Romano v Romano; Estate of Giacomo Romano [2018] NSWSC 1021 | Case summary

Supreme Court of NSW|2018-07-02|Before: Kunc J, Mr P

Summary

This judgment resolves another round in a bitter dispute between two sisters about their late mother's estate.
The applicant is Ms Susan Shine. She was represented by Mr I Pike of Senior Counsel with Mr P F Santucci of Counsel. The respondent is Ms Jeannette Raynish. She was represented by Mr R Wilson of Senior Counsel with Mr N Bilinsky of Counsel. The parties' late mother, Ms Helena Raynish, died on 6 September 2015, aged 93. Without disrespect, I shall refer to the various family members by their given names.
Probate of Helena's estate was granted to Susan and Jeannette on 13 September 2016. They are co-executrices and each is a 50 per cent beneficiary. The estate is substantial, with a current value of nearly $11 million. Unfortunately, there is no love lost between Susan and Jeannette.
By notice of motion filed on 29 November 2017, Susan seeks these orders: "1. An order pursuant to section 84 of the Probate and Administration Act 1898, that the amount of $8,661,685 be distributed to Jeannette Raynish and Susan Shine in equal shares as beneficiaries under the Will of Helena Raynish (the Deceased). 2. In the alternative, an order that Jeannette Raynish make further distributions to Susan Shine from the Deceased's estate of such an amount as the Court sees fit. 3. Costs. 4. Such other orders as the Court thinks necessary."
During the course of argument, in a process for which the parties and their lawyers are to be commended, the parties agreed that if the Court were minded to make an order for interim distribution, the amount of that distribution should be $4,452,942 to be divided equally between Susan and Jeannette. I will direct that the handwritten document setting out how that amount is calculated, entitled "Respondent's Schedule", which I have initialled and dated today, be kept with the Court's file.
The debate before me ultimately focussed on two reasons why Jeannette argued that no interim distribution should be made (or at least why what was sought should be significantly reduced): that Susan was in contempt of orders made in related proceedings, or, further and alternatively, as a matter of discretion because of other proceedings in which Jeannette alleged Susan had breached her fiduciary duties to Helena.

Is Susan prima facie in contempt?

