Weinstock v Beck in the Estate of Weinstock

LEGISLATION CITED : Supreme Court Rules, Pt 78 r69(4) Wills Probate and Administration Act 1898, s74

Bowler v Bowler (unreported Young J SCNSW 7 June 1990), Estate of Keith Chandler Crane (2005) 93 SASR 198 Estate of Pederson (unreported Holland J SCNSW 17 June 1977); CASES CITED : Estate of Ritchie; Uniting Church in Australia Property Trust (NSW) v Millane (2002) NSWSC 1070 Estate of S deceased (1968) P 302 In The Goods of William Loveday (1900) P 154 Marsh v Patten (1868) 7 SCR(NSW) Eq 18

Amiram David Weinstock (First Plaintiff) PARTIES : John Halliday (Second Plaintiff) Tamar Rivqa Beck (Defendant)

COUNSEL : Mr P Hallen SC (Plaintiffs) Mr J Simpkins SC with him Mr T Castle (Defendant)

SOLICITORS : Milne Berry Berger & Freedman (Plaintiffs) Harris Freidman Hyde Page (Defendant)

• 11 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROBATE LIST

122006/06 AMIRAM DAVID WEINSTOCK & ANOR v TAMAR RIVQA BECK IN THE ESTATE OF HEDY JADWIGA WEINSTOCK JUDGMENT 1 The plaintiffs, who are two of the executors named in the will of Hedy Jadwiga Weinstock, deceased, seek an order that the caveat lodged by the defendant, who is the third executor named in the will, cease to be in force. The defendant claims the plaintiffs are not proper persons to obtain a grant of probate. Facts 2 Mrs Weinstock died on 6 July 2004. She left a will dated 21 February 1996. The original will cannot be found but it is accepted that a grant of probate or letters of administration with a copy of that will annexed should be made. 3 Under the will Mrs Weinstock gave the whole of her estate to her husband if he survived her thirty days, which he did not. In those circumstances, she appointed, first her son, Mr Amiram Weinstock, one of the plaintiffs, whom I will call Amiram to distinguish him from his father, second her daughter, Tamar Beck, the defendant, and third, her accountant, Mr John Halliday, executors and gave the whole estate to her said two children in equal shares. 4 Clause 12 of the will is as follows: 12. I DECLARE that should any differences of opinion at any time exist between my Trustees in relation to the commission or omission of any act or otherwise howsoever related to this my Will or the trusts created thereby then the opinion of the majority of my Trustees shall prevail notwithstanding that any one or more of such Trustees may be personally interested or concerned in the matter in dispute or question. 5 The estate, according to the evidence filed in support of the probate application, has an estimated value of $9,353,758. The plaintiffs, Amiram and Mr Halliday, seek a grant of probate of the will with leave reserved to the defendant to come in and prove. It is apparent from the evidence that some negotiations for a grant to be sought by all three executors named in the will did not come to fruition. 6 The deceased's husband, Mr Leo Weinstock, died on 27 July 2003. His will was more complicated. In brief it appointed Amiram as executor and after substantial legacies gave to that son all the shares in a company which is the trustee of a family trust for the son's family and gave the shares in a company Alem Pty Limited, which is the trustee of a family trust for Mrs Beck and her family, to Mrs Beck. He gave the residue of his estate as to two-thirds upon various trusts in favour of Amiram and Amiram's family and as to one third thereof upon various trusts in favour of Mrs Beck and her family. Probate of the will of Mr Weinstock was granted to Amiram on 5 May 2004. 7 Under the terms of a call option granted by Mr Weinstock to Amiram in 2001, Amiram had the right to purchase all shares of Mr Weinstock within four months of his death at a value determined by an independent valuer. Amiram exercised this right. 8 Since the death of Mr Weinstock there had been constant and unfortunate disputes between brother and sister. Generally speaking Mrs Beck's complaints are about the conduct of her brother and can be summarised as follows:

a. She claims that the option exercise price for the shares was about $10 million below value.

b. She claims that a Swiss bank account in the name of Mr Weinstock was closed shortly after his death and the proceeds are not properly accounted for.

