Plaintiff v Defendant

1 Irma Locher died on 14 February 2003. The plaintiff is the beneficiary under the deceased's will dated 1 December 1988.

2 On 28 June 2007, probate was granted to the plaintiff and the defendant, with leave granted to Perpetual Trustees.

3 The principal asset of the deceased's estate is a property in North Coburg ('the Coburg unit') which remains registered in the name of the deceased.

4 The plaintiff is not living in the Coburg unit. In affidavits sworn 12 September 2018, the defendant gives the Coburg unit as his address and it may be inferred that he is living there.

5 The Owners' Corporation responsible for the common property of the Coburg unit has obtained a judgment in the Victorian Civil and Administrative Tribunal against the deceased's estate ('the VCAT debt judgment') and has commenced bankruptcy proceedings against the estate.

6 The plaintiff and the defendant, in their capacities as the executors of the deceased's estate, have filed an appeal against the VCAT debt judgment. That appeal is scheduled for hearing on 10 October 2018. The bankruptcy proceeding against the estate is scheduled for hearing on 12 October 2018.

7 On 16 April 2018, the VCAT appointed State Trustees Limited ('State Trustees') as the plaintiff's administrator.

Plaintiff's application for removal of executors of the deceased's estate

8 By originating motion filed 10 August 2018, the plaintiff, by her administrator

State Trustees, seeks the removal of the plaintiff and the defendant as the executors and trustees of the estate of the deceased, pursuant to s 34(1)(b) and s 34(1)(c) respectively of the Administration and Probate Act 1958 and s 48(1) of the Trustee Act 1958 and the appointment of an independent administrator in their place.

9 State Trustees approached Perpetual Trustee and Mr David Hughes, solicitor, to act as an independent administrator in the estate. Both declined to act as administrator. In those circumstances, State Trustees is prepared to act as the administrator of the estate of the deceased. Alternatively, if the Court considers that an alternative trustee company or independent person should be appointed, it would not oppose that appointment.

10 On 14 September 2018, the application was listed for directions. Due to the imminent scheduled hearings for the VCAT debt judgment and the bankruptcy proceeding, orders were made for the filing of written submissions so the application could be determined on the papers.

11 After orders were made in the removal application, the defendant filed a summons seeking pseudonym orders in the proceeding and for the Court file not to be inspected by any person not a party to the proceeding.

12 The defendant's application for pseudonym orders was listed for hearing on

3 October 2018. On that day, the Court made orders in the pseudonym application and also in the plaintiff's removal application.

13 The defendant's application for a pseudonym order was dismissed. In the removal application, orders were made removing the plaintiff and defendant as the executors and trustees of the estate of the deceased and, in their place, State Trustees was appointed as the administrator and trustee of the estate. The Court refused the defendant's oral application for a stay of the orders for one month on the basis of the need for the estate to be administered and the hearings scheduled on

14 Written reasons for making the orders in each application are now provided, as requested by the defendant.

15 A court may remove an executor at its discretion pursuant to s 34 of the

Administration and Probate Act 1958. Under s 34(1)(c), the grounds for removal are that an executor 'refuses or is unfit to act in such office or is incapable of acting therein'.[1]

16 Ultimately the decision to remove an executor depends on the facts of the particular case and is a determination to be made at the discretion of the Court after consideration of the interests of the beneficiaries, the security of the estate property, the efficient and satisfactory exercise of the trusts, and the faithful and sound exercise of the powers by an executor or trustee.[2]

17 The authorities demonstrate that an executor or trustee will not necessarily be removed where there is a conflict between duty and interest, but in some cases this may be sufficient. Proof of actual misconduct is not required for the removal of a trustee. Examples of cases where executors or trustees have not been removed when in a position of conflict between duty and interest can be seen in McKenna v Low[e]33 (1878) 1 SCR (NSW) Eq 10. and Porteous v Rinehart.[4] Examples of cases where a trustee has been removed when in a position of conflict between duty and interest are Passingham v Sherborn,[5] Hunter v Hunter,[6] Titterton v Oates,[7] Hill v Fry[8] and Hobkirk v Ritchie.[9] These examples demonstrate that each case depends on the facts and it is a matter of what is best for the welfare of the trust or estate as a whole.

18 The defendant opposed the application for removal on a number of grounds.

He submitted that State Trustees has no power to bring the removal application.

This ground is rejected. As the plaintiff's administrator, State Trustees has the power to, in the plaintiff's name and on her behalf, generally do all acts and exercise all powers with respect to the plaintiff's estate as effectually and in the same manner as the plaintiff could have done if she were not under a legal disability.[10] State Trustees may bring and defend actions and other legal proceedings in the plaintiff's name.[11] An action taken by State Trustees as the plaintiff's administrator has effect as if that action had been taken by the plaintiff and the plaintiff had the legal capacity to do so.[12] State Trustees may take actions as the plaintiff's administrator even without the plaintiff's consent or knowledge. The very nature of an administration order means that an administrator regularly acts without the represented person's knowledge or consent.

