Plaintiff v Caveator

2 On 15 July 2011, Mr Carey executed an authority pursuant to s 11(1)(b) of the Trustee Companies Act 1984 authorising State Trustees Limited ("State Trustees") to apply for letters of administration. On 10 August 2011, State Trustees made that application.

3 On 29 July 2011, Mrs Howden had lodged a caveat. On 2 September 2011, the grounds of the caveator's objection were filed. They read as follows:

The applicant for the grant does not have the capacity or standing relationship in which it seeks administration.

The appropriate persons to make the application for probate are Emma Fiona Howden or Robert James Carey, the children of the deceased.

The caveator seeking administration has a better right, stating the nature of the right.

The caveator is the daughter of the deceased, one of two children of the deceased.

4 Affidavits in support of the application by State Trustees for letters of administration have been filed, as have affidavits by Mrs Howden in opposition to that application and in support of her application for a grant of letters of administration to her. She relies on the steps taken by State Trustees in terms of searches and advertising and so forth.

5 The question for determination is which of State Trustees and Mrs Howden should be appointed administrator. A well recognised general principle is that the person who has the greatest interest as beneficiary is normally entitled to be appointed.[1] Here however, the interests of the siblings are equal and Mr Carey, as he is entitled to do, has appointed State Trustees.

6 It is my view that, in an appropriate case, where you have a beneficiary who has an equal entitlement to the estate and who is willing to act as administrator, then he or she should be given a grant in preference to a trustee company, even though that company has been appointed by the other equal beneficiary. The question is whether this is an appropriate case for such a decision.

7 Mrs Howden has deposed that she has a Bachelor of Arts degree, Bachelor of Commerce degree and a Graduate Diploma of Education and that she is presently studying law and expects to complete that degree next year. She says that for many years she has run her own business on a part-time basis, jointly with her mother, and that she is now operating that business alone. Apart from one matter that I will refer to in a moment, it seems to me that there is absolutely no reason why Mrs Howden should not be appointed the administrator. She has relevant qualifications, experience and is willing to undertake the task of administering the estate of her mother.

8 The estate is a large one, valued at in excess of $11 million. Most of that is because of the valuation of what I assume was the former family home in Brighton of over $8.5 million and there are some minor personal estate in terms of a car, traveller's cheques, furniture, jewellery, a dividend from the company run by Mrs Howden, in which her mother was a shareholder, and some money in a bank account. There are two other significant personal assets, a superannuation entitlement which is said in the inventory to be worth $745,000 and shares in the company called Carey's Food Services (Aus) Pty Ltd, worth nearly $1.9 million.

9 The one remaining asset of the estate is a loan to Mrs Howden, secured by a mortgage over a property at 112 Gatehouse Street, Parkville. The loan is said in the inventory to have a principal owing of $170,000, plus interest at 5 per cent per annum from February 2003. I agree with Mrs Howden's statement in her affidavit that the estate is a relatively straightforward one to administer. But the real question is whether the existence of the loan, now from the estate to Mrs Howden, should be a disqualifying factor.

10 In Monty Financial Services Limited v Delmo[2] Ashley J held that:

Upon the critical issue I have come to the conclusion that unfitness to act does comprehend a situation in which an executor has a conflict of duty and interest in carrying out his executorial duties.

That was a case in which there was an application to remove an executor because of an alleged conflict of duty and interest. And as I have said, his Honour found that that was a possible disqualifying factor. However, his Honour also said:

It is not every conflict of duty and interest which should result in removal of an executor.[3]

His Honour then went on to talk about the intention of the testator in appointing a particular person as executor. As I will come to in a moment, that is not relevant in this case, because there is no will.

11 So the question is whether the existence of the loan posing as it does, a potential conflict of duty and interest, should be a disqualifying factor or a factor that should be taken into account in deciding which of these two parties should be appointed administrator.

12 In reaching my conclusion on that matter, I have considered the submissions from both parties. I have discounted, by not giving weight to, the following factors relied on by one or other of the parties. First, the fact that State Trustees applied first does not seem to me, in the circumstances, to be of any real weight or importance.

