Cicvaric v Blazevic
[2024] VSC 450
•31 July 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2023 04426
IN THE MATTER of the estate of ZVONKO CICVARIC, deceased
- and –
IN THE MATTER of an application under s 34 of the Administration and Probate Act1958 and s 48 of the Trustee Act1958
BETWEEN:
| IVAN CICVARIC | Plaintiff |
| v | |
| MARIA BLAZEVIC (IN HER CAPACITY AS EXECUTOR AND TRUSTEE OF THE ESTATE OF THE ABOVE NAMED DECEASED) | Defendant |
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JUDGE: | Goulden AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 May 2024 |
DATE OF JUDGMENT: | 31 July 2024 |
CASE MAY BE CITED AS: | Cicvaric v Blazevic |
MEDIUM NEUTRAL CITATION: | [2024] VSC 450 |
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ADMINISTRATION AND PROBATE — Application to remove executor — Administration and Probate Act 1958, s 34 — Trustee Act 1958, s 48 – Whether executor unfit to remain in office – Whether executor entitled to pay her legal costs incurred in resisting removal application from the estate in advance of the determination of that application and the making of an order that she be indemnified from the estate – Application for orders for an account under Order 52 of the Supreme Court (General Civil Procedure) Rules 2015.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N Baum of counsel | Sinisgalli Foster Legal |
| For the Defendant | Mr T Fleming of counsel | Stern Legal |
TABLE OF CONTENTS
Background
Remedy sought in the proceeding
The course of the administration prior to the commencement of the proceeding
The defendant’s first attempt to sell the Vermont property in late 2022
Damage to the Vermont property and the cost of repairs
The request to distribute the estate property in specie
The investigation of the Croatian assets
Steps taken in the administration subsequent to the commencement of the proceeding
The defendant’s further attempt to sell the Vermont property
Should the defendant be removed as executor?
Powers of removal
Ground One – Failure to transfer the Vermont property promptly following the November 2022 Request
Ground Two – The defendant’s approach to the beneficiaries
Ground Three – Unreasonable delay in the whole administration
Ground Four – Unreasonable pursuit of the investigations of overseas assets
Ground Five – Excessive costs incurred in the administration of the estate
Costs of the first attempted sale of the Vermont property
Costs of the deed of family arrangement negotiations
Costs of the further attempted sale of the Vermont property
Payment of costs of the removal application prior to the determination of the proceeding
Ground Six – Failure to insure the Vermont property
Ground Seven – The defendant is a qualified lawyer and previously acted in respect of wills and estates
Conclusion on the issue of removal
Costs of the proceeding
Repayment of costs improperly incurred and charged to the estate
The plaintiff’s application for orders for an account under Order 52 of the Rules
Disposition
HER HONOUR:
The plaintiff seeks orders for the removal of the defendant as executor and trustee of the estate of the deceased, Mr Zvonko Cicvaric. The deceased passed away on 14 April 2022.
The plaintiff is one of three brothers of the deceased, and the only brother resident in Australia. He seeks a grant of letters of administration with the will annexed in the event that orders are made removing the defendant.
Background
On 3 December 2004, the deceased made his last will by which he:
(a)revoked all former wills and testamentary dispositions;
(b)appointed the defendant to be his executor and trustee; and
(c)left the whole of his estate, after payment of expenses, to his mother, and if she predeceased him, equally between the plaintiff and his two other brothers, Mr Ante Cicvaric and Mr Josip Cicvaric.
The defendant prepared the will for the deceased when she was working as a solicitor. The defendant is not a beneficiary.
It is uncontroversial that the deceased’s mother predeceased him, so the gift under the will was to his three brothers.
Probate was granted to the defendant on 10 November 2022. The inventory filed by the defendant in the application for the grant of probate records the estate as then comprising:
(a)a real property at 6 Kensington Gardens, Vermont, more particularly described in certificate of title volume 10179, folio 345 (‘the Vermont property’), valued at $1,215,000;[1]
(b)a personal estate valued at $326,232.18; and
(c)no liabilities.
[1]In some documents, the property is referred to as ‘6 Kensington Gardens, Vermont South’, but will herein be referred to as the Vermont property.
At the time she obtained probate, the defendant was no longer working as a solicitor and no longer held a practising certificate. She does remain on the roll of practitioners in Victoria.
By letter sent to the defendant’s solicitors, Stern Legal, on 29 November 2022, the three beneficiaries requested that the estate’s property, including the Vermont property, be transferred to them in specie and otherwise distributed to them (‘November 2022 Request’). Notwithstanding that request, the defendant did not transfer the Vermont property to the beneficiaries for approximately 16 months following receipt of the November 2022 Request, and has not otherwise distributed any other part of the estate to them. It was only in March 2024 that the defendant transferred the Vermont property in specie to the beneficiaries, and reimbursed the plaintiff for certain costs relating to the deceased’s funeral (which occurred in April 2022). The estate has not been finalised as at the date of the hearing of this proceeding.
The defendant’s administration account,[2] shows that since assuming the executorship, the defendant has spent $187,166 in estate funds, including $120,425,[3] in legal fees.
[2]The administration account was filed in the related probate proceeding S PRB 2022 19786 and exhibited as part of Exhibit IC-3 to the Affidavit of the plaintiff affirmed 15 April 2024 (‘Third Cicvaric Affidavit’), 193-195 (‘Administration Account’) (the pages erroneously bear the numbers 183 to 185).
[3]This is the sum of disbursement items 9, 10, 11, 16, 18 and 26 in the Administration Account.
Remedy sought in the proceeding
The plaintiff seeks orders, amongst others, for the removal of the defendant as executor of the estate pursuant to s 34(1)(c) of the Administration and Probate Act 1958 (‘A&P Act’) and as trustee of the deceased’s estate under s 48(1) of the Trustee Act 1958 (‘Trustee Act’). The plaintiff seeks orders that he be appointed as administrator and trustee of the estate in place of the defendant. Consequential orders are sought to ensure, amongst other things, the transfer and vesting of the assets of the estate in the new administrator and trustee, and for delivery up of estate records. The plaintiff also seeks an order for an account to be taken pursuant to Order 52 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’).
The plaintiff submits there are multiple grounds for the Court to remove the defendant as executor and as trustee, as follows.
(a)first, her failure to transfer the Vermont property promptly following the November 2022 Request, which, it is said, constitutes an unwarranted delay in the administration of the estate;
(b)second, the defendant’s unsatisfactory approach to and engagement with the beneficiaries, which it is said, is exemplified in the correspondence sent on her behalf. This includes the positions which the defendant has taken in relation to the administration of the estate (which are said to be unreasonable), the strong form of words used, and certain unjustified allegations made, against one or more of the beneficiaries in that correspondence;
(c)third, the overall delay in the administration — the deceased died over two years ago, probate was granted over 18 months ago, the estate is simple and the terms of the will, simple and clear, and the wishes of the beneficiaries were clearly expressed, yet all of the estate (other than the Vermont property) remains undistributed;
(d)fourth, the pursuit of ‘investigations’ into the existence of potential property in Croatia are said to be unreasonable in circumstances where the defendant knew about the deceased’s minority interest in a single Croatian property from the outset (the other interests in which are held by the other beneficiaries), where her investigations turned up no other assets despite taking some months to complete, and where the beneficiaries had specifically instructed her not to pursue those investigations;
(e)fifth, the costs incurred in the administration by the defendant, including legal costs, which exceed $120,000 (or approximately 10% of the value of the estate), and the costs of preparing the Vermont property for sale (on multiple occasions), are said to be excessive and contrary to the beneficiaries’ wishes;
(f)sixth, the failure to insure the Vermont property in circumstances where it is said that doing so is an incidence of her duty to preserve the estate property, and where damage to the Vermont property did, in fact, occur; and
(g)seventh, which was described in closing as more of an aggravating factor than a stand-alone ground, that the defendant is a trained solicitor, admitted to the profession and having practised in wills and estates, she ought to have a greater understanding of her fiduciary obligations to the beneficiaries.
The defendant opposes her removal, and the orders seeking an account under Order 52 of the Rules. She submits in answer to the plaintiff’s case that she has acted in good faith in the exercise of her duties, including when she made the decisions to prepare the Vermont property for sale. She submits that the power of the Court to remove an executor is a discretion that should not be exercised lightly. She explains that any delay in the administration has largely arisen from the failure of the beneficiaries to provide verification of their identities when requested by her to enable execution of a deed of family arrangement to effect a distribution to them. She submits that insisting on verification was a prudent step given she did not know the family members at all and she was at risk in permitting a transfer (whether under a deed or otherwise) without that verification. She also says that the process of dealing with the deceased’s overseas assets contributed to the time taken to administer the estate.
The course of the administration prior to the commencement of the proceeding
A level of suspicion (on both sides) is palpable in all of the communications exchanged between the plaintiff and the defendant and their respective legal representatives following the death of the deceased, the location of his will and the identification of the defendant as named executor.
On the side of the plaintiff and his family, that suspicion appears to be founded in the apprehension that the defendant sought the appointment solely to profit from her office by way of executor’s commission. Prior to the defendant's application for a grant of probate, the beneficiaries told the defendant they did not wish for her to administer the estate,[4] and accused her of seeking a grant for the improper ‘purpose of claiming commission’.[5] The plaintiff also lodged a caveat with the Registrar of Probates, and sought the defendant’s agreement to step aside, threatening to oppose her appointment and apply to have her passed over as executor.[6]
[4]Exhibit IC-1 to the affidavit of the plaintiff affirmed 20 September 2023 (‘First Cicvaric Affidavit’), 25, 27-29, 42-55, 45, 46-7, 48-9, 55-60.
[5]Exhibit IC-1 to the First Cicvaric Affidavit, 55-60.
[6]Exhibit IC-1 to the First Cicvaric Affidavit, 55-60.
On the part of the defendant, it appears her suspicions concerning the beneficiaries were founded in the deceased having deliberately chosen not to appoint any of his brothers to the role of executor, a question in her mind as to whether what the beneficiaries wanted was consistent with the testamentary wishes of the deceased, and whether each beneficiary wanted the same outcome as the others;[7] in particular, whether the plaintiff was unduly influencing one or both of his brothers.[8]
[7]See paragraph [13(d)] of the letter dated 25 August 2022 from the defendant to the beneficiaries’ lawyers, Exhibit IC-1 to the First Cicvaric Affidavit, 33.
[8]See paragraph ‘e’ under the heading ‘Outstanding Matters’ in the defendant’s solicitors’ letter dated 26 April 2023, Exhibit IC-1 to the First Cicvaric Affidavit, 123.
In the end, it is likely that none of these suspicions was well-founded,[9] but it does not matter, for those suspicions coloured the relationship between the executor and the beneficiaries for the duration of this administration and have undoubtedly contributed to the events that have ensued.
[9]The defendant has deposed that executor's commission is ‘of no interest to me’ and that she never advised the deceased that she had the intention of exercising a right to executor's commission: Affidavit of Maria Blazevic sworn 23 January 2024, [7], [16] (‘Blazevic Affidavit’). She confirmed that evidence under cross-examination — see Transcript of Proceedings, Cicvaric v Blazevic (Supreme Court of Victoria, S ECI 2023 04426, Goulden AsJ, 2 May 2024) T47.8 (‘Transcript’).
