Plaintiffs v Defendant

2 The defendant, Mayling Louey, is the third executor of the deceased's estate. The defendant was joined as a necessary party to the proceeding. She took a generally neutral position, neither consenting to nor opposing the plaintiffs' application. The defendant made only limited submissions on very discrete points which are discussed below.

3 For the reasons that follow I have decided that the plaintiffs are justified in defending the TEP Proceeding. I have also decided that the plaintiffs should be indemnified by the estate for their costs of defending the TEP Proceeding.

4 The plaintiffs relied on three affidavits in support of their application:

(a) affidavit of Ms Chan sworn 1 December 2022;

(b) affidavit of Oliver Charles LaCaze affirmed 23 February 2023; and

(c) further affidavit of Oliver Charles LaCaze affirmed 14 July 2023.

5 Ms Chan's affidavit set out the factual context against which the plaintiffs' application was brought. Mr LaCaze's first affidavit exhibited the memorandum of advice of counsel, Mr Verspaandonk, obtained by the plaintiffs and addressing the merits of the TEP Proceeding. Mr LaCaze's second affidavit was largely directed to the plaintiffs' anticipated costs in defending the TEP Proceeding.

6 The following background is drawn from Ms Chan's affidavit.

7 Ms Chan is one of three co-executors of the deceased's estate pursuant to a grant of probate dated 7 September 2021. The other two executors named in the grant were Ms Yuen and Mayling Louey. Both Ms Yuen and Mayling Louey are adult children of the deceased. Ms Chan is an adult grandchild of the deceased.

8 Ms Yuen's mother is Wai Chung Louey, the plaintiff in the TEP Proceeding. Ms Chan is the granddaughter of Wai Chung Louey. Mayling Louey is the daughter of the deceased and Joan Chang Kum, ie. she is not the daughter of the plaintiff in the TEP Proceeding.

9 The application for judicial advice is made by Ms Chan and Ms Yuen. Ms Chan explains this is because Mayling Louey has filed a claim for a family provision order under Part IV of the Administration and Probate Act 1958 (Vic) (Part IV claim) against the estate in which Mayling Louey is separately represented. In an affidavit filed in her Part IV claim, Mayling Louey deposed that she has 'resigned as executor in order to bring her proceeding'. Ms Chan anticipates that as a consequence Mayling Louey will not wish to defend the TEP Proceeding. This last point is discussed further below.

10 At the time of his death the deceased was married to Wai Chung Louey. Ms Chan deposed that Wai Chung Louey suffers from dementia and does not have the capacity to manage her legal or personal affairs. An adult child of the deceased and Wai Chung Louey, together with an adult grandchild, have been appointed as Wai Chung Louey's administrators by order of the Victorian Civil and Administrative Tribunal made on 16 August 2022.

11 At the time of his death the deceased had five adult children, 15 adult grandchildren and two infant grandchildren, as well as two adult great grandchildren and ten infant great grandchildren.

12 In summary, the deceased's will dated 26 October 2018 (Will) provides:

(a) a life interest in a property situated at 54 York Street, Rosebud (York Street Property) to Wai Chung Louey. After Wai Chung Louey's death the property is to be sold and the proceeds of sale will form part of the residuary estate;

(b) a right to Sueling Ottobre (an adult child of the deceased) to reside in the property situated at 89 Leon Avenue, Rosebud (Leon Avenue Property) until her death or until she decides to vacate the property. If the property is vacated during her life, then the house is to be sold with the proceeds distributed in equal shares to Sueling Ottobre and six adult grandchildren of the deceased (who appear, from their names, to be Sueling Ottobre's children);

(c) the residue of the estate is to be divided into equal shares to each of the deceased's children, grandchildren and great grandchildren.

13 Ms Chan deposed that according to the inventory of assets and liabilities filed with the probate application, the deceased's estate comprised assets to the value of $4,114,090.81 and liabilities in the amount of $6,606.21. The estate's assets include the York Street Property and the Leon Avenue Property, funds held in various bank accounts, various shareholdings, a motor vehicle and a ride on mower. One of the shareholdings, is valued at $1,090,344.74.