Jeannette submitted that Susan was in contempt of consent orders made by the Court in related proceedings and that, accordingly, she should not be heard on her motion and that the Court had no discretion but to dismiss that motion: Young v Jackman (1986) 7 NSWLR 97 ("Young").
The contempt was said to arise in this way: 1. On 22 August 2014, Susan and Jeannette entered into an agreement (the "Compensation Agreement") for Susan to be paid for the care that Susan was giving Helena. The Compensation Agreement provided: "Compensation for Susie Shine for management of Health and Welfare of Helena Raynish • Arranging all personal carers • Carer's Rosters, payment of their invoices • Maintaining cashbook in relation to Mum's care • Arranging and attending all the various medical appointments • Filling in when carers don't turn up • Ordering and overseeing mother's medication • Her exercise • Blood tests and urine test (weekly) • Entertainment • Staying with her when she is admitted to hospital • Shopping for groceries, clothing and personal requirements • Cooking and dietary requirements in relation to diabetes, sodium levels and Hypertension • Personal care - Toileting, showering, Dressing, changing, emptying and sterilising catheter bags • Washing, soaking clothes separately due to colonisation with vancomycin resistant enterococcus • Ordering catheter equipment including day and night bags, Statlock Foley devices and catheter tubing and incontinence pants • Night shift 8.30pm to 9.00am 7 days a week • Organising respite care • Communication with Government health bodies in relation to disability aids • Organising financial assistance where available through DHB • Organising DHB twice daily visits Based on current Care Agency Rate of $160.00 per night plus a fee of $150.00 administration we agree the [sic] Susie Shine should receive the sum of $2170.00 (two thousand one hundred and seventy dollars per week). Care commenced 8th March 2014. [sgd] Jennie Raynish [sgd] Susie Shine 22/08/14 22/8/14" 1. In protective proceedings in this Court concerning Helena, consent orders were made on 17 June 2015 which included (the "17 June 2015 Orders"): "6. Upon the plaintiff [Jeannette] giving the usual undertaking as to damages, orders that the first defendant [Susan] be restrained from operating the second defendant's [Helena's] bank accounts other than to draw upon them to pay the second defendant's reasonable living and medical expenses. … 8. Notes the agreement of the plaintiff and first defendant that the first defendant will provide the plaintiff on a monthly basis on the 16th of each month, excluding today, with copies of all bank statements for the second defendant's bank accounts and all receipts and invoices for expenditures paid or incurred by the first defendant on behalf of the second defendant for the previous month. 1. On 12 July 2015, Susan withdrew $22,537.53 (the "Withdrawal") from Helena's bank account which Jeanette submitted was in contempt of the 17 June 2015 Orders.
Susan's response to this submission was that the Withdrawal was made pursuant to the Compensation Agreement.
At this point it is appropriate that I record that by statement of claim filed on 3 March 2017 (the "Equity Proceedings"), Jeannette alleges that Susan is obliged to repay to Helena's estate at least approximately $1.2 million which it is alleged Susan paid herself from Helena's funds in breach of a fiduciary duty that she (Susan) is said to have owed to Helena. The Withdrawal is included as part of that claim. In the Equity Proceedings, Susan has admitted the Withdrawal, averred that it was made pursuant to the Compensation Agreement, and denied any breach of any alleged duty.
Because the Withdrawal is part of the Equity Proceedings, I wish to make it clear that the only issue upon which I am expressing a conclusion is whether or not, on the material before me, the Withdrawal is a prima facie contempt of the 17 June 2015 Orders. In my respectful view, it is not, because it is at least clearly arguable that if the Withdrawal was made under the Compensation Agreement, it constitutes part of Helena's "reasonable living ... expenses" for the purposes of the 17 June 2015 Orders.
As Mr Pike SC submitted, the terms of the Compensation Agreement make clear that the rate of compensation was calculated by reference to care agency rates. Whether the care was provided by an agency or by Susan, it is well arguable that payment for that care was for living expenses, i.e. care that Helena needed to live. Putting it another way, the ambiguity in the expression "living ... expenses" in the 17 June 2015 Orders is sufficient to preclude something as serious as a finding of even prima facie contempt.
This conclusion means it is not necessary to resolve the precise status or effect of the rule or principle for which Young is said to stand. However, if it were necessary for me to do so, I would respectfully adopt the analysis set out in two more recent cases.
In Stokes (by a tutor) v McCourt [2013] NSWSC 1014, Lindsay J said: "18 The plaintiff's objection to the defendant being heard on his motion for summary disposal of her claims for relief is based upon the general principle that, until any contempt is purged, a party guilty of contempt should not be heard on any application for relief beyond an application to set aside or vary an order (or undertaking to the court) in respect of which he, she or it is in contempt or an appeal designed to set aside or vary that order or undertaking: Permewan Wright Consolidated Pty Ltd v Attorney General (NSW) (1978) 35 NSWLR 365 at 369 and 374; Young v Jackman (1986) 7 NSWLR 97; Leaway v Newcastle City Council (No 2) [2005] NSWSC 826; 220 ALR 757; Kayserian Nominees (No. 1) Pty Ltd v JR Garner Pty Ltd [2008] NSWSC 1011 at [1]-[3]. 19 I deliberately describe this proposition as a "principle", rather than as a "rule" (as it is sometimes characterised), because use of the expression "rule" has led to unjustified, or at least unproductive, perceptions of rigidity in its application. … 24 It is not necessary to review them, or subsequent experience of the "rule", because, in modern times, the leading case became that of the English Court of Appeal in Hadkinson v Hadkinson. 25 All three judges in that case (Somervell, Romer and Denning LJJ) concurred in declining to hear an appeal until the appellant had purged her contempt by compliance with an order under appeal, which she evidently did within a short time. Their decision was unanimous, but their articulation of reasons for the decision differed, at least in form. 26 Sommervell and Romer AJJ stated the law in terms of a general rule subject to exceptions: [1952] P 288-289. Lord Denning favoured a statement of the law in terms of a discretionary rule: [1952] P 298. 