Sleiman v Alwan [2009] NSWSC 484 | Case summary

5993/06 - SLEIMAN v ALWAN JUDGMENT 1 HIS HONOUR: Wajih Antonios Alwan (the deceased) died on 1 June 2002. The deceased made and published his last will on 9 January 1992. Probate of that will was on 18 November 2002 granted to the defendant who was a brother of the deceased and was the executor named in the will. The deceased left an estate with a gross value of $1.95 million with a net value of $1.28 million. 2 The basic provisions of the will were that the deceased gave $10,000 to various children of his brothers and sisters and then gave the remainder upon trust for the defendant, the plaintiff, one of his sisters, another brother, another two sisters and a sister-in-law as tenants in common in equal shares, ie one-sixth of the residue each. 3 On 1 June 2004, the plaintiff's solicitors wrote to the solicitors for the defendant to the effect that: "There appears to be a number of discrepancies between what was offered to the beneficiaries and what is noted in trust account statements and the Summons [for probate]." 4 The plaintiff's solicitors put 17 questions to the defendant's solicitors. They noted that the defendant contended that the plaintiff was only entitled to $141,238.99 for her one-sixth share of the estate, but that the defendant had received $15,000 more than that for his one-sixth share, and also appeared to have purchased the estate property at an under value. The plaintiff's solicitors indicated that she would be prepared to accept $860,265 in lieu of what was offered to her. 5 The defendant's solicitors answered the plaintiff's letter by way of a letter dated 10 June 2004, not however to the plaintiff's solicitors' satisfaction and mentioned that the defendant and his family were very close to the deceased, there had been many mutual dealings between the parties and that the deceased had in fact owed the defendant considerable sums of money. They also revealed that an estate property had been sold, allegedly for full value, to the executor. 6 There was further correspondence, but no satisfaction and on 24 August 2006, the defendant's solicitors formally called on the plaintiff under s 93 of the Probate & Administration Act 1898, to commence proceedings to enforce any claim the plaintiff had within three months and to prosecute that claim. 7 The plaintiff issued a summons filed on 27 November 2006. An amended summons of 9 February 2007 seeks that the defendant be removed as executor and trustee and that two of the plaintiff's solicitors be appointed trustees of the estate in his place and that accounts be taken on the basis of wilful default. 8 During 2007 and 2008 there were interlocutory skirmishes based on a very searching subpoena and notice to produce issued by the plaintiff. During those interlocutory proceedings the possibility was canvassed that the Public Trustee might take over the estate. On 21 March 2007, the Public Trustee declined voluntarily to accept administration of the estate. 9 On 23 June 2008, a notice of motion was heard by Associate Justice McLaughlin by the defendant to strike out the proceedings. The transcript of that hearing shows that the defendant filed a motion on 23 November 2007 for the proceedings to be dismissed on two grounds: (a) that the plaintiff's solicitor had no authority to commence them; and (b) that they had not been prosecuted with due despatch. 10 As to the first ground, the Associate Judge was concerned that a lot of time had been wasted in challenging the fact that the plaintiff had given her daughter a power of attorney which may not have been effective under NSW law. This was quite irrelevant because the solicitor had personally been instructed by the plaintiff by telephone and told that her daughter would provide the details. 11 As to the second ground, the Associate Judge was not at all impressed with the way in which the plaintiff had progressed the case, but gave her a further opportunity to get the thing in order. He ordered the plaintiff to pay costs. 12 The case was then referred to Justice Hammerschlag as List Judge and his Honour fixed the hearing of the case for three days before me commencing on 16 February 2009. 13 When the matter came before me it had really progressed no further. However, it was futile to allow the case to proceed on the evidence available, but it was clear that it was not vexatious because of the prima facie voidable transaction to which I have already referred. The way forward, accordingly, was to appoint a new executor or trustee and then, under the supervision of a capable person, it could be seen whether there were specific items that needed to be investigated in a cheap and efficient manner. 14 I made orders on that occasion appointing the Public Trustee as the new trustee of the estate on the basis that I was told all the executorial duties save the final distribution and the settling of accounts had been done. I made orders dealing with the costs of both parties up to 7 May 2007 (the date when the defendant had agreed that the Public Trustee should take over the estate), and stood over matters as to costs to 3 March 2009. 15 It was not, as far as I remember, brought to my attention that the Public Trustee had already declined voluntarily to take over the estate, although that information is disclosed in Mr Webb's affidavit of 22 February 2008. 16 I made provision to allow the Public Trustee to be heard before the order was taken out. Correspondence has since been received from the Public Trustee which suggests that despite his earlier declining not to be involved, he is prepared to be involved at this stage. However, it is regrettable that it was not brought to the Court's attention as to the attitude the Public Trustee had taken in 2007. Be that as it may, the situation now is that the Public Trustee is prepared to take over the administration of the estate if that is the Court's wish. 17 The case has, of course, not finished. All that has really happened is that it has been put in some form of logical order. What the plaintiff wanted to do was to spend three days going through a whole series of matters dealing with the conduct of the estate by the defendant without any isolation of the real problems. 18 As I pointed out during discussion with counsel on 3 March, the proper way of proceeding is to have the defendant file accounts, work out (either by the traditional process of surcharges and falsifications or by some more informal manner), what matters are in dispute, and then have an associate judge or one of the ordinary judges decide those items. 19 It would appear that when probate was granted there was no special order for the executor to file accounts. Thus, if the plaintiff as a beneficiary wants an account she must show that she has a right to obtain an account. As appears in Jacobs' Law of Trusts in Australia 7th ed (LexisNexis Butterworths, Australia, 2006) [1714]: "If a beneficiary asks for accounts or for information, the trustees are entitled to be paid by the beneficiary the cost of supplying the accounts or information and if they choose, may require payment in advance."

