Case as to Testamentary Capacity
So far as a reasonably arguable case for a grant of probate of the 2010 Will is concerned, Lana submits that there is ample contemporaneous evidence confirming Henry's testamentary capacity including records of an experienced solicitor, a long-standing general practitioner, Dr Solomons, and a medical specialist, Dr Ogle, and there is no justification to embark on a retrospective determination as to whether the deceased had testamentary capacity.
Further, Henry's deviation from his will-making pattern, by changing the gift of his one-third interest in the Druitt Street property from David to Lana, was explained by the surrounding circumstances. Lana submits that Henry was increasingly experiencing difficulties with David and gave anxious consideration to changing his Will in December 2012. The contemporaneous evidence demonstrates capacity in making that decision.
Certainly, it is apparent from the contemporaneous evidence that, as David pressed his father further to secure some certainty with respect to the business premises, Henry grew annoyed with his son and concerned that David would make Lana's life difficult once time came to administer Henry's estate.
Lana submitted that the mere existence of a Will that fails to meet the will-maker's moral obligations does not necessarily indicate a lack of capacity. As Kirby P said in Re Estate of Griffith (dec'd); Easter v Griffith (1995) 217 ALR 284 at 294, "Freedom of testamentary disposition includes a freedom to be unfair, unwise or harsh with one's own property". As Gleeson CJ said in that case at 291:
"Testamentary capacity is not reserved for people who are wise, or fair, or reasonable, or whose values conform to generally accepted community standards. A person may disinherit a child for reasons that would shock the conscience of most ordinary members of the community, but that does not make the Will invalid".
See also Tobin v Ezekiel (2012) 83 NSWLR 757; [2012] NSWCA 285 at [44] - [54] per Meagher JA (Basten and Campbell JJA agreeing); Carr v Homersham [2018] NSWCA 65 at [14] per Basten JA; Dickman v Holley; Estate of Simpson [2013] NSWSC 18 at [159] - [163] per White J.
There is prima facie evidence of Henry's testamentary capacity but, as I have already mentioned, Dr Wijeratne's report indicates that there is also a prima facie case that Henry did not have testamentary capacity when he executed his final Will on 11 December 2012, but did in 2010. On the face of his expert report, Dr Wijeratne possesses the relevant qualifications to opine on Henry's capacity.
David has a reasonably arguable case that Henry lacked capacity to make his final Will in 2012 and that the 2010 Will should stand as Henry's last Will.
[8]
Explanation for Delay
David faintly suggested that it was an affidavit filed by Mr Lynch, sworn on 6 September 2017, which prompted David to explore his concerns as to his father's testamentary capacity, issuing 17 subpoenas to hospitals, treating doctors, Henry's nursing home and the like. To the extent that David thereby sought to explain his delay, I do not accept the explanation.
Since November 2012, David has voiced his view that Henry lacked testamentary capacity, both directly and via his solicitors. Assisted by legal representation, David investigated the issue of his father's capacity in 2013 and 2014, before NCAT. There was nothing new or different in Mr Lynch's affidavit of 6 September 2017 which would have raised concerns about Henry's testamentary capacity beyond the information which David had already had for some years.
Lana submits, by reference to Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 that, where a discretion is sought to be exercised in favour of one party and to the disadvantage of another, an explanation is called for: at [103]. In the absence of an explanation in this case, leave to amend should be refused.
Certainly, the absence of an explanation for delay tells against granting leave to amend to revoke a grant of probate, but features beyond mere delay are usually needed to bar revocation of a grant: Dickman v Holley; Estate of Simpson [2013] NSWSC 18 at [135] - [136].
[9]
Acquiescence
In October 2016, David acquiesced in the grant of probate of the 2012 Will and until April 2018 conducted these proceedings on the premise that the 2012 Will was valid.
[10]
Prejudice
Three items of prejudice were identified by Lana. First, Lana's counsel submitted that, if leave to amend be granted, Lana will bring a Family Provision application together with an application for an extension of time. However, Lana is now out of time to bring an application for provision under the Succession Act 2006. The Court invited David to agree that, if leave to amend the Cross Claim is granted, he would consent to Lana making a claim for family provision relief. David did so, although expressed reservations about such a claim, and I apprehend it would be opposed.
Second, Lana has partially administered the Estate by paying the pecuniary legacies. In accordance with the orders of 2 February 2018, Lana has paid legacies to Henry's children, grandchildren and stepchildren totalling $200,000. Lana did not pay the gift of $100,000 to Michael, which was not in the 2012 Will but is in the 2010 Will which David now seeks to prove. If David is successful in proving the 2010 Will in solemn form, Lana could be at risk of a claim by Michael for the amount of his legacy, or a portion of it.
The Court sought an undertaking from David to address this prejudice. The parties have conferred and the undertaking proffered by David is, relevantly:
"1. .… in the event that the 12 August 2010 will is admitted to probate (and that in consequence the grant of probate in respect of the 11 December 2012 will is revoked) David will indemnify Lana in respect of:
a. Any claim against Lana either as executor or in her own right by Michael for the payment of the legacy of $100,000 due to him under the 2010 will, including interest due on the legacy.
b. Any claim against Lana either as executor or in her own right by those beneficiaries (other than David), who have received legacies under the will of 11 December 2012 (or any claim by David in either his own right or as executor), subject to the orders of Ward CJ in Eq on 2 February 2018 and provided Lana, acting in good faith, has complied with her legal obligations as executor, in the event that:
i. a claim is made against any of those beneficiaries to disgorge any part of the legacies received by them; and
ii. such claim directly arises from the 12 August 2010 will being admitted to probate and the grant of probate in respect of the 11 December 2012 will being revoked.
