Cody v Cody
[2013] VSC 274
•5 June 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PROBATE LIST
No. 5489 of 2012
IN THE MATTER of the Will and Estate of PIERCE THOMAS CODY, deceased
IN THE MATTER of an application pursuant to O 54 of the Supreme Court (General Civil Procedure) Rules 2005
| PATRICIA ADRIENNE CODY and PATRICK FRANCIS CODY (who sue as executors of the estate of PIERCE THOMAS CODY, deceased) | Plaintiffs |
| v | |
| PIERCE PATRICK CODY (who is sued as the executor of the estate of PIERCE THOMAS CODY, deceased) | Defendant |
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JUDGE: | McMillan J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 April 2013 | |
DATE OF JUDGMENT: | 5 June 2013 | |
CASE MAY BE CITED AS: | Cody v Cody | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 274 | |
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EXECUTORS AND ADMINISTRATORS – Application by the plaintiffs as executors for orders that the defendant as executor take all steps to sell real estate of the deceased – Supreme Court (General Civil Procedure) Rules 2005 r 54.02(2)(b)(iii) – Whether agreement concluded between the parties following mediation is a binding and enforceable agreement that governs the parties’ relationship – Osborn v McDermott [1998] 3 VR 1 – Agreement not binding – Specific performance not available as a remedy to the defendant – Application by the plaintiffs properly brought in accordance with Supreme Court (General Civil Procedure) Rules 2005 r 54.02 – Relief sought by the plaintiffs to be granted
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Newton | Wisewould Mahony |
| For the Defendant | Mr C Shaw | Norton Rose Australia |
HER HONOUR:
Introduction
Mrs Patricia Cody (the widow of the deceased) and Mr Patrick Cody (a son of the deceased) (‘the plaintiffs’) are two of the executors of the estate of Pierce Thomas Cody, deceased.
By originating motion and summons filed 27 September 2012, pursuant to O 54 of the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’), the plaintiffs sought orders against the third executor of the estate, Mr Pierce Patrick Cody (‘the defendant’), that the executors of the estate take all steps to effect the sale of Apartment 1, Spion Kopje Corner, Sitzmark and Falls Creek Road, Falls Creek (‘the Falls Creek Apartment’).
Background
The deceased died on 21 November 2001. On 16 October 2002, the plaintiffs and defendant, as executors of the estate of the deceased, obtained a grant of probate of the will and two codicils of the deceased. For the purposes of this application, the relevant beneficiaries under the will and codicils are Mrs Cody and the five children of the deceased, namely, Pierce, Patrick, Anna, Caroline and Joanna Cody.[1] Under the will and codicils, discretionary trusts were set up for the benefit of each of the families of the five children.
[1]Affidavit of Patricia Adrienne Cody sworn 28 September 2012, [4].
The Falls Creek Apartment is one of the remaining assets of the deceased’s residuary estate, with an approximate value of $650 000.[2] This is held via shares in Eismeer Pty Ltd, a company controlled by the estate.[3] The effect of the will and codicils of the deceased is that each of the five discretionary trusts has a one-fifth share in the residuary of the estate, including shares in Eismeer Pty Ltd.[4]
[2]Ibid [5](a).
[3]Ibid.
[4]Ibid [6].
In support of this application, by way of an affidavit sworn 28 September 2012, Mrs Patricia Cody outlines the history of the use of the Falls Creek Apartment by her and her children following the death of the deceased. Mrs Cody deposes on behalf of both plaintiffs. Mrs Cody states that, following the death of her husband, ‘due to constant bickering and disagreement between my children the trustees prepared a set of rules for the use and occupation’ of the Falls Creek Apartment.[5] A set of rules was also prepared in respect of a property at Mount Martha, being another asset forming part of the residuary estate of the deceased.[6] Mr Patrick Cody was appointed as the booking officer and the rules provided that, if any of the five children did not accept the rules, that child was to be precluded from using the properties.[7] According to Mrs Cody, ‘[d]espite the rules and booking system there was constant bickering and disagreement between my children over the use and occupation’ of the Mount Martha property and Falls Creek Apartment.[8] The trustees ultimately decided to sell the Mount Martha property in 2010.[9]
[5]Ibid [7].