14 The estate is currently subject to three Part IV proceedings brought respectively by Wai Chung Louey (the deceased's widow), Chak May Chan (an adult daughter of the deceased) and Mayling Louey. The Part IV proceedings are on hold pending the resolution of the TEP Proceeding.

15 On 9 September 2022, Wai Chung Louey, by her litigation guardian and her legal representatives, commenced the TEP Proceeding in this Court seeking:

(a) a declaration that the York Street Property is held by the executors of the deceased's estate on trust for the benefit of Wai Chung Louey;

(b) an order that the executors of the deceased's estate do all things necessary to transfer the title to the York Street Property to Wai Chung Louey;

(c) a declaration that one quarter share of the Hong Kong shares (as defined in the statement of claim and which would fall into the residuary estate) (Hong Kong Shares) are held by the executors on a constructive trust for Wai Chung Louey;

(d) and order that the executors do all things necessary to transfer title to a one quarter share of the Hong Kong Shares to Wai Chung Louey.

16 Ms Chan's affidavit exhibited the statement of claim in the TEP Proceeding. In short, Wai Chung Louey alleges she and the deceased had a common intention that they would have a joint interest in the York Street Property; that the common intention is partly express and partly implied; and that to the extent it is express, it was contained in conversations between Wai Chung Louey and the deceased in about 1986 when the property was purchased. In the alternative Wai Chung Louey alleges the acquisition of the York Street Property and the construction of the house on the property was a joint endeavour of Wai Chung Louey and the deceased as a married couple. Wai Chung Louey alleges she contributed to the acquisition, maintenance and improvement of the York Street Property. In relation to the Hong Kong Shares, Wai Chung Louey alleges it was the common intention of Wai Chung Louey and the deceased that they would have a joint interest in those shares along with their two daughters, Ms Yuen and Chak May Chan.

17 Ms Chan deposed that if the TEP Proceeding is successful, the value of the residuary estate will be significantly reduced. Ms Chan noted that there are approximately 34 individual residuary beneficiaries, some of whom are infants and therefore cannot consent to any compromise of the TEP Proceeding. Some of the beneficiaries may support Wai Chung Louey receiving the relief sought in the TEP Proceeding, while others, from a different side of the family, may not.

18 In addition to his memorandum of advice about the merit of the TEP Proceeding, Mr Verspaandonk also prepared a draft defence to the TEP Proceeding which he annexed to his memorandum of advice. It is sufficient to note that Mr Verspaandonk's opinion, based upon an assessment of the statement of claim and the evidentiary burdens that Wai Chung Louey must meet in order to succeed, is that there are proper grounds for the executors to defend the TEP Proceeding. It is also Mr Verspaandonk's opinion that, if Wai Chung Louey is successful in the TEP Proceeding, the value of the estate will be reduced by approximately 35%. Noting that approximately one third of the residuary beneficiaries are minors and thus completely reliant on the executors to protect their interests, Mr Verspaandonk is of the opinion that it is in the legitimate interests of the estate for the executors to defend the TEP Proceeding.

19 In his further affidavit, Mr LaCaze deposed to the procedural history of this proceeding and an estimate of the time and cost of defending the TEP Proceeding. Mr LaCaze estimates that preparation and hearing of the TEP Proceeding will take approximately 18 days, including:

(a) Completing the pleading process (not including drafting the defence) - 1 day

(b) Discovery - 1 day;

(c) Proofing and preparing witnesses - 2 days;

(d) Attending mediation - 2 days (1 day being preparation);

(e) Directions hearings - 1 day;

(f) Trial of five days - 10 days (including 5 days preparation); and

(g) Preparation of written closing submissions - 1 day.

