the date at which the estate's properties should be valued
the amount of change in value of the estate's properties over time
Source
Original judgment source is linked above.
Catchwords
the date at which the estate's properties should be valuedthe amount of change in value of the estate's properties over time
Judgment (6 paragraphs)
[1]
Judgment
The NSW Trustee and Guardian ("the NSW Trustee") seeks judicial advice from the Court under Trustee Act 1925 (NSW), s 63. The NSW Trustee administers the estate of the late Edmond Wadih Wardy ("the testator") who died on 19 July 2009. The testator's will of 7 November 1992 and the administration of his estate have already been the subject of proceedings in this Court: Wardy v Wardy & Ors; Estate of Edmond Wadih Wardy [2013] NSWSC 244; Wardy v Salier [2014] NSWSC 473.
[2]
The NSW Trustee's Application
The NSW Trustee's application for judicial advice has been served on all potentially interested parties. One of those interested parties, Mr John Wardy, has already been joined as the first defendant. The number of interested parties has been reduced since the previous litigation. The only persons now interested in the estate, at this stage of its administration, are the first defendant Mr John Wardy, together with Mrs Hassiba Wardy, Mr Anthony Wardy, Mr Roger Wardy and Mr Robert Wardy.
Mr John Wardy has appeared under the procedure provided for in Trustee Act, ss 63(8) - (10). He contends that the judicial advice requested should not be given. The other named beneficiaries have not appeared. Their non-appearance may be explained by the fact that the advice which the NSW Trustee is seeking would involve the NSW Trustee committing to transactions, which at least from John Wardy's point of view, appear to favour them more than him. But the Court has reached the view: that this case is not apt for the giving of judicial advice; but is more suited to a contest where substantial relief is sought to decide the respective rights of the parties.
The NSW Trustee acted reasonably in approaching the Court and has complied with applicable procedure. It has provided a written statement of facts as is generally contemplated by Trustee Act, s 63(3) upon which the Court is asked to give judicial advice. But the statement of facts reveals a dispute between the beneficiaries. It also reveals that the facts are complex, contentious and not readily subject to being succinctly distilled into the statement of facts. Where those circumstances present themselves, the Court may properly decline to give judicial advice: Macedonian Orthodox Community Church St Petkar Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 ("Macedonian Orthodox") at [56] - [60] and Sotiropoulos as executor of the estate of the late Maria Sotiropoulos v Sotiropoulos [2015] NSWSC 855 ("Sotiropoulos") at [9] - [15].
For reasons which will shortly be explained, the Court has concluded that the dispute between these parties is not apt for the Court to give judicial advice, but should rather become the subject of a contested hearing. This approach more accurately reflects the nature and complexity of what is truly a contentious dispute.
Where an application for judicial advice is transformed into an application for substantive relief that would bind all interested parties, the proper course is for the Court to ensure that the proceedings are re-constituted by joining the necessary parties, and by reformulating the originating process: see RL v NSW Trustee and Guardian (2012) 84 NSWLR 263; [2012] NSWCA 39 at [58] (per Campbell JA) and Sotiropoulos at [16].
This Court has decided to facilitate the reconstitution of these proceedings. It has allowed the parties a short adjournment this morning to re-formulate the originating process to present a contested application for substantive relief. The parties have achieved that in the course of the day. It is now approximately 4.00pm and Mr John Wardy proposes filing a Cross-Summons, which the Court will give leave for him to file.
But so that the re-constituted proceedings can be dealt with as quickly and efficiently as possible (on dates already reserved in the proceedings, about a month hence) by all interested parties, some of whom are not present at Court today, the Court now provides some short reasons explaining why it is taking this course. Then the Court will give some directions for the joining of the parties who are not presently parties to the proceedings.
