Christopher David Hall as beneficiary of the estate of Alwyn Hall v Michael Andrew Hall as Executor of the Estate of Alwyn Hall
[2023] WASC 342
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: CHRISTOPHER DAVID HALL as beneficiary of the estate of ALWYN HALL -v- MICHAEL ANDREW HALL as Executor of the Estate of ALWYN HALL [2023] WASC 342
CORAM: HOWARD J
HEARD: 4 SEPTEMBER 2023
DELIVERED : 8 SEPTEMBER 2023
FILE NO/S: CIV 1856 of 2022
BETWEEN: CHRISTOPHER DAVID HALL as beneficiary of the estate of ALWYN HALL
Plaintiff
AND
MICHAEL ANDREW HALL as Executor of the Estate of ALWYN HALL
First Defendant
MICHAEL ANDREW HALL
Second Defendant
PETER LESLIE HALL
Third Defendant
Catchwords:
Application by beneficiary of Estate for Orders under s 94 of the Trustees Act 1962 (WA) and O 58 r 2 of the Rules of the Supreme Court 1971 (WA) - Whether beneficiary requires Leave to commence derivative action against defendant qua Executor or personally - Discretion to make orders sought - Solicitors acting for a party in potentially conflicting capacities - Application dismissed
Legislation:
Guardianship and Administration Act 1990 (WA)
Trustees Act 1962 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr R J Nash |
| First Defendant | : | Mr P A Nevin |
| Second Defendant | : | Mr P A Nevin |
| Third Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Croftbridge |
| First Defendant | : | Taylor Smart |
| Second Defendant | : | Taylor Smart |
| Third Defendant | : | No appearance |
Case(s) referred to in decision(s):
Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109
Lidden v Composite Buyers (1996) 67 FCR 560
Miller v Taylor [2018] WASC 75
Ramage v Waclaw (1988) 12 NSWLR 84
Re Beddoe [1893] 1 Ch 547
Shephard v Galea and Byrne as Executors and Trustees of the Estate of the late Joseph Galea [2019] WASC 164
TAL Life v Shuetrim (2016) 91 NSWLR 439
Woodley v Woodley [2018] WASC 333
HOWARD J:
The parties
In the broad, this Application concerns disputes between brothers over the assets of their parents, Kenneth (Ken) Hall (who died on 5 May 2016) and his wife, Alwyn Hall (who died on 2 July 2021), and the administration, in particular, of Alwyn's Estate.
Christopher (Chris) David Hall is the plaintiff in an Amended Originating Summons dated 28 February 2023 (Amended Originating Summons). Michael Andrew Hall is sued as Executor of the Estate of Alwyn (as the first defendant), and in his personal capacity (as the second defendant). Peter Leslie Hall is the oldest son/brother and is the third defendant.
Without intending any disrespect, I will from here refer to the parties and their parents by their first names.
It appears that Peter has been served with the initial Originating Summons[1] but has not entered an appearance in this Court, and took no part in this Application.
[1] Affidavit of Process Server (Mark Edward Docker) made 18 November 2022.
At the time of this Application being heard, Peter is to turn 72 next month, Chris is 65 years old and Michael is 57 years old.
Pertinently and with characteristic colour, Martin J said in 2019:
… the harsh commercial reality of litigation is that disgruntled adult children litigating over assets of their deceased parents is a well recognised source of disharmony and family breakdown.
…
More family litigation is a bad thing for society and for community harmony more generally. It brings discord and fragmentation that destroys families.
Shephard v Galea and Byrne as Executors and Trustees of the Estate of the late Joseph Galea [2019] WASC 164 [190], [191].
With respect, it may be questioned whether litigation between family members is causative of disharmony and family breakdown or merely correlative.
In any event, one can safely observe that serious disputation between siblings is pre-historically and historically well established if one considers, for example, the tales of Romulus and Remus or Cain and Abel from two different belief systems.
The Application
By the Amended Originating Summons, Chris seeks a range of orders, effectively, against Michael either qua Executor or in his personal capacity.
For present purposes it suffices to say that the Application broadly concerns three discrete topics, or areas of disputation.
Firstly, loans made by Ken and Alwyn to Michael to enable him to purchase and then retain a property in Shelley.
Secondly, moneys spent to install solar panels and air-conditioning at Alwyn's property located at Carron Road, Applecross (Alwyn's Applecross Property) at a time when Michael and his family were living at that property. Throughout, I refer to Alwyn's Applecross Property to mean the one she was principally living in during the relevant times, and the one into which Michael and his family moved. It was ultimately left to Michael by Alwyn's Will dated 12 December 2016 (Alwyn's 2016 Will).
Thirdly, Michael and his family living at Alwyn's Applecross Property without paying rent at a time when Alwyn was no longer capable of managing her own affairs and, or, was living in an aged care facility.