20 Mr LaCaze, a senior associate, has allowed $4,400 (inclusive of GST) for his own daily rate and counsel's fees at $5,500 (inclusive of GST) per day. Allowing the full 18 day estimate for both himself and counsel, Mr LaCaze estimates the plaintiffs' legal costs of defending the TEP Proceeding to be:

21 Counsel for the plaintiffs submitted that it is appropriate for the Court to make an order that the plaintiffs be indemnified out of the deceased's estate for their costs and expenses of defending the TEP Proceeding and for any costs ordered to be paid by them in that proceeding. He noted that the TEP Proceeding did not involve any allegation about the conduct of the executors and that there was no one else willing and available to act as a contradictor.

22 As stated above, the defendant made limited submissions at hearing. One observation made by the defendant's counsel was that the plaintiffs, being descendants of Wai Chung Louey, were in a position of conflict in the TEP Proceeding. I understood counsel to mean that if Wai Chung Louey was successful in the TEP Proceeding, her descendants were potential beneficiaries of the property the subject of that claim, either by way of gift during Wai Chung Louey's lifetime or as beneficiaries under her will.

23 The defendant's counsel also informed the Court that Mayling Louey had, in fact, filed a defence in the TEP Proceeding as an executor of the deceased's Will and estate.

24 Notwithstanding that she filed a defence in the TEP Proceeding, Mayling Louey's solicitor wrote to the plaintiffs' solicitor on 23 May 2023 stating that Mayling Louey had resigned as an executor of the estate in order to bring her Part IV claim and that she intends to renounce her role at the next available Court hearing. Mayling Louey's solicitor also stated that Mayling Louey would 'rely upon the remaining executors to defend the [TEP Proceeding]'.

25 The plaintiffs' counsel denied that the plaintiffs were in a position of direct conflict in the TEP Proceeding.

54.02 Relief without general administration

(1) A proceeding may be brought for any relief which could be granted in an administration proceeding and a claim need not be made for the administration or execution under the direction of the Court of the estate or trust in respect of which the relief is sought.

(2) Without limiting paragraph (1), a proceeding may be brought for -

(a) the determination of any question which could be determined in an administration proceeding, including any question -

(i) arising in the administration of an estate or in the execution of a trust;

(ii) as to the composition of any class of persons having a claim against an estate or a beneficial interest in an estate or in property subject to a trust; or

(iii) as to the rights or interests of a person claiming to be a creditor of an estate or to be entitled under the will or on the intestacy of a deceased person or to be beneficially entitled under a trust;

(b) an order directing an executor, administrator or trustee to -

(i) furnish and, if necessary, verify accounts;

(ii) pay funds of the estate or trust into court; or

(iii) do or abstain from doing any act;

(c) an order -

(i) approving any sale, purchase, compromise or other transaction by an executor, administrator or trustee; or

(ii) directing any act to be done in the administration of an estate or in the execution of a trust which the Court could order to be done if the estate or trust were being administered or executed under the direction of the Court.

27 The Court has a broad discretion and power under r 54.02 to direct a trustee in relation to their performance of their trusts. The rule also applies 'to questions concerning the proper construction of a trust instrument, and as to the proper administration or execution of an estate or trust'.[1]

28 In S_hao v One Fund Management Ltd_,[2] Derham AsJ discussed the principles relevant to the judicial advice aspect of the rule:

(a) the procedure is a summary procedure, intended to enable questions arising in the administration of an estate or a trust to be resolved cheaply and simply and operate (sic) as an exception to the Court's ordinary function of deciding disputes between competing litigants;

(b) the summary nature of the procedure is important to an understanding of the evidence the Court is entitled to rely upon in giving its advice. That evidence is ordinarily untested. The extent of the information available to the Court and its apparent reliability are factors going to the exercise of the discretion to give the advice. That is,

...while the time and cost involved in giving judicial advice at an early stage of litigation, when the issues involved in disputes about rights may not be fully sharpened and it may not be possible for the factual position to be as efficiently exposed as in a trial, may be factors relevant to a decision not to grant judicial advice but to let the matter be examined in conventional litigation, they are not factors which either automatically bar judicial advice or are so weighty as generally to compel the court not to grant the advice.

