CHARDS & ECHOLS AS EXECUTOR OF THE ESTATE OF CHARDS
[2019] FCCA 2433
•20 August 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CHARDS & ECHOLS AS EXECUTOR OF THE ESTATE OF CHARDS | [2019] FCCA 2433 |
| Catchwords: FAMILY LAW – Property settlement proceedings – wife applies for injunction to preserve life insurance moneys held by husband’s estate – executor opposes on basis that she needs access to funds to defend the proceedings – Trusts Act 1973 (Qld) – injunction ordered. FAMILY LAW – Property settlement proceedings – wife alleges that executor has waived legal professional privilege in relation to advice received from counsel – wife applies for copy of advice - consideration of whether common law or Evidence Act 1995 applies – wife’s application dismissed. |
| Legislation: Family Law Act 1975 (Cth), ss.75(2), 75(2)(ha), 79(4), 106B, 106B(1), 106B(4), 114, 117, 117(2A)(c) Federal Circuit Court Rules 2001, rr.11.02(2), 13.10, 21.7 |
| Cases cited: Adelaide Steamship v. Spalvins & Ors (1998) 152 ALR 418 Bourke & Bourke [2010] Fam CA 199 |
| Applicant: | MS CHARDS |
| First Respondent: | MS ECHOLS AS EXECUTOR OF THE ESTATE OF MR CHARDS |
| Proposed Second Respondent: | MACKEY WALES LAW PTY LTD (A.C.N 618 672 030) |
| File Number: | TVC 594 of 2017 |
| Judgment of: | Judge Betts |
| Hearing date: | 12 August 2019 |
| Date of Last Submission: | 12 August 2019 |
| Delivered at: | Newcastle |
| Delivered on: | 20 August 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms Dart |
| Solicitors for the Applicant: | Crosby, Brosnan & Creen Lawyers |
| Counsel for the First Respondent: | Mr Fellows |
| Solicitors for the First Respondent: | Connolly Suthers Lawyers |
| Counsel for the proposed Second Respondent: | Mr Williams QC |
| Solicitors for the proposed Second Respondent: | Barry Nilsson Lawyers |
ORDERS:
The Applicant be refused leave to join Mackey Wales Law Pty Ltd ACN 618 672 030 as a party to these proceedings.
Unless otherwise agreed in writing by all the parties to this application or otherwise ordered by the Court, that the Trustee of the estate of the Late Husband be restrained and an injunction issues restraining the Trustee from:
(a)Transferring or otherwise dealing with, or authorising or directing any person to act on her behalf or in her stead in transferring or otherwise dealing with, any remaining monies forming part of the estate of the Late Husband;
(b)Transferring or otherwise dealing with, or authorising or directing any person to act on her behalf or in her stead in transferring or otherwise dealing with, any remaining monies forming part of the Late Husband’s interest in the estate of the Late Husband’s Mother, Ms A.
(c)That the Trustee of the Late Husband’s estate be restrained and an injunction issue restraining the Trustee from transferring or otherwise dealing with, or authorising or directing any person to act on her behalf or in her stead in transferring or otherwise dealing with, the remaining proceeds of the B Life Insurance monies held in Suncorp Account Number … unless otherwise agreed in writing by all the parties to the application or otherwise ordered by the Court.
The Applicant’s application to obtain a copy of the advice provided to the executor by the “experienced family law barrister” referred to in paragraph 7 and 8 of the affidavit of Ms Echols filed 23 March 2018 be dismissed.
All extant costs applications in relation to the competing applications determined by the Court today are to be listed for further hearing on 23 October 2019 at 2.15pm NSW time, with the parties having leave to appear by telephone.
The reasons for Judgment are to be provided to the parties as soon as practicable.
IT IS NOTED that publication of this judgment under the pseudonym Chards & Echols as Executor of the Estate of Chards is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
TVC 594 of 2017
| MS CHARDS |
Applicant
And
| MS ECHOLS AS EXECUTOR OF THE ESTATE OF MR CHARDS |
First Respondent
| MACKEY WALES LAW PTY LTD (A.C.N 618 672 030) |
Proposed Second Respondent
REASONS FOR JUDGMENT
These reasons for judgment were delivered orally. They have been corrected from the transcript so as to make them more readable.