13 Secondly, I am not giving any weight or importance to the submission that the deceased wanted her children to be the executors. Reference was made to an unexecuted will dated 1976, under which it was said if that had been her will today, the children would have been the executors. However, that will did not express any intention or desire that the children be executors, which was hardly surprising because if it was prepared in 1976, as it appears it was, they would have been very young. What the will did say was that the deceased appointed her husband, her father and mother to be her executors and if neither of them survived, she appointed the directors for the time being of RJ Mercer Nominees Pty Ltd as executors. Forty-five years later, the directors of that company are the brother and sister. So the fact that under that unexecuted will prepared so long ago, if that had been the deceased's last will they would have been executors, does not seem to me to carry any weight.

14 I am also not giving any weight to the issue about insurance. It seems to me that that is a matter that whoever is appointed administrator can investigate and take appropriate steps.

15 I am also giving little weight to the issue of the cost of State Trustees' fees. At first glance, one might think that the fees that could be charged by a trustee company on an estate of over $11m would be a very significant cost to the estate. But the sliding scale that has been proposed means that the amount is not as large as one might have initially thought. It was likely to be $120,000 or $130,000. Nevertheless, that is a significant sum. But one also has to take into account that Mrs Howden, if she became administrator, would be entitled to make application under s 65 of the Administration and Probate Act 1958 for the awarding of commission for her pain and troubles. And whilst that may not be anywhere near as large as the figure that State Trustees would earn, nevertheless it reduces the possible difference in cost to the estate. So it is a factor, but not one of great significance.

16 I am also not persuaded that the appointment of State Trustees is required to avoid disputes between the siblings, which it is said might occur if Mrs Howden is the administrator. As I have mentioned, the brother and sister are both directors of RJ Mercer Nominees Pty Ltd. Apparently they can cooperate in that role, at least with respect to the signing of the minutes and resolving to declare dividends as evidenced by an exhibit in the material before me.

17 That brings me then to the one issue that has given me pause to decide whether or not it should change what otherwise I think would have been a clear case in favour of Mrs Howden. The inventory, as I said, indicated that there was this debt owed by Mrs Howden of $170,000, plus interest at 5 per cent from February 2003. In her two affidavits, Mrs Howden made no denial of that debt. Rather, she acknowledged it and, in her second affidavit, she set out in some detail what she said had been the advances and the repayment of one sum of principal at $130,000, plus five payments of interest at irregular intervals and in differing sums. She has also produced some bank records which might be thought to support the evidence that she has given as to what repayments have been made by her. Some of it is merely handwriting, but presumably Mr Carey would recognise his mother's handwriting, which would give the suggested recordings of payment of interest greater weight than if it was in Mrs Howden's handwriting.

18 It seems to me that the facts in this case, where there has been no dispute by the caveator/proposed administrator that she owed the estate a sum of money, where she has put forward a full statement of what she says is the outstanding debt, giving details, plus some supporting documentation, constitute a very different situation from that in Delmo. In that case Ashley J observed that the executor was possibly making claims on his behalf to a greater share in the estate in order to reduce the share that would otherwise go to his bankrupt sister in order to defeat her creditors.

19 I agree that this is a finely balanced case, but in the end I have decided that I can be satisfied that Mr Carey would have an appropriate remedy by making application to the Court if he is of the view that his sister has not properly dealt with this debt. I would anticipate that he would be seeking as much documentation with respect to this debt as he could get and that it would be very sensible for Mrs Howden to provide all that in order to try and remove any remaining doubts that he may have about the amount of that debt. Obviously, in any distribution, the debt owed by Mrs Howden has to be taken into account.

20 It therefore seems to me that, notwithstanding the existence of this potential conflict of interest and duty, the preferable situation is to have the child of the deceased, who is willing to act as administrator, appointed rather than State Trustees.

[1] Re Pierce [1886] VicLawRp 152; (1886) 12 VLR 733 (Webb J); Bourdales v Carroll; Estate of Diane Holbrook [2007] NSWSC 1057, [5] (Young CJ in Eq); Re Curran [2010] VSC 455, [21] (Ferguson J).

[2] [1996] VicRp 7; [1996] 1 VR 65, 82.

[3] [1996] VicRp 7; [1996] 1 VR 65, 83.