Liberty Teal Griffin (by her Tutor Shelley Candice Griffin) v David Raymond Coe

Supreme Court of NSW|2012-04-27|Before: Davies J, Cohen J

Timothy John Christiansen (both in his capacity as executor of the estate of the late Philip Mark Griffin and his personal capacity) (Third Defendant) Representation: Counsel: M Sneddon & C Alexander (Plaintiffs) SR Donaldson SC, DL Williams SC & M Newton (Second Defendant) Solicitors: C P White & Hetherington (Plaintiffs) HWL Ebsworth (Second Defendant) File Number(s): 2011/121962

Judgment 1This is an application by the Second Defendant to dismiss proceedings brought against him, alternatively to strike out the existing Amended Statement of Claim on the basis that no reasonable cause of action is demonstrated.

Background 2Each of the Defendants is an executor of the will of the late Phillip Mark Griffin who died by his own hand between 18 - 21 October 2007. Probate of the last will of the Deceased dated 18 May 2006 was granted to the Defendants on 22 May 2008. 3The Plaintiffs are the two children of the Deceased and Shelley Candice Griffin, the tutor of the Plaintiffs. Both of the Plaintiffs are minors. Although it is not pleaded, the Plaintiffs are two of the residuary beneficiaries of the Estate, the other residuary beneficiaries being two other children of Shelley Griffin from a prior relationship. 4At the time of his death the Deceased was the sole Director, Secretary and shareholder of PMG Holdings Pty Ltd. He held a single share in that company which was the vehicle by which the Deceased conducted his business activities. 5PMG Holdings held 7,385,586 shares in Allco Financial Group Ltd subject to escrow conditions as to when those shares could be sold pursuant to an agreement called the UK Share Acquisition Agreement dated 1 May 2006. 6The first tranche of shares was released for sale on 22 October 2007 and the second tranche was released on 30 September 2008. At 19 October 2007 each Allco share was worth $8.73 and thereafter the value declined to $0.13 on 18 and 19 September 2008, on which dates the executors sold 797,223 shares and 1,202,777 shares respectively. 7On 4 November 2008 administrators and receivers were appointed to Allco. 8The claim against the executors is first, that at various times from the death of the Deceased to the date of obtaining probate on 22 May 2008 they intermeddled in the estate, thereby becoming executors de son tort and becoming subject to duties which rendered them liable for not having sold the shares at an earlier time, and secondly, that after they obtained probate they did not sell the shares promptly. In this way they are said to have committed a devastavit on the estate of the Deceased. 9The executors are sued both in their capacity as executors and in their personal capacities. 10The First Defendant, David Raymond Coe, was one of the attorneys appointed by PMG Holdings in relation to the acquisition of shares by PMG in Allco Finance Pty Ltd and associated companies. 11The Second Defendant, Neil Sidney Matthews, was the Deceased's solicitor from time to time. 12The Third Defendant, Timothy John Christiansen, was the Deceased's accountant from time to time. On 8 November 2007 he lodged notification of his appointment as sole Director and Secretary of PMG Holdings. 13The present application is made by the Second Defendant Matthews. 14The case against Mr Matthews is pleaded as follows: (a) From the early 1990s Matthews was engaged by the Deceased from time to time to act as the Deceased's solicitor including in relation to preparation of the Will and in relation to PMG Holdings (para 4); (b) By or about 31 December 2007 all three executors had begun to intermeddle in the estate (para 18); (c) By or about 31 December 2007 all three executors had assumed the role and duties of executor, and upon the grant of probate the estate of the Deceased as a matter of law vested in them from 21 October 2007 (para 19); (d) By 31 December 2007 all three executors had become executors de son tort (para 20); (e) On 18 and 19 September 2008 the executors sold 2 million of the first tranche of 2,461,862 Allco shares at a price of approximately 0.13 cents per share (paras 22 & 23); (f) By 19 September 2008 the executors could have sold but failed to sell the remainder of the first tranche of 461,862 Allco shares (para 24); (g) In the weekend in 4 October 2008 the second tranche and the remaining shares in the first tranche of the Allco shares could have been but were not sold (paras 25 & 26) (h) The executors committed a devastavit on the estate of the Deceased by not earlier appointing one of them to be a director of PMG Holdings, by not selling the shares earlier and/or by not applying for a grant ad litem ad colligenda bona defuncti (para 34); (i) The executors committed the devastavit by not exercising their discretion bona fide with a due regard to the interests of any of the beneficiaries in the estate three of whom were minors, and did not to the best of their judgment take into consideration all the material circumstances including that the share price for the Allco shares was rapidly and consistently declining (para 35); (j) The claim for compensation is for $17,479,220.20, alternatively $730,931.00. 15In summary, the basis of the Plaintiffs' case against Mr Matthews is that he intermeddled in the estate, he thereby became an executor de son tort, and therefore became liable as if at the relevant time he had been an executor with a grant of administration. 16The particulars of intermeddling provided in paragraph 18 of the Amended Statement of Claim referred only to the three executors having, by 31 December 2007, given instructions to advertise, and having so advertised, for probate in the newspaper. It was said that further particulars were to be provided after discovery. By the time the Motion was argued the Plaintiffs pointed to a number of further matters, apart from the advertising, which were said to amount to intermeddling in the estate. 17After judgment was reserved an application was made by the Plaintiffs for leave to reopen their defence of the Motion to point to further documents and material which had become available during the course of the preparation of the case for a final hearing. This further material was said to show further instances of intermeddling and confirmation of earlier matters where perhaps only inferences were available. 18The issues as distilled during argument were in substance these: (1) Were the various acts of Mr Matthews carried out in apparent preparation for the obtaining of a grant of administration acts which amounted to intermeddling, thereby rendering him an executor de son tort; (2) If so, did he come under a duty which would render him liable for the devastavit arising from the low price obtained for the shares; (3) Regardless of the answers to (1) and (2), whether Mr Matthews is liable as executor after administration had been obtained for the devastavit associated with the sale of the shares. 19If the proceedings are to be dismissed as Mr Matthews seeks it is necessary for him to show that they satisfy the test or descriptions in General Steel Industries Inc v Commissioner for Railways (NSW)(1964) 112 CLR 125 at 129.