Introduction:
I have before me competing applications in a property settlement proceeding.
The applicant in the proceedings is Ms Chards whom I will refer to as “the wife”. The first respondent to the proceedings is Ms Echols who is the executor of the late husband. In these reasons, I will refer to her as “the executor”.
The proposed second respondent to the proceedings is Mackey Wales Law Proprietary Limited, a law practice based in Townsville (“Mackey Wales Law”). Mackey Wales Law formerly represented the husband and, for a period after his death, they then acted for the executor.
The orders that are formally sought by the wife are set out in exhibit “A2” and are relevantly orders numbered 1, 2 and 8 in that document.
By order 1, the wife is seeking leave to join the solicitors as a party to this proceeding. Mackey Wales Law oppose it and seek that the wife’s joinder application be summarily dismissed.
By order 2, the wife is applying for an injunction in relation to moneys which might fairly be described as assets of the husband’s estate.
By order 8, the wife is applying to obtain a copy of an advice provided to the executor by “an experienced family law barrister”. The wife alleges that the executor has waived legal professional privilege in respect thereof.
The executor opposes these applications.
The applications and related issues will be dealt with separately.
The hearing before me:
This matter came before me for hearing on Monday, 12 August in the Federal Circuit Court at Townsville where I was sitting on circuit.
At that hearing the wife was represented by Ms Dart of Counsel. The executor was represented by Mr Fellows of Counsel, and Mackey Wales Law were represented by Mr Williams of Queen’s Counsel.
The Court had the considerable advantage of receiving written submissions from Counsel, and the Court has had the opportunity over the past eight (8) days to consider the submissions and also relevant case law as referred to by each Counsel in the course of the argument. The Court has also had the opportunity to review the documents referred to in each party’s Outline of Submissions.
For completeness, the wife concedes that proposed orders 3, 4, 5 of exhibit “A2” are matters for trial. Proposed orders 6 and 7 as set out in exhibit “A2”, in a sense, only arise after I have made a determination. Proposed order 9 was the wife’s application to obtain a copy of the advice received by the executor’s commercial lawyer – but this was abandoned by Ms Dart at the hearing, in my view quite properly, as there was no proper basis upon which I could have found that the advice from the said commercial lawyer referred to in that order had been waived.
Joinder:
I will start with the joinder application, which was the subject of much controversy before me.
The order sought by the wife is an order that, pursuant to rule 11.02(2) of the Federal Circuit Court Rules 2001, the wife be given leave to join Mackey Wales Law as a respondent to this application.
In response, Mackey Wales Law contend that either:
(a)the application for joinder should be dismissed or, rather, that leave to join them not be granted; or alternatively
(b)that the wife’s proposed proceeding against them be dismissed on the basis that it has no reasonable prospect of success.
In a sense, the questions are one and the same. They simply approach the same problem from two different angles.
I do not propose to set out the relevant factual background in any particular detail in relation to this aspect of the matter. The essential facts seem to me to be uncontroversial.
In particular, it is quite clear that this was a long marriage between the late husband and the wife, that the parties separated in late 2015, that there are four (4) children of the relationship, the eldest of whom is an adult.
In 2009, some years prior to separation, the husband had successfully applied for life insurance with B Life Insurance. To be clear, this was the husband’s policy and his policy alone.
The parties having separated, the husband decided in May 2017 that he would consult Mackey Wales Law so as to vary his Will. Pursuant to the husband’s updated Will, he appointed his sister as his executor and his children were nominated as beneficiaries. The Will specifically excluded the wife as a beneficiary.
The husband also had Mackey Wales Law assist him to vary the relevant Beneficiary Nomination Form in respect of his life insurance with B Life Insurance. The varied form requested that the life insurance benefits be paid to the Chards Family Trust, being a trust drawn by Mackey Wales Law, pursuant to which the executor was appointed trustee and the parties’ children were the beneficiaries. The wife was excluded as a beneficiary.
