Plaintiff v Defendant

1 On 13 December 2006, State Trustees Limited ("STL") was appointed by the Victorian Civil and Administrative Tribunal as administrator of the estate of Phyllis Margaret Hill pursuant to the Guardianship and Administration Act 1986 on the ground that she was not capable of managing her financial affairs. From that time and until her death on 11 October 2009, STL managed Mrs Hill's affairs.

2 Mrs Hill (referred to in the pleadings as "Jean") had two children, Marina and Robert. Robert is married to Robyn.

3 Jean was the registered proprietor of property at Glendale Lane, Taggerty in the State of Victoria ('the farm"). On about 25 July 2006, Jean transferred the farm to Robyn.

4 On 20 June 2007, STL, in its capacity as Jean's administrator, commenced a proceeding against Robyn in the County Court of Victoria seeking, among other things, orders that the farm be re-transferred to Jean.

5 On 8 February 2008, STL on Jean's behalf and as Jean's administrator, settled the County Court proceeding. The terms of settlement included an agreement by Robyn to make payment to STL as administrator for Jean the sum of $700,000 within nine months of the date of settlement and released Robyn from further claims.

6 Marina alleges that STL as Jean's administrator entered into the settlement:

• without acting upon information provided by Marina that the farm needed to be valued;

• without acting upon information provided by Marina that the farm was worth significantly more than Robyn or Robert had represented or would represent;

• without taking all reasonable steps to consult Marina in relation to Jean's financial affairs;

• on the basis that the farm was worth "something more than $1 million" when in fact it was valued at between $2,040,000 and $2,387,500; and

• without taking all reasonable steps to ascertain whether there was any plant and equipment or livestock at the farm which was rightfully the property of Jean, ascertaining the value of such plant, equipment or livestock, and the value of any personal property or jewellery of the deceased in the possession of Robert or Robyn.

7 Marina alleges that STL was aware or alternatively ought to have been aware:

• that Marina was Jean's only daughter and one of two children of the deceased, and that as such, upon Jean's death, Marina would be entitled or would be likely to be entitled to receive a substantial share of Jean's estate, whether by will, upon intestacy or pursuant to Part IV of the Administration and Probate Act;

• that the extent of Marina's entitlement would be dependent upon and affected by the size of Jean's estate upon her death; and

• that the size of Jean's estate upon her death would be dependent upon and affected by the manner in which it conducted Jean's financial affairs, the outcome of the County Court proceeding and the settlement.

8 In the circumstances, Marina alleges that STL owed a duty to Marina to take reasonable care not to cause loss or damage to Jean's estate and to Marina as a likely beneficiary of Jean's estate. Marina alleges that STL failed to take such reasonable care and that she has suffered loss and damage as a consequence.

9 Marina alleges that, had STL taken reasonable care in carrying out its duties as Jean's administrator, then in the County Court proceeding it would have recovered for Jean the full value of the farm, the full value of any plant and equipment or livestock at the farm and any personal property or jewellery of the deceased in the possession of Robert or Robyn and costs. Pursuant to the settlement, Jean recovered $700,000, which Marina alleges is substantially less than full value of the relevant assets.

10 On 16 February 2011, probate of a will of the deceased dated 3 August 2006 ("the 2006 Will") was granted to Robert.[1]

11 Pursuant to the 2006 Will, the deceased left the whole of her estate to Robert. Marina alleges that her mother did not have testamentary capacity to make the 2006 Will, and that STL was aware of that allegation and the factual and legal basis of the allegation.

12 By an earlier Will made on 11 June 2004, Jean's estate was, in substance, left to Marina and Robert equally ("the 2004 Will").

13 Upon discovery of the grant of Probate of the 2006 Will, Marina filed with the Registrar of Probates an application for revocation of the grant of Probate of the 2006 Will to Robert and seeking the grant of Probate of the 2004 Will on the grounds of lack of testamentary capacity due to dementia, undue influence by Robert and Robyn, and lack of knowledge and approval of the contents of the 2006 Will.

14 In addition, Marina commenced a proceeding in this Court pursuant to Part IV of the Administration and Probate Act seeking further provision to be made for her from Jean's estate. Both the revocation proceeding and the Part IV proceeding were resolved at mediation.

15 Marina alleges that she settled the revocation proceeding and the Part IV proceeding on the most favourable terms that she was then able to achieve, namely that she be paid from Jean's estate the sum of $550,000 after payment of her costs. She alleges that, as a result of the failure of STL to take reasonable care, Jean's estate at her death comprised assets valued at no more than $702,570, whereas the true value of the estate was substantially more and in the circumstances, she suffered a loss equivalent to half of any amount which would have been obtained by STL acting with reasonable care as Jean's administrator in entering into a settlement of the County Court proceedings. Alternatively, Marina alleges she has suffered the loss of an opportunity to obtain a larger monetary provision from Jean's estate.

