Reed v Reed [2001] VSC 54

17. The order further provided that upon Matilda attending at a private school for her education the deceased pay a further sum of $110 per week (to Fulford). Matilda is now attending a private school.

23. By his last will dated 22 September 1999 the deceased appointed the defendants executors of his will and trustees of his estate.

26. On 3 March 2000 probate of the will was granted to the defendants.

29. By his will the deceased left the bulk of his estate to the first defendant. He left Matilda an interest in two thirds of one half of his residuary estate as remainderman subject to a life interest to the first defendant and subject to Matilda attaining the age of 25 years.

32. On 21 August 2000 Matilda, by her litigation guardian Fulford, filed an originating motion in the Court seeking an order pursuant to Part IV of the Administration and Probate Act 1958 that provision be made for her maintenance and support out of the estate of the deceased.

35. On 27 October 2000 Matilda's solicitors filed a summons in the Court whereby they sought directions in respect of the future conduct of the proceeding.

38. The plaintiff's summons came before a Master of the Court on 11 December 2000.

41. At the hearing before the Master that day, the principal order sought on behalf of Matilda was one requiring the defendants to give discovery of financial documentation relating to the assets and liabilities of the deceased's estate.

44. The reason why the plaintiff made the application for discovery was that on its face the inventory of assets and liabilities of the deceased's estate filed in support of the defendants' application for probate showed that at the time of the application the estate was bankrupt.

50. After hearing argument in relation to the matter the Master ordered that the summons for directions be adjourned to a date to be fixed and that the plaintiff pay the defendants' costs of the application.

53. Although the order does not so state on its face, it was agreed by counsel for the parties that the Master actually refused the plaintiff's application for discovery, apparently on the footing that as the estate was bankrupt the plaintiff had no prospect of succeeding in the proceeding and that it would be unfair to require the defendants to incur the expense of complying with an order for discovery, an expense they would have to bear personally.

56. The reason the Master is said to have given for not dismissing the plaintiff's summons was that he did not wish to preclude the plaintiff from making a further application for discovery if the plaintiff was able to obtain further evidence which would demonstrate that the estate was in fact solvent.

59. The plaintiff now appeals from those orders to a Judge of the Court.

62. It is a well established principle that in a proceeding commenced by originating motion such as the present proceeding, discovery will not be ordered unless the party seeking the order has established the existence of special circumstances justifying the making of the order.

65. Perhaps one of the better known authorities dealing with the point is the decision of the Court of Appeal in In re Borthwick; Borthwick v. Beauvais[1].

68. That was a case in which the widow and daughter of a testator, having brought proceedings by originating summons asking that further provision be made for them out of the testator's estate, applied for discovery of documents aimed at ascertaining whether the true value of the testator's estate had been correctly stated. At p.648 Lord Greene M.R. said:

"The jurisdiction, of course, is a peculiar one, and anyone familiar with it knows that if the procedure were to be abused and not kept under proper control, it might lead to litigation of the greatest acrimony and the threshing out of a lot of irrelevant material which would not be in the public interest."

"The plaintiffs, however, have not put forward a single shred of fact or a single suggestion casting doubt on the fairness or accuracy of the executors' evidence on the subject of value. Indeed their complaint is this: 'We cannot do that without some materials and the reason why we want discovery is to enable us to test what the executors have said and to see whether or not we can find something on which to attack their estimate.' In ordinary litigation, of course, the ordinary rules of discovery enable litigants to conduct such an examination, but this is a very special jurisdiction under a very special Act governed by very special rules. The judge has ample power, if he is not satisfied or if he thinks there is a reasonable ground for doubting the accuracy of such an estimate as this, to require further evidence on the point, to summon the executors before him, to put questions to them and to subject them to cross-examination. If he thought that was the proper course and if the matter was a matter of doubt or if suspicion was aroused, that no doubt would be the course that he would take. But here we have what on the face of it is sworn testimony by reputable people, the accuracy of which has been subjected to the not too easy test of an investigation by a government department. Everybody who has a little experience of these matters knows that the valuation of shares in private companies is often an extremely difficult matter, and also, I think, everybody knows that where such shares come up for valuation for death duty purposes they are a subject-matter on which the death duty officials are particularly vigilant and particularly inquisitive. A judge who is asked to exercise his discretion in a case of that kind has to weigh in his mind these considerations. Here are plaintiffs who cannot suggest any doubt about this prima facie reliable method of arriving at the valuation, who merely ask for the instrument of discovery to be put into their hands to enable them to see if they can find something on which to attack it. If ever there was a case where a judge should decline to exercise a discretionary jurisdiction to grant an order for discovery, I think this is such a case. If any reasonable suggestion of doubt could be raised, I have no doubt the judge in his discretion under the power given to him by these specific rules would require further information."

76. See also National Mutual Life Nominees Ltd. v. Co-operative Farmers and Graziers Direct Meat Supply Ltd.[2]

79. In the present case the plaintiff contends that the following matters do constitute special circumstances justifying the making of the order.

82. The deceased was an architect by profession conducting a successful practice in Melbourne at the time of his death.

85. In 1995 he had borrowed a sum of $760,000 from the National Australia Bank Limited (NAB). The loan was secured by a first mortgage given by the deceased over a property owned by him known as "Winterfield" and a first mortgage given by the first defendant over a property owned by her in East Prahran.

88. Following the death of the deceased "Winterfield" was sold for $575,000 and the net proceeds of the sale were paid to NAB in part repayment of the loan, the deceased's indebtedness to the bank at that time being of the order of $777,200. I shall deal with repayment of the balance of the loan shortly.

91. The plaintiff asks - what became of the $760,000 borrowed by the deceased from the bank?

94. Until 23 September 1999 the deceased had a policy of life insurance worth $300,000. On that day the deceased is said to have substituted the first defendant as the nominated beneficiary of the policy thereby diverting the proceeds of the policy from his estate.

97. The plaintiff queries the validity of that nomination.

100. It was from the proceeds of the policy of $300,000 received by the first defendant that the first defendant made a loan of $193,639 to the estate of the deceased thereby enabling the balance of the deceased's loan from NAB to be paid out.

103. In a letter of 26 July 2000 from the defendants' solicitors to the plaintiff's solicitors the defendants' solicitors stated that they understood that there was an amount of $2,190 standing to the credit of the deceased in the Mercantile Mutual Master Fund.

106. In a letter of 8 March 2000 from Mercantile Mutual to the plaintiff's solicitors it is said that as at 7 March that sum was $16,999.20.

109. There are also a number of discrepancies between the inventory of assets and liabilities of the deceased's estate filed in the Court in support of the defendants' application for probate and the statement of account prepared by the first defendant's accountant being Exhibit PAR8 to the first defendant's affidavit sworn 7 December 2000. For example the statement of account refers to repayment of a loan of $14,300 to the first defendant and a sum of $4,900 paid to the first defendant being "Reimbursement of farm wages". These amounts are not included as liabilities in what I shall describe as the probate inventory. There are other amounts which have been paid out of the estate which are not referred to as liabilities in the probate inventory for example payments to Diners Club, payments of insurance, a sum of $6,860.69 paid to Andrew and Philippa Reed (the first defendant) being "Interest on Loan" and a sum of $1,100.75 paid to the first defendant for "Reimbursement of final farm expenses".

112. Without the discovery the plaintiff seeks the plaintiff's prospects of proceeding further with this proceeding are remote. The consequences of that would be that the infant child of a well known Melbourne architect would not receive any benefit from the estate of her father. If I may say so, a most remarkable situation.

115. In my opinion the circumstances of this case are so unusual as to justify the making of the order for discovery the plaintiff now seeks.

118. As to the expense of giving such discovery I simply say that if the plaintiff's proceeding ultimately fails the plaintiff's next friend will be required to pay such costs.

121. The appeal will be allowed. The orders of the Master made on 11 December 2000 are set aside. In lieu thereof I order that within 28 days of this date the defendants make file and serve an affidavit of documents disclosing and identifying all documents which are or have been in their possession or control relating to -

(a) each of the debts of the estate of the deceased; (b) the security for each of the debts of the estate of the deceased; (c) registered mortgage to the National Australia Bank referred to in the Inventory of Assets; (d) repayment and discharge of the mortgage referred to in paragraph (c) hereof; (e) the securities and/or documentation pursuant to which the estate of the deceased is said to be liable, whether as principal or as surety or as co-obligor in respect of the National Australia Bank mortgage registered over the first defendant's property at 46 Westborne Street, East Prahran; (f) the deceased's interest in any superannuation fund of which he was a member at the date of his death including but not limited to Andrew Reed Superannuation Fund; (g) any life insurance policy payable in respect of the death of the deceased. (h) the deceased's shares in and the transfer of the deceased's shares in, and the consideration paid to the deceased for the transfer of his shares in the following company (i) Andrew Reed Australia Pty. Ltd.; (i) monies owing to the deceased's architecture practice at the date of his death; (j) the deceased's interest in Mercantile Mutual Master Fund Policy No. 88005100750; (k) monies received by the defendants in respect of the deceased's architecture practice since the date of his death; (l) all motor vehicles which were registered in the name of the deceased at the date of his death; (m) all furniture and household effects belonging to the deceased and the valuation thereof; (n) all livestock belonging to the deceased and sale thereof; (o) all plant and equipment belonging to the deceased and sale thereof."

125. I order that the costs of the application to the Master be reserved.

128. I order that the defendants pay the plaintiff's costs of the appeal.

131. I grant to the defendants the appropriate certificate pursuant to the provision of the Appeal Costs Act in respect of their costs of the appeal and the costs of the appeal they are required to pay to the plaintiff.

[1] (1948) 1 Ch. 645

[2] [1976] VicRp 65; [1976] V.R. 634