Re Estate Schwartz, Deceased:; Application of Gellert; Gellert v Bentwood... [2015] NSWSC 1484 | Case summary

Supreme Court of NSW|2015-08-25|Before: Lindsay J

Solicitors: Teece Hodgson & Ward (Plaintiff) Carroll & O'Dea (Ms Bentwood) Anne Einfeld (Dr Schwartz) File Number(s): 2015/000713652015/00222842

INTRODUCTION

Before the Court are two applications, with a common purpose, relating to administration of a discretionary trust created by the will dated 27 May 2002 of Eve Veronica Schwartz, who died on 20 or 21 August 2005, probate of which will was granted to the plaintiff by this Court on 28 July 2006.
The objects of the discretionary trust are identified, in the definition of "beneficiaries" in clause 1.1 of the will, in the following terms: "'Beneficiaries' means: (a) my grand-daughter SOPHIE BENTWOOD, her spouse (including de facto partner) and her descendants; and (b) my son JERRY LESLIE SCHWARTZ, his spouse (including de facto partner) and his descendants"
The common purpose of the applications is to lay to rest, for the purpose of due administration of the estate of the testatrix, suspicions that Dr JL Schwartz, the son of the testatrix and one of her two principal beneficiaries, caused or contributed to her death so as to attract the operation of the forfeiture rule.

A QUESTION RAISED AFFECTING DUE ADMINISTRATION OF THE ESTATE : ACCUSATIONS AGAINST A BENEFICIARY

After some years of acquiescence in administration of the testatrix's estate on the basis that Dr Schwartz had not caused or contributed to the death of the testatrix, the second principal beneficiary (the granddaughter of the testatrix, Ms Bentwood) challenged Dr Schwartz's standing as a beneficiary on the basis, she contended, that: 1. the plaintiff can not be satisfied by an "open" (ie, indeterminate) finding of the NSW State Coroner as to the cause and manner of the testatrix's death, published on 9 August 2013, that Dr Schwartz did not cause or contribute to the death of the testatrix; 2. because, on the findings of the Coroner: (i) Dr Schwartz had not followed regular procedures in certifying the cause of his mother's death, and in authorising cremation of her body, without independent scrutiny; and (ii) he had thereby limited the ability of the Coroner, and the Court, to ascertain the truth about the cause of her death, he should not be heard to contend that he had not caused or contributed to her death; 3. the plaintiff should not distribute any further estate property to Dr Schwartz or any person claiming through him unless and until satisfied that Dr Schwartz did not cause or contribute to the death of the testatrix; and 4. consideration should be given to whether steps should be taken to recover from Dr Schwartz estate property (capital) hitherto distributed to him upon an assumption that he did not cause or contribute to the testatrix's death.
Although she protested otherwise, by these means Ms Bentwood endeavoured, in substance, to invoke against Dr Schwartz the forfeiture rule (grounded in Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147 and affirmed by the NSW Court of Appeal in Troja v Troja (1994) 33 NSWLR 269), according to which a person who wrongfully kills another is disqualified by law from taking any benefit from the estate of that other, absent orders made under the Forfeiture Act 1995 NSW ameliorating the operation of the common law rule.
Ms Bentwood, in fact, disclaimed reliance, or at least direct reliance, on the forfeiture rule. In correspondence written by her solicitors to the solicitor for the plaintiff, placed before the Court at her request, she contended for the operation of an admittedly novel principle, said to be based on considerations of public policy, to the effect that because Dr Schwartz's actions (in personally signing the death certificate of his mother without independent corroboration and in authorising her body to be cremated without independent verification of the cause of her death) had constrained any independent investigation of her death, he should not be permitted to be heard against the proposition that he caused or contributed to her death.
At no point in the proceedings before me was Ms Bentwood's contention fully articulated. It is possible that I have not done it justice in this summary. However, in the correspondence of her solicitors placed before the Court it was said be based upon British American Tobacco Services Ltd v Cowel (representing the Estate of McCabe, deceased), which I take to be a reference to the judgment of the Victorian Court of Appeal reported at (2002) 7 VR 524, from which the High Court of Australia, as recorded at [2003] HCA Transcript 384, refused special leave to appeal.
One way or another, through her solicitors, Ms Bentwood appeared intent upon building a case based largely upon findings of the Coroner to the effect that, because of conduct of Dr Schwartz, an open finding as the cause and manner of the testatrix's death was required.