Authority is cited. 22 Thus, had the matter proceeded in the orthodox way, the defendant would have filed accounts, the plaintiff then would have cross-examined the defendant on those accounts and then filed surcharges and falsifications and so raised discrete issues. Alternatively, those discrete issues would have been formulated by some informal process. However, the plaintiff did not do that even though she was overseas. This led to her problems which were pressed before the Associate Judge by the defendant, but from which he survived with an order for costs made against her. 23 On or about 26 April 2007, the defendant agreed that a new trustee should be appointed of the estate or a new executor appointed of the estate whichever was appropriate, and put up the Public Trustee. The defendant says that this is all the plaintiff really wanted, he was prepared to concede that in April 2007. In his submissions of March 2009, defendant's counsel submitted that accordingly, the plaintiff should get her costs up to 7 May 2007 (the date on the cross-claim that was filed on 9 May 2007) and he should get his costs on the indemnity basis thereafter. 24 Whilst there is some validity in this point, the real truth of the matter is that the case has not yet been decided. The plaintiff sought to remove the executor on the basis of some sort of conflict of interest. The cases show that this is ordinarily insufficient because the testator is assumed to have taken possible conflicts into account when making his appointment and his appointment as executor should not lightly be set aside; see Vyse v Foster (1874) LR 7 HL 318, 332; Hordern v Hordern [1910] AC 465, 475; Morgan v MacRae [2001] NSWSC 1017 at [25]-[26]; Upton v Downie [2007] NSWSC 1095 at [48]-[49] and Rutter v McCusker [2008] NSWSC 1289 at [24]-[25]. 25 Thus, to succeed, the plaintiff would have had to go a lot further than showing a mere conflict. 26 The real point between the parties is yet to be decided. What will happen now, hopefully, is that the former trustee will have to account to the new trustee for his administration and, in this way, or in some other way in which he renders an account, the plaintiff will be in a position of knowing which item she challenges. 27 The high point, however, of the plaintiff's case would appear to be that the defendant sold some of the estate's real estate to himself. 28 There is a firm principle of equity that the sale by a trustee to himself is voidable at the suit of a beneficiary. The basal principle was laid down over the centuries. It matters not that the sale was for full value. The only defence appears to be acquiescence. 29 However, more recently, it has been held in England (see Holder v Holder [1968] Ch 353) that the Court has a discretion as to whether or not it will apply the general principle. That suggestion was adopted by Austin J in Re One.tel Networks Holdings Pty Ltd (2001) 40 ACSR 83. However, it has not found favour with most of the leading Australian textbooks and was emphatically rejected recently in New Zealand in Chellew v Excell [2009] 1 NZLR 711. 30 The inventory of property made out by the defendant for probate purposes, shows that the deceased owned a number of pieces of real estate including 60 Hawksview Street, Guildford, and units 1, 2, 3 and 4, 14 O'Neill Street, Guildford. Hawksview Street was allegedly held as tenant in common with Sourara Alwan in equal shares and the four units in O'Neill Street a half share with Sajih Alwan, the executor. 31 The defendant's solicitors' letters to the plaintiff's solicitors of 10 June 2004 say that the defendant and Sourara Alwan performed numerous extensions to the property at 60 Hawksview Street. Furthermore, they had given monies to the deceased at no interest and paid many of his expenses over 45 years and the deceased's interest in the property was transferred to the defendant "in full satisfaction of the debt owed to the deceased." 32 This transaction must be considered to be able to be attacked by the plaintiff unless a defence such as laches and acquiescence is successful. 33 Accordingly, the probabilities would be that the plaintiff will at least succeed eventually in this litigation to the extent of setting aside the sale from the executor to himself, or alternatively, receiving equitable compensation. 34 Both parties seek some order for costs. 