Clay v Clay (No 3)
[2004] TASSC 144
•7 December 2004
[2004] TASSC 144
CITATION: Clay v Clay (No 3) [2004] TASSC 144
PARTIES: CLAY, Marcus John Edward
CLAY, Curtis Patrick Robert
CLAY, Ann-Maree Louise
by their Litigation Guardian
JANEIRO, Elizabeth Maree
v
CLAY, Geoffrey Edward
CLAY, Vera IrmgardPUBLIC TRUSTEE
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: M80/2001
DELIVERED ON: 7 December 2004
DELIVERED AT: Hobart
HEARING DATES: 25, 27 February, 20 March, 24 June, 1 September,
10, 11 24 November 8, 10 and 22 December 2003,
10 - 13 February, 24 April, 4 May, 29 June, 12 August,
27 October 2004
Written Submissions 1, 9 and 16 July 2003
JUDGMENT OF: Slicer J
CATCHWORDS:
REPRESENTATION:
Counsel:
Applicants: N R Readett and K P Bradshaw
Public Trustee: B McManus
Respondents: J E Green
Solicitors:
Applicants: Clerk Walker & Stops
Public Trustee: Public Trust Office
Respondents: John Green
Judgment Number: [2004] TASSC 144
Number of Paragraphs: 32
Serial No 144/2004
File No M80/2001
MARCUS JOHN EDWARD CLAY, CURTIS PATRICK ROBERT CLAY and ANN-MAREE LOUISE CLAY by their Litigation Guardian ELIZABETH MAREE JANEIRO v GEOFFREY EDWARD CLAY and VERA IRMGARD CLAY,
PUBLIC TRUSTEE (No 3)
REASONS FOR JUDGMENT SLICER J
7 December 2004
The history and factual basis of these protracted proceedings have been set out in previous judgments [2003] TASSC 63 and [2004] TASSC 33. Following the publishing of the former, an order was made removing the respondents Clay as trustees of the estate and their replacement by the Public Trustee. Following the making of orders requiring the respondents to forward and verify accounts and their failure to comply, contempt proceedings were brought which, in turn, resulted in claims of procedural irregularity and denial of responsibility by Geoffrey Clay through illness or deterioration of mental capacity. Protraction of the proceedings has been due to the failure of the respondents to comply with the most elementary of their responsibilities, indifference, and obstructionism to requests for information and documentation and the difficulties of the solicitors for the applicants and the Public Trustee in searching for and retrieving such documentary material from banking and other institutions.
The questions referred to the Court by the applicants and the answers given by the Court in [2003] TASSC 63, were incomplete and were to await the forwarding of accounts by the respondents. Their failure to do so required further inquiry by the solicitors for the applicants and the Public Trustee and the taking of evidence.
Further evidence has not greatly advanced the ability of the Court to properly assess the value of the two items identified in, and remaining from, question 1. Further inquiry has not revealed the fund disposition of the assets as posited by question 6, other than dissipation, nor any current asset obtained through the estate money.
The evidence of Geoffrey and Vera Clay is not accepted as being accurate. Some of their answers given in affidavits or in response to examination might provide a basis for the making of findings only where the answers are against interest, corroborated by others or established through documentation. Their testimony is both internally inconsistent and contradicted by documentation and surrounding material. Both treated the funds or assets of the estate as their own.
Coin and martial arts collections
In the affidavit sworn in support of a grant of probate, the respondents listed in the inventory, these assets as:
"Martial Arts Weapons collection $2,000.00
Coin collection 50,000.00"
Three spears were produced by the respondents as representing the martial arts collection. Photographs and statements made by Geoffrey Clay show the collection to be more extensive. In her evidence given when examined by her counsel, Vera Clay stated, in response to the question:
"Are they the whole of the martial arts collection?