The wife commenced these proceedings on 2 June 2017 having apparently been told that the husband was terminally ill.
The husband passed away some five (5) days later on 7 June 2017.
In July 2017 B Life Insurance paid the amount of the life insurance benefit, namely $280,000, into a Suncorp bank account in the name of the executor as trustee for the Chards Family Trust.
In October 2017 Chards Family Holdings Proprietary Limited was incorporated and the next day that company replaced the executor as trustee of the Chards Family Trust.
There was a dispute between the wife’s solicitors and Mackey Wales Law as to whether the B Life Insurance moneys in fact formed part of the husband’s estate for the purposes of the property settlement proceedings.
On 9 March 2018 the wife filed an Application in a Case seeking various orders, including orders pursuant to section 106B of the Family Law Act1975 (to set aside the B Life Insurance Beneficiary Nomination Form).
That same day, Mackey Wales Law advised the wife’s solicitors that they no longer acted on behalf of the husband’s estate or in the family law proceedings, having acted in both matters up to that point in time. Their file was subsequently transferred to Mr Peter Logan of Connolly Suthers.
On 21 March 2018, Mr Logan informed the wife’s solicitors that various legal fees had been paid from the trust account of Connolly Suthers to Mackey Wales Law.
On 23 March 2018, the executor filed an affidavit conceding that the remaining life insurance moneys form part of the husband’s estate. What the executor deposed to in that affidavit is said to be relevant in relation to the question of waiver of the advice provided by the experienced family law barrister which I will turn to later.
The wife feels aggrieved by the conduct of Mackey Wales Law. She seeks that:
(a)the legal fees that were paid by Connolly Suthers to Mackey Wales Law should be recovered, or clawed back, pursuant to section 106B(1) of the Act. As originally drafted, the wife Application filed 4 March 2019 sought relief against Mackey Wales Law pursuant to section 106B(4). However, on 9 August 2019 the wife amended her Application to instead rely upon section 106B(1);
(b)Mackey Wales Law pay the costs incurred by the wife arising out of or in connection with her section 106B application on an indemnity basis;
(c)Mackey Wales Law pay the costs of and incidental to this Application.
Mr Williams QC relied upon the wife’s abandonment of her earlier allegation of “collusion” levelled against Mackey Wales Law – collusion being a necessary element of her relief as originally pleaded pursuant to section 106B(4). Mr Williams QC referred me to a number of authorities in relation to collusion, including the decision of Murphy J in Bourke & Bourke [2010] Fam CA 199.
Mr Williams QC also referred to a decision of Chesterman J of the Supreme Court of Queensland to like effect in Emanuel Management Pty Ltd & Ors v. Foster’s Brewing Group Ltd & Ors [2003] QSC 205.
I accept Mr Williams QC’s submission that, for the purposes of section 106B(4), collusion does connote an element of fraud or dishonesty.
Ms Dart, for the wife, made very clear at the outset of the hearing that the wife was abandoning any reliance on section 106B(4), and that instead the wife was seeking relief pursuant to section 106B(1).
Pursuant to section 106B(1), the court may set aside or restrain the making of an instruction, or a disposition, by or on behalf of, or by direction or in the interest of, a party which is made or proposed to be made to defeat an existing or anticipated order in those proceedings, or which, irrespective of intention is likely to defeat any such order.
The argument advanced by Ms Dart in her written submissions (exhibit “A1”) and in her oral submissions, is that section 106B(1) may apply irrespective of intention. Ms Dart specifically referred me to the 1994 decision of former Chief Justice of the Family Court, Nicholson CJ, in the matter of Halabi & Artillaga and Ors (1994) FLC 92-470.
I accept that section 106B(1) may apply irrespective of intention, but it is also worth noting what his Honour in fact held in that case:
“If it cannot be shown that the instrument was made with the intention of defeating the order, or if it is shown that it was not made with the intention of defeating the order, then it can still be set aside if it can be established that it was, at the time at which it was made, likely to defeat any such order. The likelihood that an instrument or disposition is likely to defeat an order can be demonstrated by finding that the pool of assets from which such order would be made is significantly reduced by the instrument or disposition.”