27 The approach of Romer LJ (in which Somervell LJ concurred) appears in the following extract from his Judgment at [1952] P 288-290: "It is the plain and unqualified obligation of every person against, or in respect of whom, an order is made by a court of competent jurisdiction, to obey it unless and until that order is discharged. The uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by an order believes it to be irregular or even void. ... Such being the nature of this obligation, two consequences will, in general, follow from its breach. The first is that anyone who disobeys an order of the court (and I am not now considering disobedience of orders relating merely to matters of procedure) is in contempt and may be punished by committal or attachment or otherwise. The second is that no application to the court by such a person will be entertained until he has purged himself of his contempt. It is the second of these consequences which is of immediate relevance to this appeal. The rule, in its general form, cannot be open to question. There are many reported cases in which the rule has been recognised and applied. ... No attempt, indeed, was made before us by [counsel for the contemnor] to challenge the rule itself; he sought only to bring the present case within one of the exceptions to which the rule is undoubtedly subject. ... Is this case, then, an exception from the general rule which would debar [the contemnor] from being heard by the courts whose order she has disobeyed? One of the exceptions is that a person can apply for the purpose of purging his contempt and another is that he can appeal with a view to setting aside the order upon which his alleged contempt is founded; neither of those exceptions is relevant to the present case. A person against whom contempt is alleged will also, of course, be heard in support of a submission that, having regard to the true meaning and intendment of the order which he is said to have disobeyed, his actions did not constitute a breach of it; or that, having regard to all the circumstances, he ought not to be treated as being in contempt. The only other exception which could in any way be regarded as material is the qualified exception which, in some cases, entitles a person who is in contempt to defend himself when some application is made against him. ..." … 30 Whether the general principle is best stated as "a rule subject to exceptions" or as a "discretionary rule" is the subject of debate in New South Wales (Kayserian Nominees (No 1) Pty Ltd v JR Garner Pty Limited [2008] NSW 1011 at [3]-[4]), a debate which must now be viewed in the context of the case management provisions of ss 56-64 of the Civil Procedure Act 2005 NSW and the Uniform Civil Procedure Rules 2005 NSW. … 32 The ambit of "exceptions" to the general rule that a contemnor cannot be heard in his own cause appears often, if not universally, to have been described by reference to felt necessities in the due administration of justice generally and by the dictates of justice in the particular case. The felt necessities appear to have varied over time and to have depended, in part, on each court's practice and procedure, not limited to particular provisions in rules of court. 33 Nevertheless, in Permewan Wright Consolidated Pty Limited v Attorney General (NSW) (1978) 35 NSLWR 365 at 369, Hutley JA emphatically favoured the approach of Romer LJ, with which Somervell LJ had concurred, over that of Denning LJ. Mahoney JA appears to have acquiesced in that approach: 35 NSWLR 374B-C. Reynolds JA appears to have sidestepped controversy: 35 NSWLR 367B. 34 In Young v Jackman (1986) 7 NSWLR 97 at 102B, Young J felt constrained to adhere to the view expressed by Hutley JA. … 39 Conceptually, Lord Denning's approach appears to have all but captured the field. 40 Even if that be so, the appropriate course for a single judge of this Court is to apply Romer LJ's approach until such time as the Court of Appeal may reconsider Permewan Wright. … 49 Despite appearances, the respective approaches of Romer and Denning LJJ might be thought to complement, rather than to contradict, one another. They approach the same question (namely, whether a contemnor should be heard) from opposite sides. Romer LJ's approach starts with a negative answer then explores competing factors. Denning LJ's approach starts with an affirmative answer, then considers competing factors. Both approaches require the court to examine factors bearing upon the administration of justice generally and the dictates of justice in the particular case. In exploring their middle ground, both are bound to take into account the case management provisions of the Civil Procedure Act 2005 NSW. 50 Strictly, I do not, ultimately, need in these proceedings to choose between a statement of the law in terms of "a rule subject to exceptions" or in terms of a "discretionary rule". However the question of whether the defendant should be heard notwithstanding his non-compliance with directions of the Court is approached, the outcome is the same. Case management considerations loom large."
That analysis was adopted by McDougall J in Stojic v Stojic [2018] NSWSC 723 (citations omitted): "16. There has been much judicial discussion of the rule, or principle, that a person in contempt of court might not be heard; discussion of the range of the rule or principle; and discussion of the exceptions to it. Lindsay J canvassed the authorities (up to the date of his Honour's judgment) in Stokes v McCourt at [16] to [51]. His Honour noted the tension in the authorities between the characterisation of the Court's approach as either a rule with exceptions or as a discretionary rule which varied in its application according to the particular circumstances of each case. 17. Lindsay J concluded at [50] that he did not need to choose between the varying statements of the rule because, whichever view was taken, the outcome would be the same. I respectfully adopt the same approach in this case. I agree entirely with his Honour's summary of the authorities as they then stood, so there is no point in my seeking to restate their effect. 18. What I do take from his Honour's judgment, and what does seem to me to be important, is that the rule or principle, however one might call it, is closely bound up with the case management provisions of the Civil Procedure Act 2005 (NSW). 19. Thus, the approach that the court takes to the application of the rule, whether in terms of considering the discretion or whether in terms of considering an applicable exception, needs to be pursued in the light of the overriding objective of the Civil Procedure Act to achieve the just, quick and cheap identification and resolution of the real issues in dispute."
Adopting the approach taken in those two cases, and on the assumption that the Court has a discretion even where there is a prima facie contempt established, I would not have dismissed the present motion but exercised the discretion to determine it for these reasons: 1. The small amount of the Withdrawal which, if repayable, is included in the amount which the parties have agreed should be retained by the estate if the interim distribution is to be made. 2. The fact that the allegation that the Withdrawal was in contempt was raised for the first time in the long history of litigation between these sisters in Jeannette's submissions filed only last week on 26 June 2018. 3. The status of the Withdrawal will be finally determined in the Equity Proceedings, if those proceedings ultimately go to a hearing; 4. Overall case management considerations support the desirability of Susan's present motion being determined on its merits today, not least because of the several volumes of evidence that the parties have prepared and filed, and the obviously considerable efforts of solicitors, senior and junior counsel on both sides to prepare and argue the merits of the application itself.

