4632/04 Amiram Weinstock v Ronnie Sarnat
JUDGMENT
1 HIS HONOUR: The plaintiff, Mr Weinstock, purports to sue in his own capacity and as executor of the estate of the late Leo Ari Weinstock who died on 29 July 2003. Although the summons names two plaintiffs, they are the same person, and I shall refer to him in the singular. The plaintiff is the deceased's only son by his second marriage. The defendant, Ms Sarnat, is the deceased's daughter by his first marriage. There is another daughter of the second marriage, Mrs Tamar Beck.
2 The deceased was born in Germany on 13 August 1916. He migrated to what is now Israel in 1934. The defendant was born in Israel and still resides there.
3 In 1954, the deceased and his second wife, together with the two children of that marriage, migrated to Australia. He became an Australian citizen and permanent resident of Australia. The evidence strongly suggests that he acquired a domicile in New South Wales.
4 The plaintiff was named as the sole executor of the deceased's estate. A grant of probate was made to him on 5 May 2004. By his will, the deceased bequeathed a legacy of $1,000,000 to the defendant. He left his residuary estate to his wife for life with remainder to the plaintiff, Mrs Beck and their children and grandchildren. His estate was sworn for probate purposes at just over $3,000,000.
5 The deceased held shares in a company called Zipor Pty Ltd ("Zipor").
6 On 31 March 2004, the defendant commenced proceedings in Israel naming the plaintiff and the estate of the deceased as defendants. She claimed that the deceased was the owner of moneys in bank accounts in Switzerland. She claimed that in 1992, whilst visiting Israel, the deceased gave her the rights to the moneys in the various accounts in Switzerland. She claimed that he declared himself a trustee of the moneys for her. She claimed that he told her in 1998 or 1999, that the Swiss Bank Corporation in which the moneys had been held had merged with the Union Bank of Switzerland and that the accounts were now with the Union Bank of Switzerland. She claimed to be entitled to the money in those accounts.
7 The plaintiff did not submit to the jurisdiction of the Israeli Court. He applied unsuccessfully for an order cancelling the permission to serve the Israeli proceedings. The Israeli court held that the state of Israel was a proper forum for the hearing of the defendant's claim on the ground that she was in Israel, the alleged agreement between her and the deceased was made in Israel, the bank account and money to which the defendant claimed to be entitled was in Switzerland and not in Australia, and that it was of no relevance that the defendant was in Australia.
8 On 20 August 2004, the plaintiff moved ex parte for an order restraining the defendant from taking any steps to continue or maintain the Israeli proceedings, and for orders for service of the summons and supporting affidavit on the defendant in Israel. On 20 August 2004, McDougall J made the orders sought. His Honour recorded the plaintiff's submission that the Supreme Court of New South Wales was the proper court for the administration of the deceased's estate and that the defendant's claim that there were additional assets of the estate which were held on trust for her should be decided by this Court. His Honour held that the processes of this Court had been set in motion by the application for and grant of probate to the plaintiff, whose performance of his duties as executor was subject to its supervision. His Honour held that it was arguable that the plaintiff would be entitled to final relief of the kind sought. His Honour referred to part of the judgment of the majority of the High Court in CSR Limited v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 391, where their Honours said that the counterpart of a Court's power to prevent its processes being abused, is its power to protect the integrity of those processes once set in motion. It is that counterpart power of protection that authorises the grant of anti-suit injunctions where, inter alia, an estate is being administered and an injunction is sought to restrain a person from seeking, by foreign proceedings, to obtain the sole benefit of foreign assets. His Honour held that there was a very real possibility that if the defendant were allowed to continue with her proceedings in Israel, the proper administration of the estate in this State may be compromised, and her position may be preferred to those of other creditors in the estate. His Honour's order was made until further order.
9 Before the plaintiff commenced the present proceedings, a Mrs Naidel, who is also a legatee under the will, had foreshadowed the commencement of proceedings for provision from the estate of the deceased under the Family Provision Act 1982. The extent of the deceased's estate will be a relevant issue in any proceedings under that Act.