35 The summons was filed on 27 November 2006. It seeks an order that the defendant be removed "as trustee of the estate of Wajih Antonios Alwan … [and] that the assets of the deceased vest in the new trustees". It was amended in February 2007 to use the expression "executor and trustee". There was a cross-claim filed on 9 May 2007 seeking that the Public Trustee be appointed. The defendant has said that at all times after 26 April 2007 he was content to have the Public Trustee appointed a neutral administrator of the estate and that the plaintiff should pay the costs after 7 May 2007 because that is all that has happened so far. 36 The plaintiff quarrels with this. She says that before Associate Justice McLaughlin the cross-claim was abandoned. I must confess there is some hint in the transcript of this, but there is nothing very definite. At page 5 of the transcript the Associate Judge noted that there was a cross-claim, Mr Jobson of counsel for the defendant said that, yes, "an offer [was made] to remove the executor from the estate and [for] the Public Trustee to be appointed", but nothing was done. His Honour then asked whether a defence had been filed to the cross-claim and was told "No". Ms Obrart, for the plaintiff, then said: "My understanding … is that that cross claim is no longer instant [because the Public Trustee declined to act]." That is virtually as far as it went. I do not consider that that was an abandonment of the cross-claim. 37 All this makes me think that, apart from dealing with costs up to 7 May 2007, which appear to be the subject of concession, it is wiser not to make any order for costs other than to reserve them at the present stage because of the factors which I have outlined, particularly the factor that the real point in the case is still yet to be decided. 38 It will be, in due course, unfortunately, a very difficult job for a costs assessor to consider what costs accumulated by the solicitors on each side were proper costs chargeable to the other party, or indeed, to the client. A surface look at what has happened in this case tends to show that a lot of the work that appears to have been done on both sides has been unnecessary and out of ignorance as to how properly to proceed. It may be that this comment on deeper consideration will be seen to appear to be erroneous, but all the indications are there that either a judge of the Equity Division will, in due course, need to give specific directions to the costs assessor, or alternatively, the costs assessor will himself or herself have to make some very hard decisions. 39 As far as I can see, formal orders have not yet been made. 40 It is still unclear to me whether the estate has been fully administered other than the distribution and the review of the sale by the executor to himself if that be the case. The defendant's original position was that he has distributed everything except what is due to the plaintiff and the plaintiff will not accept that because she says it is too little. However, in response to a recent query that I raised with counsel I received a joint memorandum from them of 12 May 2009. This says: "The position of both the Plaintiff and the Defendant is that the estate has not been administered." 41 This is rather Delphic. The note does not say fully administered. As there is still the matter of the sale of a property to the executor and the final accounting to the plaintiff and matters of administration expenses outstanding, counsels' statement is probably correct. 42 Thus it is necessary to recall the grant of probate to the defendant. 43 It needs to be noted that the Public Trustee has never appeared, despite what I would have thought were invitations issued through the parties and he has said that he has never been served with any orders. That latter point is correct because no orders have been made. 44 My Associate informs me that a solicitor telephoned her and asked "where are the orders because the Public Trustee had not been served". The solicitor was told that it was a matter for the parties to serve the orders not the court and it was no wonder the Public Trustee had received no orders, as none had been made. 45 The Public Trustee still must either consent to administer the estate even reluctantly, or alternatively, some other person must be found. 46 The matter remains in an unsatisfactory state. I am not prepared to make any orders for costs other than the ones I have indicated and it seems to me that, apart from making the following orders, I should merely stand the matter over for a judge who is still sitting in the Equity Division to take the case the next step forward. 47 My Associate recently asked counsel for their submissions on the form of the orders that should now be made. In response, I was informed in counsels' joint memorandum that the plaintiff proposes the orders which were delivered with the plaintiff's submissions on costs dated 18 March 2009 and that the defendant does not propose orders and submits that the Public Trustee should formulate the orders. 48 With respect, this was not helpful. It seems to me that the orders that should be made are as follows:

Sleiman v Alwan

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Judgment (23 paragraphs)

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Cases Cited (3)