(my emphasis)
At the time Connolly Suthers made the payment to Mackey Wales Law (which the wife seeks to impugn pursuant to section 106B(1)), the wife’s claim was for eighty per cent (80%) of the net available property, as set out in her Initiating Application. This document has yet to be amended.
Ms Dart indicated that the parties participated in a Conciliation Conference in October 2018, at which point the wife communicated her intention to seek one hundred percent (100%) of the property. But of course, this was seven (7) months after the payment in question had been made.
The amount of money sought to be clawed back - some $28,039 - equates to either five per cent (5%) of the net property or six per cent (6%), depending upon whether the ultimate amount of net matrimonial property is found to be $433,000 or $525,000 being the two competing figures.
The wife no longer presses any “collusion” claim pursuant to section 106B(4).
On any reasonable view, at the time Connolly Suthers made the payment to Mackey Wales Law, it could not be said to have logically engaged section 106B (1).
As executor of the husband’s estate, the first respondent is obliged to uphold the wishes of the deceased, and is entitled to obtain advice to enable her to fulfil her function under his last Will. To fail to do so would potentially place her at risk of being sued, or otherwise liable, to the beneficiaries under the Will. I accept, in that regard, the submission made by Mr Fellows with reference to sections 71 and 72 of the Trusts Act 1973 (Qld).
In particular, section 72 of the Trusts Act 1973 (Qld) provides:
A trustee may reimburse himself or herself for or pay or discharge out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers.
It seems to me that the life insurance policy was entirely the property of the husband. It was his policy. It was paid out by B Life Insurance in accordance with the husband’s directions to the lawful recipient pursuant to the policy, namely to the executor of his Will. The executor was entitled to obtain advice, and, in my view, had a duty to uphold the Will and administer the estate in accordance with the deceased husband’s wishes.
Mackey Wales Law had previously been acting on the executor’s instructions and in the exercise of their professional responsibilities. The amount of money paid to Mackey Wales Law represents just 5% - 6% of the available property. At the time it was made, in my view such payment could never logically be seen to have the effect of potentially defeating an anticipated order in the proceedings.
Having regard to the fact that solicitors (in this case, Mackey Wales and Connolly Suthers) are entitled to act on instructions from clients (in this case, the executor), it is extremely difficult to see any sensible or rational basis upon which joinder of Mackey Wales Law would be warranted so as to enable the wife to pursue this particular strand of the relief that she seeks.
There is also one other curious matter in relation to the wife’s application that I have not lost sight of. In particular, she seeks to join Mackey Wales Law so as to claw back a payment to them of $28,039. Yet in her most recent claim for relief she is effectively seeking legal recovery of all legal costs paid by the husband/his estate.
In those circumstances I cannot logically understand why the wife has not sought to join Connolly Suthers Lawyers as well. It strikes me as illogical that Mackey Wales Law are being pursued over $28,039, on the basis that such payment may allegedly defeat the wife’s entitlements – and yet this figure is less than half of the fees subsequently paid by the executor to Connolly Suthers. It does not make sense to me that only Mackey Wales Law would be sought to be joined. That said, I am not encouraging - and I do not want to be seen to encourage - any such joinder application of Connolly Suthers. I merely make this point to highlight another curious aspect of this case.
I turn then to the wife’s indemnity costs application against Mackey Wales Law.
I struggle to see any basis for that application. There is certainly nothing set out in the affidavit of the wife filed on 26 June 2019 which would conceivably give rise to any claim for indemnity costs. The situation would potentially be different, and indeed would logically be very different, if a claim of collusion was made and established, but this is expressly not the basis upon which the wife now brings her application.
Ms Dart instead relies upon section 117(2A)(c) of the Family Law Act 1975, which provides that a relevant consideration on the question of costs is:
“the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters.”
Orders for costs against a party’s solicitor can certainly be made, but they are far from the usual exercise of the Court’s discretion to make an order for costs.