10 The plaintiff does not accept that the accounts which were the subject of the claim by the defendant in the Israeli proceedings were assets which belonged to the deceased and formed part of his estate. The plaintiff contends that the moneys belonged to Zipor. The plaintiff has notified the Australian Taxation Office that the moneys deposited into the Swiss bank account of the deceased were purportedly paid by Zipor to a third party as royalties, but were in fact paid for the benefit of the deceased through conduit entities to avoid Australian tax. He does not accept that the moneys "belong" to the estate or were "owned" by the deceased, but says they "belong" to companies in the Weinstock group, apparently Zipor. I infer from the plaintiff's correspondence to the Australian Taxation Office, in which he asserts that the moneys were paid to the benefit of the deceased, and from the defendant's claim in the Israeli Court, that the accounts were held by the deceased. I take it that the plaintiff contends that the moneys were beneficially owned by Zipor.
11 On or about 15 October 2004, that is, after these proceedings were commenced, the plaintiff caused the moneys formerly held in various Swiss bank accounts to be transferred to a cash management trust with UBS in Sydney. He sought leave to amend the summons to add a claim for a declaration that Zipor is the legal and beneficial owner of the chose in action represented by the credit balance in the cash management trust and that the chose in action did not form part of the assets of the estate of the deceased.
12 On 28 October 2004, solicitors for Mrs Beck gave notice to the plaintiff's solicitor that their client disputed the plaintiff's claim that the money in the Swiss bank accounts belonged to anyone other than the deceased and his wife.
13 Thus the defendant contends that the moneys in the Swiss bank accounts were held by the deceased on trust for her. Mrs Beck claims that they belonged to the deceased and his wife, (who has also since died). The plaintiff says they are owned beneficially by Zipor. At the time the proceedings were commenced the moneys were held in bank accounts in Switzerland, but they are now in New South Wales.
14 The Court has jurisdiction to restrain a foreign resident from pursuing proceedings in a foreign court, if the defendant is amenable to service outside Australia on one of the grounds provided for in Pt 10 r 1A of the Supreme Court Rules. (In re Liddells's Settlement Trusts [1936] Ch 365 at 419-420; Re Siromath Pty Ltd (No. 3) (1991) 25 NSWLR 25 at 28).
15 The defendant moved to discharge the order made by McDougall J giving leave to serve the originating process outside New South Wales and alternatively sought an order that the summons served on the defendant in Israel be set aside. As permitted by Pt 11 r 8, she did so without entering an appearance.
16 Part 10 r 1A sets out the cases in which an originating process may be served outside Australia. The plaintiff contends that service outside Australia was authorised by Pt 10 r 1A(a), (k), (l), (n) and (p), although no submissions were developed in relation to paragraph (l).
17 The plaintiff also submitted that even if the court did not have jurisdiction when proceedings were commenced, it did have jurisdiction at the time of the hearing to consider whether the ex parte orders made by McDougall J on 20 August 2004 should be continued. By that time, the moneys had been transferred to New South Wales. If necessary, the plaintiff undertook to institute fresh proceedings and apply for the same relief in the fresh proceedings.
18 The initial questions are whether the plaintiff should have leave to proceed in accordance with Pt 10 r 2, or whether an order should be made setting aside the originating process or discharging the order giving leave to serve the process, pursuant to Pt 11 r 8(1)(a) or (d) and Pt 10 r 6A. In both cases, the first issue is whether the Court has jurisdiction under any of the paragraphs in Pt 10 r 1A.
19 At the time proceedings were commenced, I do not think it accurate to say that the subject matter of the proceedings, so far as concerns the person to be served, was property in the State. Nor were the proceedings proceedings for the setting aside or enforcement of an obligation or liability affecting property in the State. Nor were the proceedings proceedings for the perpetuation of testimony relating to property in the State. When the proceedings were commenced the only property affected by the proceedings was in Switzerland. The chose in action constituted by the bank account was situated where the debtor resided and where the debt is primarily payable, which in the absence of express or implied provision, is where it would be paid in the ordinary course of business. Jabbour v Custodian of Absentee Property of State of Israel [1954] 1 All ER 145 at 151-152). That is Switzerland. None of Pt 10 r 1A(k), (l) or (n) was applicable. The only two grounds on which it was arguable that there was jurisdiction to serve process outside Australia was on the grounds in Pt 10 r 1A(1)(a) or (p).
