I delivered my primary judgment on the issues in dispute between the plaintiff, Ms Telfer, and the second defendant, Mr Mark Telfer, on 12 February 2016: see Telfer v Fairfax [2016] NSWSC 60.
I delivered a judgment on outstanding costs issues on 18 May 2016 see Telfer v Fairfax (No 2) [2016] NSWSC 639.
The first defendant, Mr Fairfax, is the administrator with the will annexed of the late Lyall Telfer. Ms Fairfax was Lyall's wife. Mr Mark Telfer was Lyall's son.
In short, I decided in the principal judgment that Mr Fairfax, as administrator of Lyall's estate, was liable to pay a debt to Ms Telfer, and that Ms Telfer had a charge over the only substantial asset of the estate, being a residential property at 39 Hammers Road, Northmead, to secure repayment of the debt. I also found that Mr Fairfax, as administrator of Lyall's estate, was obliged to specifically perform a contract that Lyall had entered into before his death to sell the Northmead Property to Mark Telfer. As the total amount of the judgment I entered in favour of Ms Telfer was greater than the amount that the evidence suggested was the balance of the purchase price, payable by Mark Telfer on completion of the contract, Mark Telfer found himself in the position where he had to pay the greater amount of the debt owed by the estate to Ms Telfer, before Mr Fairfax, as administrator, could require Ms Telfer to withdraw a caveat that she had lodged to protect her charge, and to deliver the certificate of title to Mr Fairfax in order to enable him to complete the contract of sale to Mark Telfer.
I made orders on 17 February 2016 to deal with the result of my primary judgment. Mark Telfer was given an opportunity to require Mr Fairfax to complete the contract of sale within a stipulated period, but he was required to pay the amount that Mr Fairfax had to pay to Ms Telfer to discharge the judgment in her favour.
Mark Telfer elected to pay the additional sum, so that he could acquire title to the Northmead Property.
It was necessary for me to make further orders to facilitate the implementation of my earlier orders, and I did so on 18 April 2016.
One of the matters that I was required to deal with was the fate of the only other asset in the estate, which is an amount that Mr Fairfax retains in his trust account, which Mark Telfer claims is the balance of the $25,000 deposit that he paid to his father at the time that the contract of sale was entered into. The evidence before me shows that, on 31 March 2011, the $25,000 was received into the trust account of Lyall's then solicitors. After a number of transactions, as reflected in the solicitors' trust records, apparently undertaken by Lyall or his brother, Neil Telfer, who understood that he was the executor of Lyall's estate, on 23 May 2014 the solicitors paid the balance in their trust account of $9,579.85 to Mr Fairfax, after his appointment as administrator.
On 18 April 2016, I gave directions for the parties to deliver submissions on the issue of who was entitled to the amount of $9,579.85 in Mr Fairfax' trust account.
Mr Fairfax has not made any submission concerning who is entitled to that money. Ms Telfer neither consents to nor opposes an order being made that the money be paid to Mark Telfer. Mark Telfer delivered submissions supporting his claim to the money. It is not necessary to consider those submissions in depth. Although the evidence is scant, it is in no party's interests that the court delves into any tracing exercise concerning the transactions that occurred, after the initial deposit was paid into the former solicitors' trust account.
It is sufficient to note that the original $25,000 must have been released to Lyall or Neil Telfer, and on 30 August 2011 an amount of $9,812.31 was paid into the trust account described as "balance of deposit". At that point, the balance in the trust account was $12,201.73, so that the trust account must have initially contained $2,389.42 before the deposit was made. There were then a small number of transactions, and on 23 May 2014 the balance of $9,579.85 was paid out to Mr Fairfax. On the basis that the intervening withdrawals should be applied against the $2,389.42 that was the balance in the trust account before the deposit was made on 30 August 2011, it is fair to conclude that the amount paid to Mr Fairfax represents the balance of the original deposit paid by Mark Telfer to his father.
As it is clear that Mark Telfer has both a contractual right to repayment of the balance of the deposit, and a lien over that fund, I will make an order that Mr Fairfax pay to Mark Telfer the amount in his trust account represented by the deposit of $9,579.85 made on 23 May 2014.
The second issue for determination concerns payment of Mr Fairfax's fees and disbursements.
Mr Fairfax has given evidence that his professional fees as administrator of Lyall's estate are $6,688, and his fees attributable to being the first defendant in the proceedings are $9,399. The total amount of the professional fees is $16,087. In addition, Mr Fairfax has incurred disbursements, so that his total claim is $17,592.
The issue of how Mr Fairfax' fees should be secured was an issue dealt with when I made orders on 18 April 2016. Because of the need for expedition in the making of orders that would facilitate the early completion of the contract of sale, and the payment of the debt owed by the estate to Ms Telfer, I made orders that had the effect that Mark Telfer was required to pay an additional $8,000 on completion of the contract, and Mr Fairfax was entitled to retain a further $8,000 from the amount payable to Ms Telfer, at the time her debt was repaid. That created a fund of $16,000, which provided some security for Mr Fairfax in respect of his entitlement to receive his fees and disbursements.
However, those orders were only a temporary arrangement, as the court did not have an opportunity to properly examine the question of who, if any other party, should be responsible for paying Mr Fairfax' fees and disbursements. Accordingly, I made directions for the parties to provide to the court further submissions on that issue. Both Ms Telfer and Mark Telfer delivered further submissions.