[6]Ibid.
[7]Ibid.
[8]Ibid [8].
[9]Ibid.
The Cody family continued to use the Falls Creek Apartment, but there were disagreements over the implementation of the rules and use of this property.[10] New rules were drafted, amendments were proposed, but, according to the plaintiffs, no agreement was ultimately reached. Mrs Cody deposes that:
In my view there is no real prospect of my children reaching any or any lasting agreement with respect to the use and enjoyment of FALLS CREEK. The correspondence exhibited points out the deep divisions and bitterness between my children in respect of FALLS CREEK.[11]
[10]Ibid [9].
[11]Ibid [42].
Mrs Cody’s affidavit exhibits extensive and bitter correspondence between her children.[12]
[12]Ibid, Exhibits PAC-10–PAC-19, PAC-21, PAC-23.
On 15 November 2012, Mr Benjamin Thomas Davis, solicitor for the defendant, swore an affidavit in this proceeding. In this affidavit, Mr Davis states that his instructions are that the defendant opposes and intends to defend the application made by the plaintiffs on the basis that the Cody family can continue to use the Falls Creek Apartment if a set of rules can be agreed and that a set of rules has been agreed by the trustees.[13] Mr Davis also deposes that the defendant believes it would be imprudent to sell the Falls Creek Apartment because of its complex ownership structure and the depressed state of the alpine real estate market. Mr Davis’s instructions are that ‘there are disputes between Cody family members that extend beyond the scope of the current proceeding’, including in relation to the use and enjoyment of a bathing box at Mount Martha, forming part of the residuary of the deceased’s estate.[14] Mr Davis states:
I am further instructed by Pierce Cody that there have been numerous discussions between various members of the family attempting to resolve matters of dispute, including discussions that have concerned the whole of the Estate and the Settlement. Those discussions have not been fruitful. However there has not been a general mediation of all issues with all family members to try to resolve all of the matters between them in a more formal and guided setting.[15]
[13]Affidavit of Benjamin Thomas Davis sworn 15 November 2012, [3](a).
[14]Ibid [4].
[15]Ibid [5].
The Agreement
By agreement between the parties on 16 November 2012, the application was adjourned so that the parties could proceed to mediation. The mediation was conducted on 20 December 2012.
Pursuant to the mediation, the proceeding was settled and the agreement was documented in a document entitled Binding Heads of Agreement (‘the Agreement’). The precise terms and nature of the Agreement are fundamental to the resolution of this dispute.
In relation to the Falls Creek Apartment, the Agreement generally provides for it to be placed on the market for sale at the end of the 2014 ski season (unless a majority of family members agrees to retain it) and for the family members to continue to use it in the meantime in accordance with agreed rules.
The Agreement also provides for the defendant to be paid his entitlements to share in the capital of a family trust known as the Cody Family Settlement (‘the Cody Family Settlement’) earlier than originally provided for according to the terms of the Cody Family Settlement.
The settlement of the defendant’s entitlements to share in the Cody Family Settlement was not part of the application made in the proceeding, but rather a matter dealt with at the instigation of the parties.
Clause G of the Agreement provides that:
These Heads of Agreement are subject to and conditional upon the parties executing Terms of Settlement embodying these Heads of Agreement and the parties will in good faith take all steps to enable preparation thereto.
The consequences of the parties failing to execute Terms of Settlement are not set out in the Agreement.
Subsequent Negotiations
In an affidavit sworn 4 April 2013, Mr Davis deposes that since the Agreement was entered into, there have been ongoing negotiations between the parties in respect of a draft Deed of Settlement.[16] Mr Davis deposes that various steps need to be taken in order to execute Terms of Settlement as contemplated by the Agreement, including the preparation of Two Deeds in order to effect the early payment of capital to the defendant. He deposes that the First Deed has been prepared but there have been problems in relation to the preparation of the Second Deed.
[16]Affidavit of Benjamin Thomas Davis sworn 4 April 2013, [7].