c. She claims that her brother, as attorney for Mrs Weinstock, transferred a voting share of Mrs Weinstock in a company Zipor Pty Limited to his wife and has declared dividends in that company to the disadvantage of Mrs Weinstock or her estate. She claims improper conduct as a director in connection with a company Tuckey Pty Limited.

d. She claims that her brother delayed transferring the share in Alem Pty Limited to her and that while he was in control he entered into various transactions not for the benefit of the trust of which the company was trustee and purported to obtain for himself or release for Alem from any claims. 9 In general it can be said that the conduct complained of relates to the activities of Amiram as executor of the estate of his father or his actions as director of various companies in which one of Mr Weinstock, the deceased and Mrs Beck held an interest. 10 The evidence I consider is sufficient to establish that Mrs Beck has cause for concern about the administration of the estate of her father or at least that she needs further information about the estate. She also has cause for concern about her brother's dealings and actions as director or shareholder of Alem Pty Limited, Tuckey Pty Limited and in particular a company, Zipor Pty Limited. The concerns of Mrs Beck about Mr Halliday are claimed to arise because, while he was previously an accountant for the deceased and for Mrs Beck and her brother, he is no longer her accountant but remains accountant for Amiram and the estate of Mr Weinstock. There is a complaint that he refused to give her, Mrs Beck, details which she requested about the assets of her father's estate unless he had instructions from Amiram, which he did not have. 11 The present proceedings arise on a motion that a caveat lodged by Mrs Beck against a grant cease to be in force. Mr Hallen SC, for the applicant on the motion, argued that whatever the unproved fears of Mrs Beck were, they could not stand in the way of a grant. He pointed out that Mrs Beck had taken no proceedings against her brother for breach of trust or failure to duly administer the estate of Mr Weinstock and that any complaints that she had about the companies were properly brought in separate proceedings for that purpose. He submitted that unproved allegations and concerns about conduct of an executor in one estate did not justify passing over the same named executor in another estate. So far as Mr Halliday is concerned, Mr Hallen said that as the only criticism or concern about him is that he is accountant for the named executor and that he refused to provide some information about Mr Weinstock's estate without instructions from Amiram, then that is no reason to pass him over. That argument so far as Mr Halliday is concerned really seems unassailable. 12 The argument of Mr Simpkins, SC, for Mrs Beck, is simple. He relies on Pt 78 r69(4) of the Supreme Court Rules which is as follows: 69 Order that caveats cease to be in force

(4) Where in respect of the caveat, or any of the caveats, the Court considers that the evidence does not show: (a) that the caveator has an interest in the estate or has a reasonable prospect of establishing such an interest, and (b) some matter occasioning doubt as to whether the grant ought to be made,