(1) Did Mr Matthews intermeddle in the estate? 20The Plaintiffs urged that questions concerning intermeddling were questions of fact unsuited to resolution on an application such as the present. Attention was drawn to what Needham J said in Mulray v Ogilvie (1987) 9 NSWLR 1 at 3: The questions of what acts will make a person an executor de son tort and of what acts make it impossible for a person named as executor to renounce probate cannot be said to have instant and convincing answers. There are many decisions on each of these points, most of them comparatively ancient, but it is not possible, I think, to reconcile them. 21Whilst it is true that it is a question of fact whether there has been intermeddling, if the acts themselves are not doubted then it is a question of law whether the acts are capable of amounting to intermeddling: Ex parte Public Trustee; Re Birch (1951) 51 SR (NSW) 345 at 361; Cash v Nominal Defendant (1969) 90 WN (Pt 1) 77 at 79. 22If the assertion about intermeddling is confined to the advertising as paragraph 18(a) of the Amended Statement of Claim alleges, I consider it is clear that there has been no intermeddling. In The Will of Colless (1941) 41 SR (NSW) 133 provides strong support for that conclusion. Nicholas CJ in Eq had no difficulty in distinguishing the only clear case to the contrary - Long and Feaver v Symes and Hannam (1832) 162 ER 1339. Further he considered a number of cases which he acknowledged were difficult to reconcile. Nevertheless, he referred to the judgment of Lord Macnaghten for the Privy Council in Mohamidu Mohideen Hadjiar v Pitchey [1894] AC 437 who affirmed the view that an executor even after taking the oath of office may renounce before probate is actually granted. Nicholas CJ in Eq went on to say (at 134): If an executor may renounce after taking the oath he may, I hold, renounce after inserting an advertisement that he is about to apply for probate. 23More recently Needham J in Mulray v Ogilvie (at 4) followed the decision in In the Will of Colless. It appears also that Needham J preferred the statement of Lord Macnaghten in Mohamidu to what had been said in Long and Feaver v Symes and Hannam. His Honour also referred favourably to what each of the members of the United Kingdom Court of Appeal said in Holder v Holder [1968] Ch 353 in relation to a concession concerning renunciation by the executor. Needham J concluded by saying (at 6): [I]t appears to me that the trend of the more modern cases is to take a more lenient view of the acts of nominated executors. This was the view, also, of Nicholas CJ in Eq in In the Will of Colless. 24The Plaintiffs appeared to accept, during the course of argument, that merely advertising would not be sufficient to amount to intermeddling. However, they pointed to a number of other acts involving Mr Matthews which are said to amount to intermeddling in the estate. These can be identified as follows: (a) Mr Christiansen made handwritten notes which refer to discussions had with Mr Matthews in late November 2007, and a "meeting with D Coe, N Matthews and [another] re estate" on or about 6 December 2007; (b) Mr Christiansen also typed notes concerning "Phil Griffin Est" which record a "meeting with D Coe, N Matthews in Sydney on 5 December 2007", a subsequent meeting with "D Coe, N Matthews, in Sydney" on 20 December 2007, and a "discussion with "NM" on 15 January 2008; (c) In response to a letter from Teece, Hodgson and Ward of 27 March 2008 (the then solicitors for the Plaintiffs), Matthews Solicitors replied on 28 March 2008 stating that probate had not been granted but that it was anticipated an application would be made within the next few weeks, that the Deceased's affairs were complex and that the compilation of all relevant information had not been a simple matter, and that the collapse of the share value in Allco Finance Group Ltd was a matter beyond the control of the executors. In any event, the letter said, the Deceased did not hold any shares personally in that company - rather, the shares were held by PMG Holdings Pty Ltd