(c) the purpose of the procedure is to enable a trustee or executor [or beneficiary] to obtain the direction or opinion of the Court on a matter of administration or management, or as to the construction of the will or trust instrument, without the need to commence an administration suit with all its attendant delay and costs;

(d) there is but one jurisdictional bar to relief: the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument.

29 Counsel's opinion is usually important in judicial advice proceedings for the reasons summarised by Derham AsJ in Avery v Manno.[3] The Court must reach a view whether it is satisfied on the basis of counsel's advice that there are sufficient prospects to warrant an executor proceeding with the litigation. The advice must address the facts necessary to support the legal conclusions reached and the propositions of law relied upon for those conclusions must be properly arguable.

30 In The Uniting Church in Australia Property Trust (Victoria) v Attorney-General for the State of Victoria,[4] I considered the authorities on the question of whether it is appropriate that a trustee have an indemnity from trust funds:

In Re Frosthollow Pty Ltd, McDonald J noted that 'whether it is appropriate for a trustee to have access to trust funds to defend its defence will depend on what is in the best interests of the trust, having regard to the particular circumstances of the case. Relevantly, such circumstances will include:

(a) the nature of the trust;

(b) whether the trustee has a pecuniary interest in the outcome of the litigation;

(c) the nature of the allegations against the trustee including whether there is an allegation of breach of trust;

(d) whether the beneficiaries ... have a substantial financial interest in defending claims, including claims which are made against the trustee;

(e) the financial means of the beneficiaries to fund their defence;

(f) the merits and strengths of the claim against the trustee;

(g) the extent to which recourse to the trust's estate for defence costs would deprive the successful claimant of the fruits of litigation; and

(g) whether the costs likely to be incurred in defending the claims, including potential exposure to a costs order in favour of the plaintiff's, are proportionate.'

[citations omitted].

In Hopkins the active defendants had made a Beddoe application for advice that they, as trustees, were justified in defending the main proceeding and were entitled to indemnity from the trust property for their costs of the main proceeding. The judge on the Beddoe application provided advice that the trustees were justified in defending the main proceeding but deferred the question of indemnity for costs to the trial judge. On the question of costs at trial, the Attorney-General submitted that it was not appropriate for the defendants to be reimbursed from trust assets for their costs of the proceeding (which were significantly higher than the costs estimates that had been provided to the judge deciding the Beddoe application). The Attorney-General submitted that the Court had to be satisfied that the costs were properly incurred to give rise to any immunity, and that the Court could not be so satisfied as:

(a) the proceeding involved personal interest and were of an adversarial nature;

(b) the proceeding resulted in no real benefit to the trust; and

(c) the conduct of the defendants in defending the proceeding was inconsistent with the trustees' obligation to exercise the care and diligence that a person of ordinary prudence would exercise.

In considering the principles relevant to applications for judicial advice, Lyons J noted even if a justification order is made, it may not be appropriate to make an indemnity order. His Honour referred to McDonald J's summary of the relevant factors in Re Frosthollow Pty Ltd outlined ... above.

31 As I have noted above, the plaintiffs in this proceeding are two of the three co-executors of the deceased's estate. The third co-executor has brought a Part IV claim against the estate and has filed an affidavit in that proceeding in which the third co-executor purports to have resigned as a co-executor. The affidavit material filed in this proceeding confirms the third co-executor intends to renounce her position as executor of the deceased's estate. The third co-executor has been joined to this proceeding as a defendant. All current executors are parties to the proceeding and legally represented. I am satisfied in these circumstances that the plaintiffs have standing to bring the proceeding.