In substance, Mr Davis alleges that the plaintiffs have disrupted the progress being made in relation to the preparation of the Second Deed by not permitting the defendant to have a teleconference with Mr Mark Darrer (of the firm Darrer Muir and Fleiter, who are the solicitors for the deceased’s estate) and Mr David Kew (the accountant for the Cody Family Settlement). Mr Davis deposes that the defendant has instructed him that he needs to speak with Mr Darrer and Mr Kew in order to respond to the matters set out in an email sent by Mr Tony Joyce (the personal solicitor of Patricia Cody) to Darrer Muir and Fleiter on 19 March 2013. That email is not before the Court.
A number of emails have passed between the parties in relation to this proposed teleconference, which are exhibited to the affidavit of Mr Davis. Of relevance is an email dated 25 March 2013 from Carroll & Dillon (the solicitors for the plaintiffs) to Mr Davis,[17] stating that ‘your client would be free to speak to Mark Darrer and David Kew if need be for purposes of finalising the terms of the variations to the Cody Family Settlement’.[18]
[17]Note: Carroll & Dillon became the solicitors for the plaintiffs shortly after the originating motion was filed, save for the period between 28 March and 5 April 2013, during which Mr Carroll was on leave. During Mr Carroll’s absence, Mr Joyce acted for the plaintiffs jointly. Mr Joyce otherwise acts in his capacity as Patricia Cody’s personal solicitor.
[18]Exhibit BTD5 to the Affidavit of Benjamin Thomas Davis sworn 4 April 2013.
A further email dated 27 March 2013 from Carroll & Dillon to Mr Davis states that ‘in relation to the matter we discussed yesterday … I would suggest you talk to Tony Joyce as to the outcome thereof as he is aware of the problem’.[19] A third email of 28 March 2013 from Mr Joyce to Mr Davis states that:
If there is to be a conference call with David Kew, Pierce and Michael Muir then Patrick and Trish as Directors of Inistioge Pty Ltd must be involved in that conference call. As Patrick is overseas it might be possible to arrange a conference call with Pierce, David Kew, Trish Cody, Michael Muir and myself. …
With good will on all sides I believe real progress can be made.[20]
[19]Exhibit BTD6.
[20]Exhibit BTD7.
Mr Davis deposes that he does not understand why Mr Tony Joyce would state that ‘with good will on all sides I believe real progress can be made’. He further deposes that his client considers that the plaintiffs are not acting in good faith to finalise the Settlement Deed and the two further deeds.
The issues between the parties could not be resolved and the plaintiffs’ application, which had been adjourned numerous times, was heard on 24 April 2013.
The Plaintiffs’ Position
The plaintiffs’ position is set out in a short affidavit of Tony Joyce sworn 3 April 2013, which simply states that:
Despite extensive negotiations the parties have not reached agreement in relation to the Cody Family Settlement which is referred to in the Binding Heads of Agreement. The Cody Family Settlement is separate to and severable from these proceedings.[21]
[21]Affidavit of Anthony Patrick Joyce sworn 3 April 2013, [4].
The plaintiffs submit that this application is made under O 54 of the Rules, which enlivens the Court’s special jurisdiction relating to the supervision of the administration of estates and trusts. This power allows the Court to ensure that estates and trusts are administered properly and in an efficient way.
The plaintiffs say that the proceeding has been settled, and that this is evidenced by the Heads of Agreement. They say it does not matter that the Agreement refers to two issues (the sale of the Falls Creek Apartment and the Cody Family Settlement) because those issues are completely separate and not interdependent. They also say that, if the parties intended for those issues to be interdependent, that could have been provided for in the Agreement, but it was not.
The plaintiffs say that the Court, on the present application, has power to deal only with the sale of the Falls Creek Apartment.[22] They say that the question of breach and specific performance, as submitted by the defendant, is not relevant and that they come to the Court seeking an order that gives effect to the Agreement to sell the Falls Creek Apartment. The plaintiffs say that the Court should make orders providing for the sale of the Falls Creek Apartment, there being no prospect of Terms of Settlement being executed between the parties that relate only to the subject of the Falls Creek Apartment.
