HER HONOUR: This is an application by summons seeking orders for the appointment of the plaintiffs Garry Neville Penhall and Daniel George David as administrators cum testamento annexo colligenda bona of the Will dated 21 October 2021 of the late Raymond David, subject to the limitations described in Orders 4 and 5 of the summons.
The background to the proceedings is set out in the affidavit of Mr Penhall which was affirmed on 31 January 2022. Mr Penhall is the solicitor for the applicant, and both he and his co-plaintiff, Daniel George David, are the executors named in the last Will of the deceased, Raymond David, that being the Will dated 1 October 2021. Until his death unexpectedly on 10 January 2022, the deceased had resided at a residence in Bringelly comprising a five-acre allotment dwelling house and sheds, which was occupied by the deceased and his wife and some of his children. The registered proprietors of the property at Bringelly are the deceased and his son, Joseph David, who is not a party to the present application but who, I am informed, is aware and has been given notice of the application. His son, Joseph David, holds his interest in the property, as acknowledged by him, at least in the Contract for Sale - to which I will refer shortly - as a bare trustee for his father, Raymond David, thus Bringelly is a property wholly beneficially owned by the deceased.
On 21 December 2021 the deceased entered into a contract for the sale of the property for a sum of $6 million (Contract for Sale). A deposit of $300,000 was paid on exchange of the contracts. The Contract for Sale has a completion date of 31 January 2022. The Contract for Sale was signed both by the deceased and by his son Joseph in the acknowledged capacity as bare trustee for the deceased. A Deed of Indemnity was executed by the deceased to protect his son, Joseph, from any Capital Gains Tax liability in relation to the sale, and to provide him with security over part of the sale proceeds of Bringelly. The deceased died on 10 January 2022. A copy of his death certificate is attached to the affidavit of the applicants affirmed 30 January 2022 for the orders here sought.
The Contract for Sale, as summarised in the affidavit affirmed 31 January 2022 of Mr Penhall - who arranged for the exchange of contracts in relation to the property - contains certain special conditions which, in Mr Penhall's experience, are unusual. First, that a 5 per cent deposit of $300,000 was released to Mr David, the deceased, on 21 December 2021 by deposit to Mr Penhall's solicitor's trust account, and has been used partly in payments of debts of the deceased. Mr Penhall has deposed, from his discussion with the deceased at the time of the Contract for Sale, that the deceased intended to relocate his family in Cooma following completion of the Contract for Sale, and with the assistance of funding of the released deposit. Second, a short period of time for completion of the Contract for Sale was provided, namely 31 January 2022. Mr Penhall has deposed that the deceased told him that early settlement was required to fund the purchase of other real estate in Cooma for use by him and his family as a replacement dwelling. Third, the Contract for Sale included a special condition permitting the vendor and his family to occupy Bringelly for a period not exceeding six months from and after completion and without payment of a licence fee. Fourth, the special conditions of the Contract for Sale do not permit the purchaser to rescind the contract in the event of the vendor's death. (See cl 33 which simply provides for a right of rescission by the vendor in the event of the purchaser's death or liquidation if the purchaser is a corporation, but the liquidator is not a corporation.) Finally, the special conditions of the Contract for Sale permit the service of a 14-day notice to complete in the event of default by either party.
The concern by the plaintiffs is that following the unexpected death of the deceased, the vendors will be in default under the Contract for Sale if they are unable to complete the sale. This clearly had not been completed on 31 January 2022. The purchasers will then be entitled to serve a 14-day notice to complete from and after 1 February 2022. Mr Penhall has deposed at paragraph 9(c) of his affidavit that as a result of a precontract enquiry of the purchasers, he is aware that they have obtained mortgage finance to fund the $6 million purchase of Bringelly and he is aware, from his local knowledge as a conveyancer, that existing clients are seeking early completion of the purchase to avoid anticipated interest rate increases proposed and being implemented by major banks in Sydney. There is a concern that within a short timeframe, the purchasers may suffer damage arising out of the unintended breach of the Contract for Sale by the vendors and that the vendors may be at risk of rescission of the Contract for Sale and the loss of the sale bargain directed and intended by the deceased to be for the benefit of his family.