An alternative discretionary consideration?

Mr Wilson SC submitted that, at least insofar as any moneys which Susan might owe the estate pursuant to a judgment in the Equity Proceedings was concerned, it was not correct to characterise the present application as one for interim distribution. He submitted that the approach which Susan was inviting the Court to adopt was to avoid or overcome her liability to account to the estate as a defaulting fiduciary for the full value of the claim. It was said that the proper approach was to require Susan, at least notionally at this stage, to account fully for the amount of her alleged liability. Mr Wilson SC argued that what was in fact being proposed by only allowing half of any such liability to be retained in the estate (on the basis that the other half of any such liability would be repaid to Susan as a 50 per cent beneficiary in the estate) was to offer a reward to a defaulting fiduciary. It was submitted that this was a discretionary basis on which any interim distribution should be reduced (at least in relation to the amount said to be owed in the Equity Proceedings was concerned).
Mr Wilson SC fairly conceded that he was unable to point to any authority in support of the proposition which he had advanced.
In response, Mr Pike SC submitted that the approach which Mr Wilson SC urged upon the Court was itself unprincipled. By that, I understood him to mean that Mr Wilson SC's approach ignored the fact that Susan denied any liability in the Equity Proceedings. The estate would be sufficiently protected by an allowance being made in the amount retained to represent half of the liability which the evidence suggested Susan might have to the estate if judgment was ultimately entered against her in the Equity Proceedings.
I accept Mr Pike SC's submission. In my view, the appropriate exercise of the Court's discretion in an application under s 84 of the Probate and Administration Act 1898 (NSW) (the "Act") is, as I will further set out in a moment, to ensure that the estate is fully protected against any contingencies that might arise in the course of its administration. In the present case that is satisfied by ensuring that the estate is credited with (and there is retained) half the amount which might be repayable by Susan to it pursuant to a judgment in the Equity Proceedings. To adopt any other course would involve the Court in the highly undesirable consequence of having to ascertain the merits or otherwise of the case brought against Susan in the Equity Proceedings. Nevertheless, the Court should approach an application of this kind recognising the practical reality that, even if the Equity Proceedings were to be determined against Susan, any amount which Susan had to repay to the estate would necessarily recognise that half of it was hers as a 50 per cent beneficiary. I accept Mr Pike SC's submission that to adopt the approach urged by Mr Wilson SC would, in effect, punish Susan in respect of what is presently no more than an unproven and vigorously contested allegation.