the Court may order that that caveat cease to be in force in respect of the intended application. 13 There is no doubt that Mrs Beck as caveator has an interest. In most cases, of course, the interest which a caveator asserts is an interest under an earlier will if capacity is attacked or under a later will if the last will is not propounded. There might also be an interest on intestacy in the event that the will propounded is held to be invalid. In such a case the law is quite clear. If the caveator adduces some evidence that may cast doubt upon the validity of the will propounded or whether it is the last will then orders will be made that the matter proceed as a contested suit on pleadings. There is no requirement on the caveator to establish a prima facie case or a serious question to be tried; what has to be established is that there is reason to allow the matter to proceed as a contested suit. 14 Mr Simpkins said that the same principle must apply where the doubt the caveator seeks to raise is whether a grant of representation in respect of an estate should be made to particular persons named as executors. I reserved judgment because I wished to give further consideration to this question. 15 I consider that Mr Simpkins is right so that if there is established to be doubt then the caveator is entitled to a contested suit. The decision must, however, be made in light of the equally clear law that there are few occasions when it is proper to refuse a grant to a testator's nominated executor and therefore one would think that evidence would be required to show that this could possibly be such an occasion, Marsh v Patten (1868) 7 SCR(NSW) Eq 18; Bowler v Bowler (unreported Young J SCNSW 7 June 1990), before allowing the suit to go forward on the issue of the suitability of the named executor to receive a grant. 16 The matters put forward by the defendant fall into two categories. I have already set these out. The first relates to the conduct of Amiram as executor of the will of his father. These are allegations about obtaining shares pursuant to the call option at an undervalue and claims in respect of the Swiss bank account. It is difficult to see how the first could be made out unless it can be established the valuation of the independent valuer was flawed. The second matter relied upon is not proved misconduct. At present Mrs Beck has put forward all the evidence she has. But in contested proceedings what would be happening would be that claims against Amiram for breach of trust in Mr Weinstock's estate would be an issue in proceedings to determine whether or not a grant of probate should be made to him as named executor in his mother's estate. In my view that is not a proper or appropriate inquiry to determine in an issue of passing over. It is clear that a person nominated as executor is entitled to a grant absent special established exceptions. Such exceptions do not extend to immorality or claims of unestablished breach of trust in another estate. Nor should they be proved in an action of the type the caveator wishes to have tried. The second group of matters relates to claimed misconduct or at the least irregularity in the affairs of various companies. Claims of improper conduct of directors, fraud on the minority, and suchlike are in the same way quite inappropriate for determination in a probate action particularly as they are likely to require additional parties, including companies to be joined. 17 This is not a situation as in an ordinary contested action where evidence is collected as the matter proceeds to hearing. This is a situation where administration of an estate cannot be allowed to flounder while issues which ought to be determined in separate proceedings are fought out in an inappropriate venue. I adhere to my view expressed in Estate of Ritchie; Uniting Church in Australia Property Trust (NSW) v Millane (2002) NSWSC 1070. Paragraph 7 of that judgment is as follows: 7 Counsel for the plaintiff relied on two decisions. The first was In Re Hunter (deceased) Hunter v Hunter [1932] NZLR 911. In that case the New Zealand Court of Appeal held that there was power to pass over a named executor as incompetent if that person had so misconducted himself in relation to the estate as to show he was not a proper person to be entrusted with its administration. In the same way the court said that if after an executor has been granted probate he is found to be guilty of such misconduct in his office as renders it proper to remove him then he should be removed. There can be no doubt about any of this but the fact that an equitable type claim is pleaded in a statement of claim in probate proceedings, does not in my view give sufficient ground to pass over a named executor. Proved misconduct is very different from pleaded misconduct. It would be highly undesirable if the administration of estates were delayed by having to determine in prior proceedings or perhaps in the same proceedings, disputed claims of unconscionable conduct as would be the position here. 18 The next matter raised was the question of conflict of interest. I dealt with this in Ritchie, pointing out that in many cases an executor was in a position of conflict, but this did not bear on entitlement to a grant in ordinary circumstances. The question of conflict was considered in Estate of Keith Chandler Crane (2005) 93 SASR 198. In that case Besanko J in making an order passing over the named executor did so principally on the basis that very shortly before his death the testator transferred to the named executor a number of shops with a value of over $400,000 for a consideration of $100. There were some other transactions at the same time involving lesser sums, but the consideration was not the true value of the assets transferred. It was clear there was going to be a question of capacity of the deceased at the time these transactions were effected and the validity of the transactions. The determination made by Besanko J appears at paragraph 40 of that judgment as follows: [40] In considering whether this is an appropriate case to exercise the jurisdiction to pass over Kevin, I must have regard to the due and proper administration of the estate and the interests of the parties beneficially entitled to the estate. That is the guiding principle. I must also recognise that the jurisdiction is limited and that, in general, Kevin, as a person who is named as executor by the testator, is entitled to a grant of probate. I also recognise that, in the ordinary case, a potential conflict of interest will not be sufficient to justify the exercise of the jurisdiction. As Windeyer J observed in Uniting Church in Australia Property Trust (NSW) v Millane , not infrequently an executor will have some conflict, such as being a debtor to the estate. However, in my opinion, this is a different case (from that of an executor who has some conflict by reason of being a debtor to the estate). Kevin has made it clear that he maintains that the transactions involving the Mount Barker shops and the caravan are legally effective and that he owes no money to the estate. There is every reason to think that he will continue to maintain that position until a court determines otherwise. If made an executor, I think that it can be said with a high level of confidence that he will not consent to the estate asserting rights in relation to the three assets. In that event, an application to the court for the estate to bring or defend proceedings would be almost inevitable. 19 That was, I think, a clearer case than Ritchie, although I have some difficulty in concluding that it is necessarily right to pass over one executor just because the other executor will wish to bring proceedings against the first on behalf of the estate. In coming to his decision, Besanko J said there were two principles to be applied in determing whether to pass over a named executor. The first was that such a person was ordinarily entitled to a grant; the second was that the court in exercising jurisdiction does so having regard to the due administration of the estate and the interests of beneficiaries. In support of the second consideration Besanko J relied on a passage from the decision of Jeune P In The Goods of William Loveday (1900) P 154, where he said at page 156: After all, the real object which the court must always keep in view is the due and proper administration of the estate and the interests of the parties beneficially entitled thereto; and I can see no good reason why the court should not take fresh action in regard to an estate where it is made clear that its previous grant has turned out abortive or inefficient.