Rule 21.07 of the Federal Circuit Court Rules 2001 provides specifically that an order for costs may be made against a lawyer if that lawyer has caused costs to be incurred by a party or another person, or to be thrown away, because of the lawyer’s undue delay, negligence, improper conduct or other misconduct or default. Some specific examples are given.
I do not suggest that rule 21.07 “covers the field” as it were, but clearly it sets out this Court’s expectation as to when a costs order might be appropriate against a lawyer.
Of course, a costs order on an indemnity basis is an unusual order as well.
In the course of the hearing I was referred to the well-known decision of Colgate-Palmolive Company and Colgate-Palmolive Pty Ltd v. Cussons Pty Ltd (1993) 46 FCR 225, a decision of Justice Sheppard. His Honour in that judgment made clear that where a costs order is appropriate, the usual order would be an order for standard (or party and party) costs. That is, there should be a special or unusual feature of a case before a Court could be justified in departing from that ordinary practice and instead making an order for indemnity (or solicitor and client) costs.
By reference to decided cases, his Honour gave various examples as to when the making of an indemnity costs order would be appropriate. These include the making of allegations of fraud, knowing them to be false; the making of irrelevant allegations of fraud; or evidence of other particular misconduct, causing loss of time to the Court or to other parties. Other examples are proceedings commenced or continued for an ulterior motive or in wilful disregard of known facts or clearly established law.
His Honour also referred to the making of allegations which should never have been made, and to the undue prolonging of the case by groundless intentions.
Of course, the categories for the making of an indemnity costs order can never be closed, and each case turns upon its own facts.
In the present case I am left asking the question - what possible basis might the Court have for making an order for costs against Mackey Wales Law as distinct from an order for costs against the executor? I am further left wondering as to why the Court would make an order for indemnity costs?
Although the wife has abandoned her reliance upon section 106B(4), and instead relies upon section 117(2A)(c), I am drawn to the view that her application is effectively a masquerade – in that she is effectively still relying upon section 106B(4).
I take this view because it is difficult to see how anything short of the most serious misconduct on the part of Mackey Wales Law could warrant the making of an order for indemnity costs. And yet, those allegations are not made by the wife.
If a complaint is made about the way in which the executor has conducted the litigation, then ordinarily the claim for costs would be made against the executor. I see nothing in the wife’s affidavit which warrants any consideration of an indemnity costs order against Mackey Wales Law whatsoever.
The wife was invited to provide pleadings in relation to her claim against Mackey Wales Law; she declined to do so. Her facts, as set out in her affidavit, are apparently designed to make it self-evident that an indemnity costs order would be reasonably arguable. In my respectful view, it is not.
To the extent that the wife complains that there was a delay in the executor acknowledging that the life insurance moneys received from B Life Insurance formed part of the estate of the deceased husband, or were otherwise matrimonial property relevant to the proceeding, such costs said by the wife to have been thrown away as a result are, in the grand scheme of things, de minimis. And, in my view, if an application for costs was to be made in this respect, it would be more properly directed at the executor in any event.
I see no proper basis for the joinder of Mackey Wales Law in this particular case.
In so finding, I note the authorities referred to by Ms Dart, particularly Kramer & Anor v. Ward (2017) FLC 93-817 and the decision in the matter of Mitty & Mitty and Ors (2010) 45 Fam LR 20. These are factually very different cases - they involved, essentially, solicitors taking money from a trust account or contrary to an order of the Court.
In this case, there was no order which restricted the executor from accessing the life insurance moneys. The executor incurred legal expenses to Mackey Wales Law in the ordinary course, and the payment was made from moneys which were, at least prima facie, property of the husband’s estate.
Respectfully, without doubting for a moment their correctness, I consider the authorities referred to by Ms Dart to be distinguishable.
Likewise, Ms Dart referred me to a decision of Cronin J in Brown & Murdoch (No.3) [2014] Fam CA 1005.
This is an interesting and complicated case with some similar facts, in that one of the parties to the property settlement litigation passed away in the course of the proceedings so that the matter continued against his estate. There were also other competing claimants on his estate.