Ms Telfer submitted that Mark Telfer should solely be responsible for paying Mr Fairfax' fees and disbursements, essentially on the basis of the maxim that he who seeks equity, must do equity. Further, the obligation to pay Mr Fairfax' fees and disbursements should be imposed upon Mark Telfer as a condition of the grant of an order for specific performance of the contract of sale in his favour. Ms Telfer submitted that Mr Fairfax had a first ranking charge over the assets in Lyall's estate to secure payment of his fees and disbursements, and that that charge was effectively destroyed by the order that the court made, which required Mr Fairfax to specifically perform the contract of sale in favour of Mark Telfer.
However, the evidence provided in support of Mark Telfer's claim that Ms Telfer should be responsible for Mr Fairfax' fees and disbursements shows that, before Mr Fairfax was appointed as administrator of the estate, Ms Telfer had experienced significant difficulty in finding a qualified person who was prepared to accept appointment as administrator of the estate, and who was acceptable to the court. Ms Telfer appreciated that she could apply for an appointment herself, but apparently thought it more appropriate that a qualified and independent person be appointed. Prior to Mr Fairfax' appointment, Ms Telfer's solicitors wrote a letter to him on 12 October 2013, in which they acknowledged that it had been asserted that the estate was insolvent, because of the debts owed to creditors. The solicitors said to Mr Fairfax:
… we believe that if the Estate is properly administered it may well not be insolvent, and in any event our client would consent to your reasonable fees as Administrator being paid from the proceeds of the Estate before any debt due to her is repaid.
Would you please consider this request and advise us, which at your earliest convenience whether or not you are prepared to accept appointment as Administrator of this Estate, if the Court was of mind to make that appointment.
Mr Fairfax accepted the court's appointment of him as administrator of Lyall's estate, on the basis of the assurance given to him by Ms Telfer, with knowledge that there was a risk that the assets in the estate would not be sufficient to meet his reasonable fees and disbursements.
I do not accept that the argument put by Ms Telfer provides a proper basis for requiring Mark Telfer to pay Mr Fairfax' fees and disbursements. The evidence shows that both Ms Telfer and Mr Fairfax were on notice, at the time of Mr Fairfax' appointment, that there were parties who had proprietary claims over all of the assets of the estate, which may take priority over Mr Fairfax's entitlement to be paid his fees and disbursements. Ms Telfer secured Mr Fairfax' agreement to be appointed as administrator by promising him that any shortfall in his ability to be paid his reasonable fees and disbursements could be recovered by him by retaining that amount out of the debt due by the estate to Ms Telfer.
In my view, Mr Fairfax' fees and disbursements should accordingly be paid on the basis of the agreement that he entered into with Ms Telfer.
The result is that Mr Fairfax should be ordered to repay to Mark Telfer the additional amount of $8,000 that Mark Telfer paid to him on completion of the contract of sale, in accordance with the orders made by the court on 18 April 2016.
In his affidavit made on 26 April 2016, in which Mr Fairfax informed the court of the amount of his fees and disbursements, he indicated that he would accept $16,000 in final discharge of his claim.
Neither Ms Telfer nor Mark Telfer suggested that there was anything unreasonable about Mr Fairfax' claim for fees and disbursements, and superficially they do appear to be reasonable.
In the circumstances, Mr Fairfax is entitled to retain the $8,000 that he was permitted to retain by the orders made on 26 April 2016 out of the amount of the debt that was repaid by the estate to Ms Telfer at the time the contract of sale was completed.
The effect of this judgment is that I have found that Mr Fairfax was entitled to retain an additional $8,000. The orders made by the court did not make provision for that additional retention, and I do not recall Mr Fairfax seeking to rely upon his rights under Ms Telfer's solicitors' 17 October 2013 letter, when these matters were dealt with on 18 April 2016. However, the effect of the orders made by the court on that date was to oblige Mr Fairfax to overpay Ms Telfer by the sum of $8,000. It is appropriate, in order to bring finality to these proceedings, and to avoid the need for further litigation, that the court now makes an order to reverse the effect of its original order.
I accordingly make the following orders:
1. Order the first defendant to pay to the second defendant the amount of $9,579.85 standing in the first defendant's trust account.
2. Order the first defendant to pay to the second defendant the amount of $8,000, which was paid by the second defendant to the first defendant in compliance with order 4 made by the court on 18 April 2016.
3. Declare that the first defendant is entitled to retain the $8,000 retained by the first defendant upon repayment of the debt owed to the plaintiff, in compliance with order 4 made by the court on 18 April 2016, on the basis that the first defendant is entitled to apply the $8,000 towards his fees and disbursements as administrator of the estate of the late Lyall Telfer, and as the first defendant in these proceedings.
4. Order the plaintiff to pay to the first defendant $8,000 in accordance with the agreement made between the plaintiff and the first defendant on or about 17 October 2013, whereby the first defendant could meet any shortfall in the ability of the assets of the estate of the late Lyall Telfer to meet his reasonable fees and disbursements out of the amount of any debt payable by the estate to the plaintiff.
5. Declare that the effect of the retention by the first defendant of the $8000 referred to in order 3, and the payment of the $8,000 referred to in order 4, will be in full and complete discharge of the first defendant's entitlement to fees and disbursements as administrator of the estate of the late Lyall Telfer, and as first defendant in these proceedings, provided that if the plaintiff does not pay the $8,000 referred to in order 4, the first defendant will be entitled to claim from the plaintiff the unpaid balance of whatever reasonable fees and disbursements he is able to justify.
6. Order that any remaining exhibits and documents produced on subpoena or notice to produce may be returned in accordance with the Rules.
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Decision last updated: 05 July 2016