And the answer is:
No, there was quite a bit more but after Adam’s death it was all displayed in 55 Liverpool Crescent and the police actually took a lot of that collection under Geoffrey's instructions. They were shurkins and throwing stars and that sort of thing and Geoffrey didn't want them in the house at the time so it was a lot."
A file note in a file of the respondents' solicitors contains an entry that at the time the inventory was being prepared, Geoffrey Clay stated that he had no idea as to the value of the collection. There is no evidence of any attempt to have it valued.
Allowing for the possibility that some of the material might have been retained by police for forensic evidence, the evidence clearly establishes that the collection was more extensive than that produced and its value greater than that specified in the inventory. The answer to this portion of question 1 is:
"More than $2,000."
The remaining portion of the collection has most likely been sold in portions, rather than as a whole. The return was greater than the value asserted by the respondents, but beyond that it is impossible to say. The answer to this component of question 6 is:
"Sold by the respondents for a sum greater than $2,000."
No evidence was presented by the respondents of any valuation of the coin collection. A box said to comprise the collection was produced to the Court which contained a small number of coins. However, there was a large number of spaces in the sleeves and a large number of indentations consistent with the removal of a significant number of the coins. The solicitor's file note referred to above also contains a record of information provided by Geoffrey Clay in terms:
"He told me they have the coin collection and the martial art collection. There is a candid admission that he has no idea about the martial arts collection. But the value of the coin collection is about fifty thousand dollars."
The answer provided by the respondents in their inventory will be accepted, with the outcome that the answer to that component of question 1 is:
"Coin collection to a value of $50,000."
The only conclusion permitted by the evidence of what became of these assets is that a significant portion of the collection was sold by the respondents and used for their own purposes. An assumption will be made, which favours the respondents, that the items remaining might be sold for $10,000. The answer to this portion of question 6 is:
"Sold by the respondents for an actual return to them less than the amount of $40,000. The remaining portion of the collection is available to the Trustee."
Those items remaining in the collection are to be released to the Trustee.
Proceeds of insurance policies and bank account
The amount remaining in the bank account mentioned by the testator was $641.59 and, in the scheme of things, is of little import. An amount of $547,324.32 was paid by the AMP Society as the proceeds of a life insurance policy, whilst an amount of $70,832.30 was received by way of compromise of a disputed entitlement to the proceeds of an insurance policy issued by the Government Insurance Office. The moneys were paid to, and disbursed by, the solicitors for the respondent, the National Australia Bank, the Colonial Bank, the Commonwealth Bank of Australia, and/or by way of mortgage. There were two significant items of expenditure, namely the purchase of the property "Huntingfield", and the discharge of a mortgage and subsequent sale of the property at Goulburn Street. Both transactions involved a considerable loss to the estate. Funds were intermixed, transferred, used as living expenses, and used for the purchase of vehicles, furniture and personal items. No appropriate records were kept and the task of the applicants' solicitors was difficult and its discharge by them commendable, representing the legal profession at its best. Nevertheless the tracing shows general dissipation, rather than an identifiable asset. It is convenient first to trace the moneys expended on property before examining the disbursement of funds received by the estate.