The defendant’s first attempt to sell the Vermont property in late 2022
By their former lawyers, Ferdinand Zito & Associates, the beneficiaries wrote to the defendant by email dated 22 August 2022 and required that she:
… cease and desist from engaging in any activity whatsoever purporting to represent the deceased until such reasonable time has been taken to properly assess the situation and the desirability or otherwise of [her] continued involvement.[10]
[10]Exhibit IC-1 to the First Cicvaric Affidavit, 25.
In her letter reply dated 25 August 2022, the defendant explained that on 9 August 2022, she had inspected the Vermont property and as a result, had organised for tradesmen to attend to undertake works to prepare it for sale. She also explained that, in anticipation of being granted probate, she had listed the property for sale by auction to be held on 1 October 2022.[11] Despite the request in the letter of 22 August 2022, the defendant did not, in her response, provide any assurance that she would not proceed with the sale.
[11]Exhibit IC-1 to the First Cicvaric Affidavit, 33 [14]-[15].
On 6 September 2022, the plaintiff filed a caveat with the Registrar of Probates in relation to the deceased’s estate. The beneficiaries had also by this time instructed new solicitors, Sinisgalli Foster Legal, who wrote to the defendant on 7 September 2022. That letter referred to works having been occurring at the Vermont property since the 22 August letter had been sent.[12] The 7 September letter stated unequivocally that:
The residuary beneficiaries do not wish [the defendant] to proceed with the sale of the [Vermont] property at the present time and request that [she] withdraws the [Vermont] property from sale.[13]
The letter sought, amongst other things, an acknowledgment from the defendant that the Vermont property would be withdrawn from sale. In support of the request, and to allay any concern the defendant may have had that she might be held responsible for a diminution in value by reason of the sale being deferred, the beneficiaries gave an assurance they would not hold her so responsible.
[12]The letter also suggested, and the plaintiff made the point in his submissions, that the locks had been changed at the Vermont property after receipt of the 22 August letter. However, the locksmith’s invoice included in the Administration Account dates the locksmith’s work to 9 August 2022, well before the 22 August letter.
[13]Exhibit IC-1 to the First Cicvaric Affidavit, 28.
Despite this assurance, the defendant gave no acknowledgment in any response to this request that the Vermont property would be withdrawn from sale in compliance with the beneficiaries’ wishes. Instead, in an email from her solicitors, she challenged the authority of the beneficiaries’ lawyers to make the request on behalf of all three of them.[14] Once further assurances about that authority had been provided,[15] the ensuing communications principally concerned the plaintiff’s caveat, with the defendant’s solicitors’ letter dated 9 September 2022 stating variously that ‘the lodgement of the caveat indirectly precludes the sale of the [Vermont property] progressing as planned’,[16] and ‘[t]he filing of your client’s caveat has the practical effect of preventing the scheduled sale of the subject property’.[17] It was submitted, and I accept based upon the statements to this effect in the correspondence and the defendant’s subsequent conduct, that the reason the sale did not occur in October 2022 as originally planned was not because the defendant took the beneficiaries’ expressed wishes into account, but rather because that was the practical effect of the caveat.
[14]Exhibit IC-1 to the First Cicvaric Affidavit, 30.
[15]Exhibit IC-1 to the First Cicvaric Affidavit, 35-7, 41.
[16]Exhibit IC-1 to the First Cicvaric Affidavit, 38.
[17]Exhibit IC-1 to the First Cicvaric Affidavit, 40 [7].
By further letter dated 2 November 2022, the beneficiaries’ solicitors identified various alleged failures by the defendant in complying with her duties as executor, including the fact that she was not considering their interests in pursuing a sale of the Vermont property.[18] These failures were alleged to have occurred in the very short time in which the defendant had been acting as executor and prior to the grant of probate. In regard to the Vermont property and the beneficiaries’ wishes that it not be sold, the letter stated:
Critically, your client seems not to have appreciated that our clients, as residuary beneficiaries of the estate, may wish to have the estate property appropriated to them in partial satisfaction of their entitlements under the will in accordance with s 46 of the Administration and Probate Act 1958. This is especially so where the estate has funds available to meet the estate's expenses. Your client ought to have inquired whether our clients wished to have the property appropriated to them before taking steps to sell the property.[19]
[18]Exhibit IC-1 to the First Cicvaric Affidavit, 55-60.
[19]Exhibit IC-1 to the First Cicvaric Affidavit, 59.
The plaintiff’s caveat ultimately lapsed, and he did not pursue any application to pass over the defendant. Accordingly, in mid-November 2022, the defendant obtained a grant of probate. Despite the repeated requests she had received in correspondence from the beneficiaries’ solicitors by that time asking her not to sell the Vermont property, she again proceeded to list the Vermont property for sale, this time by auction scheduled for 17 December 2022.[20]
[20]The details of the auction are set out in an email from the beneficiaries’ solicitors dated 29 November 2022, at Exhibit IC-1 to the First Cicvaric Affidavit, 65.
Learning that the property was again listed for sale, on 29 November 2022, the beneficiaries’ solicitors sent an email to the defendant’s solicitor requesting that the Vermont property be immediately withdrawn from the market.[21] That email also enclosed the November 2022 Request, addressed to the defendant and signed by each of the beneficiaries electronically, which included a request for, amongst other things, the Vermont property to be distributed to them in specie. The November 2022 Request also sought distribution of the remaining cash balance after payment of the executor’s expenses.
[21]Exhibit IC-1 to the First Cicvaric Affidavit, 65.
By her solicitors’ letter dated 30 November 2022, the defendant agreed to ‘temporarily postpone the sale’ of the Vermont property.[22] No assurance was given that the property would not be re-listed for sale, which ultimately occurred in early 2024 without notice to the beneficiaries, as explained further below. The defendant agreed to the temporary postponement to allow time for various matters connected with the administration of the estate to be worked through to the defendant’s satisfaction and made the subject of a deed of family arrangement that would be considered by the defendant. Those matters included:
(a)a request that evidence be provided of the death of the deceased’s mother;
(b)a request that each beneficiary provide an unequivocal request for the transfer of their share in the Vermont property in specie (in an appropriately notarised form if made by a foreign resident), together with an attestation that the request was being made of their own free will and free from duress;
(c)the investigation of the deceased’s interests in any overseas property (in respect of which the beneficiaries were asked to provide information concerning any interest of the deceased in any overseas assets); and
(d)a request for itemisation and proof of payment of funeral expenses by the plaintiff for the purposes of reimbursement.[23]
The defendant requested that, in the meantime, she be free to continue her work in performing her duties as executor.[24]
[22]Exhibit IC-1 to the First Cicvaric Affidavit, 66.
[23]Exhibit IC-1 to the First Cicvaric Affidavit, 66-9.
[24]Exhibit IC-1 to the First Cicvaric Affidavit, 67 [3].
Damage to the Vermont property and the cost of repairs
In March 2023, the ceiling in the family room and kitchen of the Vermont property collapsed. Photographs of the damage were tendered in evidence.[25] By letter dated 4 April 2023 from their solicitors, the beneficiaries referred to the ceiling collapse. The letter stated:
In this regard, we have learned that the ceiling in the loungeroom and kitchen has collapsed at [the Vermont property] and the insurer needs to be notified, so that the repairs can be quantified and repair costs can be agreed. As you are aware, the brothers wish to renovate the property before selling it within the two-year period of Zvonko's death. They would like to have access to the property as soon as possible so the insurance damage can be assessed and the repair costs agreed. Our clients wish to be responsible for the repairs, seeking to incorporate them into the renovation of the property.[26]
[25]See Exhibit IC-2 to the affidavit of the plaintiff affirmed 12 February 2024 (‘Second Cicvaric Affidavit’), 6-10.
[26]Exhibit IC-1 to the First Cicvaric Affidavit, 117.
The defendant gave rambling and irrelevant answers when pressed under cross-examination as to whether she knew if there was insurance on the Vermont property, although she did concede she never purchased insurance herself,[27] and never paid any premium to extend any existing coverage.[28] She said in response to questioning about the 4 April 2023 letter that she thought there was a ‘possibility’ the plaintiff had taken out insurance over the Vermont property,[29] though she did not contact him to ask.[30]
[27]Transcript, T49.2, T52.16-18.
[28]Transcript, T50.20, T51.5.
[29]Transcript, T53.21-22.
[30]Transcript, T53.23-25.
The defendant gave evidence that she arranged for the repair works to be undertaken in or about March 2023,[31] with the costs of the repairs ($7,975) charged against the estate. Item 17 in the Administration Account is a disbursement for ‘Ceiling Plaster Repairs’ undertaken in 2023,[32] and is the subject of invoice number 20230524 issued by ‘James’ Total Property Maintenance’ on 24 May 2023.[33] No claim was made on any policy of insurance.
The request to distribute the estate property in specie
[31]Transcript, T53.26-27.
[32]Administration Account, Exhibit IC-3 to the Third Cicvaric Affidavit, 184.
[33]Exhibit IC-3 to the Third Cicvaric Affidavit, 189.
As noted above, on 29 November 2022, under cover of their solicitors’ email, the beneficiaries provided the November 2022 Request that the defendant deal with the estate property in accordance with their wishes, including by distributing the Vermont property to them in specie. The November 2022 Request stated:
As the residuary beneficiaries of the Estate of Zvonko Cicvaric, we request that you make distributions of the assets of the Estate to us, in the manner set out below.
We note that the assets are those identified in the Inventory of Assets and Liabilities attached to the Executor's affidavit sworn 1 October 2022.
1.Distribute the real property at 6 Kensington Gardens, Vermont (Certificate of Title Volume 10179 Folio 345) in specie, to the residuary beneficiaries as tenants in common as to 1/3 each;
2.The personal belongings of gold necklace, household furniture, tools of trade and household appliances be delivered to Mr Ivan Cicvaric at 9 Oakwood, Templestowe to be dealt with by him as he may deem appropriate;
3.The motor vehicle Holden VF Calais 2021 Reg 1CB1RL be distributed in specie to Mr Ivan Cicvaric and the registration to the vehicle be transferred into his name, with Mr Cicvaric to pay any stamp duty on the transfer; and
4.That the cash balance of the Estate, after payment of all liabilities be paid equally to each of the residuary beneficiaries.
We request that the delivery up of personal belongings (item 2 above) be made forthwith.
We also request that the distribution of and transfer of the vehicle (item 3 above) be made forthwith.
Could we request that Mr Ivan Cicvaric be given keys to the Vermont property to access the property for consideration of any works he may recommend to us to improve the property. No works will be undertaken before the property is transferred to us.
Could you please let us have your response, through Sinisgalli Foster Legal, within the next seven (7) days.[34]
[34]Exhibit IC-3 to the Third Cicvaric Affidavit, 147-8.
