[1998] NSWCA 286
Mead v Watson as Liquidator for Hypec Electronics Pty Ltd [2005] NSWCA 133
(2005) 23 ACLC 718 Riccardi v Riccardi [2013] NSWSC 1655
Source
Original judgment source is linked above.
Catchwords
[1998] NSWCA 286
Mead v Watson as Liquidator for Hypec Electronics Pty Ltd [2005] NSWCA 133(2005) 23 ACLC 718 Riccardi v Riccardi [2013] NSWSC 1655
Judgment (2 paragraphs)
[1]
Judgment
This is an application by the plaintiffs for the revocation of a grant of probate made by the court to the defendant, and an order that the court grant letters of administration with the will annexed to the plaintiffs, together with consequential relief.
The late Hugh Charles Davison died on 20 November 2010, leaving a last will and testament dated 2 July 1990.
By the will, the deceased appointed the defendant, Murray George Davison, his brother, as his executor.
The deceased gave the whole of his estate to the plaintiffs, Kimberley Roy Parsons and Julie Percy, and the defendant's three children, in equal shares.
This court made a grant of probate of the deceased's will to the defendant on 29 March 2011. A resealing of the grant was obtained on 18 October 2011 in the Supreme Court of Western Australia.
The plaintiffs' statement of claim was filed on 5 June 2015. As at the hearing on 29 July 2016, the administration of the estate of the deceased remains incomplete.
In substance, the plaintiffs claim that the administration of the estate by the defendant has been entirely dilatory; the defendant has failed to realise estate assets in a timely way; the defendant paid himself a substantial commission without authorisation (albeit that the sum has been repaid); and the defendant has failed in his attempt to pass accounts because of the manner in which he has conducted the administration.
The principles that the court is required to apply on an application such as the present have been authoritatively confirmed by the Court of Appeal in Mavrideros v Mack (1998) 45 NSWLR 80; [1998] NSWCA 286 by Sheller JA (Priestley and Beazley JJA agreeing) at 101 and 102:
The principles to be applied are stated in the decision of thiscourt in Bates v Messner. In that case, the appeal was from a decision ofMyers J dismissing an application for the revocation of a grant of probate made to the respondent. Sugerman JA (at 189; 36) quoted from the judgment of Jeune P in In the Goods of Loveday [1900] P 154 at 156 and said the principle there stated had been consistently followed and no doubt cast on its correctness in point of principle. Jeune P in the passage quoted said:
After all, the real object which the court must always keep in view is the due and proper administration of the estate and the interests of the parties beneficially entitled thereto; and I can see no good reason why the court should not take fresh action in regard to an estate where it is made clear that its previous grant has turned out abortive or inefficient. If the court has in certain circumstances made a grant in the belief and hope that the person appointed will properly and fully administer the estate, and if it turns out that the person so appointed will not or cannot administer, I do not see why the court should not revoke an inoperative grant and make afresh grant.
Asprey JA said (at 191-192; 39-40):
… that the essential basis of the exercise of the court's inherentjurisdiction to revoke a grant of probate is that emphasised by Jeune P, namely, that the real object which the court must always keep in view is the due and proper administration of the estate in the interests of the parties beneficially entitled thereto on the part of the person to whom and by whose oath as to the faithful performance of his duties the court has been induced to entrust the office of executor. The terms used in some of the previously decided cases with relation to the circumstances which have given rise to the exercise of the jurisdiction of revocation, such as 'abortive', 'inefficient', 'useless' or 'ineffectual', are simply descriptive of a situation in which the court has been persuaded to the view that its grant, which was predicated on the oath of the executor named in the will that 'he will pay all the just debts and legacies of the said deceased so far as the estate of the said deceased will extend and the law shall bind him, and that he will otherwise well and faithfully administer the said estate according to law; and that he will render a just and true account of his administration' has been circumvented by a breach of that oath which is in effect an undertaking to the court making the grant. I shall make no attempt to define all circumstances which may attract the exercise of the court's jurisdiction, but where circumstances clearly appear to have arisen after a grant of probate which impel the court to the firm conclusion that the due and proper administration of an estate has either been put in jeopardy or has been prevented either by reason of acts or omissions on the part of the executor or by virtue of matters personal to him, for example, mental infirmity, ill health, or by virtue of the proof of other matters which establish that the executor is not a fit and proper person to carry out the duties which he has sworn to the court that he will perform, the court may exercise its inherent jurisdiction to revoke the grant.