That facts in that case were that a widow appointed administrator of the intestate estate of her husband in 1885 could not be found at a time when an additional asset came into the estate as a result of a court decision in 1899. The children of the deceased sought a grant of administration de bonis non to one of them, but their difficulty was that they could not prove their mother to have died, although they had made proper searches for her. It was as a result of that that the learned president made the statement which he did and went on to say: If the court has in certain circumstances made a grant in the belief and hope that the person appointed will properly and fully administer the estate, and if it turns out that the person so appointed would not or cannot administer, I do not see why the court should not revoke an inoperative grant and make a fresh grant.

It was in those circumstances that the statement about the interests of the parties beneficially entitled was made. It must be borne in mind that in the present case the interest of the person appointed by the testator to be one of his executors and, to some extent of course, the interests of the testator, are matters to which attention must be given as is made clear in Bowler v Bowler . I am not suggesting Besanko J in Crane failed to do so: he stated it was the first consideration. 20 Examples of cases where executors have been passed over are set out in Crane and by Young J in Bowler v Bowler and in all the relevant text books. There is no purpose in setting them out here. The decision in Crane is probably as far as any have gone. Litigation was certain there; it may be almost certain here but at least at present Mrs Beck does not seek probate. Her position as beneficiary is quite strong. 21 I have when considering this matter given careful attention to the cogent arguments of Mr Simpkins that this matter should proceed to a properly contested hearing at which the parties could presumably be subject to cross-examination. As I have said, I do not think it proper for claims of breach of trust in other estates or improper conduct in connection with the affairs of various companies to be determined in a contested probate action of this type. If a named executor is obviously not a proper person to be allowed to administer the estate by reason of some criminal conduct closely associated with the deceased; Estate of Pederson (unreported Holland J SCNSW 17 June 1977); Estate of S deceased (1968) P 302, or by reason of some improper dealings with the estate of the deceased which are clear, rather than just alleged, then in my view, it could be proper to pass over the executor guilty of such conduct. In this case that is not the position and I am unable to see how a contested suit kept within proper bounds could result in any different conclusion. An action doomed to fail should not be allowed to proceed. 22 I should add that the caveator's position, made clear by her counsel, was that she did not seek a grant herself but wanted the court to order an appropriate person be appointed as administrator with the will annexed. In my view that is not an order which could be made because as I have said there is no basis to pass over Mr Halliday as an executor. In such circumstances I do not consider s74 of the Wills Probate and Administration Act 1898 is relevant. 23 I have come to the conclusion that an order should be made that the caveat cease to be in force. I consider however, that proceedings on the present summons for probate should be stayed for a short period to enable the defendant to decide whether or not she wishes to join in an application for probate or whether she just wishes leave to be reserved to her in accordance with the present summons. Orders

1. Order that the caveat lodged by the defendant cease to be in force.

2. Stay proceedings on the summons for fourteen days.

3. The caveator pay the plaintiffs' costs of the notice of motion. **********

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