The defendant said of this Request in giving evidence under cross-examination that there was ‘doubt in her mind’[35] as to whether the solicitor who wrote the email which enclosed the Request ‘was being given information that reflected reality’.[36] She later conceded that she had no reasonable basis to doubt that when the firm said it was acting for all three beneficiaries, it was doing so.[37]
[35]Transcript, T58.21-25.
[36]Transcript, T58.9-11.
[37]Transcript, T61.19-T62.8.
Regardless, the following day, the defendant’s solicitors wrote to the beneficiaries’ solicitors in the terms described at paragraph [24] above. As noted, that letter invited the beneficiaries to provide the information requested and submit a deed of family arrangement to deal with the various estate matters that would be considered by the defendant. Despite her knowledge, as revealed by the contents of her 25 August 2022 letter, that the deceased’s mother had pre-deceased him,[38] the defendant sought proof of this from the beneficiaries. The defendant also sought proof of the identity of each of Ante and Josip Cicvaric, who resided overseas, and information concerning funeral expenses paid by the plaintiff, and the burial plot secured for the deceased.
[38]See Exhibit IC-1 to the First Cicvaric Affidavit, 31-34. The letter states at paragraph [2], ‘[t]he deceased was survived by three brothers, two of whom, Ante Cicvaric and Josip Cicvaric, reside overseas’, and at paragraph [16] ‘the deceased has a quarter interest in real estate, situate in Croatia, inherited from his mother who passed away in 2008’.
The beneficiaries provided a draft deed of family arrangement to the defendant by a letter from their solicitors on 18 January 2023.[39] As well as enclosing the draft deed, the letter enclosed a copy of the beneficiaries’ mother’s death certificate, a certified copy of the passport of Ante Cicvaric, a notarised copy of the passport of Josip Cicvaric, details of the funeral expenses that had been paid by the plaintiff and information concerning the deceased’s burial plot. The proposed deed also included warranties confirming these matters, a release in favour of the defendant, and a warranty that the beneficiaries each entered the deed of their own free will — all of which was offered to satisfy the defendant that she was protected from personal liability in relation to the proposed arrangements. The covering letter reiterated that the beneficiaries had provided a clear request for the estate property to be distributed to them (after payment of expenses) in the November 2022 Request.
[39]Exhibit IC-1 to the First Cicvaric Affidavit, 71-109.
Receiving no response to the letter and the proposed deed, the beneficiaries’ solicitor sought a response from the defendant by email and phone calls to her solicitor on 22 February 2023.[40] By email on 1 March 2023, the defendant’s solicitor requested a word version of the draft proposed deed.[41] Having provided a word version of the draft deed,[42] the beneficiaries’ solicitor wrote by email to the defendant’s solicitor following up on the provision of a substantive response on 3 March 2023,[43] 7 March 2023,[44] and then by a lengthier letter on 4 April 2023.[45]
[40]Exhibit IC-1 to the First Cicvaric Affidavit, 110.
[41]Exhibit IC-1 to the First Cicvaric Affidavit, 112–3.
[42]Exhibit IC-1 to the First Cicvaric Affidavit, 112.
[43]Exhibit IC-1 to the First Cicvaric Affidavit, 114.
[44]Exhibit IC-1 to the First Cicvaric Affidavit, 116.
[45]Exhibit IC-1 to the First Cicvaric Affidavit, 117-8.
A response was finally provided to the 18 January 2023 letter and draft deed of family arrangement by letter from the defendant’s solicitors dated 26 April 2023.[46] The letter provided no explanation for the over 3 months’ delay in furnishing that response. Amongst other things, the response complained that the death certificate provided to prove the death of the beneficiaries’ mother used her full name, rather than the diminutive ‘Ika’ as used in the will of the deceased. It also complained about various deficiencies in the translation and notarisation of documents submitted to verify the identity of the plaintiff’s brothers. The letter enclosed an amended deed, with the amended sentences highlighted in yellow. The highlighted amendments were described as being ‘preliminary’ and ‘should not be taken as a confirmation that the Deed is otherwise in all other respects satisfactory or acceptable’.[47]
[46]Exhibit IC-1 to the First Cicvaric Affidavit, 120-135.
[47]Exhibit IC-1 to the First Cicvaric Affidavit, 121.
What followed between the 26 April 2023 letter and 27 July 2023 is a series of communications in which the defendant made additional stipulations concerning the certification requirements for the evidence and documents submitted, and re-submitted, by the beneficiaries in order to satisfy her as to the identity of the deceased’s mother and two brothers.[48] The defendant’s solicitors’ correspondence in this period is pregnant with suspicion about the beneficiaries and their intentions — it is hard to understand what else could have motivated the defendant to request, by the 26 April 2023 letter, a photograph of the deceased’s coffin taken on the day of his funeral other than some suspicion that he was not buried in the coffin the cost of which had been claimed by the plaintiff.[49] That letter also contains extraordinary and unjustifiable assertions in relation to the supposed reasons for the plaintiff not having previously submitted the funeral expenses information to the defendant, such as:
[48]Exhibit IC-1 to the First Cicvaric Affidavit, 136-166.
[49]Exhibit IC-1 to the First Cicvaric Affidavit, 122.
We can only surmise that in the absence of a clear and unambiguous explanation from [the plaintiff] the only benefit to [him] is for him to keep his brother Ante feeling uncomfortable and embarrassed and somehow indebted to [him] and less inclined to express his true opinion on matters concerning the Estate…
What is even more disturbing is that [the plaintiff] has previously advised [the defendant] that:
‘…[Josip]…will do anything I tell him.’
Such comments from [the plaintiff] and the failure to provide the full costs of the funeral and the burial as well as the failure to provide a listing of Estate assets leave the [defendant] with little assurance that any Deed proposed to be entered into by the parties shall be done so without any undue influence by [the plaintiff] over the other beneficiaries.[50]
Other accusations in the letter regarding the conduct of the beneficiaries in relation to the deceased’s interest in a Croatian property are considered further below. The defendant’s solicitors’ subsequent letter on 26 May 2023 starts off in the same combative way:
Your letter fails to address even the most basic requests from the Executor, leaving us uncertain about your intentions in obstructing the fulfillment of the Executor’s duties.[51]
[50]Exhibit IC-1 to the First Cicvaric Affidavit, 123.
[51]Exhibit IC-1 to the First Cicvaric Affidavit, 152.
During these months and for the balance of the calendar year after all communications about the deed ceased in July 2023, the defendant did not take any steps to distribute the estate consistently with the wishes of the beneficiaries as communicated in the November 2022 Request.[52] Not even the itemised funeral expenses were reimbursed. In the face of that inaction, on 21 September 2023, some 17 months after the death of the deceased, the plaintiff commenced this proceeding.
[52]Second Cicvaric Affidavit, [10].
As set out in greater detail at paragraphs [45] to [55] below, after a directions’ hearing on 16 February 2024 at which the proceeding was listed for trial, the defendant signed an exclusive auction authority with a real estate agent to sell the Vermont property by auction. The defendant ultimately withdrew the Vermont property from sale after the beneficiaries became aware of it and threatened to seek injunctive relief against her.[53]
[53]Third Cicvaric Affidavit, [22]-[23]; Exhibit IC-3 to the Third Cicvaric Affidavit, 159, 169-173.
Then, on 4 March 2024, without any explanation and without further insistence on the provision of authenticated documents or other information, the defendant’s solicitor informed the plaintiff’s solicitor that the Vermont property would be transferred to the beneficiaries in specie. The Vermont property was subsequently transferred on 14 March 2024.[54]
[54]Exhibit IC-3 to the Third Cicvaric Affidavit, 176-8.
On 22 March 2024, again without any explanation and without further insistence on the provision of further information, records or photographs, the defendant’s solicitor informed the plaintiff’s solicitor that he would transfer to the plaintiff’s solicitors’ trust account estate funds by way of reimbursement of the plaintiff for claimed funeral and other expenses incurred on behalf of the estate. That reimbursement occurred later on 22 March 2024.[55]
[55]Exhibit IC-3 to the Third Cicvaric Affidavit, 185-8 (the pages erroneously bear the numbers 175-178).
The investigation of the Croatian assets
The deceased had a small interest in real estate located in Croatia in equal shares with his brothers, which they inherited from their mother after her passing in 2008. In his examination-in-chief at the hearing, the plaintiff gave evidence that the Croatian property asset was a family home in a now deserted village in a rural area in Croatia, with little or no value beyond the emotional significance of its having been in his family for over a 100 years.[56]
[56]Transcript, T28.29-29.21.
The defendant’s written submissions attempt to portray the beneficiaries as having been uncooperative with the defendant’s investigations concerning whether the deceased had any interest in overseas assets. In particular, the defendant submits that the beneficiaries did not assist her to locate any Croatia-based assets.[57] However, as the plaintiff points out, the defendant already knew about the one asset that did exist, having referred, in her letter dated 25 August 2022, to the deceased having an equal share with each of his brothers in a real property asset in Croatia, inherited from his mother after her passing in 2008.[58] The defendant’s searches had revealed that no other Croatian property in the name of the deceased existed.[59]
[57]Defendant, ‘Defendant’s Outline of Submissions’, 22 April 2024, 3 [17].
[58]Exhibit IC-1 to the First Cicvaric Affidavit, 33 [16].
[59]Plaintiff, ‘Plaintiff’s Reply Submissions’, 29 April 2024, 2 [9].
Indeed, it is likely because of the defendant’s existing knowledge that she took particular exception to the inclusion of the following warranty in the beneficiaries’ draft deed of family arrangement provided on 18 January 2023:
iii)[The beneficiaries] are unaware of any assets located in Croatia owned by [the deceased] prior to his death and they do not require the Executor to undertake searches to ascertain any such assets.[60]
Plainly, the defendant saw this as an attempt to deceive her, even though the beneficiaries’ solicitors’ subsequent 4 April 2023 letter enclosed what was described as ‘a photograph of the entitlement of Zvonko to the property in Croatia’.[61] That 4 April 2023 letter continued:
The [beneficiaries] propose that given the land has a very low value, they would simply take one third interest each in the interest of [the deceased] in the property and deal with it in that manner going forward. They do not wish the distribution of his estate in Australia to be hindered by dealing with the minor property interest in Croatia.[62]
The letter also suggested that it ‘may be necessary’ for the beneficiaries to make an application to remove the defendant as executor by reason of her delay, and because the beneficiaries felt she was not acting in their interests, although the letter states that they ‘do not wish this to be done, particularly given the small estate and the need for timely disposition’.[63]
[60]Exhibit IC-1 to the First Cicvaric Affidavit, 74.
[61]Exhibit IC-1 to First Cicvaric Affidavit, 118. The enclosure to the letter, which is written in Croatian, was omitted from the First Cicvaric Affidavit. The enclosure was included in Exhibit MB-1 to the Blazevic Affidavit, 102-3.
[62]Exhibit IC-1 to the First Cicvaric Affidavit, 118.
[63]Exhibit IC-1 to the First Cicvaric Affidavit, 118.