As Lindsay J has more recently said in Riccardi v Riccardi [2013] NSWSC 1655; (2013) 11 ASTLR 198 at [7]:
[7] Upon an application of the principles enunciated in Bates v Messner (1967) 67 SR (NSW) 187 at 189 and 191-192 and Mavrideros v Mack (1998) 45 NSWLR 80 at 107F-108C, I am satisfied that the plaintiff's substantive application should be granted. An executor or administrator may be removed where it appears that the due and proper administration of an estate has been put in jeopardy or has been prevented by reason of acts or omissions on the part of the executor or administrator, or by reason of matters personal to him, such as mental incapacity or ill health, establishing that he is not a fit and proper person to carry out the duties involved in the due administration of the estate. This is such a case.
The plaintiffs were represented by Mr Sneddon of counsel. The defendant was originally represented by solicitors, who acted for him in the preparation of his defence. The defendant then represented himself at the hearing. For the convenience of the defendant, and the first plaintiff, who was the primary witness for the plaintiffs, the hearing was conducted in a manner whereby Mr Sneddon was present in the courtroom, and the court communicated with both the defendant and the first plaintiff, who were in Western Australia, by telephone.
The issues between the parties are substantially disclosed by the response to the statement of claim made in the defendant's defence, filed on 5 August 2015. A number of significant matters are admitted. In summary, they are as follows:
1. The defendant admitted that he had failed to disclose 12 categories of assets, listed in par 5 of the statement of claim in his application for a grant of probate, and his applications for reseals. The defendant claimed that he was not aware of the existence of the assets at the time, and that he notified the plaintiffs as soon as he became aware of them.
2. The defendant agreed that he had only partly administered the estate. He listed, in par 3 of the defence, three assets that had not yet been realised or transferred in specie; being two blocks of land, some farmland, and 1001 shares in a company called Moore Securities Pty Ltd (Moore Securities).
3. The defendant admitted an allegation that, as at 17 February 2014, the balance in the estate account was $359,079.84. He said that when the defence was filed, the amount in the account was $244,416.51.
4. The defendant admitted an allegation that he had made interim distributions to the beneficiaries in total of $1,550,000, but said that in May 2015 he had distributed an additional $60,000 to each of the beneficiaries.
5. The defendant denied an allegation in par 9 of the statement of claim that listed particulars of unrealised assets and assets not transferred in specie. He said that he had realised some of the assets, and paid the proceeds into the estate's bank account. He said that he is continuing to take reasonable steps to sell the remaining two unsold blocks of land and the farmland. As to the latter, the defendant said that there was little interest from prospective buyers because the land lacks road access. Concerning the shares in Moore Securities, the defendant pleaded that "the shares are the subject of a dispute and have not been transferred to the beneficiaries". The defendant did not explain the nature of the dispute in his defence.
6. In response to an allegation that, in breach of his duty, the defendant had paid $46,500 to himself from the estate, the defendant denied that he had breached his duty. He claimed that he had paid himself the money with the full knowledge of the plaintiffs, and further, that the amount of $46,500 was transferred back to the estate on 18 June 2014.
7. The defendant denied an allegation that he had failed to keep adequate accounts. He did not respond specifically to particulars contained in the statement of claim to the effect that he was required, by the rules of the Supreme Court of Western Australia, to pass the accounts of the estate, and that on 20 August 2014, Registrar Boyle of the Supreme Court of Western Australia had declined to pass the accounts.
8. The defendant denied a claim by the plaintiffs that the proper administration of the estate has been put in jeopardy, and that the defendant is not a fit and proper person to carry out the duties of executor. He claimed that he had taken all reasonable steps to properly administer the deceased's estate.
Apart from the general dilatoriness displayed by the defendant in executing the will of the deceased, there remains a significant problem concerning the shares in Moore Securities held by the defendant as executor of the deceased's estate.
The evidence shows that there are 2004 ordinary shares in Moore Securities. The defendant holds two of the shares in his own right. His sister, Ms Maxine Parsons, holds 1001 shares. At the time of his death, the deceased held the remaining 1001 shares. Those shares have been transferred to the defendant in his capacity as executor of the deceased's estate.
The deceased's will requires that the 1001 shares be transferred to the five beneficiaries in equal shares.
Plainly, 1001 shares cannot be distributed equally between five persons. Ms Parsons gave evidence that she and the deceased's wife, Patricia, are the directors of Moore Securities. The defendant is the secretary of the company. On 21 July 2014, the directors signed a resolution that the shares in the company be split on a 5 to 1 basis, in order to facilitate the transfer of the estate's shareholding to the beneficiaries.
Some two years have now passed, without the shares being transferred.
Ms Parsons explained that Moore Securities was set up by the defendant, who persuaded his mother to transfer assets into the company. There is a question as to what has happened to those assets over time, but that is not a matter that can be explored on the evidence in the present case.