Huntingfield
In September 1997 following transfer of money by the solicitors for the estate to the respondents, paid by the AMP Society, the respondents purchased a property known as "Huntingfield". Settlement was effected in late October and at that time the respondents had the care of the first three applicants, although in February 1999, the children left either to live with their mother, the fourth applicant, or were placed into the care of the Department of Community Services. The purchase was made with estate money and a mortgage advanced by the National Bank. Details of the purchase are:
Purchase Price $375,000.00 Rates, costs and stamp duty $16,475.12 $391,475.12 Provided by AMP Society $375,000.00 From National Bank account of respondents $173,975.12 Mortgage advanced by National Australia Bank
$180,000.00
$391,475.12
The respondents lived at Huntingfield until November 2001 when the property was sold. During that time, household expenses, maintenance and certain capital items were paid from estate money. It is accepted, to the advantage of the respondents, that some of that money was expended for the benefit of the children and thus for the legitimate purpose of the estate. It would appear that a significant percentage of interest money was unpaid and was added by the bank to the capital sum owing. During the same period, the respondents operated a standard account with an overdraft facility. Details of the sale, discharge of mortgage, disbursements and costs are:
Sale price $370,000.00 Less deposit $37,000.00 $333,000.00 Plus rates apportionment $1,179.62 $334,179.62 Less capital and interest payable under mortgage $212,947.55 Repayment of Balance $44,574.32 $76,657.75 Balance on Settlement Deposit $37,000.00 Less: Commission $12,239.00 Payment of rates $3,395.65 Costs $1,875.50 Disbursements $151.40 $19,338.45 Paid to respondents
$95,996.20
Accepting for the purpose of this assessment that the interest payments are attributed to the first three applicants, then the amount accountable to the estate is, at a minimum:
Proceeds of sale $95,996.20 Money paid on overdraft $44,574.32 $140,570.52
This represents a loss to the estate of $70,886.60 from its contribution of $211,457.12. The respondents contend that payment of the overdraft represented repayment of money expended for the benefit of the children and thus the estate. Likewise they claim the same attribution to the accrued interest payments. They claim that every amount of money expended ought be debited to the estate. Such a claim is belied by the evidence and rejected. The time spent by the three applicants in the care of the respondents during the period was from the date of death of the testator (31 May 1997) until February 1999. The respondents were responsible for the upkeep of their own three children and significant amounts drawn against the overdraft account were either for capital items or personal expenditure. The respondents ought not be entitled to the benefit of the interest incurred for accommodation, living expenses and other capital items, and the eventual loss suffered by the estate through their conduct as executors and trustees.
Goulburn Street
The second respondent and the deceased were joint tenants in real estate at Goulburn Street, Hobart. The circumstances of the mortgage entered into and the basis of its repayment have been stated and the basis of respective entitlements determined by this Court in judgment [2003] TASSC 63, at pars13 – 31.
In December 1997, an amount of $184,974.82 was paid in discharge of the mortgage from estate moneys held in an account with the National Australia Bank controlled by the first respondent in the name of the Order of St Basil. That sum represents a wrongful dissipation of capital of the estate. In September 1998, the property was sold for a net sum, after discharge of mortgage of $116,346.75, and allowing for retention of costs and sundry disbursement by the solicitors, the proceeds paid to the respondents in the names of Lord and Lady Rathangan on 7 September 1998, amounted to $112,408.40. No portion of this payment has been either paid or accounted to the estate. There is a strong suggestion that the amount paid on settlement did not take into account a further sum of $30,000 paid separately by the purchaser. However, the evidence is insufficient to permit a positive finding that such occurred. Even allowing for the loss upon sale because of loss of property value and the requirement of indemnity arising from joint ownership, the respondents, or at least the second respondent, remain liable to the estate for a significant sum. The appropriate calculation produces an indebtedness of $150,659.96, arrived at in the following terms:
Money paid by estate in discharge of mortgage $184,974.82 Less proceeds of sale $116,346.74 Loss $68,628.08 One half of share of loss $34,314.04 Less money expended by estate $184,974.00 Balance
$150,659.96
Tracing
A similar result is obtained by employing the method of tracing. Some money received by the estate's solicitors was retained for the purpose of costs expended and those associated with custody and care proceedings conducted by the respondents and the fourth applicant concerning the children. Those costs, including those paid to the solicitors for the fourth applicant, are accepted as payable by the estate. There were some other payments claimed by the respondents to have been made for work performed or services provided for Goulburn Street or for matters otherwise payable on behalf of the estate. For the purpose of this determination, they will likewise be accepted as having been properly paid. However, the sum of $4,119.09 paid to Citibank is not accepted as a legitimate charge as against the estate. Making allowance for those sums properly expended, there remains a significant amount unaccounted for. The moneys were paid into a variety of accounts conducted with a building society, the National Australia Bank, the Colonial Bank and the Commonwealth Bank of Australia as ordinary or term deposits in various names. There is little ordinary documentation showing the final disposition of much of the money. Mr Readett, counsel for the applicants, was assiduous in his endeavours to trace the money to end destinations. Such might have been productive if any assets held could be currently located and the proceeds recovered. That he has been unsuccessful might be explained by their total dissipation. Here it is not necessary to analyse in detail the material he has obtained and compiled. The Court will proceed on the basis that the respondents are required to account for their conduct of the estate and their expenditure of money. The commencing point will be their receipt of the money and the identification of its use on items known such as the two mortgages, costs and the like, and the answer to question 6 will be framed accordingly.