In her affidavit, the defendant describes the words in the 4 April 2023 letter as ‘an admission … that Zvonko (the deceased) did in fact own property in Croatia’.[64] That language exemplifies the agitation and suspicion the defendant felt (and still feels) about the motives of the beneficiaries at that time in the administration. It also explains the rather extraordinary response, when finally provided in her solicitor’s 26 April 2023 letter, on this issue. That letter, referring to the proposed warranty extracted above, states as follows:
It is clear and apparent that this warranty is false and was made without reasonable belief and with the intention to have the Executor desist from investigating the full extent of the Asset base of the estate.
In fact, your clause proceeded to include the following words:
“… and they do not require the Executor to undertake searches to ascertain any such assets.”
On our reading of this part of the Deed, it was a purposeful attempt to discourage the Executor from discovering the truth. We can only assume that this was an instruction from your client(s).[65]
[64]Blazevic Affidavit, 11 [37].
[65]Exhibit IC-1 to the First Cicvaric Affidavit, 124.
By letter dated 17 May 2023, the beneficiaries’ solicitor responded.[66] That response, quite correctly, pointed out that the transmission of interests in land in Croatia was likely not within her remit.[67] The letter called upon the defendant to duly administer the Australian estate at the earliest opportunity and sought the defendant’s assurance that she would take no further steps in relation to the overseas property.[68]
[66]Exhibit IC-1 to the First Cicvaric Affidavit, 136-151.
[67]Exhibit IC-1 to the First Cicvaric Affidavit, 140-1 [34]-[35].
[68]Exhibit IC-1 to the First Cicvaric Affidavit, 141 [36]-[37].
The defendant did not heed that warning, and continued taking steps in relation to the overseas property. She gave evidence that:
(a)in October 2023, she made an application for an Exemplification of the grant of probate (‘Exemplification’), which was issued by the Court on 20 October 2023;[69]
(b)she thereafter arranged the filing of an application with the Department of Foreign Affairs and Trade for the affixing of an Apostille to the Exemplification, which Apostille was affixed on 14 December 2023; and
(c)by her solicitors, she arranged for the Exemplification, with the Apostille affixed, to be forwarded to solicitors engaged in Croatia to deal with the Croatian assets of the estate and ‘to undertake further searches of identifiable overseas property’.[70]
Steps taken in the administration subsequent to the commencement of the proceeding
[69]Exhibit MB-1 to the Blazevic Affidavit, 141-5.
[70]Blazevic Affidavit, 13 [43]-[45]
The defendant’s further attempt to sell the Vermont property
At the time he commenced the proceeding, the plaintiff deposed in paragraph [17] of his first affidavit, affirmed 20 September 2023, as follows:
Notwithstanding the simplicity of [the deceased’s] Will, and that my brothers and I are the sole residuary beneficiaries, and the limited nature of his assets and despite him dying on 14 April 2022, none of the assets of the estate of [sic.] been distributed. My brothers and I are anxious to fix up the [Vermont property] with a view to resale within the two years of the date of death to avoid capital gains tax obligations. Our attempts to have the property transferred have been met with silence and resistance from the administrator…[71]
[71]First Cicvaric Affidavit, 3 [17].
In her affidavit, sworn 23 January 2024, the defendant responded to the matters deposed to by the plaintiff in his first affidavit. At paragraph [14] she deposed that:
With regard to paragraph 17 of the Plaintiff’s affidavit, I say that this is the first occasion that the Plaintiff has indicated a desire to have the deceased’s property sold.
The defendant pointed to that evidence by way of explanation as to why she took steps in early 2024 to again prepare the Vermont property for sale by public auction. When pressed in cross-examination about what it was in the paragraph referenced that made her think the plaintiff wanted her to sell the property despite the previous requests made by the beneficiaries that it be transferred to them in specie, the defendant answered that ‘it wasn’t unambiguous, and that is how I understood it’.[72]
[72]Transcript, T69.5-7.
Emails were produced in the proceeding under subpoena issued to Ray White Real Estate, Blackburn. Two of those emails dated 15 January 2024 were sent to an email address used by the defendant from Mr Peter Schenck of Ray White, with one providing ‘marketing costings to run an auction campaign’ for a sale on 17 or 24 February 2024.[73] These emails were put to the defendant in cross-examination and she was adamant that she did not have any dealings with Ray White in January 2024 prior to receiving Mr Schenck’s email.[74] She gave evidence that she did instruct Mr Schenck to sell the property, but only when she met with him on 14 February 2024.[75]
[73]Exhibit IC-3 to the Third Cicvaric Affidavit, 202-3 (the pages erroneously bears the numbers 192-193).
[74]Transcript T70.23-26, T71.7-11, T73.19-29.
[75]Transcript T70.16-9, T73.25-9.
On 12 February 2024, the plaintiff filed his second affidavit affirmed that day. At paragraph 6, he deposed:
I refer to paragraph [17]. I do not desire that the [defendant] sell the deceased's property. As was communicated to the executor in the letter from my solicitors dated 7 September 2022, at that time, me and my brothers did not wish to proceed with a sale at that time (see the exhibit to [the First Cicvaric Affidavit] at pages 28, 37 and 41). Instead, as was communicated to the executor in the letter from my solicitors dated 29 November 2022, we sought that the [Vermont] property be transferred to us in specie (see the exhibit to [the First Cicvaric Affidavit] at page 65). That remains our wish. Ms Blazevic does not explain why she has failed to take any steps to distribute the assets of the estate to my brothers and I, notwithstanding she was in a position to sell the [Vermont property], by way of public auction on 1 October 2022. Since then the property has remained unoccupied and is effectively a wasting asset. My brothers and I wish that the property be transferred to us, so that I may undertake renovation work so as to improve it for resale.[76] (emphasis added)
When pressed on what she understood reading the plaintiff’s second affidavit, the defendant insisted that she did not understand that the plaintiff did not want her to sell the property,[77] and that she felt she was being ‘criticised for not selling the property on 1 October 2022’.[78] She also gave evidence that she believed that the plaintiff thought the Vermont property remained in a state of disrepair because he had included as an exhibit to his second affidavit photos of the property taken following the ceiling collapse in March 2023. She said she wanted him to understand that ‘[t]he property was pristine and it was prepared for sale. And it was styled.’[79]
[76]Second Cicvaric Affidavit, 2 [6] (emphasis added). The plaintiff appears to have erroneously referred to the ‘plaintiff’ here, where he should have referred to the ‘defendant’.
[77]Transcript, T80.23-26.
[78]Transcript, T80.3-9, T84.15-18.
[79]Transcript, T84.24-25.
Following her receipt of the plaintiff’s second affidavit, the defendant says she spoke with Mr Schenck and that she ‘did instruct him to put the property on the market’.[80] An email between Mr Schenck and the defendant on 14 February 2024 refers to a phone discussion earlier that day and outlines a plan to auction the Vermont property on Saturday 23 March 2024 at 12:30pm.[81]
[80]Transcript, T71.6-7.
[81]Exhibit IC-3 to the Third Cicvaric Affidavit, 212 (the page erroneously bears the number 202).
On 15 February 2024, the defendant sent a text to Mr Schenck in the following terms:
Hi Peter
Just doing some stuff the barrister asked for the directions hearing tomorrow, I will attend to the Authority for the auction ASAP.
I told them that I am putting the property to auction and why.. I was not given Any (sic) reason why I should not
You just need to be ready when the other camp find out the auction is happening.[82]
Mr Schenck’s response reads:
All good I have dealt with this type before
I will be prepared
All good. [83]
[82]Exhibit IC-3 to the Third Cicvaric Affidavit, 214 (the page erroneously bears the number 204).
[83]Exhibit IC-3 to the Third Cicvaric Affidavit, 214 (the page erroneously bears the number 204).
A directions’ hearing in this proceeding occurred on 16 February 2024. At the hearing, the proceeding was listed for trial. That same day, the defendant signed an exclusive auction authority with Ray White Real Estate to sell the Vermont property.[84] The defendant did not tell the plaintiff or his representatives that she was doing so.
[84]Exhibit IC-3 to the Third Cicvaric Affidavit, 204-6 (the pages erroneously bear the numbers 194-196).
On 28 February 2024, the beneficiaries, assisted by a neighbour who had been a friend of the deceased, became aware that works were being undertaken at the Vermont property which suggested it was being readied for sale. By email from his solicitors, the plaintiff sought information from the defendant about the works and the reason they had been undertaken ‘in circumstances where the beneficiaries wish to have the property transferred to them in specie so that they may renovate the property before it is offered for sale’.[85]
[85]Exhibit IC-3 to the Third Cicvaric Affidavit, 159.
That afternoon, the defendant was again in contact with Mr Schenck by text message. She informed him that she had received an email from the plaintiff’s lawyer, but nevertheless asked if the ‘photos [have been] taken?’[86] When Mr Schenck responded outlining a range of actions that are to be completed over the coming week, the defendant responded, ‘[t]hank you’.[87]
[86]Exhibit IC-3 to the Third Cicvaric Affidavit, 216 (the page erroneously bears the number 206).
[87]Exhibit IC-3 to the Third Cicvaric Affidavit, 216 (the page erroneously bears the number 206).
By email dated 29 February 2024, the defendant’s solicitor conveyed by email to the plaintiff’s solicitor an undertaking from the defendant that:[88]
the [Vermont] property shall not at this stage be sold and that any sale shall be deferred until such time as the matter is heard at trial in May, 2024, or earlier by agreement between the parties.
The plaintiff subsequently became aware that further painting and plastering works had been undertaken at the property, and also located advertisements in respect of the sale online. On 29 February 2024 and 1 March 2024, the plaintiff’s solicitors wrote by email to the defendant’s solicitors demanding, amongst other things, that she desist (in accordance with the undertaking provided by her solicitors) from taking any further steps to ready the property for sale.[89] The Vermont property was thereafter withdrawn from sale.[90]
[88]Exhibit IC-3 to the Third Cicvaric Affidavit, 169.
[89]Exhibit IC-3 to the Third Cicvaric Affidavit, 173-4.
[90]Third Cicvaric Affidavit, 7 [23].
As described above, on 4 March 2024, the defendant decided to distribute the Vermont property to the beneficiaries in specie, with the transfer occurring on 14 March 2024.
Should the defendant be removed as executor?
Powers of removal
The plaintiff seeks removal of the defendant from her role as executor of the estate under s 34(1)(c) of the A&P Act. Section 34 itself states:
(1)Notwithstanding anything contained in any Act where an executor or administrator to whom probate or administration has been granted whether before or after the commencement of this Act or where an administrator who has been appointed under this section or any corresponding previous enactment—
(a) remains out of Victoria for more than two years;
(b)desires to be discharged from his office of executor or administrator; or
(c)after such grant or appointment refuses or is unfit to act in such office or is incapable of acting therein—
the Court upon application in accordance with the Rules of Court may order the discharge or removal of such an executor or administrator and also if the Court thinks fit the appointment of some proper person or trustee company as administrator in place of the executor or administrator so discharged or removed upon such terms and conditions as the Court thinks fit; and may make all necessary orders for vesting the estate in the new administrator and as to accounts and such order as to costs as the Court thinks fit.
