Reid v Brett [2004] VSC 403

Supreme Court of Victoria|2004-10-12|Before: MORRIS, J.

The plaintiffs seek an order restraining the first defendant, who is the administrator of the will and estate of John Rickett Hubbard, deceased, from expending any funds of, or incurring any liabilities on behalf of, the estate of the deceased, or Susan's Fund (under the terms of the will and estate of the deceased) on solicitors' fees or counsel's fees in respect of any proposed or contemplated litigation, or any legal advice in connection with such proposed or contemplated litigation, other than this proceeding and proceeding 5260 of 2004, until the hearing and determination of this proceeding or further order.

The facts are set out in detail in the plaintiffs' outline of submissions, which is in turn drawn from various affidavits and witness statements which are referred to in that document. Having regard to the interlocutory nature of this application, it is both unnecessary and undesirable to recite those facts in full. Rather it is sufficient to note that the facts as stated in the outline are, together with other material I will refer to, the basis of my decision. A key part of the evidence is the affidavit of Charles Brett dated 27 September 2004.

It is easy in a case like this to get ahead of oneself and to seek to determine issues that are best left until the full hearing of the two proceedings in March 2005. Essentially, an interlocutory proceeding is designed to best balance the interests of the parties pending the final hearing and determination of the proceeding; and also to deal with procedural and other like issues that need to be dealt with before the matter is finally determined. In the context of the application now before the Court, the principal issue that must be resolved is what is the most appropriate course to adopt to fairly and appropriately balance the interests of the parties pending the hearing.

The established principles in relation to interlocutory injunctions are essentially that there must be a serious issue to be tried and it be in the balance of convenience that the injunction be granted. However, in my opinion, the serious issue must be connected in some way with the interlocutory injunction that is sought.

As the plaintiffs state in their outline of submissions, there is a serious issue to be tried concerning whether Susan's Fund is to receive the remaining half of the residuary estate in addition to the half it is to receive. There is also a serious issue to be tried as to who should be the trustees of Susan's Fund. It would appear that, in addition to those matters, the plaintiff contends that another serious issue to be tried is whether the residuary estate has already been distributed to Susan's Fund in particular, but possibly also to John's Fund. It is said that there has been an "assent", with the consequence that funds that have been distributed are now held by the first defendant, not as administrator but as trustee, and cannot be accessed by the administrator as such for expenditure on legal advice or litigation.

The first defendant pointed to a number of factors that support a conclusion that there has been no assent in relation to the residuary estate. I find that, notwithstanding the persuasive force of a number of those points, there is a serious issue to be tried in March next year on that question.

It is not essential that I make a finding on the "assent" issue to determine this application. Even if there has been no assent, and all of the funds in the residuary estate are subject to the control of the administrator as such, it would still be open for the plaintiffs to approach the Court and seek an injunction to prevent the administrator incurring expenditure on legal advice or litigation that would be wasteful of the funds the subject of administration.

I think the real issue that needs to be addressed is whether there is a threat on the part of the administrator that he may seek legal advice, or engage in litigation, which is wasteful of the funds the subject of a trust or the subject of administration. If there is a serious issue to be tried in relation to this, then, I think some relief should be granted if the balance of convenience favours it.

The question of a serious issue to be tried and the question of the balance of convenience are, of course, connected. The stronger the serious issue, the more likely an injunction will be granted, even though the balance of convenience may be tilted somewhat against it. On the other hand, if the case in support of a serious issue is a weak one, an injunction could still be granted if it is in a form that would make it appropriate having regard to the balance of convenience.

I must say that I am concerned that the Plaintiff's case has been touched with an element of fear, possibly based upon a lack of confidence. It is not clear to me that there is a substantial basis for the fear or the lack of confidence. That said, it is obviously desirable that an administrator retain the confidence of the beneficiaries of an estate, particularly a major beneficiary.