Government Insurance Office
The settlement of the claim against GIO, including costs, was in an amount of $70,832.30. Costs associated with the claim and some referable to the custody proceedings totalling $5,205.95, were deducted, and the sum of $65,626.35, in two payments, forwarded to an account held with the Colonial Bank. Withdrawals from the account do not show conversion into a recoverable asset.
AMP Society
The sum of $547,324.32 was paid to the estate's solicitors in September 1997 which, together with the CBA bank account credit of $641.59, amounted to $547,965.91. The trust records of the solicitors show the payment of money for costs and identified creditors in the sum of $15,976.14. Payment from within that figure, with the exception of that made to Citibank of $4,119.09, will be accepted as having been made on behalf of the estate. The Citibank figure will be separately stated. Details of reception by the solicitors and payments made to or on behalf of the respondents, are:
Receipts AMP Society $547,324.32 CBA Bank $641.59 $547,965.91 Paid G & V Clay (NAB) 7007 – 69 – 109 – 4463 $452,500.00 G & V Clay (NAB) $10,000.00 G & V Clay Huntingfield purchase $37,500.00 G & V Clay (Order of St Basil 087 – 009 – 60916 – 1226) $19,211.28 Bass & Equitable Building Society $10,000.00 National Australia Bank $3,808.16 Paid Creditors $15,976.14 Citibank
$4,119.09
$553,114.67
The difference is explicable by the payment of the sum of $5,148.76 from the Bass & Equitable Building Society to the account which was credited against an account for costs in the identical sum which has been included above in the payment to creditors of $15,976.14. It ought not be double debited to the respondents. The amount paid to the respondents for which they were accountable to the estate is $531,989.77. The transfer of $37,500 to the Huntingfield purchase is seen as an expenditure in the earlier statement. Money was transferred from the NAB account to make up the purchase price of Huntingfield and a further figure of $185,805 for Goulburn Street. It is unnecessary to attempt to trace other money into and out of other accounts in order to answer question 6. Money appropriate for the maintenance and care of the children has been taken into account in the Huntingfield calculations, as is the loss which ought be paid by the estate following the sale of Goulburn Street.