20 Pt 10 r 1A(1)(p) provides that subject to rules 2 and 2A, originating process may be served outside Australia where "the proceedings are for the administration of the estate of a person who dies domiciled in the State or are for relief which might be granted in proceedings for administration of such an estate". It appears that the deceased died domiciled in New South Wales. The defendant submitted that the proceedings could not be characterised as being proceedings for the administration of the deceased's estate, or for relief which might be granted in such proceedings, because the plaintiff denied that the moneys in the Swiss bank accounts belonged to the deceased. However, I do not accept that as a sufficient ground for denying jurisdiction. It appears that the accounts in question were in the name of the deceased. He was the legal owner of the choses in action. It is true that the plaintiff says that the moneys "belonged" to Zipor. But this amounts to a contention that the deceased held the moneys on trust for Zipor. If that contention is right, Zipor can maintain its claim against the legal personal representative of the deceased in whom the chose in action vests.
21 Proceedings for general administration are now rare (McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 633-636). One reason for that is that the procedures in an administration action have been streamlined so that disputed points of administration can be resolved without the need for a general decree. The effect of a general decree for an administration of an estate or a trust was described by Young J (as his Honour then was) in McLean v Burns Philp Trustee Co Pty Ltd as follows (at 633):
" … by 1850 the law was that if any beneficiary came to the Court at all and asked for general administration, general administration would be decreed as of course. The Court would order that the trust was to be specifically performed under its supervision, that nothing was to be done without its imprimatur, that accounts should be taken to see what the trust assets were and the Court would give directions as to how the trust would be carried out. "
22 The proceedings are not proceedings for the administration of the estate. But they do seek relief which could be granted in such proceedings. Claims for an injunction to restrain a party from taking foreign proceedings in respect of foreign assets of an estate have long been entertained in administration actions.
23 A grant of probate vests in the executor the real and personal estate to which the deceased dies "seised or possessed of or entitled to in New South Wales". (Wills, Probate and Administration Act 1898, s 44). Grants of probate are local. Title to the Swiss bank accounts did not vest in the plaintiff as executor of the estate by reason of New South Wales law. (Re Fitzpatrick [1952] Ch 86 at 87). It may be that under the law of Switzerland, being the place where the choses in action constituted by the Swiss bank accounts were situated, title to the debts vested in the plaintiff by virtue of the grant of probate to him in the State of the deceased's domicile, or Swiss law might recognise the plaintiff as the person entitled to a grant of representation to deal with the asset. That would depend upon the lex situs. (Nygh & Davies, Conflict of Laws in Australia, 7 ed, page 674; Dicey & Morris, Conflict of Laws, 13 ed, para 26-022). Once the assets have been moved to the forum and the executor obtains possession of them, the court of the forum will recognise him as having a good title to the assets, except against an administrator previously appointed in the place where the assets were situated. (Nygh & Davies at page 674; Currie v Bircham (1822) 1 Dowl & Ry 35; Dicey & Morris, para 26-023).
24 However, the question of whether the assets had vested in the executor when the proceedings were commenced, is not the same question as whether the proceedings were for relief which might be granted in proceedings for the administration of an estate. An executor may legitimately take steps to recover property of the deceased situated abroad and will be accountable for what he receives. (Dicey & Morris, paras 26R-025-028). By taking out probate, the executor accepts the trusts of the will in respect of the whole of the property subject to those trusts, even though part of the personal estate is not within the jurisdiction of the Court of Probate and more is required in order to vest title in the executor. (Ewing v Orr-Ewing (1883) 9 App Cas 34 at 39-40).
25 Notwithstanding the local effect of a grant of probate, decrees for administration were made in the Chancery Division, not limited to assets situated in England (Stirling-Maxwell v Cartwright (1879) 11 Ch D 522; Ewing v Orr-Ewing (1883) 9 App Cas 34 at 40). As Dicey & Morris say (30 ed. Para 26-028), "The court's power to enforce trusts exists whenever the trustee is personally within the jurisdiction, irrespective of where the assets are situate or whether they are moveable or immovable".
26 In Hope v Carnegie (1866) 1 Ch App 320, a decree had been made in England for the administration of the estate of a testator who died domiciled in England, but leaving property both in England and in the Netherlands. One of the beneficiaries of the deceased's estate sought declarations, inter alia, that the deceased's real and personal property in the Netherlands was subject to the trusts of the will and sought to restrain proceedings brought in the Netherlands by one of the deceased's daughters for the administration of the real and personal estate of the testator situated in the Netherlands. The plaintiff in the Netherlands had contended that the will was inoperative in the Netherlands. It was undisputed that if the testator was domiciled in England, his personal estate should be distributed according to English law. That was a sufficient ground for restraining any proceedings in the Netherlands in relation to the personal estate situated there. The Court of Appeal in Chancery held that although it would not have restrained the defendant from commencing proceedings in the Netherlands relating only to the real estate situated there, she should be restrained from proceeding in the Netherlands because those proceedings would inevitably interfere with the administration of the personal estate and the whole matter was better treated in the English Court. The application for an injunction was part of the proceeding for the administration of the deceased's estate.