It was a complex matter. Pursuant to the deceased’s Will in that particular case, he appointed two friends - an accountant and a banker - to act as his executors. The Will authorised them to be paid a commission for their work and that commission was paid and regarded as a proper debt of the estate.
The quantum of the estate’s liability for legal costs was challenged.
His Honour said that:
83.Section 79(4) provides that in considering what order (if any) should be made, the Court is to take into account the matters referred to in section 75(2) insofar as they are relevant. One such manner is seen in section 75(2)(ha), which provides that the Court is to take into account the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s “debt” as far as that effect is relevant.
84.…[C]reditor is not defined in the Act. In my view, it includes any person who has an entitlement in law to be paid from or by one of the parties. [His Honour specifically referenced a person seeking a share in the deceased’s estate by reference to the state law concerning testator’s maintenance provisions.]
85.In my view, when determining the alteration of the interests of the wife and the estate, the Court is obliged to consider but not necessarily absolutely protect, the interests of the creditors…”
Ms Dart specifically took me to paragraph 174 of the reasons for judgment. In that paragraph his Honour referred to the estate’s liability for legal expenses. With specific reference to section 117 of the Family Law Act 1975, his Honour held that such expenses should not be included in the matrimonial Balance Sheet. His Honour reasoned that deducting such a liability would effectively require the Court to find a “justifying circumstance” within section 117. His Honour did not consider such circumstance to exist in that particular case. (Nor did his Honour deduct the wife’s liability for legal expenses.)
In that particular case, the executors were both paid a commission as they were entitled pursuant to the Will and such commission was taken into account as a matrimonial liability. Further, there was going to be sufficient money left over as part of any property settlement so that the estate’s legal expenses would be able to be paid.
I do not consider that Brown & Murdoch (supra) is of any particular assistance to me. I particularly repeat the observations I made earlier concerning the timing of the payment to Mackey Wales Law in the context of the then claim being brought by the wife (80% of the net property), and the absence of the suggestion of collusion.
I also add that the moneys paid to Mackey Wales Law in this case were paid from estate funds and that the legal fees of Mackey Wales Law were a properly incurred expense in the administration of the estate.
In the end I am not of the view that it would be appropriate for Mackey Wales Law to be joined as a party to these proceedings. I do not consider having regard to rule 13.10 of the Federal Circuit Court Rules 2001 that the wife has any reasonable prospect of success if joinder were permitted, at least insofar as her case is presently drafted.
Injunction:
The wife essentially seeks in proposed order 2 of exhibit “A2” that, pending further order, the executor be restrained from dissipating the moneys presently held on behalf of the estate.
The logic of the wife’s argument is unquestionable. If the balance of the estate moneys should be expended by way of legal fees of the executor, then such expenditure could defeat the wife’s property settlement claim.
I have already referred to the Trusts Act 1973 (Qld) in this respect, and to the usual right of a trustee to be reimbursed from the estate in relation to the proper administration expenses thereof.
There are some curious aspects of this matter that remain unexplained.
In particular, in March 2018 the parties agreed to put in place a restraining order preventing disbursement of the estate funds. However, that restraining order subsequently lapsed. It has been lapsed for over a year.
It is unclear to me whether this was a mere slip perhaps on the part of the legal representatives, or whether or not it was a deliberate decision not to pursue the continuation of the injunction. It rather strikes me as a slip, but I make no finding about it and I was not addressed on it. But it simply makes no sense that the injunction was allowed to lapse given the case the wife wants to run.
In any event, the question now is whether the injunction sought by the wife ought to be revived.
Mr Fellows submits, and I accept that, it is unclear why the injunction was allowed to lapse, or why there were such a delay in the wife applying to reinstate the injunction. I also accept his submission that the executor/trustee is entitled to indemnity from the trust as I referred to earlier.
I also accept the submissions made by Ms Dart that if any further funds are paid out of the estate moneys held in the Connolly Suthers trust account, then it is unlikely that the wife’s claimed entitlements would be able to be realised from the available funds - or at the very least there is certainly a real likelihood that such entitlements will not be able to be realised.