[3]
Sale of the Property in Clause 3(iv) of the Will
The judicial advice and the contest which it generates relate to clause 3(iv) of the testator's will. Clause 3(iv) gives to the testator's widow, Hassiba Wardy, for her life with remainder to the testator's and Hassiba Wardy's sons, Anthony Wardy, Roger Wardy and Robert Wardy (together described as "the Hassiba Wardy interests") in equal shares as tenants-in-common a property in Cleveland Street, Redfern ("the Cleveland Street property"). But the Cleveland Street property was sold by the administrator pendente lite in November 2012 for the sum of $5,150,000 in order to meet the estate's liabilities to the Australian Taxation Office ("ATO").
The residue of the estate comprises approximately $4,000,000 in cash, a property in Coogee Bay Road, Coogee ("the Coogee Bay Road property") and another property in Redfern, in George Street ("the George Street property").
Some substitution of real estate or other property for the Cleveland Street property is necessary to satisfy clause 3(iv) of the will. This substitution is to give effect to established principle that if an executor sells property which is the subject of a specific legacy or devise then the legatee is entitled by a process of adjustment of the rights of beneficiaries between one another "to be put into the same position he would have been if the property the subject of the specific legacy had not in fact been sold…": Ewer v Corbet (1723) 2 P Wms 148; (1723) 24 ER 676, Joyce v Cam [2004] NSWSC 621; (2004) 12 BPR 22,231 at [48] - [49] and Wardy v Salier [2014] NSWSC 473 at [9], [34] - [37].
The core contest in these relatively complex proceedings may be shortly stated. The NSW Trustee seeks advice, and the Hassiba Wardy interests do not contest, that the George Street property should be substituted for the Cleveland Street property, so as to satisfy the provisions of clause 3(iv) of the will. But John Wardy resists this proposed substitution. He contends instead that the Coogee Bay Road property or some other property, yet to be acquired should be substituted for the Cleveland Street property.
The interests of John Wardy on the one side, and the Hassiba Wardy interests on the other side, are in tension across three questions: (1) whether the George Street property should be substituted for the Cleveland Street property; (2) whether the Coogee Bay Road property should be substituted for the Cleveland Street property; and, (3) whether some other property should be substituted for the Cleveland Street property.
To argue against the substitution of the George Street property for the Cleveland Street property, it is in John Wardy's interests to contend for a low past and present value of the Cleveland Street property and to contend for a high past and present value of the George Street property. Any party who wishes to promote the substitution, of the George Street property for the Cleveland Street property would reverse these valuation contentions.
The NSW Trustee has already obtained valuation evidence of the George Street property, the Cleveland Street property, and the Coogee Bay Road property. John Wardy has produced different valuations of the same properties. There is no agreement between John Wardy and the NSW Trustee about the value of these properties, either in the past or at present. Nor is there any agreement: as to the date at which the estate's property should be valued; whether the valuation should be at the date of sale of the Cleveland Street property in November 2012, or the date of the hearing; about any changes in value of the estate's properties over time or, as to the level of sustainable income derivable from the proposed substitute properties in comparison to the Cleveland Street property.
Finally, there is a question of whether if neither the George Street property nor the Coogee Bay Road property is a proper substitute for the Cleveland Street property, whether some other property should be purchased by the estate and what property, or kind of property, that should be. If the Coogee Bay Road property is going to be the substitute, there is no agreement as to the cost of works that are required to be done to make that property compliant with the Building Code of Australia (BCA), with fire safety and council regulations. All these different contests between the parties, will require cross-examination to resolve, and make judicial advice an inappropriate vehicle upon which the Court can now act.
The Court can theoretically give the judicial advice as sought: that would involve saying "yes" or "no" to the NSW Trustee's proposal to substitute the George Street property for the Cleveland Street property. But giving that advice on the current statement of facts will be of little utility to these parties. John Wardy will contend that the statement of facts is irrelevant to the real values of these properties upon which the NSW Trustee must ultimately act and therefore the advice will not protect the NSW Trustee. He has already restrained the sale of the Coogee Bay property. The giving of judicial advice would predictably result in another stalemate and a further contested hearing. In the Court's view, it is far better to direct the parties' resources towards bringing that contested hearing on as soon as possible.