Removal of the defendant is also sought, if it is necessary, as trustee of the deceased’s estate under s 48(1) of the Trustee Act, which provides:
The Court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient difficult or impracticable so to do without the assistance of the Court, make an order appointing a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee. …
In terms of whether an order removing the defendant as trustee is necessary, it is an order that is sought by the plaintiff in his originating motion, and was included also in his proposed minutes of order provided to the Court in advance of the hearing of the trial. However, no submissions were directed in advance of, or at the trial, to whether the defendant had ascended to the role of trustee. Given the tests for removal of executor and trustee are, in all relevant respects, the same (for the reasons discussed below), the capacity of the defendant to act as either executor or trustee in this case makes no difference to the Court’s determination of the removal question.
The seminal authority on the Court’s power to remove a trustee, and the circumstances which would motivate its exercise, is the High Court decision in the case of Miller v Cameron.[91] In that case, Dixon J (as he then was) stated:
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised.[92]
[91](1936) 54 CLR 572 (‘Miller’).
[92]Miller 580-1.
This core principle regarding the power to remove trustees has come to be applied in order to remove executors under s 34(1)(c) of the A&P Act. That is, to adapt the reasoning of Dixon J to the case of executors, the Court must make a judgment ‘based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries [of a deceased estate] is opposed to [the executor’s] continued occupation of that office’. Specifically, in the case of Monty Financial Services Ltd v Delmo (‘Monty’),[93] Ashley J endorsed the line of decisions including Hoxha v Hoxha (‘Hoxha’),[94] in which neglect of duty or misconduct had been treated as unfitness within the terms of s 34(1)(c), rather than following an earlier line of decisions including Turner,[95] which had limited the meaning of unfitness to bankruptcy or criminal conviction.
[93][1996] 1 VR 65 (‘Monty’).
[94]Hoxha v Hoxha (Supreme Court of Victoria, Jenkinson J, 22 September 1975, unreported) (‘Hoxha’).
[95]In re Turner [1923] VLR 189 (Weigall AJ).
In Hoxha, Jenkinson J found that a 5 year delay in the administration had not been adequately explained and raised a strong inference that the respondent was unfit to act in his office, holding that ‘unfitness’, as used in the A&P Act, may be satisfied by ‘demonstrated incapacity’ or ’demonstrated unwillingness to perform [the duties of the executorial office] within a reasonable time’.[96] As noted above, this reasoning was endorsed by Ashley J in Monty, a case concerning a conflict in duty and interest, in which he held that serious dereliction of duty, whether born of intent, carelessness or incompetence, may make that person unfit to hold office as executor.[97] Justice Ashley noted that unfitness could be constituted ‘by matters such as unwarranted delay in administration of the estate, failure to communicate with beneficiaries, failure to account, and unreasonable delay in paying beneficiaries their entitlement’.[98] His Honour also acknowledged that cases concerning the removal of trustees showed by analogy circumstances where an executor may be removed under s 34 of the A&P Act.[99]
[96]Hoxha, 3.
[97]Monty [1996] 1 VR 65, 73.
[98]Monty [1996] 1 VR 65, 73.
[99]Monty [1996] 1 VR 65, 81-2.
In Fysh v Coote,[100] the Court of Appeal dismissed the appeal of an executrix against an order that she be removed from office pursuant to s 34 of the A&P Act. The executrix, who was one of a number of beneficiaries under her father’s will, had retained sole occupation of a residential unit devised to all beneficiaries without paying rent for a lengthy period. She had used intemperate language towards other beneficiaries, declined to sell the residential unit, been guilty of further delays in the realisation and distribution of the estate and made the resolution of her disputes with the other beneficiaries a precondition of any sale of the property. The Court of Appeal endorsed the reasoning of Ashley J in Monty and, drawing on the decision in Miller v Cameron,[101] gave expression to the executrix’s unfitness by reference to the welfare of the beneficiaries and their interests in the estate, holding that the appellant was ‘unfit’ to remain as executor primarily because, in the circumstances, ‘the welfare of the beneficiaries [was] opposed to her continued occupation of that office’.[102]
[100][2000] VSCA 150.
[101](1936) 54 CLR 572.
[102][2000] VSCA 150, [25] (Ormiston JA, with Batt and Chernov JJA agreeing).
The plaintiff submits that some of the complaints made in the case of Skaftouros v Dimos (‘Skaftouros’),[103] in which the beneficiaries made an application to remove the executor under s 34(1)(c), are analogous with the plaintiff’s complaints in this case. In that case, the plaintiff beneficiaries alleged the executor (a solicitor) had been responsible for serious and inexcusable delays in obtaining probate and administering the estate, and had: failed to manage the estate properly; failed to provide accounts and information to the beneficiaries when requested and generally failed to communicate with the beneficiaries; failed to pay creditors of the estate; made exaggerated or unlawful demands for commission and costs for himself; and exhibited an offensive and adversarial attitude towards beneficiaries.
[103][2002] VSC 198 (‘Skaftouros’).
One allegation about the delay in Skaftouros concerned the reimbursement of the beneficiaries’ legal costs following a settled family provision claim. The quantum of those costs was agreed in December 2000, but the costs were not then paid until 6 September 2001. Recognising the duty of executors, owed to beneficiaries as much as to creditors, to pay the debts of the testator and those incurred in the administration with due diligence,[104] Mandie J noted the relative speed with which the executor had paid or reimbursed his own costs out of the estate, compared with his lengthy delays in the payment of other parties' costs and of the pecuniary legacies.[105] This conduct was taken into account by his Honour in determining the fitness of the executor to continue in their role.
[104]Skaftouros [2002] VSC 198, [10] citing Re Tankard [1942] Ch 69, 72 (Uthwatt J).
[105]Skaftouros [2002] VSC 198, [212].
Another allegation concerned the executor’s failure to transfer a property forming part of the residuary estate in specie as requested by the beneficiaries some 16 months prior. After commencement of the removal application, the executor then proposed to exercise his discretion under the will to sell the property because the actual and expected estate liabilities exceeded the available liquid assets. Included in those liabilities was a forecast $80,000 to $90,000 in legal fees for defending the removal application. The sale of the property was ultimately restrained by order of this Court. His Honour held that:
I am satisfied that the defendant's decision to sell Mena Avenue, which he clearly had the power to do, in his discretion, was not a bona fide decision but intended in spite to thwart the repeated requests of the residuary beneficiaries to receive the property in specie.[106]
His Honour then stated:
… I consider that the defendant's attempted exercise of discretion to sell Mena Avenue was made in bad faith and for an ulterior purpose. … . In my view there is a serious risk that the defendant is not capable of exercising [his power to sell Mena Avenue] in a proper and objective manner, unaffected by the evident antagonism which he now bears to the plaintiffs.[107]
His Honour therefore considered that the exercise of the testamentary discretion in bad faith or for an ulterior purpose was relevant to the question of fitness to continue to act in the office of executor.
[106]Skaftouros [2002] VSC 198, [178].
[107]Skaftouros [2002] VSC 198, [213].
These cases establish that it is the ‘whole of the circumstances’ that must be taken into account in determining unfitness to continue in the role.[108] Individual instances of conduct, whether a mistake or neglect of duty, will not necessarily render an executor unfit. It is the totality of the conduct that is relevant. In reaching his conclusion that the defendant was unfit to continue as executor in Skaftouros, Mandie J held:
I reach that conclusion upon a consideration of the whole of the defendant's abovementioned conduct, by both act and omission. That conduct may be broadly characterised as serious neglect and laxity in the proper performance of his duties, a gross failure to respond to communications or to provide information, and a tendency to prefer his own interests over his duty to beneficiaries.[109]
[108]Fysh v Coote [2000] VSCA 150, [25] (Ormiston JA, with Batt and Chernov JJA agreeing).
[109]Skaftouros [2002] VSC 198, [200].
Justice Mandie’s findings in relation to individual instances of conduct were challenged by the executor on appeal (‘Skaftouros Appeal’).[110] The Court of Appeal rejected the appellant’s approach of selectively challenging his Honour’s individual findings divorced from their full context, concluding that ‘[c]umulatively, his Honour’s findings made the case for removal unanswerable.’[111]
[110]Dimos v Skaftouros (2004) 9 VR 584 (‘Skaftouros Appeal’).
[111]Skaftouros Appeal (2004) 9 VR 584, 618 [170] (Dodds-Streeton AJA, with Winneke P and Batt JA agreeing).
As set out above at paragraph [11], the plaintiff has identified a number of acts and omissions by the defendant which, it is said, collectively constitute sufficient grounds for her removal as executor. I will consider each of these grounds in turn, together with the explanations provided by the defendant.
Ground One – Failure to transfer the Vermont property promptly following the November 2022 Request
As set out above, the defendant initially embarked on the process of preparing and listing the Vermont property for sale in August 2022 before she had heard anything from the beneficiaries. Acting reasonably, however, the defendant should not have continued to prepare the Vermont property for sale throughout September, and should not have relisted it for sale having obtained the grant of probate, after she became aware:
(a)by reason of the letter dated 22 August 2022, that the beneficiaries wanted time to consider their preferred way forward;
(b)by reason of the letter dated 7 September 2022, of the beneficiaries’ expressed wishes that she withdraw the Vermont property from sale;
(c)by reason of the letter dated 3 November 2022, that the beneficiaries may be desirous of receiving a distribution of the Vermont property asset in specie; and
(d)by reason of the November 2022 Request, of the beneficiaries’ express request that the Vermont property be distributed to them in specie.
This conduct, which was knowingly contrary to the repeatedly expressed wishes of the beneficiaries, is relevant to the overall question of the defendant’s fitness to remain in her office.
It was only in her solicitors’ 30 November 2022 response to the November 2022 Request that the defendant agreed to ‘temporarily postpone the sale’ of the Vermont property.[112] At that same time, she invited the beneficiaries to submit a deed of family arrangement to allow the distribution of the estate, including the Vermont property, in accordance with the beneficiaries’ Request. The delay which ensued by reason of the correspondence concerning the deed of family arrangement is discussed further below in respect of ground three, affecting as it did the administration of the whole of the estate, including delaying the distribution of the Vermont property. There was no transfer of the Vermont property in specie until March 2024, with the transfer only occurring after the commencement of this proceeding seeking the defendant’s removal and after the defendant’s further attempt to sell the Vermont property at auction.
[112]Exhibit IC-1 to the First Cicvaric Affidavit, 66.
I am satisfied that the defendant’s attempt to sell the Vermont property in early 2024 was intended to thwart the beneficiaries’ repeated requests to receive that property in specie. In forming this view, I make the following findings.