THE TRUSTEE'S RESPONSE : APPLICATIONS FOR ADVICE OR DIRECTION

Confronted with Ms Bentwood's contention challenging Dr Schwartz's entitlement to participate in enjoyment of trust property; exposed thereby to a risk of personal liability arising from distributions of estate property earlier made without controversy; and in need of guidance about how to approach administration of the estate hereafter, the plaintiff applied to the Court for advice or direction.
The first application made by the plaintiff, in time, was an application for judicial advice or directions made (under the Trustee Act 1925 NSW, section 63) on notice to both principal beneficiaries.
The second application, arising out of reticence on the part of Ms Bentwood to participate actively in the judicial advice proceedings, in which no party is named as a defendant, was an application (under the Uniform Civil Procedure Rules 2005 NSW, Part 54) for directions in proceedings for a partial administration of the estate.
Both modes of procedure are procedural expedients, historically grounded in 19 century equity reforms, designed to provide summary, cost-effective alternatives to an application for general administration of a trust by the Court: Re Estate Late Chow Cho-Poon; Application for Judicial Advice [2013] NSWSC 844 at [167]-[183].
An application for judicial advice under section 63 is an application by a trustee - broadly defined by the Trustee Act 1925 to include an executor of a deceased estate - for "private advice" (Macedonian Orthodox Community Church St Petka Incorporated v Bishop Petar (2008) 237 CLR 66 at 91 [64] -92[66]) which, if given on the basis of an accurate statement of facts and served on affected parties, can bind those parties by force of the section.
It is not a mode of procedure calculated to deal effectively, or fairly, with contests about controversial facts material to the advice, or directions, sought by a trustee.
An application under section 63 can, by procedural directions for the joinder of parties and redefinition of the form of relief sought, be converted into an application for partial (or, indeed, general) administration of an estate: Application of Perpetual Trustee Company [2003] NSWSC 1185 at [14]-[20]; AG Nevill and AW Ash, Equity Proceedings with Precedents (NSW) (Butterworths, Sydney, 1981), paragraph [1204].

NO PERSON PREPARED TO PROSECUTE ACCUSATIONS AGAINST A BENEFICIARY

After several unsuccessful attempts to encourage Ms Bentwood to participate directly, and constructively, in the section 63 proceedings, I determined that the appropriate course, in the best interests of the estate (Application by Marilyn Joy Cottee [2003] NSWSC 47 at [35]), was to give Ms Bentwood an opportunity (which, ostensibly, she had sought in the correspondence addressed to the plaintiff with a request that he place it before the Court), and a correlative obligation, to participate in proceedings constituted with her as a party.
That was done by a direction, given to the plaintiff in the judicial advice proceedings, for the filing and service of a fresh summons for directions, naming both principal beneficiaries as defendants, with the object, upon return of that summons, of determining the appropriate way forward procedurally (whether by way of section 63, UCPR Part 54 or some other form of procedure), with the benefit of submissions of all affected parties (particularly, the plaintiff and each of the principal beneficiaries) at a case-management directions hearing of the two sets of proceedings listed together.
Upon the return of the summons for directions under UCPR Part 54, Ms Bentwood appeared by senior counsel, as a courtesy to the Court, to announce that she submitted to the orders of the Court, save as to costs, and otherwise proposed to play no role in either set of proceedings.
In the lead up to this point, by procedural directions for the service of notice of the plaintiff's application for judicial advice on the State Coroner and the Attorney General of NSW, the Court had ascertained that neither the Coroner nor the Attorney General sought an opportunity to be heard in the proceedings.