But do the Hassiba Wardy interests wish to contest John Wardy's case? They have not appeared so far on these applications. If John Wardy seeks substantive relief, the Hassiba Wardy interests may wish to contest it, or they may not. The authorities cited above clearly contemplate that where a Trustee Act, s 63 application is displaced by a contested claim for substantive relief, that the trustee can stand back and watch while the beneficiaries contest the issues among themselves.
But it is unclear here whether the Hassiba Wardy interests want to commit the necessary resources to that kind of contest. Even if they do not, it is clear from what has already gone before in this estate that there will be some contest, if only with the NSW Trustee. The contest arises not because the NSW Trustee has any particular agenda to pursue, as it is truly independent of the beneficiaries, but because the facts on which the NSW Trustee wishes to act are sufficiently complex, uncertain and contested that they must be resolved by traditional and unavoidable methods of adducing evidence, cross-examination and judicial fact -finding.
[4]
Further Procedural Steps
So the Court and the parties have discussed the following course, which appears to have the merit of at least a loose consensus. The Hassiba parties will be served with notice of the proceedings and a copy of this judgment. They will be asked to come before the Court next week to indicate whether or not they wish to take an active role in contesting the relief that John Wardy seeks on the Cross-Claim. If they do, then they can probably take the benefit of such evidence as has been filed by the NSW Trustee and continue the current contest at their own risk as to costs, as John Wardy will also do in respect of the Cross-Claim. The NSW Trustee will incur few additional costs as a result. And the estate will be saved the expense of the contest.
But the Hassiba Wardy interests may not wish to appear. In that case, both John Wardy and the NSW Trustee presently accept (and the Court will ask the Hassiba Wardy interests when they appear whether they also accept) that the contest will be conducted on the following basis. The NSW Trustee will act as the contradictor to John Wardy's case and no one will contest the propriety of it doing so. The NSW Trustee will have a full indemnity from the estate for its costs of acting as contradictor. Neither John Wardy nor any other beneficiary will seek to have the NSW Trustee removed or disqualified on the grounds it has acted as a contradictor to John Wardy's Cross-Claim. In the event that John Wardy is successful he will be a liberty to seek his costs out of the estate. If John Wardy is unsuccessful the NSW Trustee will be at liberty to seek the reimbursement of its costs from John Wardy.
The Court has reserved the afternoon of 30 November 2017 and 1 December 2017 for further contests in relation to this estate. The Court proposes to use this period, if possible, to deal with the contested proceedings have now evolved into the Cross-Summons. To that end John Wardy and the NSW Trustee have co-operated. The Cross-Summons has been exchanged. But many other procedural issues have been discussed and will need to be the subject of more specific directions.
I am sitting as the duty judge on Thursday 2 and Friday 3 November 2017. The draft Cross-Summons will be made returnable at 10am on 2 November. But the parties, including the Hassiba Wardy interests are at liberty to re-schedule that return time and date by agreement to any other time on 2 November or 3 November that suits them. But by that date the parties (including the Hassiba Wardy interests, whose lawyers should become involved in this process if required) should agree upon a timetable to deal with all the procedural issues that are required to get the matter ready for hearing on 30 November 2017. This will include the further exchange of experts reports and the appointment of engineering and building experts by the Court to deal with the cost of making the Coogee Bay Road property compliant with the Building Code of Australia, and applicable fire safety regulations.
[5]
Conclusion and Orders
The Court therefore orders and directs:
1. Grant leave to the first defendant, John Wardy, to file the Cross-Claim initialed by the Court, dated today and placed with the Court papers.
2. Direct that the Cross-Claim and a copy of these reasons be served on the cross defendants by 5pm on 27 October 2017.
3. Make the Cross-Claim returnable before the Court at 10am on 2 November 2017, or at such other time on 2 or 3 November 2017 as is otherwise arranged between all parties and my Associate.
4. Direct the parties to bring in agreed directions to enable the filing of evidence and submissions and the appointment of Court experts in preparation for hearing on the Cross-Summons on 30 November and 1 December 2017.
5. Grant liberty to apply.
6. Costs are reserved.
[6]
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Decision last updated: 26 October 2017