27 A similar order had been made by Lord Langdale, MR, and affirmed by the Lord Chancellor, in Bunbury v Bunbury (1839) 1 Beav 318; 48 ER 963 as part of an administration suit. There a testator, being domiciled in England, died leaving real and personal estate in the colony of Demerara which had been a Dutch colony until its capture from the Dutch in 1796. Dutch law prevailed in Demerara during the period the testator, when married to his first wife, resided and acquired property there. He made a settlement in favour of his second wife which purported to deal with his property in Demerara and a will in favour of the children of his second marriage which purported to deal with that property. The children of his first marriage claimed to be entitled to a share of the deceased's real and personal property under Dutch law which conferred upon his first wife a community in the property of her husband which, upon her death, devolved upon her children. The children of the second marriage brought a suit for the administration of the deceased's estate. As part of that suit, they sought an injunction restraining the children of the first marriage from prosecuting their claims in Demerara. Lord Langdale M.R. granted the injunction sought, because on the taking of accounts in the administration suit, all questions between the parties would have to be resolved, including whether the children of the first marriage had a clear equitable, as well as legal, title to the property in Demerara which they claimed in the proceedings in that colony. They were restrained from proceeding in Demerara to obtain possession of their alleged share of the estate there.
28 In Heilmann v Falkenstein (1917) 33 TLR 383, an injunction was granted in an action for administration of a trust, restraining the defendant from taking proceedings in the United States to seek to obtain assets of the trust located there.
29 The claim for an injunction to restrain a party from dealing with foreign assets forming part of the estate of a deceased is a claim for "relief which might be granted in proceedings for administration of such an estate" within the meaning of Pt 10 r 1A(1)(p).
30 As the evidence strongly suggests that the deceased died domiciled in New South Wales, I am satisfied that on that ground, the Court has jurisdiction. As I am of the view that the proceedings fall within Pt 10 r 1A(1)(p), it is unnecessary to consider whether the claim for an anti-suit injunction is also a "cause of action arising in the State" within the meaning of Pt 10 r 1A(1)(a).
31 The plaintiff seeks leave to proceed pursuant to Pt 10 r 2. The plaintiff's claim to the injunctive relief it seeks is clearly arguable. New South Wales is the only appropriate forum to determine its claim to the anti-suit injunction. It is therefore appropriate to give leave to proceed under Pt 10 r 2. For the same reasons, I refuse the defendant's application to set aside the originating process and to discharge the order giving leave to serve the originating process outside the State.
32 The next question is whether the injunction granted by McDougall J until further order should be continued or discharged. The plaintiff accepted that he had the onus of showing sufficient reason for the continuation of the interlocutory injunction. (Resort Hotels Management Pty Ltd v Resort Hotels of Australia Pty Ltd (1991) 22 NSWLR 730). That question should be determined having regard to the circumstances which obtained at the date of hearing. By that date, the moneys in question were no longer held in Switzerland, but in New South Wales.
33 The identification of the beneficial ownership of property which may form part of the estate to determine what assets are held on trust for the beneficiaries, is an essential aspect of the administration of the deceased's estate. As the deceased died domiciled in New South Wales, the property in question is now located in New South Wales, and two of the three contending parties are resident in New South Wales, it is clear that New South Wales is the appropriate forum to resolve the disputed question of the beneficial ownership of the moneys. Hope v Carnegie (1866) LR1ChApp 320, and Bunbury v Bunbury (1839) 1 Beav 318; 48 ER 963, are in point as showing that all questions in relation to the administration of the estate should be decided in the one jurisdiction. An administration of assets is to be carried out in accordance with the lex fori. (Permanent Trustee Co (Canberra)) Ltd v Finlayson (1968) 122 CLR 338 at 342-343). There is well-established jurisdiction to protect the integrity of the Court's processes by granting an anti-suit injunction where an estate is being administered and the injunction is granted to restrain a party from seeking, by foreign proceedings, to obtain the sole benefit of certain foreign assets. (Societe Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] AC 871 at 892, cited with approval in CSR Limited v Cigna Insurance Australia Ltd at 391). The case is even stronger here because, at the date of hearing, there was no "foreign asset" which the defendant sought to attach by her Israeli proceedings.