of which the Deceased at his death was the sole shareholder and director. (d) On the same day (28 March 2008) Karen Healey of Matthews Solicitors wrote to Lawyer Central in relation "the estate of the late Phillip Mark Griffin" referring to a letter they had written to David Coe, saying that the firm acted for the executors of the will of the Deceased and asked them to advise the basis upon which the other firm's client considered she was an eligible person within the meaning of the Family Provision Act 1982. (e) The Plaintiffs point particularly to the appointment of Mr Christiansen as the sole director and secretary of PMG Holdings on 8 November 2007. Mr Christiansen had given his consent so to act on 21 October 2007, presumably immediately after becoming aware of the Deceased's death. In that regard an email from Mr Christiansen to Mr Coe on 9 November 2007 at 10:24am was said to be of significance. The email was headed "PMG Holdings - Record of Decision". It then said: Record of Decision of executors of the estate of the late Phillip Mark Griffin Decision made by telephone by David Coe and Tim Christiansen on 8th November 2007 It was decided that Timothy John Christiansen be appointed as sole director and secretary for PMG Holding Pty Ltd as of 8.11.07. The Plaintiffs said that this was relevant to Mr Matthews' position on the basis that after probate was granted on 22 May 2008 "nothing whatever changed". It was submitted that there was at least an argument which ought to go to hearing as to what happened, as evidenced in that email, in relation to Mr Christiansen acting for the benefit of not only himself but also with the concurrence of Mr Coe. It was submitted that it was not "so obviously untenable that it cannot possibly succeed" to submit that all three [i.e. executors] in effect had the joint conduct of PMG Holdings. 25It should be noted that there has been criticism in cases and in commentary of the description executor de son tort being applied to an executor appointed under a will who does acts in relation to the estate prior to obtaining a grant: Sykes v Sykes (1870) LR 5 CP 113 at 117, 118 and 119; Howling v Kristofferson (unreported - Sup Ct NSW, Cohen J - 14 October 1992; BC9201556 at 11); Williams, Mortimer and Sunnucks, Executors, Administrators and Probate (16th Ed) at 93; and see also F C Hutley, The Executor De Son Tort in the Law of New South Wales (1952) 25 ALJ 716. The basis for the criticism is that there is no wrongdoing on the part of the named executor if he undertakes certain acts prior to the grant. That is not to say that the carrying out of those acts may not be such as to deny the executor the right to renounce, but that is a different point from an assertion of liability for devastavit in respect of the whole of the Deceased's estate. This will be discussed in the next section of the judgment. 26The combination of the acts with which Mr Matthews was involved in paragraph 24 (a) to (d) may well have resulted in his not being able to renounce had he sought to do so. Advertising, conferring with the co-executors about what can reasonably be inferred were matters preliminary to the obtaining of a grant and letters to other solicitors concerning what the executors were doing towards obtaining of a grant may in total be described as intermeddling, as some cases would describe it. On one view the decision in Howling would suggest otherwise (BC9201556 at 15), but Cohen J seems there to be directing attention to the incurring of liability to creditors or beneficiaries rather than whether the acts simply amounted to intermeddling. I accept, nevertheless, that Mr Matthews' acts may be regarded as intermeddling. 27What was contained in paragraph 24 (e) was relied on for the purpose of linking Mr Matthews to the relevant asset, namely, the share in PMG Holdings. The material provided no support whatsoever for suggesting any intermeddling by Mr Matthews in relation to the PMG Holdings share. Those documents do not suggest that he had any part in the decision to appoint Mr Christiansen as director.