16 By summons filed on 15 June 2012, STL applied for an order pursuant to r 23.01 Supreme Court (General Civil Procedure) Rules 2005 that the proceeding be stayed or that there be judgment for the defendant. At the hearing, STL also relied on s 63 of the Civil Procedure Act 2010 which empowers the Court to summarily dispose of a claim or defence which the Court is satisfied has no real prospect of success.

17 The summary application was heard and determined by Associate Justice Zammit. Her Honour held that the plaintiff did not have any real prospect of success in establishing that STL owed her a duty of care. In the circumstances, the Court dismissed the proceeding. It is against that decision that the plaintiff appeals.

18 In JBS Southern Australia Pty Ltd & Anor v Westcity Group Holdings Pty Ltd & Ors,[2] Croft J observed that the new test for summary judgment under the CPA that a claim, defence or counterclaim has "no real prospect of success" is clearly intended to liberalise the requirements of the test as provided for in the Supreme Court Rules.[3] The Supreme Court Rules permit summary dismissal of a claim in a proceeding which does not disclose a cause of action, is scandalous, frivolous or vexatious or is an abuse of process of the court.[4]

19 Traditionally, summary dismissal of a claim would occur only where a claim is hopeless, untenable, bound to fail or in respect of a claim which could not possibly succeed.[5] In Spencer v Commonwealth,[6] the High Court observed that these earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail.[7]

20 In JBS Southern Australia, Croft J adopted the following principles which had been applied by J Forrest J in Matthews v SPI Electricity Pty Ltd:

(1) If a court determines that a particular cause of action is hopeless or bound to fail, then it should be dismissed;

(2) A court may also dismiss a claim where it determines that it has no real prospect of success in the sense that such prospects are fanciful rather than realistic;

(3) The less complex the issue in a case then the easier it is for a court to take the view that such a proceeding is capable of being determined on summary judgment; and

(4) whatever the test to be applied, the power to order summary dismissal of a claim must be exercised with care. This is particularly so where a case may involve issues of contested fact, or the construction of complex documents or where its consequences may affect a large number of persons.[8]

21 In Spencer, the High Court reiterated the importance of exercising the power to order summary dismissal of a claim with care, whichever test is to be applied.[9]

22 On the hearing of the appeal, which was conducted as a re-hearing de novo, senior counsel for the applicant focused on the pivotal allegation in the plaintiff's proposed amended statement of claim, namely that:

in carrying out its duties as administrator of Jean's estate ... State Trustees Limited owed a duty to Marina to take reasonable care not to cause loss and damage:

(a) to Jean's estate; and

(b) to Marina as a likely beneficiary of Jean's estate".[10]

23 It was submitted by the applicant that there was no basis for the plaintiff to contend that STL as Jean's administrator owed a duty of care to anyone other than Jean when it settled the County Court proceeding on her behalf, and in particular that STL did not owe any duty of care to the plaintiff.

24 The applicant relied on Hill v Van Erp[11] as authority for the general rule that a solicitor owes no duty to anyone other than the solicitor's client as a sufficient analogy for the purpose of demonstrating that no duty is owed in this case.

25 In Hill v Van Erp, Dawson J illustrated the general rule by reference to Gran Gelato v Richcliff Ltd, [12] in which it was held that no duty was owed to a purchaser to whom the solicitor's client was selling an under lease; Al-Kandari v J R Brown & Co,[13] in which it was held that no duty was owed by a solicitor to a client's opponent in adversarial litigation; and Clarke v Bruce Lance & Co,[14] in which it was held that no duty was owed by a solicitor to a prospective beneficiary under a client's will in relation to a proposed dealing with property during the client's lifetime. In addition, Gummow J cited with approval Sutherland v Public Trustee.[15] In that case, the New Zealand Supreme Court held that there was no duty of care on the part of the solicitor to persons who the will maker had deliberately refused to nominate as beneficiaries.[16]

26 Nevertheless, based on the particular circumstances in Hill v Van Erp, the court made an exception to the general rule. In his reasons, Dawson J said that a solicitor did owe a duty to a nominated beneficiary to give effect to a testamentary instruction in favour of that beneficiary on the basis that when a solicitor accepts responsibility for carrying out a client's testamentary intentions, the solicitor accepts responsibility to intended beneficiaries; that the responsibility to intended beneficiaries arises from the solicitor undertaking the duty of ensuring that the testator's intention of conferring a benefit upon a beneficiary is realised; and that in a factual if not a legal sense that may be seen as assuming a responsibility not only to the will maker but also to the intended beneficiary.[17]

27 In the context of drawing up and executing a will, a failure to exercise due care may affect not only the interests of the client but also the interests of others whom the client has in mind as beneficiaries. In that situation, the interests of the client and the interests of the beneficiaries are relevantly the same.[18]

28 Unlike the testamentary instruction situation in Hill v Van Erp, the settlement of the County Court proceeding on Jean's behalf did not, on its face, involve the administrator ensuring that the intention of the represented person in conferring a benefit on another person was realised. The object of the settlement was to benefit Jean.[19]

29 The present case must be considered in the context of the legislative framework of the Guardianship and Administration Act as it applies to administrators appointed under that Act.[20]

30 Section 49(1) Guardianship and Administration Act provides:

49 Exercise of power by administrator

(1) An administrator must act in the best interests of the represented person.