The capital which the respondents were entitled to withdraw from the estate in relation to the property transactions can be calculated in the following manner:
Receipts GIO net proceeds $65,626.00 AMP net proceeds $531,990.00 $597,616.00 Payments Attributable to Estate Loss occasioned on sale of Goulburn Street $34,314.00 Capital, interest and maintenance costs and loss occasioned on sale of Huntingfield $70,886.00
$105,200.00
Balance
$492,416.00
The respondents claim that money was expended for the benefit of the first three applicants. In a belated and unsatisfactory response to the order regarding account, the first respondent supplied a list of expenses he provided to his solicitors by letter dated 19 July 2001, setting out payments made by the respondents on behalf of the estate. The list, attached to his affidavit of 16 December 2003, sets out the following:
"Demand for 88 Goulburn Street $203,938.31 Sold Property Letter J Green 7/9/98 $92,530.31 Loss on Sale $111,408.00 Purchase Huntingfield $215,003.52 Bank Interest to June 01 $99,528.00 Total $425,939.52 … Carried Forward $425,939.52 Purchase Mitsubishi 7 Seat $28,864.00 2 Years [sic] Running Cost plus Servicing $1,120.00 Registration 2 years $900.00 Insurance $600.00 Huntingfield House Insurance 2 years $6,000.00 Entertainment Aust $75 per month $1,800.00 Rates $5,616.00 Children Court Expenses $6,177.17 Children Clothing including School Uniform $3,200.00 Baby Sitting $3,000.00 Mower for Grounds: Petrol and Maintenance $3,900.00 Half Repairs Goulburn Street 2 Fires/Vandals $25,000.00 Repairs Castle Sealing
(Children refer to it as home and still do)
$12,680.00
Boundaries Mr Green $2,173.65 Professional Gardener $3,750.00 Advertising Property for Sale $5,581.00 Repairs Plumbing $3,499.00 Well Cover $800.00 Electrical $303.00 Funeral Ashes and Burial $600.00 Dog Setter for Children $587.00 2 years [sic] Injections & Food $870.00 Moonbird for Children including Food, Riding Gear, lessons and board
Even Dept of Child Health and Welfare continued some riding lessons
$1,885.00
Harrison Mowers $120.00 Insurance $1,813.43 Rubbish $590.00 Gas $177.90 MBF $266.60 Telstra $2,591.30 HEC $9,660.32 Electrical Repairs $303.00 RACT $415.00 Locksmith $752.50 Bike Shop Kingston $229.85 Extra Bed $360.00 Hookers Real Estate $1,000.00 Books & Toys $794.89 Petrol $651.50 Mercury $676.93 Mitre Ten $764.70 Primary School $897.50 New Clothes Party $238.98 Albany $69.00 Cleaners $984.00 New Print Change of Address $885.80 DCA Computer $4,075.00 Discon Ink $311.95 Service Computer $100.45 John Green $1,910.00 Plants $145.52 grand total
$575,630.00"
A number of reasons were provided justifying the claimed expenditure. Little, if any, documentation was provided in support of the claim. Neither the list, the affidavit, nor the evidence given by the first respondent at the hearing are accepted. The reasons given for some of the purchases are not plausible. Many of those reasons concern the disputation as to custody and care of the children and problems associated with or following the death of the testator. However, some costs associated with the children ought be paid by the estate.
Marcus John Clay was born on 16 April 1989, Curtis Patrick Clay on 17 June 1990, and Ann-Maree Louise Clay on 9 May 1992. Their father died on 31 May 1997. The mother of the children and the respondents had been involved in proceedings concerning the custody and care of the children since 1998. Following the death of their father, the children had resided with the respondents and, on 27 November 1997, the Family Court of Australia ordered, by consent, that the children reside with the second respondent and their mother have access for certain specified periods. Following disputation, the details of which are unnecessary to recount, the fourth applicant, on 13 February 1999, did not return the children to the care of the second respondent and on 2 March, the Family Court ordered that the children be provided with a representative for the purpose of the proceedings, and following a hearing, the court ordered that responsibility for the children be that of the Secretary of the Department of Health and Human Services and that they reside in the care of the Department. On 2 August 2000, solicitors for the mother wrote to the solicitors for the respondents, asking the respondents, as administrators of the estate, for confirmation that the three children were "… the beneficiaries of the estate", and asking "… where the funds have been invested and their current value." On 9 August 2000, the respondents replied through their solicitor that "… do not accept that the abovementioned children are beneficiaries of the Will" and raised a question as to whether the testator was the father of those children. In his affidavit sworn on 19 June 2001, Geoffrey Clay deposed that:
"Neither Elizabeth Janeiro nor the Secretary of the Department of Health and Human Services have formerly requested the payment of maintenance for the children out of the estate of Adam Clay."