(2) Is Matthews liable for devastavit prior to the grant? 28Even if it is accepted that the combination of the acts referred to amounted to intermeddling on the part of Mr Matthews, it is necessary to give attention to what has been done by him as a result of those acts. He does not thereby become liable in respect of the whole of the Deceased's estate. As executor de son tort he is only liable to account for assets which he has "taken into his possession or dealt with": Ex parte the Public Trustee; Re Birch and Anor (1951) 51 SR (NSW) 345 at 351; or assets "with which he... has purported to deal: Nolan v Nolan [2004] VSCA 109 at [20]; or assets "which he has received": In re Stevens; Cooke v Stevens [1898] 1 Ch 162 at 178; and see also Parker v Stratford-Upon-Avon Corporation [1914] 2 KB 562 at 567. 29The Plaintiffs submitted that the documents identified in paragraph 24, particularly in paragraph 24(e) above, demonstrated that Mr Matthews along with the other executors had taken the share in PMG Holdings into his possession and/or dealt with it particularly by reason of the fact that he was organising a valuation of that share together with the shares in Allco which were owned by PMG Holdings. The Plaintiffs went so far as to submit that any executor who obtained a valuation of an estate asset had intermeddled with that asset and became liable in respect of any loss associated with it from that point onwards even though the valuation was being obtained as a preparation for the obtaining of probate or administration. 30In those circumstances the Plaintiffs submitted that the relevant test to be applied is that found in Halfhide v Beavan [2003] NSWSC 1207 where Barrett J (as his Honour then was) said: [43] The fiduciary constraints to which I have referred are analogous to those embodied in the common law concept of devastavit, described by Williams, Mortimer and Sunnucks in terms taken from Bacon's Abridgement (Executors, I, 1) as: "a mismanagement of the estate and effects of the deceased, in squandering and misapplying the assets contrary to the duty imposed on them ..." [44] Fifth, the standard of care to be exercised by an administrator in effecting a sale for purposes of administration may be regarded as the equivalent of that expected of a trustee exercising a power of sale, although considerations relevant to the competing interests of classes of beneficiaries will not intrude in the case of a legal personal representative. The standard of care includes the exercise of diligence in inviting competition and in pursuing a course of conduct of the kind that an ordinary prudent person would apply in managing his or her own affairs. Formulations based on a supposed duty to "obtain the best price" or "not to sell at an undervalue" must, I think, be approached with care. Such absolutes tend to be illusory. The emphasis is on responsible, methodical and prudent behaviour undertaken according to an informed appreciation of the subject matter and the market environment in which it is to be sold. In In re Cooper & Allen's Contract for sale to Harlech (1876) 4 ChD 802, Jessel MR said: "It is the duty of trustees for sale to sell the estate to the best advantage they can, that is the manner most beneficial to the cestuis que trust." Harvey J added, in Permanent Trustee Co v Angus (1917) 17 SR (NSW) 364: "Regard must be paid to the method of sale adopted by ordinary prudent vendors of their own property in this country, who are anxious to dispose of their property to the best advantage." I regard these criteria as equally applicable to a legal personal representative undertaking a sale of estate assets for purposes of administration. 31Halfhide was not a case involving an executor de son tort or intermeddling but the Plaintiffs submitted that the test stated by Barrett J was applicable in the present case because Mr Matthews was to be treated as if he were an executor by reason of his actions with regard to the PMG share and the Allco shares. 32In my opinion none of the documents or matters relied on by the Plaintiffs show that Mr Matthews had taken into his possession, received or dealt with either the share in PMG Holdings, which was the asset in the estate, or the Allco shares which were not. Merely conferring about the need to value assets is not taking them into possession nor dealing with them. Nor, for that matter, would obtaining a valuation of them (Williams & Mortimer, 16th Ed p.95), although the documents relied upon do not show that such a valuation was obtained. 33As mentioned earlier, after I had reserved my decision in the matter the Plaintiffs made application to re-open on the basis that evidence served by Messrs Christiansen and Coe subsequent to the argument on the Notice of Motion ought to be considered in deciding the motion. A little procedural history is necessary. 34The Notice of Motion by Mr Matthews was filed on 15 February 2012. It was returnable before the Registrar on 23 February 2012 when directions were given in relation to evidence and submissions in respect of the Motion. It was then stood over to 9 March 2012 before Bergin CJ in Eq. 35In the meantime the proceedings themselves were listed before Bergin CJ in Eq on 9 March 2012 where directions were made in relation to discovery on the part of the Plaintiffs, the First and Third Defendants. Directions were also given for the Plaintiffs to serve all their evidence by 20 April 2012. The proceedings were stood over for directions to 27 April and at the same time Mr Matthews' Motion for summary dismissal was listed for hearing on that day. It is clear that her Honour, who had been case managing the proceedings, intended that the Motion be heard before discovery was complete and before the Defendants' evidence had been served. 36At the outset of the hearing of the Motion an issue arose in relation to a Notice to Produce served by the Plaintiffs. When I enquired what the position was with regard to discovery by Mr Matthews counsel for the Plaintiffs informed me that Bergin CJ in Eq had, in accordance with the Equity Practice Note, said that she would not entertain a Notice of Motion filed by the Plaintiffs for discovery against Mr Matthew until the Plaintiffs' evidence was on. I was informed that the Plaintiffs' evidence had been served and counsel for the Plaintiffs sought to re-agitate the discovery Motion before me. I declined to deal with it and said that I would adjourn to enable the Plaintiffs to raise the matter with Bergin CJ in Eq. He did so and Bergin CJ in Eq refused his application and delivered a short judgment to that effect. 37All of this led strongly to the view that Bergin CJ in Eq intended that Mr Matthews' Motion be heard on the basis of the material then available to the Plaintiffs whether in terms of affidavit evidence, or documents obtained through discovery or elsewhere. 38Nevertheless, the Plaintiffs sought to reopen the hearing of the Notice of Motion and referred to what was said by Clarke JA (with whom Mahoney and Meagher JJA agreed) in Urban Transport Authority (NSW) v Nweiser (1992) 28 NSWLR 471 at 478 where it was said: The principle which should guide the Court in determining whether to grant an application for leave to re-open is whether the interests of justice are better served by allowing or rejecting the application as the case may be. No doubt it is relevant to take account of a number of matters such as likely prejudice to the party resisting the application and the reasons why the evidence was not led in the first place. ... 39In Australian Securities and Investments Commission v Rich [2006] NSWSC 826; (2006) 235 ALR 587 at [18] Austin J noted a number of factors which might be considered on such an application. One of the factors which Austin J identified was the degree of relevance and probative value of the further evidence sought to be adduced. Indeed, it would be difficult to have regard properly to the interests of justice without considering the material itself. 40The Plaintiffs identify the following documents:

(a) A redacted letter from Matthews Solicitors to the executors dated 24 January 2008. 41The letter made reference to the list of assets and liabilities of the Deceased, made reference to the advertisement of the intention to apply for probate, gave some brief advice about the obtaining of probate and then went on to say this: 4. We confirm that as Phil was the sole director of PMG Holdings Pty Ltd, Tim has been appointed as the sole director for the time being to enable the company to continue to operate given the nature of its assets. 42It is difficult to see how this letter takes the matter any further than was the position known previously. Mr Christiansen had himself appointed as the sole director of PMG Holdings on 8 November 2007. This statement in the letter from Matthews Solicitors merely confirms that that happened. It does not in any way suggest an intermeddling by Matthews in relation to that asset.

(b) Email Mr Matthews to the other two executors dated 27 March 2008 43This email first reminded the other executors that probate had to be lodged by 21 April 2008 or an affidavit filed explaining the reasons for the delay. The email confirmed that Mr Christiansen would submit to Mr Matthews a list of assets. The email went on to say this: I understand that the only item needed to finalise the valuation of the shares in PMG Holdings Pty Ltd is the valuation of the art works. There was then a discussion of how the artworks would be viewed and images forwarded to the valuer. A later email from Mr Matthews to Mr Christiansen of 6 April 2008 refers to the fact that the art valuer had almost finished the valuation. 44These emails only show that what was inferred previously, namely the obtaining of valuations associated with the assets, was actually being organised. The mere obtaining of valuations of estate assets for the purposes of an application for probate does not involve a taking of the assets into possession or dealing with them as understood in the authorities earlier referred to. 45It should also be noted in relation to the emails referred to in (a) and (b) above that the Plaintiffs concede that they were available prior to 27 April 2012 but were merely overlooked in the sheer volume of material.

(c) Affidavit of David Coe. 46Nothing in this affidavit assists the Plaintiffs to support any view that Mr Matthews intermeddled in relation to the share in PMG Holdings. Paragraphs 53 - 59 deal with the appointment of Mr Christiansen as the director and it is noted that Mr Coe agreed to that course. However, the affidavit goes on to say: [60] For the reasons set out in s 6.1 above, I deliberately refrained from discussing AFG and the AFG shares held by PMG with Christiansen and Matthews. ... [61] At no time during the period from October 2007 onward did Christiansen or Matthews ask me for my view as to the prospects of AFG or as to what should be done with the AFG shares held by PMG. 47There is some material in the affidavit which makes reference to some meetings of the executors in December 2007 but there is nothing in the affidavit that goes beyond the fact that Mr Matthews and the executors were preparing to apply for probate and doing what was necessary in that regard.