The evidence at the hearing
Chris read his affidavits made:
1.4 August 2022 with attachments CDH-1 - CDH-20;
2.23 February 2023 with attachment CDH-1; and
3.31 August 2023.
Michael read:
1.his affidavit made 23 January 2023 with annexures MAH‑1 - MAH‑11; and
affidavits of Selena Faye Gates (a solicitor at Taylor Smart) made:
2.28 February 2023 with annexures SFG-1 - SFG-2;
3.3 May 2023 with annexures SFG-1 - SFG-2;
4.16 May 2023 with annexures SFG-1 - SFG-3; and
5.14 August 2023 with annexures SFG-1 - SFG-7.
There were no objections taken to the above affidavits and they were taken into evidence.
Factual background
The following do not appear to be seriously in dispute, or are common. I am not now making any final findings of fact, and have assumed them to be the case for the purposes of this Application only.
In 1999 Ken and Alwyn lent Michael $20,000 to buy the Shelley property.
On 11 March 2005 both Ken and Alwyn made Wills. Both Wills contained a cl 6 which provided:
I DIRECT that any debt owing to myself or PETER, CHRISTOPHER and MICHAEL as at the date of my death be forgiven, by my Trustees on behalf of my Estate.
Ken's Will appointed Alwyn to be the Executrix and Trustee of his Will and by cl 3 gave her all of his real and personal property. For the purposes of this Application only it appears that (quoted above) 'forgiveness' in cl 6 of Ken's Will only became operative if Alwyn predeceased him or did not survive him for 28 days.
Ken and Alwyn's 2005 Wills were prepared by the firm Taylor Smart. Further, it appears that Ken wrote notes to those solicitors which, in part, appeared to explain certain instructions he had given in relation to his 2005 Will, including an explanation for cl 6.
In 2010 Ken and Alwyn lent Michael a further $200,000 to enable him to retain the Shelley property in a matrimonial settlement.
On 5 May 2016 Ken died.
In June 2016 Michael and his family moved into Alwyn's Applecross Property.
On 27 June 2016 Michael was appointed Alwyn's attorney pursuant to an enduring power of attorney (Enduring Power of Attorney).
The Enduring Power of Attorney was to continue in force notwithstanding any subsequent legal incapacity of Alwyn.
As noted, on 12 August 2016 Alwyn made her 2016 Will. In it she:
1.revoked all former testamentary dispositions;
2.appointed Michael to be the Executor and Trustee of her Will;
3.released Peter, Chris and Michael from 'any debt or interest owing thereon to me at the date of my death': cl 5.
Alwyn's 2016 Will and the Enduring Power of Attorney of 27 June 2016 were prepared by the firm Taylor Smart.
In May 2020 Michael sold the Shelley property but did not repay any loan funds to Alwyn.
On 2 July 2021 Alwyn died, and on 24 September 2021 probate of her 2016 Will was granted to Michael.
The Statement of Assets and Liabilities for Alwyn's Estate was annexed to Michael's application for probate in this Court. It deposed to there being movable assets in excess of $3.3 million and real property in the total value of $5.98 million. After the deduction of funeral expenses, which appear to be the only liabilities of the Estate, the value of the net Estate was comfortably in excess of $9.3 million.
Without needing to go into the details, after specific gifts of real property in Applecross to each of Michael (being Alwyn's Applecross Property valued in the Statement of Assets and Liabilities at $2.4 million), Chris (valued in the Statement at about $1.55 million) and Peter (valued in the Statement at $1.73 million), the 2016 Will made some other specific gifts and gave the residue of Alwyn's Estate to Peter, Chris and Michael equally.
There is a conflict on the affidavits between Chris and Michael as to what was Alwyn's capacity at certain points in time. There does not appear to be any contention that Alwyn's 2016 Will was affected by a lack of capacity. It appears further that it is accepted that there was a confirmed diagnosis of Alzheimer's disease in September 2018.
The Application in more detail
The plaintiff seeks relief in the Amended Originating Summons under s 94 of the Trustees Act 1962 (WA) and, or, pursuant to O 58 r 2 of the Rules of the Supreme Court 1971 (WA).
Order 1 of the Amended Originating Summons seeks this Court 'review' whether Michael qua Executor 'is justified in not seeking relief from, or advancing a claim against' Michael personally 'for the benefit of Alwyn's Estate' 'for compensation, or other equitable relief for breach of fiduciary duty arising from':
1.the loan for the Shelley property which (is said) became due and payable on about 28 May 2020 (when Michael sold the Shelley property) at a time when Alwyn was no longer capable of managing her own affairs and Michael was her attorney pursuant to the Enduring Power of Attorney;
2.moneys that Michael (is said to have) accessed from Alwyn's bank account under her Enduring Power of Attorney for the purpose of installing solar panels and air-conditioning at Alwyn's Applecross Property when Alwyn was living in an aged care facility and had little (or no) prospect of returning to the Applecross Property; and
3.Michael (together with his immediate family) living at Alwyn's Applecross Property at a time when Alwyn was no longer capable of managing her own affairs and, or, Alwyn was residing in an aged care facility and Michael was her attorney under the Enduring Power of Attorney.