THE MATRIX FOR DECISION ABOUT ESTATE ADMINISTRATION

The Court is thus called upon to determine whether (and, if so, what) advice or directions should be given, in and for the purposes of administration of the estate of the testatrix, in circumstances in which: 1. the testatrix died a decade ago; 2. Dr Schwartz denies that anything he did, or did not do, caused or contributed to her death; 3. the Coroner made an open finding two years ago about the cause or manner of the testatrix's death; 4. no action has been taken against Dr Schwartz since that time charging him with complicity in the death of the testatrix; 5. the Coroner and the Attorney General both declined an invitation to be heard in the current proceedings relating to due administration of the testatrix's estate; 6. despite a clear invitation to Ms Bentwood to pursue allegations made in correspondence against Dr Schwartz she has, with the benefit of representation of an experienced senior counsel (BA Coles QC), declined to do so; 7. having reviewed all the evidentiary material available from the coronial proceedings, an experienced senior counsel retained by the plaintiff for the purpose of expression of an independent opinion (MS Willmott SC), has formally expressed an opinion that: 1. on the balance of probabilities, the available evidence does not establish that Dr Schwartz was guilty of the unlawful killing (as defined by the Forfeiture Act 1995) of his mother; 2. unless and until further and more accurate evidence becomes available, there is no, or no sufficient, basis upon which the plaintiff might properly exclude Dr Schwartz from consideration as an object entitled to receive income or capital from the trust by reason only of an application of the forfeiture rule; and 3. there is no basis upon which the plaintiff should involve the trust in the expense of instituting civil proceedings for a declaration as to whether the forfeiture rule should be invoked against Dr Schwartz.; 1. substantially all (but not the whole) of the evidentiary material considered by the Coroner has been placed before the Court for the purpose of ensuring that the factual assumptions of that opinion can be objectively grounded; 2. that material provides, in fact, a reasonable foundation for senior counsel's opinion; and 3. no party (in particular Ms Bentwood, but also the Coroner and the Attorney General) has sought to contend otherwise.
The formal finding of the Coroner was that the testatrix died, at her home in Sydney, some time between 20 and 21 August 2005, but that the evidence did not allow findings to be made as to the cause or manner of her death.
That finding was published by the Coroner with the benefit of five days of evidence (on 8-11 April 2013 and 29 July 2013), and the assistance of counsel instructed by the Crown Solicitor's office, and others, in the course of coronial proceedings in which questions were ventilated about the death, not only of the testatrix, but also of a close friend of the testatrix.
The evidence considered by the Coroner included evidence of a former partner of Dr Schwartz (Ms Viselle) who had made allegations to the police regarding the circumstances of both deaths.
In proceedings reported as Gellert v Viselle [2011] NSWSC 560, Windeyer AJ determined that Ms Viselle was not a discretionary object of the trust established by the testatrix's will unless she married Dr Schwartz or entered into a de facto relationship with him, neither of which events had occurred.
In 2014 claims for relief made by Ms Viselle against the estate of the testatrix and Dr Schwartz personally, in proceedings listed for hearing before me, were settled without me being called upon to make any determination of questions bearing upon the cause or manner of the death of the testatrix.
Each party to the present proceedings expressly disclaimed any objection to my entertaining them when, for more abundant caution, I expressly drew to their attention my earlier engagement with the family Schwartz.
In the course of the current proceedings I have not reviewed, or taken into account, any materials placed before the Court in the earlier proceedings relating to the claims for relief made by Ms Viselle, now resolved. No party has invited me to do so, or suggested that I should.

ANALYSIS

The current proceedings provide no occasion for the Court to take up a cause, against Dr Schwartz, which no party, justified by interest or bound by public duty to advance, sees as an occasion for action being taken to deprive him, or persons claiming through him, of a proprietary interest in estate assets thus far distributed or an entitlement to be considered by the plaintiff as an object of future discretionary distributions.
Absent an accuser, at a time when he has stood ready to meet any accusations against him material to administration of the testatrix's estate, Dr Schwartz is entitled to a determination by the Court that the estate be administered on the basis that he did not cause, or contribute to, the death of the testatrix.
It is neither necessary nor desirable that, in proceedings relating to due administration of the testatrix's estate, the Court take upon itself the role of a prosecutor entrusted to public authorities better able to give consideration, which I infer has been duly given, to whether any (and, if so, what) action can, and should, be taken against Dr Schwartz.
Nor should the Court step into an adversarial arena against Dr Schwartz that a competing interest, with the benefit of legal representation, has expressly declined to enter, and an experienced, independent senior counsel has found to have no factual justification in available evidence.
Quite apart from any entitlement that Dr Schwartz might personally claim to have allegations about his conduct put behind him, due administration of the estate of the testatrix requires that certitude be brought to dealings in estate property, removing from the plaintiff, Dr Schwartz and any person who might claim through Dr Schwartz, a threat of legal action arising out of their dealings, ostensibly in the ordinary course, in estate property.
Because some of the evidence relied upon by the plaintiff was filed in one set of proceedings or the other, convenience dictates that the two sets of proceedings before the Court be heard together, with evidence in one received as evidence in the other.
Because the principal beneficiaries have been joined as defendants in the partial administration proceedings, but not in the judicial advice proceedings, case management considerations dictate that any substantive orders made be made in the partial administration proceedings.
Because the beneficiaries of the testatrix's estate are defined by reference to the principal beneficiaries and their respective families, as objects of a discretionary trust, and the interests of the trust require that there be certainty in relation to the identity of persons eligible to benefit from an exercise of discretion by the plaintiff in distribution of estate property, representative orders should be made so as to ensure that all persons interested, or prospectively interested, in the estate are bound by this judgment with clear procedural parameters for its review: Ahmed v Chowdhury [2012] NSWSC 1452 at [47].
For much the same reason, the form of relief granted by the Court should be expressed as a direction to the plaintiff about administration of the estate rather than the less definitive form of order that the plaintiff "would be justified" in administration of the estate on a particular basis. An indeterminate, residual discretion extraneous to the trust instrument should not be left to the plaintiff or any future trustee standing in the shoes of the plaintiff. Having determined that the estate should be administered on a particular basis, the Court should give a direction that ensures that that determination is carried into effect. To do otherwise, in the context of the present estate, would be to invite uncertainty.