Ms Parsons gave evidence that, after the deceased's death, the defendant resided rent-free in a property owned by Moore Securities, being unit 7, 158 Broadway, Crawley in Western Australia, between 2010 and 2013 or 2014. The defendant admitted in cross-examination that he had lived rent-free in this property for a period.
More significantly, the defendant has on a number of occasions made claims that he is entitled to a third interest in the shares in Moore Securities. In February 2015, the defendant sent texts to Ms Parsons in which he claimed a third interest in Moore Securities.
In the statement of assets and liabilities prepared by the defendant in association with the grant of probate by this court, he did not list shares in Moore Securities as an asset of the estate, even though at that time he was the company secretary and should have known that the deceased held shares in the company when he died.
The defendant was cross-examined in relation to his claim for an interest in Moore Securities. In my view, the defendant's responses to the questions were not satisfactory, as they were flippant, and not in accordance with the seriousness of the defendant's obligation as executor of the deceased's estate to conscientiously execute the terms of the will. The defendant conceded that he had made claims to an entitlement to ownership of more shares in Moore Securities than the two shares already registered in his name, but was dismissive and evasive about whether or not he would pursue his claim.
The evidence is sufficient to establish that the defendant has a conflict of interest in relation to his holding of the 1001 shares in Moore Securities as an asset of the estate, both in respect of his expressed claim to be entitled to an interest in those shares, and also the possibility that he may have dealt with the assets of Moore Securities in an unauthorised manner.
Furthermore, the performance by the defendant of his duty as executor to maintain proper accounts for the estate has been entirely unsatisfactory. It appears that the primary supervision of the execution of the deceased's will has fallen to the Supreme Court of Western Australia.
Registrar Boyle, of that court, wrote to the defendant on 20 August 2014. She referred to the fact that there had been four appointments in relation to the requirements to pass the accounts. At each appointment, while there had been some explanation of various estate accounting matters, the defendant had never been able to deal with all of the matters necessary to properly pass the accounts of the estate. The Registrar referred to this as being a "serious concern". The letter included the following statements:
The executor needs proper professional assistance…
At no stage in the course of this passing of estate accounts could I say that the accounts are in a state in which they could be passed…
Additionally on matters raised before me at the appointments it appears to me that in respect to the shareholding in Moore Securities Pty Ltd there are serious issue (sic) of conflict between [the defendant's] own personal interest and the proper administration of this estate.
I think that the ultimate example of [the defendant's] failure to recognise the seriousness of the position he is in has been in the informal way he has attempted to deal with my last Directions and the issues I raised that required attention…
In the final analysis of the process to date it is clear that [the defendant] has simply failed to discharge his obligations to act in the administration of this estate in a timely and proper way. He has not accounted for his administration.
I decline to pass the accounts of this estate.
By letter dated 6 November 2014, Registrar Boyle advised the solicitors for the plaintiffs that she had declined to pass the accounts of the defendant. She said that the next steps in dealing with the problem resided with the beneficiaries. Further, she said that the beneficiaries that objected to the defendant's accounts were entitled to recover their legal fees from the defendant.
In saying that the next steps in dealing with the problem resided with the beneficiaries, Registrar Boyle was effectively suggesting that the only avenue open for the resolution of the problems caused by the defendant's conduct was for the plaintiffs to commence the present proceedings.
In my view, the evidence establishes that this is a clear case requiring the court to make the orders sought by the plaintiffs in their statement of claim.
I accept the plaintiffs' submission that this is a case where the court should order the defendant to pay the costs of the proceedings on terms that he has no right of indemnity from the assets of the estate: see Mead v Watson as Liquidator for Hypec Electronics Pty Ltd [2005] NSWCA 133; (2005) 23 ACLC 718 at [11] and following.
Accordingly, I make the following orders:
1. Order that the grant of probate of the will of the deceased, Hugh Charles Davison, made to the defendant, Murray George Davison, on 29 March 2011 in proceedings No 2011/96413 be revoked.
2. Order that the defendant deposit the revoked grant in the Registry.
3. Order that letters of administration, with the will of the deceased annexed, be granted to the plaintiffs.
4. Order that the requirement for publication of notice for the application for letters of administration with the will annexed be dispensed with.
5. Order that the proceedings be referred to the Registrar to complete the grant.
6. Order the defendant to pay the plaintiffs' costs of the proceedings on the ordinary basis.
7. Order that the defendant shall have no right to indemnity from the estate of the deceased in relation to the costs the subject of order 6, or in relation to his own costs and expenses of these proceedings.
[2]
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Decision last updated: 21 October 2016