(a)I do not accept the defendant’s evidence that she thought the plaintiff wanted her to sell the property after she read his first affidavit filed in the proceeding. His statement in his first affidavit was not an ambiguous one — it quite plainly says that the plaintiff and his brothers wanted to renovate the property before themselves selling it. This was consistent with all of the other requests made by the beneficiaries dating back to 2022, including most pertinently the November 2022 Request. Even accepting that it was ambiguous, which I do not, it would have been more reasonable and efficient for the defendant to seek to resolve the ambiguity by making a simple enquiry of the plaintiff’s solicitors;
(b)I infer from the emails sent from Ray White to the defendant’s email address on 15 January 2024 that the defendant had contacted Mr Schenck to discuss the possible sale of the Vermont property in January 2024. Although this occurred prior to her finalising her affidavit in this proceeding, she made no mention in that affidavit of her intention to make contact with Ray White or to prepare the Vermont property for auction. Notwithstanding that the defendant denies discussing the sale with Ray White in January, it is highly unlikely that the defendant would have received, unprompted, the emails dated 15 January 2024, which descend into the detail of a marketing plan for an auction of the Vermont property to occur in mid-February;
(c)I do not accept the defendant’s evidence that she did not understand the plaintiff’s very clear statement that ‘I do not desire that the [defendant] sell the deceased’s property’ in his second affidavit,[113] to mean that he did not want her to sell the Vermont property. In my view, the defendant could not have entertained any reasonable doubt by reason of this evidence that the beneficiaries did not wish for her to sell the property;
(d)although she denied it in cross-examination, I also infer that the only reason the defendant wrote by text message to Mr Schenck that he needed to be ready ‘when the other camp finds out’ is because the defendant knew the plaintiff did not want her to sell the Vermont property, as he had clearly stated in his second affidavit that she received a couple of days prior;
(e)consistently with the subterfuge she portrays in her text message to Mr Schenck referred to above, the defendant did not tell the plaintiff or his representatives that she was signing an exclusive sale authority, even though it was signed 4 days after the delivery of the plaintiff’s Second Affidavit and on the same day this proceeding was before the Court for a directions hearing (at which it was listed for trial); and
(f)after having received a letter from the plaintiff’s solicitors on 28 February 2024 asking that she cease any steps preparatory to the sale of the Vermont property by reason that the ‘…beneficiaries wish to have the property transferred to them in specie…’,[114] she did not immediately ask Ray White to cease its work, or the work it had engaged for repair of the property, as a prudent executor would have done. Rather, she allowed the works to continue knowing full well that the beneficiaries by then knew about the sale and wanted it to stop.
[113]Second Cicvaric Affidavit, 2 [6].
[114]Exhibit IC-3 to the Third Cicvaric Affidavit, 159.
I am satisfied that the defendant did not distribute the property in specie until mid-March 2024 because she was intent on selling it in spite of the beneficiaries’ clearly and repeatedly conveyed wishes. In early 2024, she concealed from the plaintiff and the other beneficiaries what she was doing, and urged Mr Schenck to have a plan for when they found out. Whatever the motivation and no matter how misdirected her intention, the defendant was acting in her own interests, and contrary to the interests of the beneficiaries, in attempting to sell the property rather than transfer it to them. In doing so, she unreasonably delayed the transfer against the interests of the beneficiaries, and in the process caused unnecessary costs to be incurred by the estate. All of this conduct is relevant to the question of the defendant’s fitness to remain in office.
Ground Two – The defendant’s approach to the beneficiaries
With the exception of the 25 August 2022 letter from the defendant and some limited earlier correspondence directly with the plaintiff and his daughter, all of the defendant’s communications in relation to this estate were made through her solicitors. Oftentimes that correspondence referred to fears or suspicions ‘we’ hold, suggesting a personal investment by her solicitors in the estate matters. Despite this, the defendant has not sought to lay any blame for the actions and inactions in relation to this estate at the feet of her solicitors. It would not have assisted her to do so, for as the Court of Appeal in the Skaftouros Appeal, referring to Hoxha, made abundantly clear, an executor cannot avoid responsibility for the actions or inactions of their solicitor where that solicitor is acting on the instruction and authority of the executor.[115] The defendant is responsible for effectively supervising her lawyers, or, if necessary, for engaging replacement counsel.
[115]See Skaftouros Appeal (2004) 9 VR 584, 616-7 [160] (Dodds-Streeton AJA, with Winneke P and Batt JA agreeing).
At first instance in Skaftouros, Mandie J stated in relation to the executor’s communications with beneficiaries:
An executor, like a trustee, should provide a prompt and proper response to reasonable inquiries and requests for information by beneficiaries. Even onerous, unreasonable or antagonistic inquiries or requests should, at least in the first instance, receive some appropriate response or acknowledgment.[116]
These observations were then endorsed by the Court of Appeal in the Skaftouros Appeal.[117]
[116]Skaftouros [2002] VSC 198, [14].
[117]Skaftouros Appeal (2004) 9 VR 584, 616-7 [160] (Dodds-Streeton AJA, with Winneke P and Batt JA agreeing).
Whilst the defendant may have been understandably frustrated by being asked to step down in the first letter she received from the beneficiaries, and by their subsequent threats to seek her removal and/or passing over, even her first letter to the beneficiaries’ solicitor on 25 August 2022 contained accusations about the plaintiff’s conduct. Looked at compendiously, the executor’s communications are antagonistic, defensive, disrespectful and distrustful of all the beneficiaries. The correspondence contains many unjustified allegations concerning the propriety of the conduct of the plaintiff towards his brothers, and of the beneficiaries together in relation to the Croatian property. Presumably her increasingly technical stipulations in order for the beneficiaries to verify their identities, the request to verify the death of their mother, and the request to provide a photograph of the coffin on the day of the funeral to support the plaintiff’s claim for the costs of it, all flowed from her unjustifiably suspicious attitude towards them.
Further, the unexplained failure to respond to the proposed draft deed of family arrangement for over three months, despite numerous follow-up attempts on behalf of the beneficiaries, falls short of the standard a beneficiary is entitled to expect from the executor. That the response eventually provided included only ‘preliminary’ comments on the draft proposed deed was also unacceptable. Despite six months passing from the provision of the draft of the deed by the beneficiaries until communications between the executor and beneficiaries ceased in July 2023, not a single provision of the deed had been fully negotiated or agreed.
I am satisfied that the defendant displayed an unacceptably antagonistic and suspicious attitude towards the beneficiaries as described above for the duration of the administration. This conduct bears upon her fitness to remain in office.
Ground Three – Unreasonable delay in the whole administration
The plaintiff submits that the defendant should be removed for undue delay in the whole of the administration. The plaintiff submits the estate was a simple one, comprising as it did one unencumbered real property asset, cash, a vehicle and other personal property of the deceased, and that there were no liabilities as at the date of the grant. The deceased died in April 2022, probate was granted in November 2022, and yet the real property was only transferred in specie in mid-March 2024 (nearly two years after the date of death and 16 months after the grant of probate). As at the date of the hearing in this proceeding, the balance of the estate still remains undistributed.
The defendant submits she has administered the estate in good faith, and that the delays have been caused by the overseas beneficiaries’ refusal to properly verify their identities and because of the investigation of the overseas assets, in respect of which she received no assistance from the beneficiaries.
There is a dispute between the parties on how to measure the delay relied upon to support removal. The defendant submits the delay is calculated up until the date of the application, relying on a quote from Monty in which reference is made to cases involving misconduct or neglect of duty by the executor ‘in the period between grant of probate and application for removal’.[118] However, I do not consider that reference to be one which limits the period of delay that is relevant to only the period between the grant and the commencement of a removal application. In Monty, Ashley J refers elsewhere to ‘unwarranted delay’[119] or ‘unreasonable delay’[120] in the administration of the estate and making distributions to beneficiaries as providing reasons for removal, without limiting such delay to instances prior to commencement of proceedings. Likewise, one of the delays relied upon in Skaftouros was the delay in making the application for a grant of probate itself.[121]
[118]Monty [1996] 1 VR 65, 73.
[119]Monty [1996] 1 VR 65, 73.
[120]Monty [1996] 1 VR 65, 73.
[121]Skaftouros [2002] VSC 198, [188]-[190].
The plaintiff submits that the defendant’s requests made of the beneficiaries — starting with the request to enter a deed of family arrangement — before she would distribute the estate property to them in accordance with the November 2022 Request were unnecessary and unreasonable and caused undue delay in the administration of the estate. The plaintiff submits there is no requirement to enter such a deed or provide a release or indemnity for the executor simply for doing the job of executor in administering and distributing the estate consistently with the terms of the will. The plaintiff submits he and his brothers went along with the defendant’s request in order to attempt to hasten the distribution.
The plaintiff further submits that the request for proof of the death of the deceased’s mother was unreasonably made, given the defendant herself acknowledged her death in her correspondence of 25 August 2022, and in circumstances where all three beneficiaries had confirmed her death. The plaintiff further submits that the defendant’s insistence on the beneficiaries’ proving that the death certificate of Ivanica Cicvaric that they had provided belonged to the ‘Ika’ Cicvaric named in the will was also unreasonable.
It is submitted by the plaintiff that it was also unreasonable for the defendant to insist on the plaintiff’s brothers proving their identities when there could be no reason to doubt they were who they said they were, still more so to require re-notarisation of the supporting documentation they had submitted. The plaintiff submits the defendant’s actions are even more unreasonable given the warranties as to identity included in the draft deed.
In circumstances where the beneficiaries accepted the defendant’s invitation to submit a draft deed of family arrangement, I do not consider it to be unreasonable in and of itself, even despite the indemnity offered in its draft terms, for the defendant to insist on verification of the identity of the beneficiaries. However, I do accept that the defendant’s delays in progressing the draft, the manner in which she went about making the requests and her pedantic focus on some of the technicalities in the authentication of the death certificate and identity documents, as well as the unjustifiable accusations made in her solicitors’ correspondence, became unreasonable and quite fairly heightened the plaintiff’s and the other beneficiaries’ frustration with her conduct and eroded any confidence they had left in her performance.
The hurdles that the defendant continued to place in front of the beneficiaries appear to have been driven by her unjustified suspicions about their motives. The relationship between the executor and the beneficiaries in the lengthy period in which the deed of family arrangement remained in prospect was completely dysfunctional, mired in suspicion and distrust, and the circumstances entirely inapt for fruitful negotiations of any such arrangement to occur. Unsurprisingly, all communications ceased in July 2023, and in September the plaintiff commenced this proceeding. Still, no action was taken by the defendant to give effect to the beneficiaries’ wishes until the sudden and unexplained distribution of the Vermont property in March 2024.
The plaintiff submits that the making of the transfer of the Vermont property in March 2024 in circumstances where the defendant no longer insisted on the proof she had insisted upon in 2023 underscores that such demands had never mattered in the first place, and that her requests were all unreasonably made. As noted above, I do consider that it is a reasonable and prudent step for an executor to require verification of identity of foreign beneficiaries and contracting parties, however her stipulations in that task became overly technical and appeared directed at providing new reasons and justifications to defer acting on the beneficiaries’ wishes. Her unilateral actions in making the transfer in March 2024, without further insistence on the proof she previously required, exemplified that the level of verification she had sought had become unreasonable.
Similarly to the facts in Skaftouros, the relative speed with which the defendant paid non-beneficiary costs, or paid or reimbursed herself for costs out of estate funds, can be contrasted with her failure to pay, until March 2024, the funeral expenses borne by the plaintiff and particularised to her on 18 January 2023, as well as her continued failure to distribute the balance of the estate property, including surplus cash, to the beneficiaries.