(d) Affidavit of Timothy John Christiansen. 48The Plaintiffs point to the knowledge of Mr Matthews as disclosed in Mr Christiansen's affidavit of Mr Christiansen's intention to become the director of PMG Holdings. The affidavit relevantly reads: [61] I knew that PMG Holdings was a sole director and sole shareholder company. Upon Mr Griffin's death, there was no director of PMG Holdings and I understood that the company needed, and was also required by law, to have a director. I was aware through the duties I had carried out as accountant that there were things that would need to be responded to in the interim until a formal grant of probate was made. [62] On or about 6 November 2007,1 had a telephone conversation with Mr Matthews during which time the directorship of PMG Holdings was discussed. I recall that we had a conversation to the following effect: Me: "We need a director for PMG Holdings because the company cannot exist without one. I am prepared to be the director, or do you want to do it?" Mr Matthews: "No, I am happy for you to do it." Me: "I will need David Coe to agree to this." [63] On or about 8 November 2007,1 had a telephone conversation with Mr Coe during which the directorship of PMG Holdings was discussed. [64] The decision that I should become director and secretary of PMG Holdings is recorded in 2 emails between me and Mr Coe dated 7 and 8 November 2007. Copies of these 2 emails are reproduced at pages 152 and 153 of exhibit TC1. The earlier email states: "Record of decision of executors of the Estate of the Late Phillip Mark Griffin Decision made by telephone by David Coe and Tim Christiansen on 8 November 2007. It was decided that Timothy John Christiansen be appointed as sole director and secretary of PMG Holdings Pty Ltd as of 8 November 2007." [65] In agreeing to the appointment, I envisaged that I would be continuing to do what I was already doing in order to keep the company going. This included paying the bills, receiving property and dividend statements and preparing Business Activity Statements, tax returns and financial statements. At the time, I assumed that it would be necessary to keep these aspects of the company functioning. I also thought that it was necessary for there to be a director and secretary of PMG Holdings in order for me to continue what I was already doing. [66] On or about 8 November 2007,1 completed and signed a form to indicate that I consented to acting as director of PMG Holdings. I back-dated the form to 21 October 2007 which was the date that I had been informed of Mr Griffin's death. My thought at the time was that there would need to be a continuous director of PMG Holdings. ... 49I do not consider that the material contained in the documents identified as (a), (b) and (c) above to be of any probative value or significance. However, the information contained in Mr Christiansen's affidavit is, potentially, of some probative value in relation to the matter of intermeddling. It tends to show that Mr Matthews approved Mr Christiansen's intention to obtain the directorship of PMG Holdings and his act of doing so. 50When considering where the interests of justice lie the following matters seem to me to be significant. First, Bergin CJ in Eq obviously intended that the Motion should be heard on the then state of preparation of the matter and in the light of the material that was then available. That material did not include the documents discussed above. That matter is particularly emphasised by her Honour's refusal to adjourn the hearing of this Motion until discovery was obtained from Mr Matthews. Secondly, the material contained in Mr Christiansen's affidavit is of some probative value in casting light on the issue of intermeddling. Thirdly, the Motion which it is sought to reopen is an interlocutory Motion but if determined against the Plaintiffs will preclude them finally from pursuing the claim against Mr Matthews at least insofar as the pre-probate actions are concerned. Fourthly, it seems highly artificial to determine the Motion ignoring material which is known to exist but which was simply not available or was overlooked at the time of the original hearing of the Motion. Fifthly, there is no prejudice to Matthews in permitting the reopening. 51Balancing these matters I consider that leave should be given to the Plaintiffs to reopen the hearing of the Motion. 52It is necessary to consider, first, if the material in Mr Christiansen's affidavit may be relied upon by the Plaintiffs and, if so, whether it alters the view I have earlier expressed that there had been no intermeddling with respect to the share in PMG Holdings. 53Mr Matthews argued that the Plaintiffs should not be entitled to rely upon and use material contained in the affidavits served by Mr Coe and Mr Christiansen because they were sworn and served for the substantive proceedings and have not yet been read. In that regard he relied on what the High Court said in Hearne v Street (2008) 235 CLR 125. However, unlike in Hearne v Street the Plaintiffs do not wish to use the affidavits for purposes unrelated to the present proceedings. 