Order 2 of the Amended Originating Summons seeks this Court to Order or direct Michael qua Executor to take all necessary steps to recover from himself (personally) money to reflect:
1.the 'unpaid loans' plus interest (this is quantified at $275,514.73 plus interest on that sum at the rate of 6% pa from 28 May 2020);
2.the money that Michael (is said to have) accessed from Alwyn's bank account to make improvements to the Applecross Property; and
3.market rent for Michael and his family's occupation of Alwyn's Applecross Property from the time Alwyn moved into aged care and was no longer capable of managing her own affairs until the date of Alwyn's death.
Order 3 seeks as an alternative to Order 2, that Chris be given leave to commence proceedings in the name of Alwyn's Estate by way of a derivative action to seek relief against Michael (personally) for each of the three matters in Order 2. In Order 3(c) the sum of $115,934 is nominated as the damages or compensation for the market rent.
Order 4 of the Amended Originating Summons seeks orders:
1.requiring Michael to provide an account for dealings and transactions undertaken by him as Alwyn's attorney during her lifetime; or alternatively
2.requiring Michael qua Executor to take all necessary steps and actions to seek from Michael personally the same account.
Lest there be any doubt, Michael in both his capacities does not accept the factual or legal basis of the 'claims' which Chris seeks to advance through the various Orders sought in the Amended Originating Summons.
Further, and it perhaps goes without saying, it appears plain that Michael qua Executor will not take any action against himself personally in relation to any of the matters agitated by Chris in the Amended Originating Summons. Michael's counsel at the hearing confirmed that was the case.
Relief sought in the Amended Originating Summons considered
For the purposes of this Application I am prepared to assume that this Court has power to make any or all of the Orders sought in the Amended Originating Summons. At least in relation to some of the Orders sought, I do have some reservations that is the case (for example Order 1 is uncommon and presents as something of a reverse 'Beddoe'[2] application).
[2] Re Beddoe [1893] 1 Ch 547.
In any event, by the conclusion of the hearing Michael accepted that the Court had power or jurisdiction to make the Orders sought.
However, without descending into the particulars of the parties' positions, there are disputes as to some of the factual or legal bases of the 'claims' which Chris seeks to advance. Those disputes would have to be resolved by this Court in contested proceedings. Neither party suggested that such contested proceedings would not best proceed on a pleaded basis.
I also note that Alwyn's Estate is of significant value and by any measure both Chris and Michael were handsomely provided for by Alwyn's 2016 Will.
I also observe that the apparent quantum of the claims in the three disputed topics are modest compared with the size of Alwyn's Estate and the property which Chris and Michael are to (or have) receive/d pursuant to Alwyn's 2016 Will.
There is no suggestion before the Court, and it is difficult to imagine how it might be said, that Chris lacks the wherewithal or motivation to continue to agitate the disputed matters against Michael.
In all of the circumstances, where the matters would have to be resolved in contested proceedings of one sort or another if they are pursued, then even if the power to make Orders in terms of the Amended Originating Summons were available (which I have assumed), I would not exercise the discretion to grant any of the Orders sought in the Amended Originating Summons.
In short, even if I were to grant Orders in the form of Orders 1, 2 and/or 3, further orders would need to be made, or proceedings commenced, to enable the disputes to be resolved in what would essentially be inter partes litigation.
Order 3 of the Amended Originating Summons
In addition to the general comments I have made about the relief sought above, there are some additional observations I wish to make about Order 3. In short, my view is that Chris does not require leave should he wish to commence proceedings in relation to the three matters set out in Order 3 of the Amended Originating Summons.
In my view, a beneficiary such as Chris may bring proceedings in their own name in special or exceptional circumstances where the proceedings ought otherwise have been brought by the trustee: Ramage v Waclaw (1988) 12 NSWLR 84, 91 ‑ 93 (Powell J); Lidden v Composite Buyers (1996) 67 FCR 560, 563D ‑ 564D (Finn J); Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109 [55] (Gleeson CJ, Gummow & Hayne JJ); TAL Life v Shuetrim (2016) 91 NSWLR 439 [53] ‑ [55] (Leeming JA for the Court); Woodley v Woodley [2018] WASC 333 [50] ‑ [51] (Tottle J).
Chris, by his Reply Submissions and at the hearing, accepted that he did not require the Court's leave to commence a derivative action in these circumstances.