So I have to weigh up the balance of convenience having regard to section 114 of the Family Law Act 1975.
Mr Fellows submits that it would be unreasonable or unfair to deprive the executor of the opportunity to pay for her legal representatives in circumstances where the wife brings serious claims against her, and where although I dismiss the application to join Mackey Wales Law, nonetheless there is still a costs claim in a not insignificant amount which the wife will be bringing against the executor personally.
The executor’s affidavit filed on 23 March 2018 concedes that the remaining life insurance funds are held on behalf of the husband’s estate. She deposes that she will continue to need access to some of those funds (presently held in the Suncorp account) to pay reasonable expenses associated with the litigation, and otherwise to perform her role as director of the trustee company which has been established and as personal representative of the husband’s estate.
I accept her evidence that there are legitimate and proper expenses to be paid by the estate, and that she is entitled as trustee to defend the claims that are brought, and to defend any “unreasonable settlement proposal put forward by the wife.”
Equally, however, the wife has very limited funds herself. Her solicitor deposes that Crosby Brosnan & Creen Lawyers are effectively agreeing to conduct the litigation for the wife on the basis of a deferred payment arrangement. I refer particularly to paragraph 14 of the affidavit of Mr Davis filed on 12 August 2019.
I have some empathy for the parties, both of whom find themselves in a difficult situation (being the executor and the wife). However, it seems to me that in circumstances such as the present where there has been some cost payments made by the executor, and in circumstances where the wife is not herself able to fund her ongoing legal representation at this stage, that it is appropriate for me to put in place the restraining orders sought by the wife in relation to the balance of the estate funds.
Such an injunction does no more than put the parties on the same footing in my view, and would be otherwise proper in the interests of preserving the remaining asset base.
In that respect, I note that the executor has filed an application seeking specific relief pursuant to the Trusts Act 1973 (Qld), which it seems to me by necessary implication is:
(a)a recognition that the executor will require the court’s imprimatur to be able to pay her legal costs going forward;
or
(b)at the very least the executor wishes to have the court’s protection in relation to any payments by her going forward.
It seems to me that the question of the executor’s Trusts Act 1973 (Qld) application and the continuation of the injunction are bound up in much the same questions to be resolved - namely the question of competing priorities as between the wife on the one hand and the executor on the other. They are matters for another day, but pending further order it seems to me that I ought to make the restraining orders - not in exactly the terms sought by the wife but in similar terms. I will come to these orders again shortly.
Waiver of privilege in respect of counsel’s advice:
I turn then to the last aspect of the matter, being the executor’s alleged waiver of legal professional privilege in respect of counsel’s advice.
The wife refers specifically to the content of the executor’s affidavit filed on 23 March 2018. Relevantly, the executor deposed therein:
“7. In addition I have been seeking to obtain advice from an experienced family law barrister regarding the urgent application now commenced by [the wife], which relates to section 106B of the Family Law Act (transactions to defeat claims) or alternatively orders regarding a declaration of a constructive trust, as well as advice about my role in the management and workings of that trust company which I am the director.
8. Late yesterday afternoon I received the aforementioned family law advice. After careful consideration I now concede that the balance of the monies that remain in the Suncorp trust account referred to below, and which comprise the balance of [the husband’s] insurance policy payout, forms part of [the husband’s] estate.”
Ms Dart contends that these statements constitutes a waiver of legal professional privilege.
It is perhaps convenient to start by observing than on any reasonable view, any advice received by the executor for the purposes of the family law proceedings would prima facie be subject to a claim by her of legal professional privilege. This point has effectively been conceded by the wife. Certainly, it is my view that any such advice would have been prepared for the dominant purpose of obtaining legal advice.
So the question then is - do those paragraphs constitute a waiver?
In the course of argument I was taken both to common law considerations relevant to the waiver question and also to section 122 of the Evidence Act 1995 (Cth).
The Evidence Act 1995 only applies to the adducing of evidence at a proceeding. In relation to questions of waiver in the context of interlocutory steps such as discovery, interrogatories, subpoenas and notices to produce, I accept the submission made by Mr Fellows that the common law test applies. I am bound in that regard by the decision of the Full Court of the Family Court in Stamp v. Stamp (2007) FLC 93-314.