I am satisfied that the defendant’s failure to action the wishes of the beneficiaries as clearly expressed in the November 2022 Request, including her placing of obstacles in the path of distribution by reason of her unreasonably technical and onerous pre-conditions, caused undue delay in the progress of the administration. This delay supports the case against her fitness to retain her office.
Ground Four – Unreasonable pursuit of the investigations of overseas assets
It is submitted by the defendant that, in part, the final distribution of the estate has been delayed by the process of dealing with the deceased’s overseas assets. However, as has been set out above, it is clear that the defendant already knew about the existence of the deceased’s partial interest in a single Croation property, and the fact that the other shares in that property were owned by the Cicvaric brothers, before she obtained the grant of probate.[122]
[122]Exhibit IC-1 to the First Cicvaric Affidavit, 33 [16].
The beneficiaries proposed that, given the Croatian property was of low value, they would each take a one-third interest in the deceased’s share, consistently with the terms of the will.[123] The beneficiaries also requested that the defendant take no further steps in respect of any overseas property, noting that such assets were beyond her remit.[124]
[123]Exhibit IC-1 to the First Cicvaric Affidavit, 118.
[124]Exhibit IC-1 to the First Cicvaric Affidavit, 140-1 [34]-[37].
As in other jurisdictions, a grant of probate in this jurisdiction only entitles the executor to deal with assets that are in, or which come into, this jurisdiction. One way for the defendant to obtain authority in a foreign jurisdiction is to apply to reseal the grant, which she ultimately did. Regardless, the plaintiff submits that I do not need to determine whether the defendant had authority to conduct her investigations and to apply for the Exemplification, on the basis that the beneficiaries had requested that she desist and she had ignored them. In disregarding the express wishes of the beneficiaries, she had spent time and money and delayed the distribution of the estate only to discover that there was a single asset of de minimis value of which she was already aware before embarking on her investigations.
The time spent on this part of the administration was wholly disproportionate to any value to the beneficiaries in the result. The defendant’s solicitors’ invoice 1703 dated 26 July 2023 (the ‘July 2023 Stern Legal Invoice’)[125] includes narrations in relation to attendances preparing communications with lawyers engaged in Croatia, the perusal of real property search results from Croatia, and communications with the defendant concerning those results in the period from 1 March 2023 to 14 April 2023. Additional work was undertaken in the period from about 23 August 2023 in relation to the Exemplification, as is revealed in the defendant’s solicitors’ invoice 1921 dated 9 March 2024 (the ‘March 2024 Stern Legal Invoice’).[126]
[125]The invoice was produced as part of the documents provided in support of the disbursement within the Administration Account and marked as exhibit P1 in this proceeding (‘Exhibit P1’).
[126]Exhibit P1.
I am satisfied that the defendant’s conduct in this regard, being at odds with the expressed wishes of the beneficiaries, was unreasonable. This conduct bears upon her fitness to remain in office.
Ground Five – Excessive costs incurred in the administration of the estate
Costs of the first attempted sale of the Vermont property
The plaintiff complains that the defendant incurred unjustified costs including preparing the Vermont property for sale in late 2022, despite the request of the beneficiaries that she not sell it.
I have considered the itemised disbursements in the Administration Account and the invoices which underlie each of them which were produced to the Court and marked as Exhibit P1. The invoices in many instances itemise work which pre-dates the 7 September 2022 letter (being the first letter that ought to have alerted the defendant that she should not pursue the sale). In other instances, the invoices lack sufficient detail to enable any understanding of when the works were commissioned and undertaken. Whilst it is possible that the defendant caused some unnecessary expenditure to be incurred by the estate in the period in which she pursued the sale in late 2022 when she ought not to have done so, there is insufficient evidence before me to determine whether such costs were unnecessary or excessive.
Costs of the deed of family arrangement negotiations
The lengthy exchanges of correspondence in the first half of 2023 concerning the verification of identity of the overseas beneficiaries caused considerable legal costs to be incurred by the estate. The July 2023 Stern Legal Invoice totals $42,225.35, and was rendered in respect of:
All matters related to the review, assessment and payment authorisation of payment claims upon the estate AND all other assistance in relation to the Estate Administration and all dealings with Alan Foster and matters related to Deed of Family Arrangement and all related and ancillary professional work to date.
Whether any portion of those fees relate to other estate-related matters is unclear, however, it nevertheless represents a significant amount of legal expenditure in circumstances where there was no actual progress towards negotiation of any of the terms of the proposed deed of family arrangement in the period between its provision by the beneficiaries on 18 January 2023 and 27 July 2023, when all correspondence between the parties on the subject ceased. Although it is likely that some unnecessary costs were incurred in this time by reason of some of the unreasonable conduct of the defendant, it is not possible to form any certain conclusion by simply analysing the invoices produced in support of the Administration Account.
Costs of the further attempted sale of the Vermont property
Various costs and expenses connected with the preparation of the Vermont property for sale in early 2024 are detailed in the Administration Account. The supporting invoices were produced within a bundle of invoices as part of Exhibit P1, and one invoice was produced and marked as a separate Exhibit P2. Within the bundle of invoices in Exhibit P1, there are invoices for Styled4Success for styling and furniture hire in the amount of $2,970, James’ Total Property Maintenance for ceiling works in the amount of $1,639, and a second invoice from the same contractor for a further $495. Exhibit P2 is an invoice from Ray White Blackburn for marketing costs in February 2024 in the amount of $5,059.
All of these costs were charged by the defendant against the estate. Given my finding that this sale of the Vermont property was attempted in her own interests and to thwart the repeated requests by the beneficiaries to distribute the property to the beneficiaries in specie, these costs were improperly incurred and are unjustified. The defendant’s incurring of these costs contributes to her unfitness to remain in office.
Payment of costs of the removal application prior to the determination of the proceeding
The defendant has already charged her legal fees incurred in defending this proceeding seeking her removal against the estate. The defendant submitted that she is entitled to take her costs out of the estate in defending the removal application prior to the determination of the proceeding by reason of her indemnity pursuant to the principles articulated by the High Court in National Trustees Executors & Agency Company of Australasia Ltd v Barnes (‘Barnes’).[127]
[127](1941) 64 CLR 268.
In Barnes, the High Court recognised the principle that a trustee is entitled to be indemnified out of the trust estate for all proper costs, charges and expenses incidental to the execution of the trust, which could include the defence of a suit to remove the trustee. As the trustees in Barnes had successfully defended an application for their removal, they were clearly entitled to their costs.[128] It was also acknowledged by the High Court that even an unsuccessful trustee may be entitled to their costs if they were properly incurred.[129]
[128](1941) 64 CLR 268, 279-280 (Williams J, with Rich ACJ and Starke J agreeing).
[129](1941) 64 CLR 268, 279 (Williams J, with Rich ACJ and Starke J agreeing).
However, Barnes is not authority for the proposition submitted by the defendant — that is, that case does not stand as authority for the proposition that an executor is ‘entitled as of right to take such costs from the estate in anticipation of success in the proceeding’.[130] It also does not stand as authority for the proposition that an executor is entitled to take their costs in anticipation not of success, but of a finding, in the event they do not succeed, that their defence of the action was justified and the costs properly incurred. In all cases, the entitlement of an executor to be indemnified for costs out of the estate ‘depends on the conclusion that the costs were properly incurred in the administration of the estate’.[131] In Skaftouros, Mandie J held that it was improper for the executor to have taken his costs from the estate before the proceeding had concluded and any appropriate costs order had been made in his favour.[132]
[130]Skaftouros [2002] VSC 198, [208] (Mandie J).
[131]Skaftouros Appeal (2004) 9 VR 584, 617 [165] (Dodds-Streeton AJA, with Winneke P and Batt JA agreeing).
[132]Skaftouros [2002] VSC 198, [211].
The March 2024 Stern Legal Invoice includes in its description of professional services rendered the following:
…including representation related to the Originating Motion filed by the Plaintiff Ivan Cicvaric, from the date of the last account.
The invoice itself incorporates detailed narrations which, from the date of commencement of this proceeding in September 2023, include numerous attendances in relation to the proceeding. The total value of the invoice is $48,972.00, and it has already been paid by the executor from estate funds.
For the reasons given above, the defendant’s payment of the legal fees incurred in relation to the removal application from estate funds prior to its determination and the making of any costs orders in her favour (or, at minimum, a finding that her actions in defending the proceeding were justified and the costs properly incurred) is improper. As was submitted by the plaintiff, the speed with which the defendant paid this and other invoices can be contrasted with her failure to pay the funeral expenses, borne by the plaintiff and particularised to her on 18 January 2023, until late March 2024, as well as her ongoing failure to distribute the balance of the estate property, including surplus cash. All of this conduct contributes to her unfitness to remain in office.
Ground Six – Failure to insure the Vermont property
As executor, the defendant owed a duty to call in and secure the assets of the estate,[133] and to use ‘due diligence and care in the management of the estate as [a person] of ordinary prudence and vigilance would use in the management of their own affairs’,[134] for the benefit of the beneficiaries.[135] However, it was submitted by the defendant that the question whether an executor should insure estate property is more complicated.[136]
[133]Bird v Bird (No 4) [2012] NSWSC 648, [104]-[105] (Rein J) (‘Bird v Bird’); Re Atkinson [1971] VR 612, 616 (Gillard J); In Re Chirnside [1956] VLR 295, 304 (Lowe, Gavan Duffy and Dean JJ). See also s 28(1) of the A&P Act.
[134]Pateman v Heyen (1993) 33 NSWLR 188, 196 (Cohen J) (‘Pateman’), citing David Hayton, Underhill and Hayton: Law Relating to Trusts and Trustees (Butterworths, 14th ed, 1987), 485; Bird v Bird [2012] NSWSC 648, [107] (Rein J); Austin v Austin (1906) 3 CLR 516, 525 (Griffith CJ, Barton and O’Connor JJ).
[135]Skaftouros [2002] VSC 198, [15] (Mandie J).
[136]Transcript , T132.18-21.
This ground emerged only after evidence was given by the defendant. In support of its argument that an executor has an obligation to maintain insurance over estate property, the plaintiff relied on an authority from the New South Wales Supreme Court in the case of Pateman v Heyen.[137] In that case, it was held that where an executor and trustee of a deceased estate is holding property for the benefit of other persons for a period of time and there may be a risk of suffering loss or damage by fire, then, providing that sufficient funds are available to the executor and trustee, he or she has a duty to act prudently and to effect an insurance policy; and that failure to do so will make the executor and trustee liable for any loss suffered.[138]
[137](1993) 33 NSWLR 188.
[138]Pateman (1993) 33 NSWLR 188, 197-8 (Cohen J).
There is no evidence before me that the Vermont property was insured, or that the defendant ever made any enquiry regarding the repair costs being covered under any policy of insurance, including any held by the plaintiff. I infer that she did not make any such enquiries because she knew the property was not insured, either by the deceased or by the plaintiff. However, for the reasons that follow, I do not accept the plaintiff’s submission that the defendant should be held liable for the damage that occurred to the Vermont property as a result of the collapse of the ceiling in March 2023.