Huntingfield was purchased in October 1997. The respondents had three children of their own and the extended family lived there together until February 1999. Allowing for the provision of accommodation for the three children from the date of purchase until February 1999, it is appropriate to allow for other costs necessary for the upbringing of the children. During that period of 74 weeks, it is reasonable, and to the advantage of the respondents, to allow for payment by the estate of $300 per week for the children, making a total of $22,200. A greater sum ought be allowed for the cost of care for the period 31 May 1997 until September, a period of approximately 16 weeks. Assuming, with the cost of accommodation, the sum to be $500, the estate ought be liable for the payment of a further $8,000. To this can be added some items from the list provided by Geoffrey Clay which can be identified as referable to the children, namely:
Clothing, including school uniforms $3,200.00 Babysitting $3,000.00 Purchase of pet $587.00 Costs of food and veterinary services for the pet $870.00 Purchase of horse, saddlery, lessons and agistment $1,885.00 Purchase cycle $229.00 Books and Toys $794.00 Primary school payment $897.00 New clothing for party $239.00 $11,701.00
The allowances as amended are unduly advantageous to the respondents, dependent as they are on material furnished by Geoffrey Clay and rough estimate. However, the statement contained in the letter of July 2003, is regarded, as a whole, as equivalent to a statement against interest, since most of it harms the cause as advanced by its maker, and it may be that he can take the good with the bad.
Conclusion
The calculations set out hereunder do not include any component of interest payable by the respondents to the estate. Given my findings as to their dealings with trust moneys, any calculation ought be at a market rate (iWave Pty Ltd v Break O'Day Business Enterprise Board Inc [2004] TASSC 43; Hagan & Ors v Waterhouse (1991) 34 NSWLR 308; Tasmanian Seafoods Pty Ltd v MacQueen (No 3) [2004] TASSC 91.) The calculations are:
Net Proceeds $597,616.00 Less: Goulburn Street Loss $34,314.00 Payments incurred in relation to Huntingfield $70,886.00 Maintenance of children $30,200.00 Special items – children $11,701.00 $147,101.00 Capital due to the estate (without interest)
$450,515.00
The capital losses were a result of breach of trust through wilful disregard for the terms of the trust, indifference to the interests of the beneficiaries, and general maladministration.
Answers to questions referred by the applicants
| "1 What were the assets and liabilities of the estate of the late Adam John Baynes Clay other than as stated in the judgment. Other as stated in the judgment | Martial Arts Weapons collection More than $2,000.00 Proceeds of GIO Life Insurance Policy $70,832.30 Liabilities Value Westpac bank loan $3,788.11 Funeral expenses 4,000.00 |
| 2 Does the Will of the Late Adam John Baynes Clay admitted to Probate on the 12th August, 1997 deal with the entirety of the net estate of the said Adam John Baynes Clay. | Yes |
| 3 Who are the Trustees referred to in the said Will? | Geoffrey Edward Clay and Vera Irmgard Clay |
| 4 In so far as the Will provides for the distribution of any assets of the estate, what provision is made and, in particular: (a) Who is/are the beneficiaries? (b) What assets are disposed of pursuant to the terms of the Will? (c) When do the beneficiaries become entitled to their legacy? | (a) Marcus John Edward Clay Curtis Patrick Robert Clay (b) See answer 1 (c) Upon each of the named beneficiaries attaining the age of 18 |
| 5 Does the Will establish a discretionary trust in relation to the net estate of the said Adam John Baynes Clay for the benefit of his children? | Yes, but limited |
| 6 What has become of the assets of the estate since the date of death?" | (1) Martial Arts Collection - items sold, except for 3 items for a price greater than $2,000 and the money dissipated. (2) Coin Collection – all items sold with the exception of some minor items held by the Court and the proceeds dissipated by the trustees. (3) The sum of $450,515 derived from the proceeds of the insurance policies misappropriate by the trustees, dissipated by them and/or wrongfully retained by them in breach of the trust. (4) The balance of the capital, excluding the interest component, expended for the benefit of the beneficiaries or lost through inadequate management, but not through misappropriation. |
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