Mr Penhall has also deposed that he anticipates that the estate of the deceased would be unable to repay the released deposit of $300,000 unless and until completion of the Contract for Sale. Mr Penhall has deposed to his experience in the probate jurisdiction of this Court and is aware that there is a delay ordinarily in obtaining a grant of probate in the normal course through the Registry. He has opined that this would take a minimum of three months. In his affidavit, Mr Penhall has deposed to taxation advice obtained in relation to the possible application of Capital Gains Tax in relation to the sale of Bringelly and as to the circumstances in which the Deed of Indemnity was entered into. He has deposed that subject to completion of the Contract for Sale, it would be the intention of the applicants that the sale proceeds be deposited into his solicitor's trust account and vested into a controlled account, and subject to the reservation for the indemnity to Joseph David, which it is proposed would be met by placing $700,000 of the sale proceeds into a separate controlled moneys account.
Mr Penhall has deposed that the pressing concerns of him and his coexecutor have been to carry out investigations and enquiries as to the assets and liability in the estate and to complete the Contract of Sale on an urgent basis (and thus protect the proceeds of sale of Bringelly for the benefit of the sale), while at the same time limiting any claim by the purchasers in damages for breach of contract. Annexed to his affidavit is a communication on 21 January 2022 from the solicitor acting for the purchasers in which it is noted that the purchasers' solicitor was being pressed by the bank for settlement and wished to have the matter completed prior to the end of February 2022.
The application is brought pursuant to s 74 of the Probate and Administration Act 1898 (NSW) under which the Court may appoint, if necessary or convenient, a person to be the administrator of the estate of the deceased or any part thereof upon the appointed person giving such security (if any) as the Court directs and may limit such administration as the Court thinks fits in circumstances there set out. The grant of administration in respect of the estate may be made to persons identified in s 63 of the Probate and Administration Act. The two administrators presently proposed are the executors. It is noted that there needs to be two trustees appointed by the Court before a good receipt for capital may be given by reference to s 66B(2) of the Conveyancing Act 1919 (NSW), and reference is also made, in that respect, to Commonwealth Bank of Australia v Nick Frisina Pty Ltd [1999] NSWSC 907. Reference is made to authorities where there was an urgent need for the assets of an estate to be the subject of an appointment of an administrator such as in Application of Teresa De Leon; Estate of the Late Kim David Frumar [2016] NSWSC 1116 (see [2]-[6] and [10]-[13] of McDougall J's decision) and to a more recent application before Slattery J in Re Estate of the Late Tanju (Andrew) Assim; Application of Ayleen Assim and Elise Assim [2015] NSWSC 337 at [20]-[21] and [28]-[29].
The application is made on an urgent basis (as adverted to above) by the need to preserve the sale of Bringelly and its proceeds; the need to avoid a damages claim against the estate for breach of contract; the need to avoid the possible loss by the purchaser if there is substantial financing for purchase, if completion is delayed; and to avoid the risk to the purchaser of an increase in mortgage rates which might constitute a damages claim against the estate.
The circumstances in which the Will dated 1 October 2021 were executed have been explained in Mr Penhall's affidavit. They were of necessity, having regard to the current COVID-19 pandemic, unusual in that Mr David was in hospital and only one person was permitted to be present in the hospital with him at the time of execution of the Will, but Mr Penhall has deposed to the fact that his senior paralegal was present and witnessed the Will, and that he and another associate had observed what had occurred on a FaceTime call at the time, and Mr Penhall, who had been the deceased's solicitor for some time, spoke on that occasion with the deceased.
The two plaintiffs who seek appointment as administrators have deposed that if granted the administration (CTA) cum testamento annexo colligenda bona of the Will of the deceased, and to the extent that they may subsequently be granted a formal grant of probate of the Will of the deceased, they will administer the estate according to law and will verify, file and pass their accounts (relating to the deceased) within twelve months from the date of the grant, if so required by the Court.
I am satisfied that this is an appropriate case in which to make the appointment in order to preserve the assets of the estate, and I have noted the limitation proposed in relation to the grant of administration and consider those to be appropriate. I note that in Re Estate of the Late Tanju Assim, Slattery J made reference to recent cases on the application of s 74 of the Probate and Administration Act which make clear that where the need to preserve particular estate assets is not contentious and where, whatever other dispute may exist in relation to the estate, the need for such preservation is common ground, such an appointment should be made and will usually be made without the need for an administration bond; his Honour there referring to Re McCorquodale v Guth [2008] NSWSC 1420 and Re Estate of Edith Macdougall [2013] NSWSC 990. I am satisfied that the purpose of the proposed appointment in the present case is to preserve the assets of the estate, being the proceeds of the Contract for Sale entered into by the deceased prior to his death, and that it is appropriate to dispense with the need for an administration bond or sureties.
In those circumstances, I will make orders in accordance with the draft Short Minutes of Order which I will initial and date, and order that the orders be taken out forthwith.
[3]
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Decision last updated: 03 February 2022