An order under s 84?

Section 84 of the Act provides: "84 Application for Legacy etc. If the executor or administrator, after requesting in writing, neglects or refuses to: (a) sign such acknowledgment, or (b) execute a conveyance of land devised to the devisee, or (c) pay or hand over to the person entitled any legacy or residuary bequest, the Court may, on the application of such devisee or person, make such order in the matter as it may think fit."
There was no dispute that the applicable principles for the making of an order under s 84 are set out by Barrett J (as his Honour then was) in Romano v Romano; Estate of Giacomo Romano [2004] NSWSC 775, in particular that the Court should act with "the greatest degree of conservation and prudence called for by the circumstances of the case" at [18].
There are some uncertainties about the future liabilities and entitlements of the estate. The parties have agreed an amount to be distributed which would leave an amount in the estate that I am satisfied would enable the estate to meet or have the benefit of those matters. The Court finds that the amount reflects the greatest degree of conservation and prudence based on the evidence and assuming that all the postulated contingencies (negative and positive) come to pass.
Against that background the Court is satisfied that it is appropriate for an interim distribution to be made in the amount agreed by the parties for these reasons: 1. Susan and Jeannette are the only people interested in the estate; 2. The amount available for distribution is large, even after adequate provision for contingencies has been made; 3. The Equity Proceedings are not far advanced. Doing the best I can, it might be at least a year or more before they are heard. There will be further delay pending judgment and any appeal; 4. There is no good reason why Susan (and, for that matter, Jeannette) should have to wait for the resolution of the Equity Proceedings and various other accounting and administrative matters to enable the final administration of the estate, before receiving at least that amount that the parties agree can be safely distributed after allowing for the relevant contingencies.

The costs of the motion

Mr Pike SC submitted that costs should follow the event with orders that, insofar as any costs come out of the estate, they should not be visited on his client's share. Mr Wilson SC submitted that each side had had a measure of success, that his client had been acting in the interests of the estate as an executrix and had not been unreasonable such that either each party should pay their own costs or that Susan's entitlement be reduced to reflect her incomplete success.
The court accepts Mr Pike SC's submission. Susan has succeeded in obtaining an order for a substantial distribution. There is no reason why costs should not follow the event. To some extent it is true to say that Jeannette's role was as an executrix. That should be reflected by an indemnity from the estate. However, her role was also significantly, and to my observation primarily, adversarial. That should be recognised by orders that any indemnity should be limited to come from her share of the estate.

Orders

The orders and directions of the Court are: 1. The applicant and the respondent are each entitled to an interim distribution from the deceased's estate of $2,226,471. 2. The respondent pay the applicant's costs of the applicant's motion filed on 29 November 2017 on the ordinary basis. 3. The respondent be entitled to an indemnity from the deceased's estate in respect of her own costs and the applicant's costs of the motion, with such costs to be charged against the share of the estate to which the respondent is entitled. 4. The handwritten document setting out how the amount referred to in Order 1 is calculated, entitled "Respondent's Schedule", which I have initialled and dated today, be kept with the Court's file. 5. The applicant notify the respondent and the Court by 6 July 2018 whether she intends to make an application to the Court for the appointment of an independent administrator. 6. The exhibits be returned to the parties to be held by them in accordance with paragraph 28 of Supreme Court Practice Note SC Gen 18.

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: 03 July 2018

Romano v Romano; Estate of Giacomo Romano

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