2. The indemnity in respect of a claim under 1(b) is limited to the amount disgorged by the beneficiary pursuant to a claim contemplated in paragraph 1(b) above.
3. Liberty to apply for the purpose of any matter relating to the foregoing undertaking to the Court.
4. For the avoidance of doubt, the acceptance of the foregoing undertaking does not affect the undertakings noted by Ward CJ in Eq on 2 February 2018, or the orders of 4 November 2016."
Third, Lana's counsel pointed to the additional stress and strain which Lana would endure if the proceedings are further protracted by permitting David to now challenge to Henry's testamentary capacity. Lana is aged 71. During the hearing, I was informed by Lana's counsel that Lana is in good health and working part-time to fund these proceedings. David's counsel did not doubt what Lana's counsel had said, and referred the Court to the orders made on 2 February 2018, which appear to indicate that legal costs incurred by Lana were paid up to 31 January 2018, but not necessarily thereafter. The stress and expense of this litigation is a burden on both Lana and David. This consideration is real but not decisive.
[11]
Case Management Considerations
David's counsel stated unequivocally that David's evidence, both lay and expert, in support of the proposed Further Amended Cross Claim is complete, being the affidavits already filed in the substantive proceedings together with the affidavits filed in support of the motion, in particular, the expert report of Dr Wijeratne. David will lead no further evidence in chief whatsoever in respect of the proposed Further Amended Cross Claim. David may wish to reply to any evidence filed by Lana as to Henry's testamentary capacity.
I accept Lana's submission that, if leave to amend the Cross Claim is granted, Lana would have to put on further lay evidence addressing Henry's capacity. Whilst the 19 affidavits already filed in the substantive proceedings may, tangentially, be relevant to Henry's capacity, they do not squarely address that topic. Lana's counsel said four to eight weeks would be needed to obtain any further lay evidence, and a further eight weeks to obtain an expert report to respond to Dr Wijeratne.
No hearing date has yet been allocated, although, absent this motion, such a date would have been allocated when the matter was listed for directions in April 2018.
The present estimated hearing time of the matter is one week. Counsel were unable, unsurprisingly, to give precise estimates of the length of hearing time needed in the event that the Cross Claim is amended. A further two to five days was proffered as a rough indication.
If leave to amend is granted, the final determination of the Cross Claim will be delayed. The parties will need to prepare further evidence. The Court cannot allocate a hearing date until the scope of the further evidence is known, and thus the time required to hear the matter. As the hearing will require more hearing days, the parties may have to wait longer for a hearing to be allocated to them. The parties will incur additional costs in the preparation of further evidence and participation in a longer trial.
Against this, if leave is refused to amend the Cross Claim for case management considerations alone, David would be entitled to commence separate proceedings in the Probate Division to revoke the grant of probate and prove the earlier Will. This would itself potentially delay these proceedings, indeed, such probate proceedings might need to be determined before these proceedings. The position is different, I think, if leave to amend is refused on the basis that an application to revoke the grant of probate is doomed to fail.
[12]
Conclusion
Adopting the language of Powell J in Bramston v Morris, notwithstanding a prima facie case of lack of testamentary capacity, other matters dictate that, in the exercise of its discretion, the Court should refuse to revoke the common form grant, those matters being that, despite the fact that at all material times David was aware of the facts, matters and circumstances upon which he now seeks to base a claim of lack of testamentary capacity, he stood by and acquiesced in the grant of probate in common form of the 2012 Will, made no attempt until recently to have it revoked and, on the contrary, prosecuted these proceedings upon the basis that the 2012 Will was the relevant Will.
At a late stage in these proceedings, for apparently tactical reasons, David now seeks to agitate an issue of which he has been apprised for more than five years.
The prejudice caused in relation to the distributions made under Henry's 2012 Will, and any claim which Lana may wish to make under the Succession Act 2006, can be largely cured by the undertakings which David has proffered at my request. But the prejudice extends beyond this. Introducing this issue in the proceedings at a time when evidence is otherwise complete will add significantly to the cost of the proceedings and the time before the proceedings are finally determined. These costs will further deplete the remaining Estate.
As such, I refuse leave to further amend the Cross Claim as I consider the additional claims are bound to fail, whether prosecuted in the Probate Division or in these proceedings.
[13]
Orders
The Court makes the following orders and directions:
1. Motion of 18 April 2018 is dismissed.
2. Defendant to pay the plaintiff's costs of the Motion.
3. These proceedings are stood over to the Registrar in Equity's list for the allocation of a hearing date.
[14]
Amendments
21 September 2018 - [103] second last line, "is" deleted.
21 September 2018 - [107] first line, "of the" to "under the"
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Decision last updated: 21 September 2018
Parties
Applicant/Plaintiff:
Lana Clarice Photios as Executor of the Estate of Henry Basil Photios & Anor