(2) Without limiting subsection (1) an administrator acts in the best interests of the represented person if the administrator acts as far as possible -

(a) in such a way as to encourage and assist the represented person to become capable of administering the estate; and

(b) in consultation with the represented person, taking into account as far as possible the wishes of the represented person.

31 Section 4 of the Guardianship and Administration Act relevantly provides:

Objects of Act

(1) ...

(2) It is the intention of Parliament that the provisions of this Act be interpreted and that every function, power, authority, discretion, jurisdiction and duty conferred or imposed by this Act is to be exercised or performed so that -

(a) the means which is the least restrictive of a person's freedom of decision and action as is possible in the circumstances is adopted; and

(b) the best interests of a person with a disability are promoted; and

(c) the wishes of a person with a disability are wherever possible given effect to.

32 The primary focus of the Act is on the represented person. Administrators are required to act in the best interests of the represented person (s 49); administrators are to exercise or perform their role so that the best interests of a person with a disability are promoted (s 4(2)(b)); administrators are required to give effect to the wishes of a person with a disability wherever possible (s 4(2)(c)).

33 The Act does not explicitly place an obligation on an administrator to act in the interests of third parties, though there is clearly potential for the interests of third parties to be considered when this would give effect to the wishes of the represented person, and is in, or promotes, the best interests of the represented person.[21]

34 On the hearing of the appeal, the applicant relied on s 63 of the Civil Procedure Act 2010 ("CPA"). Section 63 of the CPA must be read subject to the overriding discretion of the Court under s 64 in an appropriate case not to dispose of a matter summarily. Sections 63 and 64 provide:

63. Summary judgment if no real prospect of success

(1) Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.

(2) A court may give summary judgment in any civil proceeding under subsection (1) -

(a) on the application of a plaintiff in a civil proceeding;

(b) on the application of a defendant in a civil proceeding;

(c) on the court's own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding.

64 Court may allow a matter to proceed to trial

Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because -

(a) it is not in the interests of justice to do so; or

(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.

35 In light of the general rule in Hill v Van Erp as it applies to solicitors, it might be considered unlikely that STL will be found to owe a duty to the plaintiff in the circumstances of this case. However, I am not satisfied that the plaintiff's claim is fanciful or bound to fail.

36 In this regard, I am mindful of the observations of Kirby P in Wickstead & Ors v Browne:[22]

Common experience teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence. Testimony gives colour and content to the application and development of legal principle. That is why leave is usually required to an appeal from interlocutory orders. Appellate courts, including this Court, will usually require evidence to be adduced and trial concluded before considering the application of the law to that evidence. Out of the detail of the evidence ultimately proved, affecting the relationship of the respondent and the appellant, may arise a finding of a duty of care which the common law of negligence would uphold;

37 These observations are pertinent here. For the purposes of the appeal, I assume in favour of the plaintiff the correctness of all of the facts alleged in the proposed statement of claim. But this does not allow for the benefit of hearing testimony which will set the alleged facts and any background facts in context and may give colour and content which is not readily apparent from the pleading.

38 I note also the observations of Gummow J in Hill v Van Erp that "the field of liability in negligence for pure economic loss is a comparatively new area. It also is a developing area. The case law will advance from one precedent to the next".[23]

39 At the hearing of the appeal, there was passing reference but no detailed submissions were made as to the role of an administrator under the Guardianship and Administration Act. No sections of the Act were considered, and no direct authorities were cited on whether an administrator might, when managing the interests of a represented person, owe duties to third parties and, if so, the content of those duties.

40 Powers and duties conferred by the Guardianship and Administration Act are to be exercised or performed so as to give effect to the wishes of a person with a disability wherever possible. In this case there is a an underlying issue about the testamentary capacity of Jean at the time she made the 2006 Will which, depending precisely what STL knew or ought to have known when it settled the County Court litigation, may bear on the question of her "wishes", her "best interests " and may inform the content of any duty owed at that time.

41 Senior counsel for the applicant submitted that if the plaintiff's assertion of a duty of care is upheld there could be double recovery (in the sense that the estate could recover and that the plaintiff could recover), that there would be a conflict of duty and interest and that there could be indeterminate liability because a concurrent duty would be owed to all persons with a prospective claim on the estate.

42 Counsel for the respondent submitted that the plaintiff's claim does not conflict with the duty of STL to exercise reasonable care to look after the interests of the represented person; that there is no risk of indeterminate liability in this case as the total exposure of STL, however many claims are made, is the difference between the value ascribed to the farm and its true value; that because of the unusual facts of this case, the plaintiff cannot rely on the executor of the estate to prosecute a claim on behalf of the estate because the executor on the pleaded case took advantage of the negligence of STL; and that the cases relied on by the applicant, in particular Clarke v Bruce Lance, are distinguishable on the facts, including the fact that the plaintiff in that case was not denied a remedy whereas here the plaintiff has not been able to obtain a remedy through the estate for the special reasons that exist in this case.

43 In the circumstances of this case, I am not satisfied that the plaintiff's claim has no real prospect of success. Accordingly, it is not appropriate for me to evaluate the competing positions put by the parties. Suffice it to say, there is a significant conflict which can be agitated at trial.

44 Finally, in this case the daughter of a represented person makes a serious complaint about the conduct of STL. Though the complaint is merely an allegation, in my opinion there is a public interest to be served by ventilating the complaint and subjecting the actions of STL to scrutiny in open court. It is important that administrators appointed to administer estates under the Guardianship and Administration Act are accountable and are seen to be accountable for their actions. In this case, the only other interested party is Robert, the executor and sole beneficiary under the 2006 Will. Robert is the husband of the person to whom the farm was transferred. According to the pleaded case the transfer of the farm operated to the benefit of both Robyn and Robert. In the circumstances, Robert is unlikely to have an interest in prosecuting a claim on behalf of the estate and exposing the conduct of the administrator to scrutiny. Had I found there was no real prospect of success, I would nevertheless have exercised my discretion under s 64 Civil Procedure Act to require a trial on the basis that a full hearing on the merits is appropriate and in the interests of justice.

45 I propose to allow the appeal and to set aside the judgment and orders.

46 I will hear the parties on the question of costs.

[1] Affidavit of Siobhan Anne Shepherd sworn 14 June 2012, [6] and Exhibit "SAS4" thereto.

[2] [2011] VSC 476.

[3] JBS Southern Australia [2011] VSC 476 at [39].

[4] Supreme Court (General Civil Procedure) Rules 2005 r 23.01(1)(a), (b) (c).

[5] See General Steel Industries Inc v Commissioner of Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at [128]- [130] per Barwick CJ; Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at [91] per Dixon J.

[6] [2010] HCA 28; (2010) 241 CLR 118.

[7] [2010] HCA 28; (2010) 241 CLR 118 at 139, [53].

[8] JBS Southern Australia [2011] VSC 476 at [50] per Croft J who added the words "or the construction of complex documents" in [4]; cited with approval by the Court of Appeal in Manderson M & F Consulting (a firm) v Incitec Pivot Ltd [2011] VSCA 444, [31]; Matthews v SPI Electricity Pty Ltd [2011] VSC 168 at [22].

[9] French CJ and Gummow J in Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 at 131, (in the context of considering s 31(A) Federal Court of Australia Act 1976 (no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding); Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1987) 154 CLR 87, 99.

[10] Proposed Amended Statement of Claim dated 3 August 2012 at [7], [18]. The plaintiff does not and could not make a claim to any entitlement out of the estate, the estate having been released from further claims when the plaintiff settled the revocation and Part IV claims. Affidavit of Siobhan Anne Shepherd sworn 14 June 2012, at [8] and Exhibit SAS6, thereto being the terms of settlement dated 21 September 2011, at [8].

[11] (1997) 188 CLR 159.

[12] [1992] Ch 560.

[13] [1988] EWCA Civ 13; [1988] QB 665 at 672, 675.

[14] [1988] 1 WLR 881.

[15] [1982] NZLR 536.

[16] Hill v Van Erp (1997) 188 CLR 159, 237.

[17] Hill v Van Erp (1997) 188 CLR 159, 185 (Brennan CJ, Dawson, Toohey, Gaudron and Gummow JJ, McHugh J dissenting).

[18] Hill v Van Erp (1997) 188 CLR 159, 185, 187.

[19] Clarke v Bruce Lance & Co [1988] 1 WLR 881.

[20] See Part 5 Guardianship and Administration Act 1986.

[21] Sections 49(1), 49(2), 4(2)(b) and (c). See also the definitions of "disability" and "represented person" under s 3(1) Guardianship and Administration Act 1986.

[22] (1992) 30 NSWLR 1, 5 - 6, per Kirby P, Handley and Cripps JJA (Kirby P in dissent). The plaintiff applied for special leave and the High Court granted the leave and the appeal, expressing general agreement with the reasons given by Kirby J in the Court of Appeal.

[23] Hill v Van Erp (1997) 188 CLR 159, 230.