Application of Hoang
[2020] VSC 199
•21 April 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
CRIMINAL DIVISION
TRUSTS, EQUITY & PROBATE LIST
S ECI 2020 00597
| In the matter of the Estate of KHIEM TRAN, deceased |
| In the matter of an Application by MICHAEL CHAU TRUNG HOANG, plaintiff |
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JUDGE: | Judicial Registrar Keith |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the Papers |
DATE OF JUDGMENT: | 21 April 2020 |
CASE MAY BE CITED AS: | Application of Hoang |
MEDIUM NEUTRAL CITATION: | [2020] VSC 199 |
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ADMINISTRATION AND PROBATE – Application brought by executor for advice or directions in relation to defending debt recovery proceeding initiated by son of the deceased – Order 54 Supreme Court (General Civil Procedure) Rules 2015 (Vic) – In re Beddoe, Downes v Cottam [1893] 1 Ch 547 (CA) – Role of Court in advising or directing executor in this matter, where issues are in contention – Court found executor right to have sought direction – Court found executor right to defend proceedings initiated against estate
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | A P Dickenson |
JUDICIAL REGISTRAR:
Introduction
Khiem Tran, the deceased, died on 20 July 2018 leaving a will dated 23 January 2017 (‘the will’). Probate of the will was granted to the plaintiff (‘the executor’) on 26 November 2018.
The executor has applied for advice and directions in the administration of the deceased’s estate in the nature of the application In re Beddoe[1] pursuant to order 54 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).[2]
[1]In re Beddoe, Downes v Cottam [1893] 1 Ch 547 (CA).
[2]At paragraph 1 of the Executor’s originating motion dated 3 February 2020, reference is had to “Directions pursuant to Rule 52.02 [Supreme Court (General Civil Procedure) Rules 2015 (Vic)] as to whether to defend the proceeding issued by Tony Khoa Tran against the plaintiff in his capacity as the executor of the estate of Khiem Tran, deceased.” This appears to be a typographical error, and I have proceeded on the basis that this was intended to refer to Rule 54.02, as is consistent with the Executor’s listing at the top of his originating motion.
In the origination motion filed 3 February 2020, the executor seeks the following:
(a) directions pursuant to Rule 54.02 as to whether to defend the proceeding issued by Tony Khoa Tran against the plaintiff in his capacity as the executor of the estate of Khiem Tran, deceased; and
(b) an order authorising the plaintiff to use the funds of the estate of the deceased to defend the proceeding issued by Tony.[3]
[3]Given multiple persons involved in this matter have the same last name, references to first names are used to aid identification, and not to be disrespectful.
The proceeding issued by Tony is identified in the supporting affidavit as proceeding S ECI 2019 01766. The proceeding was commenced by writ on 23 April 2019. The executor filed a defence on 17 June 2019. In that proceeding Tony claims the sum of $300,000 from the estate pursuant to a deed entered into by the deceased on 6 June 2017. The proceeding is referred to as “the debt proceeding”.
Family Background
The deceased had three sons: Tony Khoa Tran born in 1983; Anthony Khang Tran born in 1993; and John Khuong Tran born in 1995. The deceased and the mother of the three sons divorced in 2001.
The deceased formed a relationship with Lan Nguyen who is described as the partner of the executor in the will.
The will provides for the residuary estate to be divided into one hundred (100) parts and distributed: one (1) part to Tony; one (1) part to Anthony; one (1) part to John; and ninety-seven (97) parts to Lan.
Each of the three sons has commenced proceedings in this Court pursuant to Part IV of the Administration and Probate Act 1958 (Vic) seeking further provision from their father’s estate. The executor is of course named as defendant in each action. Each action has been stayed pending resolution of the debt proceeding.
The Estate of the Deceased
An affidavit of Tony filed on 3 May 2019 in his Part IV proceeding S ECI 2019 01364 refers to the value of the estate as declared by the executor in the inventory in the application for the grant of probate. The assets were declared in the amount of $2,008,752 and the liabilities at $1,142,964.
The executor has filed an affidavit dated 21 November 2019 in each of the three Part IV proceedings, providing an account of the administration of the estate so far and identifying liabilities, including capital gains tax and land tax, such that the net estate at that time was estimated to be $278,620.
If this estimate is correct, and were the debt proceeding to be entirely successful, there will be no assets to be distributed pursuant to the will. There will be no estate from which further provision could be paid to any of the sons. There may be a shortfall in meeting the liabilities of the estate, the costs of the proceedings and any other expenses properly incurred. The estate may be bankrupt.
The request for advice and direction
The originating motion is supported by affidavits of the solicitor for the executor and counsel’s memorandum of advice. The advice is protected by privilege and has been disclosed to this Court for the purpose of this proceeding to obtain advice and direction and for no other purpose. It remains confidential on the Court file.
In considering the purpose and role of the court in a proceeding of this nature, recourse may be had to McMillan J in Versaci v Rechichi,[4] at [77] [78], who noted:
The exercise of power by the Court to authorise, or refuse to authorise, a proposed course of action is discretionary. When asked to advise whether or not a personal representative should initiate or defend a proceeding, the Court’s role is limited. It is not bound to investigate the evidence in order to make a finding as to the outcome of a proposed proceeding; it must determine only whether the proceeding should be taken, that is, whether the proposed course or action is lawful and proper.
The procedure pursuant to Order 54 should not be used where the questions are likely to raise contested issues of fact or allegations of breach of trust by one party interested in the administration of the trust against another. Contested claims such as those alleged by the children must be brought by separate writ proceedings. Such claims based on their alternative positions must be pleaded and the usual interlocutory steps taken, such as discovery, and witnesses giving viva voce evidence at trial.
[4][2019] VSC 747.
The High Court in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand[5] also noted relevantly at [74] that:
A necessary consequence of the provisions of s 63 of the Act [Trustee Act 1925 (NSW), the New South Wales equivalent to r 54.02] is that a trustee who is sued should take no step in defence of the suit without first obtaining judicial advice about whether it is proper to defend the proceedings. In deciding that question a judge must determine whether, on the material then available, it would be proper for the trustee to defend the proceedings. But deciding whether it would be proper for a trustee to defend proceedings instituted about the trust is radically different from deciding the issues that are to be agitated in the principal proceeding. The two steps are not to be elided. In particular, the judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceedings.
[5][2008] HCA 42.
Also of relevance is the finding of Tate JA In the matter of an Application by Mark James Horner,[6] who noted at [66] that:
while the presence of contested issues of fact does not preclude the use of the Order 54 procedure, the directions or advice provided by the Court ought be given without the determination of any unnecessary or irrelevant factual allegations
[6] [2020] VSCA 85
The information available to the Court indicates there was a history of transactions between the deceased and his sons. The circumstances in which the Deed dated 6 June 2017 came to be signed and the events concerning the transaction described in the Deed do provide a proper basis on which the executor is justified in defending the proceeding. The executor has explained the need for evidence to be investigated and for factual findings to be made to resolve the dispute as to whether the estate is liable to Tony as alleged in the debt proceeding. I am satisfied there are good reasons to defend the debt proceeding.
The supporting material provides an estimate of costs to be incurred by the executor to complete the defence of the proceedings in the range of $25,000. The estimate for the hearing of the trial is two days. The advice of counsel has addressed appropriate steps to avoid unnecessary costs and to avoid delay in the conduct of the trial.
If the debt proceeding is not defended at trial the judgment in favour of Tony will deprive the executor of funds from which expenses and liabilities could be paid, and could cause the estate to be bankrupt. None of the beneficiaries will receive any distribution from the estate. There will be no utility in conducting the Part IV actions.
If the debt proceeding is not successful then the estate will be modest and the Part IV proceedings can be considered in that context. An earlier attempt to compromise the claims at mediation was not successful. The modest value of the estate should result in the exploration of further opportunities.
It is clearly in the interests of the executor to defend the debt proceeding for the proper and due administration of the estate. It is clearly in the interests of the major beneficiary Lan that the debt proceeding be defended.
Conclusion
It is appropriate the executor defends the debt proceeding at trial. The executor has properly made application to the Court for advice and directions, and this proceeding was an appropriate step in the administration of the estate.
ORDERS
The Court orders and declares that:
1. Pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015, the plaintiff is justified in defending the proceeding issued by Tony Khoa Tran against the plaintiff in his capacity as the executor of the estate of Khiem Tran, deceased, being proceeding S ECI 2019 01766;
2. The plaintiff is authorised to use the funds of the estate of the deceased to defend the proceeding issued by Tony Khoa Tran, being proceeding S ECI 2019 01766.
3. Pursuant to r 28.05(2)(a) of the Supreme Court (General Civil Procedure) Rules 2015, counsel’s opinion be kept on the Court file and marked ‘confidential’ and remain confidential to the plaintiffs and no other person may inspect them or obtain a copy of them.
4. The costs of this proceeding S ECI 2020 00597 be paid or retained from the estate of the deceased.
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