19 Beneficiaries of an estate have the right to expect proper administration of the estate. They have standing to seek removal of a legal personal representative of an estate.[13] State Trustees is acting within power in commencing this proceeding in the plaintiff's name to enforce her rights as the beneficiary of the estate of the deceased to compel the proper administration of the estate.

20 The defendant submitted that the application to remove the plaintiff and defendant as trustees of the estate could not be made as there as there is no trust at present.

The usual orders made in a removal application are made under s 34 of the Administration and Probate Act 1958 and s 48 of the Trustee Act 1958 so as to avoid any errors or confusion that may arise in the administration of an estate. There is no formal test to determine when a personal representative becomes a trustee. When the change occurs is to be determined on the facts and the transition cannot be based on agreements between the relevant parties. Once the executorial duties in an estate have been performed, then to the extent that the estate remains undistributed, the executors become trustees.[14] Although State Trustees, as the plaintiff's administrator,

has limited knowledge of what steps need to be taken to complete the administration of the deceased's estate, the estate still remains in administration with the Coburg unit in the name of the deceased, the probability of the defendant living in it and the imminent hearing of the two proceedings in which the estate is involved.

21 The defendant submitted there was no basis for the removal because the executors have properly administered the estate. This submission is rejected. The primary basis of the plaintiff's application is the inordinate delay by the executors in administering the deceased's estate. The deceased died in 2003, yet the administration of the estate remains incomplete. Probate was not granted until four years after the deceased's death. The Coburg unit remans in the name of the deceased. The defendant accepts that the estate remains in administration but failed to provide any explanations for the delay. The plaintiff says this long delay in the administration of the deceased's estate means that, in the event that the Coburg unit is sold, there may be a substantial capital gains tax to be paid, given that it was not transferred to the plaintiff within two years of the deceased's death. This delay is inordinate and unexplained and demonstrates that the estate has not been properly administered by the executors. This is not in the interests of the beneficiary.

22 The defendant submitted there was no basis for the removal because there is no evidence that the plaintiff is incapable of acting as the executor. The fact that the plaintiff has an administrator appointed by the VCAT points to a contrary conclusion. It is a strong indication that the plaintiff is incapable of continuing as an executor of the deceased's estate. Such an order would not have been made unless the VCAT was satisfied that the plaintiff is a person with a disability, is unable to make reasonable judgments in respect of the matters relating to all or any part of her or his estate by reason of the disability and is in need of an administrator. The defendant's statement that the plaintiff is considering setting aside the administration order appointing

State Trustees as her administrator is not to the point. State Trustees remains as the plaintiff's administrator until its appointment is set aside by the VCAT.

23 A further issue in the administration of the estate is that the defendant probably lives in the Coburg unit. He has not been forthcoming in confirming this but he has given the unit as his address in this proceeding. This places him in a position of conflict between interest and duty. As an executor, he has a duty to distribute the estate to the plaintiff. This includes the Coburg unit and any income that may be derived from it. As occupier of the Coburg unit, his interest is to minimise his personal contribution towards the unit, such as paying rent and to delay the distribution of the estate to the plaintiff. This issue is compounded by the impending hearings that involve the estate. The interests of the estate are served by an independent administrator reviewing the two proceedings.

24 In his pseudonym application, the defendant sought an order that the parties and the estate of the deceased be referred to by pseudonyms and the Court file remain confidential and not be produced for inspection by any person not a party to the proceeding without further order.

25 The defendant submitted that the mental capacity of an individual is an exception to the principle of open justice, referring to the decision of Bell J in PQR v Secretary, Department of Justice and Regulation,[15] and the same exception should apply to the confidentiality of the Court files so that access to them should only be by the parties. He submitted that the removal application should be confidential as most, or all, guardianship matters that are before the VCAT are confidential, pursuant to clause 37 of schedule 1 of the Victorian Civil and Administrative Tribunal Act 1998.

The confidentiality in the guardianship matters before the VCAT arise because they deal with personal matters, such as capacity, and that issue is personal to the person involved. Given the nature of the removal application, reference may be made to the capacity of the plaintiff in her capacity as an executor of the estate of the deceased.

26 A pseudonym order de-identifies a party or witness but does not '[prohibit] or [restrict] the publication or other disclosure of information in connection with the proceeding.'[16] Such an order is made by the Court in the exercise of its inherent jurisdiction.[17] Each case is determined on its own facts and there must be a proper foundation that establishes, if the orders are not made, the administration of justice will be prejudiced.[18]

27 The principles concerning pseudonym orders were distilled by Forrest J in ABC v D1; Ex parte The Herald & Weekly Times Limited as follows:

First, that the principal rule is that judicial hearings should take place in open court: publicly and in open view, with no restriction on reporting. This is a fundamental precept underpinning the administration of justice.

Second, that in certain circumstances the administration of justice requires a qualification of the general rule. There will be circumstances where modifications of the general rule are necessarily made to ensure that the administration of justice is not frustrated. These exceptions are many and varied and cannot be prescriptively identified.