What then is the relevant common law test?
In Mann v. Carnell (1999) 201 CLR 1, the High Court (Gleeson CJ, Gaudron, Gummow and Callinan JJ) held that:
(a)waiver at common law may be express or implied;
(b)disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect;
(c)when an affirmative answer is given to such a question it is sometimes said that waiver is imputed by operation of law. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege;
(d)what brings about the waiver is the inconsistency which the Courts perceive between the conduct of the client and the maintenance of the confidentiality. Where necessary this may be informed by considerations of fairness - but this does not involve some overriding principle of fairness operating “at large”.
In Osland v. Secretary, Department of Justice (2008-2009) 234 CLR 275, the High Court (Gleeson CJ, Gummow, Hayden and Kiefel JJ) held at paragraph 49, page 298 of the judgment:
“Whether, in a given context, a limited disclosure of the existence, and the effect, of legal advice, is inconsistent with maintaining confidentiality in the terms of the advice will depend upon the circumstances of the case. As Tamberlin J said in Nine Films and Television Pty Ltd v. Ninox Television Ltd, questions of waiver are matters of fact and degree.”
In the course of argument, I was taken to the earlier decision of the Full Court of the Federal Court in Adelaide Steamship v. Spalvins & Ors (1998) 152 ALR 418. In that case the Court (Olney J, Kiefel J [as her Honour then was] and Finn J) held, in relation to waiver of legal professional privilege, that the relevant common law test has been modified or varied by the enactment (and content) of the Evidence Act 1995.
However, it seems to me that the Adelaide Steamship decision was expressly disapproved by the High Court of Australia in Esso Australia Resources Ltd v. Commissioner for Taxation (1999) 201 CLR 49. The High Court in that case held that the Evidence Act 1995 did not modify the common law of Australia as the Act had not been passed in all of the States and Territories of Australia.
What then has the executor said in those paragraphs which constitutes a waiver according to the common law test? With respect, it remains a mystery to me.
I do not see how the executor has relied upon, or been said to rely upon, the advice to in some way tactically advance her case. In fact, she is indicating in her affidavit that following receipt of the advice she is conceding the point that was sought to be made against her, at least insofar as the remaining life insurance are concerned – being the approximately $250,000 odd after the payment to Mackey Wales Law referred to earlier. I do not see how the executor could be said to be referring to the advice of counsel to tactically advance her position in some way; rather, the executor is conceding.
It may well be that the wife wishes to obtain the advice to see what it says. That may be so, but this is not a basis for me to order that such an advice be released on the basis of an apparent waiver of privilege.
Even if section 122 of the Evidence Act 1995 applied in relation to waiver, which it doesn’t, the executor has not waived within the meaning of that section. I do not consider that the substance of the barrister’s advice has been revealed.
The fact is that, following receipt of this advice, the executor makes a significant concession. But the advice may, for all I know, say that:
(a)only the remaining $250,000 forms part of the husband’s estate; or
(b)that the whole of the proceeds originally received from B Life Insurance ($280,000) formed part of the estate.
I do not know what is says and nor does the wife.
In my view the wife’s application to obtain the barrister’s advice is a fishing expedition and I do not see how the evidence referred to in the executor’s affidavit in any way amount to a waiver of privilege at common law or under the Evidence Act 1995 had it been applicable.
I do not consider that the advice has been used in some tactical or strategic way to advance the executor’s case – quite the contrary. In the circumstances I do not consider that the privilege has been waived.
Orders:
I make the orders set out at the commencement of these reasons for judgment. The orders are substantially based on exhibit “A2”. Where the orders refer to the “Trustee” this should be taken as a reference to the executor.
I certify that the preceding one hundred and twenty-two (122) paragraphs are a true copy of the reasons for judgment of Judge Betts
Date: 30 August 2019
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
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Evidence
Legal Concepts
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Injunction
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Costs
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Privilege
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Jurisdiction
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Remedies
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Summary Judgment
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