54In my opinion, the approach of Brereton J in Baker v Paul [2011] NSWSC 957 at [6]-[8] is the correct approach. If leave is necessary for reliance on material contained in those affidavits it ought to be granted. The affidavits were sworn and served for the purposes of the present proceedings where a claim was made on the basis of devastavit on the part of the executors. Part of that claim relates to devastavit as a result of alleged intermeddling by the executors prior to the grant of probate. Whether there has been such intermeddling by Mr Matthews is the very enquiry at the hearing of the present Motion. Quite apart from the fact that the affidavits were sworn and served in the present proceedings and that they were not done pursuant to any compulsory process (cf what happened in Baker v Paul) and because of the close relationship between the enquiry on the present Motion and the enquiry at the final hearing (Baker v Paul at [9]) if leave is necessary to rely on the material it should be granted. 55The material in Mr Christiansen's affidavit (the truth of which must be accepted for the purpose of the present motion) shows that Mr Matthews was privy to Mr Christiansen's decision to appoint himself as a director of PMG Holdings. It might, therefore, be argued that the decision was one made by all of the executors and that they (as opposed to Mr Christiansen only) thereby took into their possession the estate asset constituted by the share in PMG Holdings. 56In Howling v Kristofferson the deceased owned a house where he had lived. The defendant, who was named as executor, had a key to the premises. After the deceased's death he was concerned about damage being caused by vandals or squatters taking possession. Accordingly, he asked his son to act as caretaker of the property until the estate was finalised. The son moved into the property and carried out some minor work including electrical and plumbing work to preserve it. It was asserted in those circumstances that the defendant had intermeddled in respect of the asset. 57Cohen J said: I am of the opinion that in all of the circumstances it cannot be said that the defendant intermeddled by putting his son into the house for the purpose of protecting it. That act was one which in my opinion was solely for the preservation of the estate assets and did not, in the circumstances of the dispute as to the validity of the will, amount to an acceptance of the office of executor nor to the taking over of the functions of that role. The only other act of the defendant in relation to the house, as shown by the evidence, was the employment of a plumber to clear the blocked drain. This again would be classified only as an act for the preservation of the assets. In those circumstances it does not seem to me that the defendant had acted in such a way as to make him liable as executor to creditors or beneficiaries during the period between the death of the deceased and the grant of probate. He was not obliged to invest the assets of the deceased, and indeed he had no right to use those assets. Similarly he had no obligation to enter into a lease of the deceased's house and to receive rents. If he had done either of those acts he would have assumed the role of executor and would thus have intermeddled in the estate, with the resultant consequences. Apart from other matters, the evidence shows that in order to make the premises available for letting it would have been necessary to incur expense by way of repairs to the house. The defendant had no control over the bank account of the deceased and he was not obliged to spend his own money for that purpose. 58In my opinion the act of Mr Christiansen in becoming a director of PMG Holdings is directly analogous to the position in Howling. The appointment was one solely for the preservation of the asset, as Mr Christiansen makes clear in his affidavit. It was necessary for there to be a director of the company: s 201A Corporations Act 2002; and see s 601AB(1). There was power to appoint Mr Christiansen: s 201F(2). 59It may not have been possible for Mr Christiansen to renounce probate from the time of his appointment but that does not mean, as Cohen J said: that his appointment [made] him liable to creditors or beneficiaries during the period between the death of the deceased and the grant of probate. He was not obliged to invest the assets of the deceased, and indeed he had no right to use those assets. Indeed, as Cohen J went on to point out, he would only have been held to have intermeddled if he had invested or used the assets. The distinction between intermeddling (which may result in an inability to renounce) and acts done before probate which may render an executor liable to creditors and/or beneficiaries was re-affirmed by Rein J in Mangraviti v Donato [2009] NSWSC 1258 at [36] where he followed Howling. 60I do not consider that the involvement of Mr Matthews in agreeing to Mr Christiansen's appointment as a director of PMG Holdings was an act that amounted to a devastavit nor an act that rendered him liable to creditors or beneficiaries of the estate. 61Contrary to the Plaintiffs' submission there are no factual issues involved in this conclusion. Rather, the act of Mr Matthews is accepted as having occurred and the issue is whether as a matter of law that act amounts to a devastavit. This is an entirely appropriate consideration on an application to dismiss summarily a cause of action. As Barwick CJ said in General Steel (at 130): I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed. 62No reasonable cause of action is disclosed in respect of the pre-probate claim against Mr Matthews.