It may be readily concluded that special or exceptional circumstances may arise where the putative action (not taken) would be by the trustee (or fiduciary) against themselves.
Of course, an effect of Order 3 as sought in the Amended Originating Summons would be to authorise Chris to sue Michael, in his personal capacity, with the risk of costs being on Alwyn's Estate and not on Chris personally.
As noted, it appears that Chris has the financial wherewithal to commence proceedings without the resources of Alwyn's Estate.
Another factor which I consider weighs against the exercise of discretion now is that, ultimately, if Chris were to sue Michael and succeed 'on behalf' of Alwyn's Estate then I apprehend it would be within both the Court's discretion as to costs and its general supervisory jurisdiction, at that point, to make orders to ensure that Chris was not out of pocket.
In the course of the hearing (after taking instructions), counsel stated that Chris would be content for his proposed Order 3 to be modified so as to make it plain that he was not seeking to have the costs of any proceedings against Michael paid out of Alwyn's Estate pending their final determination.
Further, counsel for Michael, after taking instructions, said that Michael would not seek to take any point as to Chris's standing to sue him on a preliminary or interlocutory basis if Chris commenced proceedings against him.
In response, counsel for Chris stated that his preference was for any question of standing to be determined on a preliminary basis rather than (potentially) becoming part of the Court's final determination as occurred, for example, in Woodley v Woodley or Shephard v Galea and Byrne.
On balance, noting that any subsequent proceedings would need to be pleaded (and that there was no draft pleading before the Court), I think it better not to attempt to finally determine Chris's standing issue. I think, also, in light of the authorities I have cited, such a determination is presently not necessary.
Order 4 of the Amended Originating Summons
By comparison with the confined nature of the three matters advanced to do with the loans, the improvements and the rent, Order 4 smacks as something of a residual 'grab-all'.
It is not at all clear to me that there is any evidential foundation for such a general review.
In response, counsel for Chris submitted that the proposed Order 4(b) would require Michael qua Executor to make an application under s 109(1) of the Guardianship and Administration Act 1990 (WA).
In response, counsel for Michael submitted, and I think, with respect correctly, that Chris was able to commence such an application under s 109(1) of the Guardianship and Administration Act himself now; and so no need for this Court's order had been demonstrated.
Another matter: Position of the solicitors for the first and second defendants
Taylor Smart filed an appearance on behalf of both the first and second defendants - ie, for Michael qua Executor and for him personally, and filed submissions (and affidavits) in this Application without distinguishing between his capacities.
I have already noted that Taylor Smart drafted: the 2005 Wills of Ken and Alwyn; Alwyn's Enduring Power of Attorney; and Alwyn's 2016 Will. They were also the solicitors who apparently received the written instructions from Ken to which I referred above.
Where Chris alleges that Michael qua Executor of Alwyn's Estate is not taking appropriate action against himself personally, there is, at the least, a potential conflict in Michael's two capacities. Counsel for Michael accepted that was so.
Counsel for Michael did not argue that Taylor Smart consequently owed potentially conflicting duties to Michael qua Executor and to him personally.
Leaving aside this Court's important supervisory jurisdiction over its officers for a moment, Taylor Smart's potential conflict of duties is of moment.
From the material before this Court it does not appear that Michael qua Executor has had the benefit of advice independently of advice he appears to have received personally from the solicitors. Counsel for Michael accepted that was so. Nor, in assessing the Application has this Court had the benefit of submissions made independently on behalf of Michael qua Executor.
Considering these matters, it appears to me to be imprudent, at the least, for Taylor Smart to purport to act for Michael in his two potentially conflicting capacities.
In response, Michael's counsel pointed to Miller v Taylor [2018] WASC 75 [427] (Curthoys J) as being to the effect that the modern position was there was no difficulty with the same firm representing both the executor and a beneficiary where the executor is 'in the camp of the beneficiaries'.
In my view, with respect, the observations of Curthoys J in that case cannot be taken in the way Taylor Smart appears to have in this case. They were specific, I would suggest, to that trial. His Honour was not seeking to state any general principle.
While it may be the case that in a particular estate trial it is unnecessary for the executor to be separately represented if the beneficiaries are, effectively, proper contradictors, that does not mean that solicitors in estate matters are held to some different standard as to avoiding conflicting duties or interests.
In my view, Michael ought give consideration to, and be given advice as to, his position and obligations qua Executor and to his conflicting capacities.
At this point in time, I consider it is sufficient to raise this obvious matter without making any further order in relation to Taylor Smart presently.
Disposition
For the above reasons, I would dismiss Chris's Amended Originating Summons. I will hear the parties as to the appropriate orders to be made.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JR
Associate to Hon Justice Howard
8 SEPTEMBER 2023
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