Although the defendant did not address the point directly in submissions, emerging as it did after her evidence in cross-examination, the evidence that is deployed against her in relation to her attempts to sell the property in 2022 works in her favour in respect of this ground, in that it reveals that she did not intend to hold the Vermont property for any length of time. The fact that she continued to hold the property after 1 October 2022 (and 29 November 2022) — being the dates she had set for the auction of the property — came about at the request of the beneficiaries and as a result of the caveat filed by the plaintiff.
The relevant time to assess the defendant’s actions, therefore, is during the period between late 2022 and March 2023; that is, from the time when the defendant became aware that she would not be able to sell the property at the previously scheduled auctions to the date of the collapse of the ceiling. During this period of time, the beneficiaries and the defendant had intended to negotiate a deed of family arrangement, which amongst other things, would pave the way for the transfer of the property in specie.
Although the defendant’s response to the deed of family arrangement was unacceptably delayed by the time it was provided to the beneficiaries on 26 April 2023, I am unable to reach the conclusion that the events of late 2022 and early 2023 — including the delay between the initial provision of the deed on 18 January 2023 and the collapse of the ceiling in March 2023 — would lead a reasonable executor to conclude that the property was likely to remain held by the estate for a lengthy period, and that therefore a policy of insurance was required.
Therefore, even in the event that it could be said that the defendant would have been required to take out a policy of insurance at some stage during the administration of the estate, I cannot find that the costs associated with the damage to the property in March 2023 should be borne by the defendant.
Ground Seven – The defendant is a qualified lawyer and previously acted in respect of wills and estates
Having previously identified this as a separate ground, the plaintiff appropriately conceded that it was not really a separate ground, but should be seen more as an ‘aggravating feature’ of the defendant’s conduct.
Given her experience in practice, and having regard to her skills and knowledge as a qualified and admitted solicitor, the defendant’s conduct in the administration of this estate is more alarming. However, given the totality of the defendant’s conduct so clearly establishes her unfitness to remain in her office, this ‘aggravating feature’ does little to change the result and I do not need to give it any consideration.
Conclusion on the issue of removal
For the reasons given in this judgment, I am satisfied in all the circumstances to which I have referred above that the defendant is unfit to continue to act in the office of executor of this estate. By her conduct in the administration, she has delayed the distribution of the Vermont property, caused improper expenses to be incurred by the estate, delayed the distribution of the entire estate property, behaved unreasonably towards the beneficiaries, preferred her own interests to theirs and improperly paid her costs of the removal application from estate funds in anticipation of being successful, or if not successful, in anticipation of a finding that the costs were properly incurred. To permit her to remain in the role would likely have a further deleterious effect on the security of the trust property, and the efficient and satisfactory execution of the trust, and will be adverse to the interests of the beneficiaries.
An order should therefore be made that the defendant be removed as executor of the estate under s 34(1)(c) of the A&P Act. I accept the submission of the plaintiff that he is an appropriate person to be appointed in her place.
The usual practice in these matters is for orders removing an executor under the A&P Act to be accompanied by equivalent orders under the Trustee Act, so as to ‘avoid any errors or confusion that may arise in the administration of an estate’.[139] This is on the basis that ‘[o]nce the executorial duties in an estate have been performed, then to the extent that the estate remains undistributed, the executors become trustees’, however, ‘[t]here is no formal test to determine when a personal representative becomes a trustee’.[140] Accordingly, an order should also be made removing the defendant as trustee under s 48(1) of the Trustee Act.
[139]Giurina v Giurina [2018] VSC 599, [20] (McMillan J).
[140]Giurina v Giurina [2018] VSC 599, [20] (McMillan J).
Costs of the proceeding
In Skaftouros v Dimos (No 2) (‘Skaftouros (No 2)’),[141] Mandie J considered the costs consequences of the executor’s resistance of the removal proceeding. He held that, in the circumstances of that case, the executor should have resigned, rather than resist the application for removal.[142] The defendant executor had also been warned of the beneficiaries’ intention to commence removal proceedings well before the proceeding was actually commenced, such that he had sufficient time to put things right.[143]
[141]Skaftouros v Dimos (No 2) [2002] VSC 219 (‘Skaftouros (No 2)’).
[142]Skaftouros (No 2) [2002] VSC 219, [12]-[13], [18], [20]-[21].
[143]Skaftouros (No 2) [2002] VSC 219, [11].
In this case, the defendant was also warned of the plaintiff’s intention to commence a removal application in the correspondence sent on 4 April 2023 and 17 May 2023. These explicit warnings were in addition to the plaintiff indicating from his first interaction with the defendant that he wished to consider what, if any, involvement she should have in the administration of the estate, and the beneficiaries making an offer to the defendant for her to renounce her role as executor prior to the grant of probate on 2 November 2022. The proceeding was only then commenced in September 2023, after the extensive communications and interactions between the defendant and the beneficiaries outlining their desires and concerns.
From a very early stage, the defendant had opportunity to put things right, to make the distributions and administer the estate without further delay, but she chose not to do so. She then made things considerably worse by seeking to again sell the Vermont property in 2024, this time without notice to the beneficiaries despite their clearly and frequently expressed wishes to the contrary. Her very late attempt to put the situation right by making the transfer of the Vermont property in specie in March 2024, and the payment of the funeral expenses later in March 2024, was too little too late, and in any event was most likely motivated at that time by her own self-interest in resisting the application. In any event, the balance of the estate remains undistributed, now more than 2 years after the death of the deceased. Accordingly, I do not consider the defendant has acted reasonably in resisting the application for her removal from the time of its commencement.
The defendant refused to resign at the urging of the beneficiaries at the commencement of the administration, even after the commencement of this proceeding seeking her removal. The fact that the defendant was appointed pursuant to the wishes of the deceased (as expressed in the will) does not render her immune from suit if she does not perform her duties. The executor does not exist for the benefit of the deceased, but for the benefit of those to whom the deceased has given his estate.[144] As was submitted by the plaintiff, the defendant in this case seems to have forgotten that the estate belongs to the beneficiaries and not to her.
[144]See Letterstedt v Broers (1884) 9 App Cas 371, 386 (Lord Blackburn) and its discussion of the role of a trustee vis-à-vis those to whom the creator of the trust has given the estate.
The estate ought not bear the costs of the defendant’s unjustified resistance to the plaintiff beneficiary’s application to remove her.
Repayment of costs improperly incurred and charged to the estate
In Skaftouros (No 2), Mandie J held that:
… the court has power to make such an order pursuant to s34(1), either as a term and condition (as referred to in the section, the court may order the removal of an executor "upon such terms and conditions as the court thinks fit"), alternatively, as part of the further power of the court under that section to, "make all necessary orders for vesting the estate in the new administrator, and ... as to costs". I also invoke the power of the court to make orders as if it were in an administration proceeding to support the making of this order.[145]
[145]Skaftouros (No 2) [2002] VSC 219, [8].
Having found that the defendant:
(a)improperly paid her legal costs in resisting the proceeding from the estate prior to its determination; and
(b)ought be removed from her position as executor under s 34(1)(c) of the A&P Act and as trustee under s 48(1) of the Trustee Act; and
(c)was not justified in resisting the proceeding
I also find that the defendant must repay to the estate all of the legal costs she charged to it in respect of her defence of this proceeding. Given that some of those costs are included in the March 2024 Stern Legal Invoice together with other costs in administering the estate (for example, the legal costs of effecting the transfer of the Vermont property in specie), I will ask the parties to consider that invoice (and any further invoices issued and paid using estate monies since) and, in the absence of agreement between them as to the appropriate sum, to make further brief written submissions to me to assist the Court in determining the appropriate sum to be paid by way of reimbursement.
In addition, having found that the defendant improperly incurred costs in readying the Vermont property for sale in 2024, I also find that the defendant must repay all of the costs incurred in connection with that sale which have been charged to the estate. At the very least this will comprise:
(a)the amount of $5,059 paid to Ray White Blackburn for marketing;
(b)the amount of $2,970 paid to Styled4Success for styling and furniture hire; and
(c)the amounts of $1,639 and $495 separately invoiced by James’ Total Property Maintenance for ceiling works at the Vermont property.
The plaintiff’s application for orders for an account under Order 52 of the Rules
The plaintiff seeks an account so that the quantum of any improper expenditure can be determined and the monies paid by the executor to the beneficiaries.
The taking of an account is a ‘procedure to ascertain the monetary dealings of the parties in respect of the subject property, and to determine with precision the balance due between them.’[146] An account will not be ordered unless it is first established that one party is liable to pay to the other party anything that is found to be due.[147] It is not enough that a party might be owed some money; they are not entitled to a form of general discovery.[148]
[146]Batrouney v Forster [2015] VSC 230, [1397] (Robson J).
[147]See, for example, Re Sharpe [1992] FCA 616, [5] (Drummond J) and Doss v Doss (1843) 18 ER 464, 472 (Dr Lushington, with Mr Baron Parke and Lord Brougham agreeing).
[148]John Dyson Heydon, Mark James Leeming and Peter G Turner, Meagher Gummow & Lehane’s Equity: Doctrine and Remedies (LexisNexis Butterworths, 5th ed, 2015), 916 [26-085].
I decline to order the taking of an account as sought by the plaintiff for the reasons that follow.
(a)the administrator has recently delivered the Administration Account, and ordering the taking of another account would lead to unnecessary repetition of that task by the defendant;
(b)I have made findings regarding two items of improper expenditure that must be repaid by the executor as a consequence of the removal order. There is no need for an account to be taken to determine the quantum of those repayments as they are already itemised in the Administration Account;
(c)with the exception of the costs referred to immediately above, I am not in a position to make any specific findings about the propriety of other expenditure (on legal fees or in preparing the property for sale) incurred by the executor in the course of the administration, there being insufficient evidence to do so. That conduct has been taken into account in considering the totality of the defendant’s conduct in the administration to determine whether she is fit to remain in office. If the beneficiaries complain about loss caused to the estate by the defendant by reason of any other expenditure they can establish was improperly incurred by the defendant, then they have remedies, which they have not sought in this proceeding; and
(d)the orders that the Court will make consequential upon the removal of the defendant as executor and trustee will mean that all of the books and records of the estate are to be delivered up to the new administrator.[149] The new administrator will also be able to access the estate’s solicitors’ files. There is no utility in ordering the defendant to produce an account, especially if she is required to deliver up all of the records to the plaintiff. The plaintiff will be able to look at the invoices and the documents on file and form a view about whether there is any claim to be made against the executor in relation to her expenditure.
[149]Batrouney v Forster [2015] VSC 230, [1410 (e)(vi)] (Robson J).
Disposition
For the reasons given in this judgment, I will order that the defendant be removed as executor of the estate under s 34(1)(c) of the A&P Act and as trustee under s 48(1) of the Trustee Act.
There are orders that will need to be made as a consequence of the removal orders. The parties are requested to confer and to attempt to agree on those proposed consequential orders for the Court’s consideration. Absent agreement, I will hear further from the parties.
I will order that the defendant pay the plaintiff’s costs of the proceeding personally, however, I will hear further from the parties concerning the basis upon which those costs are to be paid.
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