(c) The post-probate claim 63Once probate was granted, Mr Matthews, along with the other executors, had all the responsibilities and duties that are imposed upon executors. There can be no doubt that the duties discussed in Halfhide are relevant. The enquiry at this point concerns what in tortious terms might be described as the breach question. 64The issue to be determined is whether wilful default on the part of Mr Matthews has been demonstrated. This would be so whether or not the claim is one brought at common law (the present claim) or as some form of administration suit in equity involving an account: Bovaird v Trustee of the Bankrupt Estate of Frost [2010] FCA 1159 at [19] - [20], and see Juul v Northey [2010] NSWCA 211 at [188]. 65McColl JA (with whom Basten and Campbell JJA agreed) said of wilful default: [180] Wilful default in the present context means "a passive breach of trust, an omission by a trustee to do something which, as a prudent trustee, he ought to have done - as distinct from an active breach of trust, that is to say something which the trustee ought not to have done": Bartlett v Barclays Bank Trust Co Ltd (Nos 1 & 2) [1980] 1 Ch 515 (at 546) per Brightman LJ. Martyn and Caddicks (eds), Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 19th ed (2008) Sweet & Maxwell ("Williams") (at [61-28]) cites this passage from Bartlett to explain the meaning of wilful default in the executorial context. Bartlett was a case concerning wilful default by trustees. However it is in my view apt for Williams to treat the duties of executors and trustees as analogous so as to apply principles concerning wilful default developed in the trust context in a work dealing with executors and administrators. [181] It is also apt to refer to a passage from Meehan [Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146] (at [65]) in which Giles JA (Sheller and Beazley JJA agreeing) addressed the issue of what constitutes wilful default, again in the context of an accounting by trustees, as follows: [65] It is then necessary to return to what amounts to wilful default... In an accounting by a trustee, the underlying concept is that through breach of trust the trustee has failed to obtain for the trust that which would have been obtained if the trustee's duties had been discharged. There may be simple failure to get in an asset of the trust; sale of a trust asset at an undervalue has been treated as wilful default, presumably because of failure to obtain for the trust the full value of the asset (Re Tebbs); failure to obtain rent for a stranger's occupation of a trust property has been treated as wilful default (Bartlett v Barclays Bank Trust Co Ltd (Nos 1 & 2) [1980] 1 Ch 515). The breach of duty need not be conscious wrongdoing (Bartlett v Barclays Bank Trust Co Ltd (No 2) (at 546)). But wilful default is not co-extensive with breach of trust: there may be a breach of trust which is not wilful default (see Re Wrightson; Wrightson v Cooke [1908] 1 Ch 789 at 799-800; Russell v Russell (1891) 17 VLR 729 at 732; Re Wood (decd); Ebert v Union Trustee Company of Australia Ltd [1961] Qd R 375 at 378)." (emphasis added) 66It seems to me that the questions involving whether wilful default has been demonstrated are essentially factual questions which can only be determined after a final hearing. Although a pleading which essentially does no more than set out the price of the Allco shares at various dates does not go far enough in establishing a breach, the issue raised is a matter of pleading and not a matter where no factual issue is involved in a way that would justify summary dismissal. 67The pleading contained in the Amended Statement of Claim appears to be deficient particularly with regard to allegations of devastavit after the obtaining of probate. For example, it is not apparent what is meant by "By reason of the matters pleaded aforesaid" in paragraph 41. Additionally, attention needs to be given to what McColl JA said in Juul and Giles JA said in Meehan. 68It cannot be said, however, that the Plaintiffs' claim in relation to the post-probate period is manifestly groundless or so obviously untenable that it cannot possibly succeed. The determination of the matter may well turn on expert evidence associated with the share price and share trading. It may turn on inferences which are asked to be drawn from the history of the share trading both from the time before probate was obtained and afterwards. Nevertheless, and particularly by reason of my decision in respect of the pre-probate claim the Statement of Claim needs to be completely re-pleaded. 69I will hear the parties with respect to costs.

70Accordingly, I make the following orders: (1)The claim made in respect of the pre-probate period against the Second Defendant is dismissed pursuant to r 13.4 UCPR; (2)The Statement of Claim in respect of the Second Defendant is otherwise struck-out pursuant to r 14.28 UCPR; (3)Leave is granted to the Plaintiffs to re-plead the post-probate claim against the Second Defendant, and such Amended Statement of Claim is to be filed and served by 28 September 2012.

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. Decision last updated: 14 September 2012

At a glance

Court

Decision date

Before

Source

Judgment (12 paragraphs)

Parties

Cases Cited (14)

Cited By (2)