32 The plaintiffs seek advice about whether they, in their capacity as executors, are justified in defending the TEP Proceeding. The TEP Proceeding has been made by the widow of the deceased against some of the estate property. If successful the TEP Proceeding would reduce the value of the estate significantly, including the value of the residuary estate. I am satisfied that the plaintiffs seek advice on a question arising in the administration of the estate.

33 A significant portion of the residuary beneficiaries are infants. As such they rely upon the executors to protect their interests in the property of the estate.

34 The plaintiffs have obtained an advice from counsel on the merits of the TEP Proceeding. Counsel has examined the statement of claim filed in the TEP Proceeding. Counsel's opinion is that there are proper grounds for the executors to defend the TEP Proceeding and that to do so is in the legitimate interests of the estate. Having read counsel's opinion, I am satisfied that there is a sound factual and legal basis for counsel's opinion.

35 I accept the plaintiffs' counsel's submission that the plaintiffs are not in a position of direct conflict in the TEP Proceeding. Other than the fact that the plaintiffs are descendants of Wai Chung Louey there was no substantive evidence before the Court to support an assertion that the plaintiffs stood to personally gain from Wai Chung Louey's success in the TEP Proceeding. Counsel informed the Court that prior to any agreement to compromise the TEP Proceeding, the plaintiffs will obtain the consent of all of the adult beneficiaries of the deceased's estate. Counsel also noted that any compromise of the TEP Proceeding would likely be subject to the Court's approval or advice under the Rules. I am not satisfied that the plaintiffs status as descendants of Wai Chung Louey is sufficient, in all the circumstances of this case, to render their defence of the TEP Proceeding unjustified.

36 In relation to the plaintiffs' application to be indemnified for their costs of the TEP Proceeding, I accept that given the early stage of the TEP Proceeding, it is difficult to estimate the costs with accuracy. I also accept that it is desirable the plaintiffs defend the TEP Proceeding knowing the amount of any indemnification available to them for their costs. The plaintiffs intend to defend the TEP Proceeding on behalf of all residuary beneficiaries of the estate and are best placed to do so without the risk of personal liability for costs.

37 While I will order that the plaintiffs be indemnified out of the deceased's estate for the costs and expenses of defending the TEP Proceeding, in my view it is appropriate that the indemnification be capped at $150,000, including any GST component. I will provide liberty to the plaintiffs to apply to increase the quantum of indemnification if required. I will also order that the plaintiffs be indemnified for any costs ordered to be paid by them in the TEP Proceeding.

38 For the reasons provided above I am satisfied that it is appropriate that the Court provide the advice sought about whether the plaintiffs are justified in defending the TEP Proceeding. The advice is that the plaintiffs are justified in defending the TEP Proceeding. It is appropriate that the plaintiffs be indemnified for their costs of doing so.

(a) The plaintiffs in their representative capacities are justified in defending the TEP Proceeding.

(b) The plaintiffs be indemnified out of the deceased's estate for the costs and expenses of defending the TEP Proceeding up to the amount of $150,000 including any GST component.

(c) The plaintiffs have liberty to apply to increase the amount of the indemnity for their costs and expenses.

(d) The plaintiffs be indemnified out of the deceased's estate for any costs ordered to be paid by them in the TEP Proceeding.

(e) The plaintiffs' costs and expenses of this application be had and retained out of the estate of the deceased on an indemnity basis.

(f) The defendant's costs and expenses of this application be paid out of the estate of the deceased on an indemnity basis.

CHIK CHUN YUEN (as Executor of the will of WING POY LOUEY (also known as PAUL LOUEY), deceased)

JACKIE MAN-WAI CHAN (as Executor of the will of WING POY LOUEY (also known as PAUL LOUEY), deceased)

MAYLING LOUEY (in her representative capacity as an executor of the estate of WING POY LOUEY (also known as PAUL LOUEY), deceased)

[1] Shao v One Fund Management Ltd [2023] VSC 192, [53].

[3] [2020] 62 VR 281, [28].

[4] [2022] VSC 769, [59]-[61] (citations omitted).