34 After the conclusion of the hearing, the plaintiff sought leave to re-open the evidence by tendering an application made by the defendant to this Court for an order under s 7 of the Family Provision Act 1982, that the provision be made for her maintenance and advancement in life out of the estate or notional estate of the deceased. In support of that application the defendant has sworn an affidavit in which she deposes to the conversation with her father and to which, according to her, he transferred or gave to her the right to the moneys in the Swiss bank accounts. Accordingly, the very issues which the defendant has raised in the Israeli proceedings, are raised by her in separate proceedings commenced in this Court. The defendant objected to the admission of this evidence on the ground that it could not affect the outcome of the proceedings. The basis for this contention was that the plaintiff himself asserts that the moneys belong to Zipor and not to the deceased and hence the Swiss moneys do not form any part of the administration of the estate of the deceased. However, I reject that contention for the reasons I have already given. I consider the material sought to be tendered is relevant. The evidence was not available at the time of the hearing and there is no discretionary reason to refuse leave to the plaintiff to re-open. The summons in proceedings number 1227/05 and the affidavit of the defendant sworn 25 January 2005 will be exhibits B and C respectively. The defendant's application to this Court raising the same issue as to the beneficial ownership of the moneys is a further reason that this Court is the appropriate forum to deal with that issue.
35 It was submitted for the plaintiff that by commencing proceedings under the Family Provision Act, the defendant submitted to the jurisdiction for the purpose of the present proceedings. Having regard to my earlier findings it is not necessary to decide this question.
36 I take into account, as did McDougall J, the need to exercise caution in granting an injunction to restrain foreign proceedings which, whilst it is directed to the party and not to the foreign court, will nonetheless interfere with the processes of that court. (CSR Limited v Cigna Insurance Australia Ltd at 395-396). However, I consider that this Court is clearly the appropriate forum, indeed the only proper forum to resolve the issue which arises in the administration of the deceased's estate. If the Israeli proceedings were allowed to be pursued, they would have the tendency of embarrassing the proper administration of the estate. If the defendant's claim that the moneys belonged to the deceased before he declared a trust of them in her favour is correct, the estate is likely to have liabilities to pay tax, interest and penalties in Australia. It is necessary to resolve the beneficial ownership of the moneys before the estate can be distributed. It may also be necessary to resolve that question for the purposes of the proceedings under the Family Provision Act.
37 For the reasons given in CSR Ltd v Cigna Insurance Australia Ltd at 396, where the injunction is sought in the Court's inherent jurisdiction to protect its own processes, it is not necessary for the plaintiff first to have sought a stay or dismissal of the foreign proceedings. In this case the plaintiff made such an application, although that was before the moneys were moved to Sydney. It is not necessary that he should move again in the Israeli court.
38 For these reasons the injunction which McDougall J granted until further order should be continued on the basis of the continuance of the plaintiff's undertaking as to damages. No orders are necessary for that purpose.
39 The plaintiff sought leave to amend the summons to claim a declaration that "the legal and beneficial owner of the chose in action represented by bank account USB Cash Management Trust is Zipor Pty Ltd and that the said chose in action does not form part of the assets of the estate of the late Leo Ari Weinstock."
40 It is appropriate for the Court to determine the beneficial ownership of property held in the name of the deceased. The plaintiff proposes to add Zipor Pty Ltd as the second defendant. As the proceedings are presently constituted, the only party who might oppose the relief sought is the defendant, who has not submitted to the jurisdiction. Mrs Tamar Beck, who is the other beneficiary of the estate, also has an interest in the issue. As it is the executor's position that the asset was not beneficially owned by the deceased, and as that is also the defendant's position, it is appropriate that she be added as a party to the proceedings so that there is a proper contradictor. I grant leave to amend the summons on condition that she be joined as a third defendant.
41 The plaintiff has succeeded in his application for the continuation of the interlocutory injunction. The defendant was unsuccessful on her application under Pt 11 r 8. The defendant should pay the plaintiff's costs of her notice of motion filed in court on 6 December 2004. Otherwise the costs of the hearings before me will be the plaintiff's costs in the proceedings.
42 For these reasons I make the following orders: