Bellman v Peters
[2020] VSCA 143
•3 June 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2019 0026
S APCI 2019 0047
| KEVIN GRAEME PHILLIP BELLMAN (as executor of the estate of BRENDA MAY BELLMAN, deceased) | Applicant |
| v | |
| JOYCE MAY PETERS (as executor and trustee of the estate of EDWARD RICHARD PETERS, deceased and in her personal capacity) | Respondent |
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| JUDGES: | TATE, KYROU and McLEISH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 7 February 2020, 27 May 2020 |
| DATE OF ORDERS | 27 May 2020 |
| DATE OF REASONS: | 3 June 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 143 |
| JUDGMENT APPEALED FROM: | Bellman v Peters (Unreported, Supreme Court of Victoria, McMillan J, 20 December 2018) (Ruling); [2019] VSC 200 (McMillan J) |
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PROBATE AND ADMINISTRATION – Deceased died in 1994 – Will named respondent as executor and trustee and left estate to five children as tenants in common in equal shares – Main assets of estate an interest in land subject to mortgage and one of two shares in a company – Executor owned other share – Probate of will in 1995 – Inventory of assets and liabilities incorrectly listed interest in land as sole asset and did not list any liabilities – In 1998 executor transferred estate’s interest in land to company for $200,000 all of which was paid to mortgagee – No steps by executor to finalise administration of estate until after applicant sought information about assets of estate and its administration in 2017.
PROBATE AND ADMINISTRATION – Application for order for respondent to file administration account – Consent order made – Administration account filed – Included nominal value of share in company rather than market value – Applicant challenged adequacy of administration account – Whether judge erred in finding administration account compliant – Administration and Probate Act 1958 s 28(1) – Appeal allowed.
LEGAL PERSONAL REPRESENTATIVES – Application for removal of respondent as executor and trustee – Alleged conflict of interest in sale of interest in land to company – Alleged failure to properly administer estate – Whether judge failed to give proper consideration to removal application – Appeal allowed.
PRACTICE AND PROCEDURE – Order allowing appeal by consent – Circumstances in which such an order can be made.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr M C McKenzie | Prior Law |
| For the Respondent | Mr J Smith | Hibbert & Hodges Lawyers |
TATE JA
KYROU JA
McLEISH JA:
Introduction
These applications for leave to appeal against orders made by a judge in the Trial Division were heard on 7 February 2020. On that day, we reserved our decision and, by consent, made an order that the parties attend a mediation before an associate judge of the Supreme Court. Following a successful mediation on 27 February 2020, in May 2020, the parties submitted proposed consent orders to the Court which included orders setting aside the judge’s orders. They informed us that the Trial Division proceeding will be discontinued, with no order as to costs.
Allowing an appeal by consent is not a mere exercise in ‘rubber stamping’.[1] The Court has a duty to be satisfied, as a condition of its power to allow an appeal by consent, that there was an appellable error, or at least an arguable error.[2]
[1]Melbourne Water Corporation v Caligiuri [2020] VSCA 16, [19]; Hennes v Hobsons Bay City Council [2012] VSCA 215, [7]; Kovacic v Transport Accident Commission (2016) 76 MVR 82, 84 [4]; [2016] VSCA 139.
[2]Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64, 77–8 [51]–[54]; [2008] FCAFC 7 (‘Telstra’); Commonwealth Bank of Australia v Walker (2012) 289 ALR 674, 675 [3]–[5]; [2012] FCAFC 68; Smits v Lillas & Loel Lawyers Pty Ltd [2016] FCAFC 143, [10].
There are good reasons for this approach. Allowing an appeal involves setting aside a decision of another court or tribunal, the processes and decisions of which are entitled to due respect and will ordinarily be matters of public record. In any substantive case, the decision is likely to form part of the body of non-statutory law having value as binding or persuasive authority, by virtue of the doctrine of precedent. To set aside such decisions is a serious matter with consequences beyond the immediate parties. Moreover, allowing an appeal may involve remitting a matter for rehearing, with resource implications for the administration of justice.[3]
[3]Newton v Geelong Ethnic Communities Council Inc [2011] VSCA 59, [17] (‘Newton’); Loftus v Australia and New Zealand Banking Group Ltd [No 2] [2016] VSCA 308, [3] (‘Loftus’).
The present case is unusual in that, prior to receiving the proposed consent orders from the parties, we had heard full argument in respect of both applications for leave to appeal and had an opportunity to consider those arguments.[4] Accordingly, we were in the position of being affirmatively satisfied that appellable error had been established and that the judge’s orders should be set aside.
[4]In other circumstances, the Court has sought a joint memorandum from the parties identifying the arguable error upon the basis of which they seek to have the decision under appeal set aside. See Newton [2011] VSCA 59, [18]; Loftus [2016] VSCA 308, [3]; Telstra (2008) 166 FCR 64, 77–8 [51]–[52]; [2008] FCAFC 7.
After hearing further brief submissions from the parties at a mention on 27 May 2020, we made orders granting the applications for leave to appeal, allowing the appeals and setting aside the judge’s orders, with no order as to costs, in accordance with the proposed consent orders. We stated that we would publish reasons for making those orders in due course. These are those reasons.
Overview
Edward Peters died on 10 December 1994. He was survived by his wife (the respondent) and four of their five children, Robert Peters, Lorraine Lilley, Patricia McLachlan and Brenda Bellman. Their fifth child, Sidney Peters, died on 12 January 1985.
By his final will made on 27 August 1976, the deceased named the respondent as executor and trustee and left his residuary estate to his children as tenants in common in equal shares. The respondent obtained probate of the will on 1 March 1995. On 23 February 1995, she filed an inventory of assets and liabilities which listed a one third share in certain land as the only asset of the estate and did not list any liabilities (‘1995 inventory’). As will be seen, the 1995 inventory was inaccurate: there were additional assets of the estate — including one of two shares in Thornton Caravan Park Pty Ltd (‘Thornton’) with a nominal value of $1 each — and the estate was subject to some liabilities.
The respondent did not take any steps to transfer the assets of the estate to the beneficiaries. On 23 April 1998, she transferred the estate’s interest in the land to Thornton, of which she was a director and the owner of the other share.
Brenda died on 5 September 2016 and was survived by her husband (the applicant) and their children, Nicole Dummett and Dean Bellman. The applicant is the executor of Brenda’s estate. He obtained probate of her will on 9 July 2018.
On 21 November 2017, the applicant’s solicitors, who also acted for Nicole, commenced correspondence with the respondent requesting financial information regarding the deceased’s estate and Thornton.
On around 1 May 2018, the estate’s shareholding in Thornton was converted from a share with a nominal value of $1 to 100 shares with a nominal value of one cent each. On 16 August 2018, the respondent signed a transfer naming the applicant — in his capacity as executor of Brenda’s estate — as transferee of 20 shares in Thornton (‘share transfer’). On 27 August 2018, the share transfer was sent to the applicant’s solicitors, but he refused to sign it. The respondent signed similar transfers naming the other beneficiaries as transferees.[5] The transfers were intended to finalise the administration of the deceased’s estate.
[5]One of the transfers named the children of Sidney as transferees because cl 4 of the deceased’s will provided for a gift over to the children of any child of the deceased who predeceased him. Sidney was survived by his children Andrew Peters and Sharyn Peters. The applicant did not accept that Sidney was survived by a third child, Jason Sutcliffe, who was also named as transferee. The dispute relating to Jason is not presently relevant. For convenience, Sidney’s children will be treated in these reasons as a single beneficiary.
On 30 August 2018, the applicant commenced a proceeding in the Trial Division. He sought orders including that the respondent provide an administration account for the estate and that she be removed as executor of the estate.[6]
[6]In these reasons, references to the respondent’s capacity as executor of the estate include her capacity as trustee.
On 12 November 2018, the respondent filed an administration account (‘2018 administration account’).
At the conclusion of a directions hearing on 20 December 2018, the judge made an order dismissing the applicant’s proceeding (‘dismissal order’) and delivered a short oral ruling setting out her reasons for that order.[7] She decided that, having regard to the respondent’s filing of the 2018 administration account and execution of the transfers in favour of the beneficiaries, the proceeding was misconceived. On 28 March 2019, the judge made an order that the applicant pay the respondent’s costs on an indemnity basis (‘costs order’).[8]
[7]Bellman v Peters (Unreported, Supreme Court of Victoria, 20 December 2018, McMillan J) (‘Ruling’).
[8]Re Peters [2019] VSC 200 (‘Costs decision’).
The applicant sought leave to appeal against the judge’s ruling. In essence, he contended that the judge erred in deciding that the provision of the 2018 administration account and the share transfer provided adequate relief to the applicant. Separately, the applicant sought leave to appeal against the judge’s costs order. In essence, he contended that the order was based on inferences that were not open to the judge.
Facts
As we have already stated, the deceased’s will left his residuary estate to his children as tenants in common in equal shares. It empowered the executor to sell the assets of the estate with liberty to postpone such sale for such a time as the executor deemed fit.
At the time of his death, the deceased and the respondent were directors of Thornton. Thornton operates a caravan park on two parcels of land located at 1288 Goulburn Valley Highway, Thornton (‘caravan park land’) that were owned by Thornton. The caravan park land is in close proximity to two parcels of land at 1240 Goulburn Valley Highway that were owned by Janet Peters (as executor of Sidney’s estate), the deceased and Robert as tenants in common in equal shares (‘Land’). The deceased owned one of two shares in Thornton and the other share was owned by the respondent.
The other asset of the estate at the time of the deceased’s death, as shown in the 2018 administration account, were five shares in Pivot Ltd worth $250 in total.
The liabilities of the estate, also as listed in the 2018 administration account, comprised a mortgage to National Australia Bank (‘NAB’) over the Land and a debt of $2,212.80 to the Department of Social Security. As the caravan park land was also mortgaged to NAB, the total amount owing under the mortgage to NAB and what part of it was referrable to the Land at the time of the deceased’s death are not currently known.
The 1995 inventory listed the deceased’s one third share in the Land as the only asset of the estate and did not refer to any liabilities. The 1995 inventory stated the value of the Land as $239,500 and the deceased’s one third interest as $79,833.33.
Following the grant of probate of the deceased’s will on 1 March 1995, the respondent, as executor, became the registered proprietor of the deceased’s interest in the Land. She held one of the shares in Thornton in her own right and the other share as executor. She remained a director of Thornton. Lorraine and Robert were appointed directors on 23 January 1995 and 18 October 1995, respectively.
On 23 April 1998, the Land was sold to Thornton for $200,000. There is no evidence of how the sale price of $200,000 was arrived at or why it was $39,500 less than the value assigned to the Land in the 1995 inventory. The entirety of the sale price was applied towards moneys owed under the mortgage to NAB. Subsequently, Thornton granted a new mortgage over the Land to NAB.
There was no evidence that the respondent informed the five beneficiaries of their entitlements under the will. It is likely that Lorraine and Robert, in their capacity as directors of Thornton, knew of the sale of the Land to the company. However, there was no evidence that the respondent disclosed the sale to any of the five children in their capacity as beneficiaries.
Between 1995 and the time that Brenda died on 5 September 2016, the respondent did not take any steps to distribute any income or assets of the estate to the beneficiaries.
On 21 November 2017, the applicant’s solicitors wrote to the respondent requesting full details of the accounts of Thornton dating back to 1994.
By letter dated 25 January 2018, the respondent’s solicitor provided to the applicant a company report of Thornton as at 21 November 1999, a ledger entries report as at 30 June 1998 and a balance sheet and profit and loss statement as at 30 June 2017. The letter stated that no dividends had been declared by Thornton. The letter also stated that ‘the property and business have been for sale for some period with the intention that when sold any net surplus would be divided and at that time distribution in the Estate could be effected’. The letter concluded by stating that, if the applicant desired to receive his entitlement in the share in Thornton, the share capital would need to be altered and he would need to provide ‘the usual particulars’.
The applicant did not consider that the documentation provided was adequate and, on 1 February 2018, his solicitors made a further request for documentation relating to Thornton and the Land. In relation to the proposed sale of the property and business of Thornton, the information sought included ‘details of the agent engaged to sell and the marketing material that has been produced’.
On 14 February 2018, the applicant’s solicitors sent an email to the respondent’s solicitors stating that ‘[m]erely transferring the share is not a sufficient response or remedy for the lack of administering the estate for 23 years’. In a further email dated 15 February 2018, the applicant’s solicitors stated that the applicant would not be able to consider accepting ‘as [his] share of the estate the share in Thornton’ unless he was provided with the information he had requested.
On 19 February 2018, the respondent’s solicitors sent an email to the applicant’s solicitors stating that copies of the statutory accounts of Thornton were being compiled and that archived records were being reviewed to identify any records that could be retrieved. The email reiterated that Thornton had never paid a dividend and stated that any profit had been reinvested and enhanced the asset owned by the company.
On 10 April 2018, the applicant’s solicitors wrote to the Probate Office of the Supreme Court asking that office to ‘request administration accounts’ in relation to the estate. They also wrote to the respondent’s solicitors seeking her agreement to the appointment of an independent administrator to replace her as executor. They advised that if the respondent did not agree, the applicant would seek to remove the respondent as executor and trustee. They also advised that they had ‘written to the Probate office seeking administration accounts’.
On 11 April 2018, the respondent’s solicitors provided to the applicant’s solicitors the balance sheet and profit and loss statement of Thornton as at 31 December 2017. They also advised that the death of the lawyer who had previously acted on behalf of the estate and their inability to obtain the probate file made reconstruction of material difficult, and that the respondent would not ‘renounce her appointment’.
On 23 April 2018, the Registrar of Probates sent an email to the applicant’s solicitors stating that as probate of the deceased’s will was granted 23 years ago and it did not create any life estates, he was not prepared to request that the respondent file an administration account.
On 1 May 2018, the respondent’s solicitors sent an email to the applicant’s solicitors stating that the two $1 shares in Thornton had been divided into 100 one cent shares so that the shares could be transferred in the proportions required by the deceased’s will. The email further stated that the transfer of the shares to the beneficiaries would finalise the administration of the estate. Under this proposal, each beneficiary would receive a transfer of 20 one cent shares. In subsequent correspondence, the applicant’s solicitors asserted that such transfers would not constitute proper administration of the estate and continued to press for financial information relating to Thornton and valuations of its property.
On 8 August 2018, the applicant’s solicitors sent a copy of the grant of probate of Brenda’s estate to the respondent’s solicitors and advised that they would proceed to institute proceedings against the respondent.
On 15 August 2018, the respondent’s solicitors advised the applicant’s solicitors that an administration account would be provided within 14 days. They stated that there was no basis for the applicant’s proposed proceeding and that indemnity costs would be sought if the proceeding was issued.
On 27 August 2018, the respondent’s solicitors informed the applicant’s solicitors that an administration account had been drafted and was being reviewed by the respondent. They also sent the share transfer referred to at [11] above.
An administration account was not provided to the applicant prior to the expiration of the 14 day period on 29 August 2018. As appears from [43] below, it was not provided until 12 November 2018.
Orders sought by the applicant and procedural history
On 30 August 2018, the applicant commenced a proceeding against the respondent in the Trial Division by way of originating motion seeking several orders, including the following:
(a)An order pursuant to s 34 of the Administration and Probate Act 1958 and ss 48 and 51 of the Trustee Act 1958 removing the respondent as executor and trustee of the deceased’s estate.
(b)An order pursuant to ss 48 and 51 of the Trustee Act appointing Nicole Dummett or other independent person or trustee company as administrator of the deceased’s estate.
(c)An order that the respondent deliver the following documents to the person appointed as administrator of the deceased’s estate:
(i)all funds, assets and property of the estate in her possession custody or control, including but not limited to, money and assets held on trust for Brenda’s estate;
(ii)all documents and records relating to the assets and affairs of the deceased’s estate, including shares held in Thornton, in her possession, custody or control including but not limited to balance sheets and profit and loss statements for the company for the last 10 financial years;
(iii)statements of the rent received on the Land and the caravan park land since the date of the deceased’s death;
(iv)valuations obtained on the Land or the shareholding in Thornton that had been sold during the administration of the deceased’s estate or are still held;
(v)assessments from the Australian Taxation Office for the deceased, the deceased’s estate and Thornton.
(d)An order pursuant to s 28 of the Administration and Probate Act that the respondent file and serve on the administrator appointed and the beneficiaries, full and proper accounts in relation to the administration of the deceased’s estate.
(e)An order that the respondent personally pay the applicant’s costs of the proceeding on an indemnity basis or such other basis as the Court may order.
Section 28(1) of the Administration and Probate Act provides that when lawfully required to do so, the personal representative of a deceased person must exhibit on oath or by affirmation in Court, a true and perfect inventory and account of the real and personal estate of the deceased. It also states that the Court has the power to require personal representatives to bring in inventories.
Section 34(1)(c) of the Administration and Probate Act relevantly provides that the Court may order the discharge or removal of an executor who refuses or is unfit to act, or incapable of acting, in that office and, if it thinks fit, appoint some proper person or trustee company as administrator.
Section 48 of the Trustee Act provides that whenever it is expedient to appoint a new trustee, and it is found inexpedient, difficult or impracticable so to do without the assistance of the Court, the Court may order the appointment of a new trustee. Section 51 enables the Court to make a vesting order in certain circumstances, including where the Court appoints a new trustee.
On 10 October 2018, the judge made a consent order pursuant to s 28 of the Administration and Probate Act requiring the respondent to file and serve ‘an accurate account of her administration of the estate’ by 9 November 2018. The order required that the account contain full particulars of, among other things, all assets of the estate collected by the respondent, the proceeds of all assets realised by her and all assets retained in specie by her.
On 12 November 2018, the respondent filed an affidavit which exhibited the 2018 administration account. The 2018 administration account listed the following items:
(a)‘Sale of one third interest at 1240 Goulburn Valley Highway, Thornton VIC’ on 23 April 1998 for $66,666.66.
(b)Five shares in Pivot Ltd valued at $250 in total.
(c)$1,896.40 debt due to John Gunn, solicitor acting in the administration of the deceased’s estate.
(d)$66,666.66 debt due to NAB, ‘secured over the deceased’s interest at 1240 Goulburn Valley Highway, Thornton VIC’.
(e)$2,212.80 debt ‘due to Social Security representing overpayment’.
(f)The ‘Portion of Estate to be Distributed in specie’ listed five transactions for the transfer of 20 one cent shares in Thornton to each of the beneficiaries.
(g)‘Matters Outstanding in Respect to Administration: Registration of the share transfers when they have been provided by the Beneficiaries. Unpaid accounting and legal fees in respect to the Estate administration as yet not quantified’.
There was no income listed in the 2018 administration account.
On 16 November 2018, a directions hearing was held before the judge. At that hearing, the applicant sought to respond to the respondent’s affidavit and the 2018 administration account by filing further affidavit material. The applicant argued that the 2018 administration account was unsatisfactory and that it ought to set out ‘an appropriate proper and true assessment of the value of the relevant shares’.[9] He raised a number of issues with the 2018 administration account, including that it was highly unlikely that NAB had lent more than the value of the Land which would have had the consequence that when it was sold to Thornton in 1998 the entire value was absorbed by the debt.
[9]Transcript of Proceedings (16 November 2018) 5.8–5.9.
The judge did not order that the applicant file any further affidavit material in response to the respondent’s affidavit. Rather, she made an order that the applicant file an outline of points arising from the respondent’s affidavit and that the respondent file a response to the applicant’s outline of points.
On 20 December 2018, a further directions hearing was held before the judge. At that hearing the applicant maintained that he was seeking proper administration accounts and the removal of the respondent as executor. The following relevant exchange between the judge and counsel for the applicant occurred:
HER HONOUR: This proceeding, in effect, has exhausted itself because the relief has been obtained.
[COUNSEL]: Only, Your Honour, if one takes the view that the accounts provided are proper and appropriate accounts. We say that they’re not, and we maintain that position.
HER HONOUR: I repeat what I say, … If you have any issues with the accounts any cause of action is appropriate for a different proceeding, not a removal proceeding. This proceeding has exhausted itself.
…
There’s nothing left in the proceeding. You’ve got your accounts. There’s no estate left apart from a $1 share, and whatever your issues might be are not — they don’t proceed in a removal application.
…
[COUNSEL]: Well, we don’t say we aren’t proceeding with the application unless Your Honour says that the removal application itself is dismissed. We want to proceed with that removal application, and we say that the accounts that have been provided reveal - - -
HER HONOUR: No, no. You’re misconstruing the cause of action that you might think that you have. You’ve got a removal application. You don’t want to take the transfer of the share that has been offered to you. So that – but you [seek] to remove the [respondent]?
[COUNSEL]: Yes, ma’am.
HER HONOUR: To what end?
[COUNSEL]: In order to enable the estate to be properly administered. We say the estate hasn’t been properly administered. There’s been no proper giving of accounts and there’s still a shareholding that - - -
HER HONOUR: I know. … It’s a separate cause of action.[10]
[10]Transcript of Proceedings (20 December 2018) 3.7–3.15, 3.24–3.27, 4.19–5.5.
Judge’s reasons
As we have already stated, on 20 December 2018, at the conclusion of a directions hearing, the judge delivered short oral reasons for the dismissal order. The reasons were as follows:
This is an application by the [applicant] to remove the [respondent] as the executor and trustee of the estate. The application has proceeded on the basis that the [respondent] has provided all of the information that she has including that of her accountant. The complaints that the [applicant] has appear to not relate to so much the estate, but to corporate entities and the administration of the estate over a long period of time.
The [respondent] has offered to transfer the one share remaining in the estate to the beneficiaries and is content to continue with that offer. For whatever reasons, the [applicant] does not accept that. I think the application as it is currently laid out by [counsel for the applicant] is misconceived, and his remedies, if he has any, lie elsewhere, and I’ll dismiss the proceeding on the basis that the [applicant] pay the [respondent’s] costs on a standard basis.[11]
[11]The quotation contains the Ruling in its entirety.
Despite the judge’s pronouncement that the applicant pay the respondent’s costs on a standard basis, at the applicant’s request the parties were granted leave to file written submissions in relation to costs. The applicant sought an order that the respondent pay his costs whilst the respondent submitted that the applicant should be ordered to pay her costs on an indemnity basis. In her submission, the respondent erroneously suggested that the applicant had not applied to the Registrar of Probates for an order requiring her to provide an administration account. That error was corrected in an email dated 18 February 2019 to the judge’s chambers but it appears that the email might not have been received.
On 28 March 2019, the judge published her costs decision in which she further explained the reasons for the dismissal order in the following terms:
In the circumstances, the application to remove the [respondent] as executor of the estate and for the [respondent] to provide an administration account for the estate was misconceived. First, r 6.03 of the Supreme Court (Administration and Probate) Rules 2014 provides an alternative option to attain an administration account, as was recognised by the [applicant’s] solicitors but was not pursued by them. Secondly, before the proceeding was commenced the [applicant] had been informed that the remaining undistributed part of the estate was the $1 share in [Thornton]. The [respondent] provided a share transfer for the undistributed share, yet the [applicant], without explaining his reasons, refused to sign the transfer. Any issue of failing to administer the estate could have been addressed by the [applicant] signing the transfer of the share. Thirdly, the [applicant’s] solicitors were informed that the [respondent] was reviewing the administration account and notwithstanding still issued the proceeding. Fourthly, the information in the administration account did not contain any information of any consequence. Fifthly, the [applicant’s] complaints concerning [Thornton] are not matters that involve the administration of the estate of the deceased.[12]
[12]Costs decision [19].
In her costs decision, the judge held that the applicant’s application for an administration account and removal of the respondent as executor was misconceived, did not have a proper basis and had no real prospect of success. She found that, having regard to the parties’ overarching obligations and the overarching purpose contained in the Civil Procedure Act 2010,[13] an order that the applicant pay the respondent’s costs on an indemnity basis was warranted.[14]
[13]The overarching purpose in s 7 of the Civil Procedure Act is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. Under s 18(d) of that Act, the parties to a civil proceeding have an overarching obligation not to make any claim that does not have a proper basis.
[14]Costs decision [20]–[21].
Grounds of appeal
The applicant has sought leave to appeal against the dismissal order on the following grounds:
1The judge did not permit the [applicant] to put the case for a proper inventory.
2The judge did not permit the [applicant] to respond to the [respondent’s] Affidavit of the 12th November 2018 and identify further breaches by the trustee of trust obligations.
3The judge in dismissing the [applicant’s] application failed to give full and proper consideration to the opportunity for the court to either refer the matter to mediation for resolution, or if seen fit direct the matter to be pleaded out in a statement of claim.
4The judge in dismissing the application gave no proper reasons for so doing.
5The judge in dismissing the application made a decision against the weight of evidence.
6The judge in dismissing the application took account of material which was short served and the [applicant] had not had an opportunity to respond to.
7The reasons provided by the judge do not set out a proper basis for the decision made.
The applicant has sought leave to appeal against the costs order on the following grounds:
1The Court has erred because an inference was drawn not supportable by the facts.
2 The Court has failed to properly consider the [applicant’s] case.
As the grounds of appeal against the dismissal order overlap, we will consider them together. We will then discuss the appeal against the costs order.
Appeal against dismissal order
Parties’ submissions
In oral submissions, the applicant contended that the judge erred in accepting the 2018 administration account as true and perfect and in dismissing the application to remove the respondent as executor of the deceased’s estate.
In relation to the administration account, the applicant argued that the judge failed to give proper reasons for accepting that the 2018 administration account was true and perfect. He contended that the 2018 administration account was incomplete or inaccurate and sought to challenge it. One issue that he raised, among others, was whether the sale of the estate’s one third interest in the Land was in fact equal to the debt owed to NAB under the mortgage.
As to the removal application, the applicant submitted that the judge failed to give proper reasons as to why the respondent should not be removed as executor. According to the applicant, the respondent had committed numerous breaches of duty in her capacity as executor. These alleged breaches included failing to inform the beneficiaries of their entitlements under the will, omitting the deceased’s shareholding in Thornton from the 1995 inventory and selling the estate’s interest in the Land to Thornton, when the respondent was a director and shareholder of that company. The applicant also contended that there was evidence that the mortgage to NAB, which was discharged and refinanced in 1998, may have been over the caravan park land and not the Land. The applicant argued that these constituted grounds for removal of the respondent as executor, however the judge did not consider them.
In his written submissions under grounds 1 and 2, the applicant argued that in dismissing the proceeding, the judge wrongly precluded him from responding to the 2018 administration account by way of affidavit evidence. He contended that he was prevented from having a full and proper opportunity to identify potential breaches of duty committed by the respondent in her capacity as executor.
As to ground 3, the applicant submitted that the judge erred in failing to give full and proper consideration to referring the proceeding to mediation or allowing the applicant to plead the matter in a statement of claim.
Under grounds 4 and 7, the applicant argued that the judge did not give proper reasons for dismissing the proceeding and did not provide a proper basis for her decision. The written submissions in relation to grounds 4 and 7 overlap with the oral submissions summarised at [55]–[57] above.
As to ground 5, the applicant contended that the judge’s acceptance of the value of the shares in Thornton to be distributed to each beneficiary as 20 one cent shares was against the weight of the evidence.
In relation to ground 6, the applicant submitted that the judge erred in taking into account a chronology signed by the accountant for Thornton which was filed by the respondent on 19 December 2018. According to the applicant, the judge failed to provide him with an opportunity to respond to the chronology and this constituted a denial of natural justice.
In oral submissions, the respondent contended that there were practical difficulties with the applicant obtaining the relief sought. She submitted that it was not realistic for her to obtain a valuation of the shares in Thornton, as there were insufficient funds left in the estate to do so. It was also submitted that there were insufficient funds in the estate to appoint an independent administrator to replace her. According to the respondent, the judge was aware of these matters at the time of her ruling and it can be inferred that they formed part of the reasons for her decision.
Other circumstances that the respondent argued were implicit in the way that the judge dealt with the proceeding included the modest size of the estate, the time that had elapsed since probate of the estate was granted in 1995 and, in the light of these factors, the lack of proportionality in relation to the costs that would be incurred.
In response to questions from the Bench, the respondent accepted that, on the face of it, the evidence indicated that she had failed to properly administer the estate for over 23 years and that this formed a basis for her removal. The respondent also accepted that the facts underlying the issues raised by the applicant relating to her alleged breaches of her duties as executor may also give rise to a basis for her removal.
In the respondent’s written case under grounds 1 and 2, she submitted that following the provision of the 2018 administration account, the applicant’s complaint was with the alleged breaches committed by the respondent in her capacity as executor, rather than what was revealed in the 2018 administration account.
As to ground 3, the respondent argued that it was open to the judge not to send the proceeding to mediation in circumstances where the only issue that remained was whether she ought to be removed as executor. Further, she contended that the only step remaining in the administration of the estate was the transfer of a 20 per cent shareholding in Thornton to the beneficiaries. According to the respondent, the applicant’s offer to file a statement of claim did not overcome the fact that the originating motion was limited to two questions which did not contemplate the grievances that he wished to agitate.
Under grounds 4 and 7, the respondent contended that the judge’s reasons for dismissing the proceeding were clear. She argued that reasons are not required to mention every fact or argument relied on by a party. According to her, where a judgment concerns a matter of practice and procedure, the reasons may be apparent from the exchange between the judge and counsel during oral submissions.
In relation to ground 5, the respondent submitted that the evidence before the judge weighed heavily in favour of the course she had adopted. Further, so it was said, the other issues agitated by the applicant in relation to the administration of the estate were not relevant to the 2018 administration account.
As to ground 6, the respondent argued that, in making her ruling, the judge did not take into account the chronology.
Decision
In our opinion, the dismissal order is vitiated by error and should be set aside.
Part of the difficulty facing the judge was that the applicant’s case before her was framed too widely and did not always differentiate between the assets, documents and administration of the estate on the one hand and the assets, documents and affairs of Thornton on the other. However, the applicant’s complaints against the respondent in her capacity as executor of the estate and the relief sought against her in that capacity were sufficiently clear.
In essence, the complaints and the relief the applicant sought in relation to them were as follows:
(a)The 2018 administration account was deficient because it set out the nominal value of the estate’s shareholding in Thornton rather than its market value. It also failed to properly identify why the estate’s interest in the Land was valued at the same amount as the mortgage in favour of NAB. The applicant sought a current valuation of the shareholding and more reliable information about the value of the estate’s interest in the Land as at the time it was transferred to Thornton.
(b)The respondent had committed multiple breaches of her duties as executor, including by: transferring the estate’s interest in the Land to Thornton when she had a conflict of interest; not acting transparently in relation to the value assigned to the estate’s interest in the Land; and failing for over 23 years to provide to the beneficiaries their entitlements under the will. Accordingly, the applicant sought an order that the respondent be removed as executor.
Section 28 of the Administration and Probate Act requires an inventory and account to be ‘true and perfect’. Where an asset of a deceased’s estate comprises shares in a company, in order for an administration account to comply with s 28, it must set out the market value of the share rather than its nominal value. That is because the nominal value does not necessarily reflect the financial worth of the asset and therefore the financial benefit to which the beneficiaries are entitled. The judge did not advert to the difference between the nominal and market value of the estate’s shareholding in Thornton and did not address the applicant’s submissions on this issue.
Although Thornton is a private company, there are well recognised methods of valuing shares in such a company by suitably qualified professionals. It is true that there may be practical difficulties in the estate obtaining such a valuation due to the costs that would be involved. However, the judge did not decide the case on the basis of such practical difficulties. Rather, in substance, she concluded that the 2018 administration account complied with s 28 of the Administration and Probate Act. She erred in so concluding.
Moreover, because of the approach that the judge adopted to the sufficiency of the 2018 administration account, consideration was not given to whether any cost-free avenues were available to the respondent to provide an estimate of the market value of the estate’s shareholding in Thornton.
As stated at [26] above, in their letter dated 25 January 2018, the respondent’s solicitors said that Thornton’s business and property had been for sale for some period. It can be inferred that Thornton would have received advice from a business broker or other professional about the value of the business and from a real estate agent about the value of the property. Such advice would inform the value of the shares in Thornton. The respondent would have had access to the advice as a director of Thornton. What was not addressed before the judge was whether the respondent could lawfully use that advice to provide to the beneficiaries an estimate of the value of the shares in Thornton or whether her fellow directors would have agreed to such use in the absence of a legal right. It is to be noted that the respondent has already provided to the applicant some financial information belonging to Thornton.
Similarly, although the respondent had limited information about the value of the estate’s interest in the Land at the time it was transferred to Thornton, consideration was not given to whether information about that value could be readily obtained from third parties. Such third parties include NAB, which had a subsisting mortgage over the Land, and the local council, which may have historical rate notices in its archives. It appears that the respondent did not make any inquiries of these obvious sources of information.
In her ruling, the judge stated that the application before her ‘proceeded on the basis that the [respondent] has provided all the information that she has including that of her accountant’. Although that was the position of the respondent, the applicant at no time accepted that the respondent had made all proper inquiries to satisfy his requests for information. In the light of the above discussion, the respondent clearly did not do so.
The judge’s statement in her ruling that the applicant’s complaints ‘appear to not relate to so much the estate, but to corporate entities and the administration of the estate over a long period of time’ is difficult to understand. Clearly, the applicant complained that the respondent had failed to properly administer the estate over a long period of time. Moreover, although some of the information that the applicant requested related to Thornton, it also related to the estate, as the estate owned 50 per cent of Thornton.
In the last paragraph of her ruling, the judge, in essence, held that the applicant should accept the share transfer and then pursue remedies as a shareholder of Thornton pursuant to corporations legislation rather than pursuing the current proceeding. By so holding, the judge failed to properly engage with the applicant’s contentions that the respondent had breached her duties as executor and as such should be removed.
It cannot be said that the applicant’s contentions raised frivolous or insubstantial issues that did not warrant investigation. The contention that there was a conflict of interest in the sale of the estate’s interest in the Land to Thornton appears to have some merit. So too does the contention that the sale price for the Land lacked transparency. Before us, counsel for the respondent conceded that the fact that the entire proceeds of the sale of the Land in 1998 were paid to NAB may indicate that part of the proceeds were applied to reduce moneys owing to NAB in relation to the caravan park land. If that is correct, the estate was deprived of that part of the proceeds, albeit that some of the proceeds would have flowed back to the estate through its shareholding in Thornton, which owned the caravan park land.
With respect, it was necessary for the judge to deal with the applicant’s allegations of breaches of duty by the respondent and to decide whether they warranted her removal. The fact that the applicant may have remedies as a shareholder of Thornton if he executed the share transfer did not provide a sound basis for dismissing his claims against the respondent in her capacity as executor of the estate. Any proceeding brought by the applicant against the respondent under corporations legislation would be confined to her capacity as director and shareholder of Thornton. Such a proceeding would not result in any findings as to whether the respondent breached her duties in her capacity as executor of the estate or result in her removal as executor.
It follows from the above that the reasons given by the judge in her ruling do not support her conclusion that the current proceeding was misconceived. The additional five reasons that the judge set out in her costs decision also do not support that conclusion.
The first reason was that the applicant’s solicitors had not carried out their stated intention to seek an order for an administration account from the Registrar of Probates under r 6.03 of the Supreme Court (Administration and Probate) Rules 2014. As appears from [30] and [32] above, the applicant’s solicitors did in fact seek such an order and the Registrar refused to make it. In fairness to the judge, she might not have received this information.
The second reason related to the applicant’s failure to sign the share transfer, which we have already discussed at [81]–[83] above.
The third and fourth reasons were that the applicant issued the proceeding notwithstanding that the respondent’s solicitors had advised that they were reviewing the 2018 administration account and that the account did not contain any information of any consequence. In circumstances where the applicant challenged the adequacy of the 2018 administration account, the third and fourth reasons did not justify the judge’s characterisation of the proceeding as misconceived. Moreover, the third and fourth reasons did not take into account the fact that the applicant alleged that the respondent had breached her duties as executor and should be removed.
The final reason was that the applicant’s complaints concerning Thornton were not matters that involved the administration of the estate. We have already discussed this issue at [80] above.
As a result of the judge’s erroneous conclusion that the applicant’s proceeding was misconceived, she dismissed the proceeding without considering the merits of the applicant’s claims. It follows that the applicant has made out ground 7. That is sufficient to warrant the orders we made granting leave to appeal, allowing the appeal and setting aside the dismissal order.
Our conclusion in the previous paragraph means that it is not necessary for us to consider grounds 1–6. However, we will make some brief observations on each of those grounds.
Ground 1 is made out. As the judge was of the view that the applicant’s complaints about the 2018 administration account were misconceived, she did not address the applicant’s requests for leave to file further evidence about the deficiencies in that account.
Ground 2 is not made out. At the directions hearing on 16 November 2018, counsel for the applicant stated that the applicant wished to have an opportunity to file further affidavit material. However, when the judge suggested that the applicant file an outline of points with cross-references to existing exhibits, counsel acquiesced to that course.
Ground 3 is not made out. We are not satisfied that the judge’s discretion whether to order mediation or pleadings miscarried.
Ground 4 is made out. The judge’s ruling is very brief and did not explain why she rejected the applicant’s contentions that the 2018 administration account was deficient and that the respondent had breached her duties as executor. It also failed to address whether the applicant had made out his claim that the respondent should be removed as executor. Although the judge’s costs decision amplified her reasons for dismissing the proceeding, it too failed to address the applicant’s removal claim.
Ground 5 should be treated as being subsumed within ground 7. As the judge did not properly consider the applicant’s claims, she did not engage in the forensic process of weighing up all the evidence that the parties had adduced.
Ground 6 is not made out because the judge did not rely on the chronology prepared by Thornton’s accountant.
Appeal against costs order
We have concluded that the judge’s finding that the proceeding was misconceived was wrong and that the dismissal order should be set aside. It follows that the costs order must also be set aside. This is sufficient to warrant the orders we made on 27 May 2020 that the application for leave to appeal against the costs order be granted, the appeal allowed and the costs order be set aside.
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