Third, that the test to be applied by the court in making a pseudonym order is ... whether it is necessary to do so in order not to prejudice the administration of justice.

Fourth, that a court, in determining whether to make a pseudonym order,

is entitled to take into account the individual considerations affecting the person seeking the order and balance those against the principal rule of open justice in determining whether the administration of justice warrants the making of the order. Relevant to these individual considerations is whether there is a real risk of the party or witness suffering psychological harm as a result of publication of his or her name or the names of other parties. Also relevant is the real risk of a party not proceeding with an action in the event that he or she or another person is identified.

Fifth, that in certain circumstances, particularly those involving sexual assaults, it may be appropriate not only to suppress the name of the plaintiff but also to suppress the name of the defendant or defendants.

Sixth, that in determining whether to make such an order, a court is entitled to take into account the fact that there will still be a reporting of the proceeding and that the hearing itself will be conducted in open court, subject to the restrictions imposed by the pseudonym order.

Seventh, in determining whether it is necessary to make such an order, usually the proofs must be cogent and will not be satisfied by mere belief on the part of a party that the order is necessary. However, in certain cases a court can,

in a practical sense, act on its own experience and draw appropriate inferences.[19]

28 The defendant's application appeared to be based on keeping any information about the plaintiff's medical condition confidential. In opposing the application,

State Trustees referred to the judgment of John Dixon J in Giurina v Melbourne Health where the details of the plaintiff's capacity were set out in detail.[20] The judgment dealt with the defendant's writ of habeas corpus for the release of the plaintiff from the Royal Melbourne Hospital into his care. In his judgment, his Honour:

(a) quoted a passage from a neuropsychology report of Dr Natalie Genardini concerning the plaintiff's cognitive disability;

(b) noted that on 6 March 2018 the VCAT appointed the Office of the Public Advocate as the plaintiff's limited guardian;

(c) found that the plaintiff has a cognitive disability and is a person under a disability because she is a handicapped person as that expression is understood in r 15.01 of the Supreme Court (General Civil Procedure) Rules 2015; and

(d) dismissed the application on the basis that no litigation guardian had been appointed to act for the plaintiff.[21]

29 His Honour also referred to the fact that the defendant 'vaguely asserted he had a volunteer practising certificate and produced a copy of his certificate of admission to legal practice' although the defendant was not located on the Register of Legal Practitioners and Law Practices. Given that the defendant initiated the proceeding against the Royal Melbourne Hospital and has some legal qualifications, it is surprising that he failed to mention this decision, considering his overarching obligations under the Civil Procedure Act 2010.

30 To the extent that the defendant's application seeks to keep the appointment of

State Trustees as the plaintiff's administrator confidential, it is misconceived.

An administrator appointed under the Guardianship and Administration Act 1986 is required to manage the represented person's financial affairs. That responsibility requires the administrator to inform external entities of the appointment, such as Centrelink to receive the represented person's pension payments and banks to operate accounts on behalf of the represented person.

31 A grant of probate in an estate of a deceased is a public act and proof of the validity of the deceased's will.[22] A grant identifies the deceased and the person appointed as the legal personal representative of the estate. This ensures that all external persons dealing with the estate of the deceased understands and knows they are dealing with the authorised representative of an estate. Where an independent administrator is appointed to administer a deceased's estate, the orders must be annexed to the original grant of representation and it is necessary for those orders to identify all relevant individuals so that it can be annexed to the correct grant. This also includes the conduct of the estate's appeal against the VCAT debt judgment scheduled and the bankruptcy proceeding against the estate. For these reasons, the same difficulties would occur if a pseudonym order was made in respect of the defendant.

32 To make orders for the parties to use a pseudonym and to restrict access to the Court would be impractical and detrimental to the finalisation of the administration of the estate of the deceased.

[1] Administration and Probate Act 1958, s 34(1)(c).

[2] Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572, 580-1.[e]

[4] [1998] WASC 270; (1998) 19 WAR 495.

[5] (1846) 9 Beav 424; 50 ER 407.

[6] [1938] NZLR 520.

[7] (1998) 143 FLR 467.

[8] [2008] VSC 13 (7 February 2008).

[9] (1934) 29 Tas LR 14.

[10] Guardianship and Administration Act 1986, s 58B(1)(c).

[11] Ibid s 58B(2)(l).

[12] Ibid s 48(3).

[13] Dimos v Skaftouros [2004] VSCA 141; (2004) 9 VR 584.

[14] G E Dal Pont and K F Mackie, Law of Succession, (LexisNexis Butterworths, 2nd ed, 2017) [10.43].

[15] [2017] VSC 513 (26 September 2017).

[16] Open Courts Act 2013, ss 3, 17.

[17] Secretary, Department of Justice and Regulation v Zhong (No 2) [2017] VSCA 19 (17 February 2017) [3].

[19] [2007] VSC 480 (30 November 2007) [65]-[71] (emphasis in original).

[20] Giurina v Melbourne Health [2018] VSC 143 (26 March 2018).

[22] Re Gardiner [2016] VSC 541 (9 September 2016) [22].