PROPOSED ORDERS

Accordingly, subject to allowing the parties an opportunity to be heard as to the form of relief to be granted, I propose make orders to the following effect: 1. ORDER that the proceedings numbered 2015/00071365 (the judicial advice proceedings) and the proceedings numbered 2015/000222842 (the partial administration proceedings) be heard together. 2. ORDER that, so far as may be relevant, evidence in each set of proceedings be evidence in the other. 3. ORDER that Ms Bentwood be appointed to represent in these proceedings, in addition to herself, each person who has been, is or may in the future be a beneficiary within the meaning of paragraph (a) of the definition of "beneficiary" in clause 1.1 of the will of the late Eve Veronica Schwartz dated 27 May 2002. 4. ORDER that Dr Schwartz be appointed to represent in these proceedings, in addition to himself, each person who has been, is or may in the future be a beneficiary within the meaning of paragraph (b) of the definition of "beneficiary" in clause 1.1 of the will of the testatrix. 5. DIRECT (pursuant to UCPR Part 54) that the estate of the testatrix be administered on the basis that Dr Schwartz did not cause, or contribute to, the death of the testatrix. 6. ORDER that the plaintiff's application for judicial advice under the Trustee Act 1925 NSW, section 63, be dismissed. 7. ORDER that the plaintiff's costs of each set of proceedings be paid out of the estate of the testatrix on the indemnity basis. 8. ORDER that Dr Schwartz's costs of the two sets of proceedings be paid out of the estate on the ordinary basis. 9. ORDER that the costs of Ms Bentwood of the partial administration proceedings be paid out of the estate on the basis of a submitting appearance (including the appearance of senior counsel, and work undertaken by him incidental to his appearance, before the Court on 25 August 2015), and that no order be made for her costs in relation to the judicial advice proceedings. 10. ORDER that exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined. 11. ORDER that these orders be entered forthwith.
The orders for representation of all objects of the trust are proposed to be made upon an exercise of the Court's power under UCPR rule 7.6 or, alternatively, the equitable jurisdiction of the Court described by Megarry J in John v Rees [1970] Ch 345 at 369H - 374E by reference to Lord Macnaughten's judgment in Duke of Bedford v Ellis [1901] AC1 at 8-11 and, ultimately, the judgments of Lord Eldon in Adair v New River Co (1805) 11 Ves 429; 32 ER 1153 and Cockburn v Thompson (1809) 16 Ves Jun 321; 33 ER 1005: Ahmed v Chowdhury [2012] NSWSC 1452 at [27]-[51]. An object of such orders is to quell disputes and avoid a multiplicity of proceedings, an object important to due administration of the testatrix's estate.
On the evidence before the Court, Ms Bentwood has no spouse, no de facto partner and no issue to attract the operation of paragraph (a) of the definition of "beneficiary" in clause 1.1 of the testatrix's will; Dr Schwartz has a spouse and their three children who attract the operation of paragraph (b) of the definition.
Although I anticipate no opposition to the making of the proposed representative orders Ms Bentwood, in particular, should be given an opportunity to object should she be advised to do so.
As presently advised, I apprehend no need for, or utility in, separate representation of trust objects whose status as such depends upon, and is defined by, their family connection with Dr Schwartz. However, I will entertain submissions, if any are made, on that topic.

Amendments 16 October 2015 - Paragraph 24 substitution of "new factor" to "de facto". DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 October 2015

Re Estate Schwartz, Deceased:; Application of Gellert; Gellert v Bentwood and Schwartz

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