Prior to 27 September 2004 the plaintiffs could be concerned that legal action was being contemplated that may be speculative and may not be to the plaintiffs' ultimate advantage. However on 27 September 2004 the position of the first defendant was clarified, at least in a sense. On that day the first defendant swore an affidavit in which he stated that he had never said that he intended to commence specific proceedings and that his intention has never been to do more than seek advice about whether proceedings should be instituted. He further stated:

"Generally I do not intend to take any step towards the commencement of any legal proceedings until proceedings 5260 and 5703 of 2004 are heard and determined, unless such a step is necessary in order to preserve an asset or possible asset of the estate. Until those proceedings are heard and determined I do not intend to take any action that I can properly postpone until after their determination. However, in the proper performance of my duties as administrator, I will, unless restrained by this Honourable Court, take such a step if I am advised that circumstances require it. I also intend, unless restrained, to take such advice about possible legal proceedings as I consider that circumstances require me to take."

That statement, unfortunately, did not dispel the fears held by the plaintiffs about unnecessary and wasteful legal action.

Counsel for the first defendant submitted that what the first defendant was effectively stating was no more than his legal duty as administrator and that there was no evidence of a threat of wasteful or unnecessary litigation. There is some force in that submission. But it is nonetheless true that the first defendant, having an opportunity to make his position plain, left open the door to the possibility of obtaining legal advice about future proceedings. Hence there is an issue to be tried on this point, albeit a somewhat weak one.

I think that the balance of convenience is best served if I make an order directed at the first defendant, but I am not satisfied that the order should be in the terms sought in the summons. Rather I think I should order in the following terms:

"In the event that the first defendant expends any funds of, or incurs any liabilities on behalf of, the estate of the deceased or Susan's Fund (under the terms of the will and estate of the deceased) on solicitors' fees or counsel's fees in respect of any proposed or contemplated litigation, or any legal advice in connection with such proposed or contemplated litigation, other than this proceeding or proceeding No.5620 of 2004, he must forthwith notify the plaintiffs in writing of the subject matter of such litigation or advice."

I do not believe it is appropriate, on the evidence before the Court, to put handcuffs on the administrator. However, by requiring the administrator to notify the plaintiffs in writing of the subject matter of any litigation or advice that is pursued, using the funds of the estate or Susan's Fund, the plaintiffs will be then in a position, if they think fit, to approach the Court to seek an order in relation to that specific litigation or the specific advice. This will then place the Court in a position to make an assessment, based upon specific material and specific litigation or advice; and then determine whether the plaintiffs can make a case that that advice or litigation is wasteful of the assets of the estate and would be detrimental to the plaintiffs.

Part of the problem with this case is that there is a surfeit of information, on the one hand, yet a vacuum in relation to the information that would appear to be most critical, namely, information about threatened wasteful legal proceedings or legal advice. The approach I propose will ensure that if this matter does revisit the Court, it will be in the context of some specific litigation or some specific advice which the plaintiffs claim is being pursued in a manner which is wasteful of the assets of the estate.

Counsel for the first defendant advanced a powerful argument to the effect that I should make no order because the plaintiffs had not demonstrated that there was a threat that legal advice or litigation would be pursued which would be wasteful or improper. This contention, although persuasive, must be weighed against the fact that the order I propose is a minimal intrusion into the rights and powers of the administrator and, in my judgment, would best serve the balance of convenience pending the trial of these proceedings.

HIS HONOUR: I propose to make an order that costs be paid out of the estate. In making that order I take into account, as I think I can, that the plaintiffs have a substantial interest in the estate: an interest that would appear to be at least half and potentially 100%, or possibly somewhere in between. If I make that order, ultimately it is the plaintiffs who will be deprived of a substantial proportion of the sum as the result of the costs incurred today. I think also it better reflects the fact that I did make an order, albeit one which I agree with counsel for the first defendant is significantly less than the one that was sought.

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Judgment (22 paragraphs)

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