[22]Note: counsel for the plaintiffs submit that, if orders are made in relation to the Falls Creek Apartment, this does not prevent a person from pursuing any other rights they may have under the Binding Heads of Agreement: Plaintiff’s Written Submissions dated 23 April 2013, [8].
The Defendant’s Position
The defendant submits that the two matters, the sale of the Falls Creek Apartment and the Cody Family Settlement, are interdependent and that the plaintiffs are, in effect, seeking specific performance of part only of an agreement, and that a court generally will not order specific performance of only part of an agreement.
The defendant further submits that there are two difficulties associated with the plaintiffs’ position. First, the defendant submits that, in order to obtain specific performance, the plaintiffs must show that there has been some breach by the defendant or an expectation that there will be a breach or non–compliance. The second difficulty is that the plaintiffs are seeking specific performance of that part of the agreement relating to the Falls Creek Apartment on the basis that the issues relating to the Cody Family Settlement may be negotiated at some point in the future.
The defendant submits that, if the Court makes the orders sought by the plaintiffs in relation to the Falls Creek Apartment, ‘as a matter of fairness and practicality’, it would make it difficult for the defendant to achieve the parts that he wants from the Agreement.
Is the Agreement a Binding and Enforceable Agreement?
The submissions of the defendant on this application raised questions of specific performance and severability. In turn, the plaintiffs responded to these issues.
The defendant did not address, in his submissions, the question whether the Agreement is binding, but asserted that the parties have agreed that it is and that it is that contract which now governs their legal relations.[23]
[23]Defendant’s Written Submissions dated 22 April 2013, [20](b).
The Court is not bound to accept that assertion and must consider the relevant facts and principles and make its own determination.
In order to resolve the issues of specific performance, it is necessary to consider the relevant principles relating to whether a settlement agreement is a binding and enforceable agreement. The key case on this issue is Osborn v McDermott (‘Osborn’).[24]
Osborn v McDermott [1998] 3 VR 1
[24][1998] 3 VR 1 (Winneke P, Phillips and Charles JJA).
Osborn was an appeal from a decision of a County Court Judge who ordered specific performance of terms of settlement and struck out two proceedings.[25] The key issue on appeal was whether the agreement, which was found to have been made on 12 February 1993, was an accord and satisfaction (as held by the County Court Judge) or a mere accord executory awaiting performance. If it were found to be a mere accord executory, in default of performance, the agreement could not be enforced by an order for specific performance.
[25] Osborn was recently applied in Deutsch v Deutsch [2012] VSC 227 (1 June 2012) [86] (Hargrave J).
The facts can summarised briefly. In 1986, the plaintiffs, who are two individuals, agreed with the defendant, who carried on business as a repairer and restorer of Rolls Royce and Bentley motor vehicles, that the defendant should restore the Bentley S2 motor car, which the plaintiffs’ owned. The parties agreed that the price of the work was estimated to be about $30 000 but no more than $35 000. The car was then driven to the defendant’s premises so that the repair work could be done.
Five years passed and the repair work was not completed. In March 1991, the plaintiffs wrote to the defendant insisting that the job be completed within four months or they would seek return of the vehicle and have the work completed elsewhere. This was not done and litigation commenced. Two proceedings were eventually issued and tried together: one proceeding was initiated by the plaintiffs seeking the return of the car and damages for breach of contract, the other was brought by the defendant claiming money for unpaid work. Both sides made offers to settle.
On 12 February 1993, a pre-trial conference was held. There was evidence that an agreement was reached whereby the plaintiffs offered to pay $18 000 for return of the car and mutual releases were to be drawn up and signed and each party was to pay its own costs. In fact, the car was not returned and correspondence asserting that the settlement negotiations had broken down flowed from either side. This eventually resulted in separate summonses being issued, one by the plaintiffs and another by the defendant, who sought specific performance of what was alleged to have been the settlement agreement and an order that the two proceedings be struck out. The alleged agreement was set out in Annexure A to the defendant’s summons, which was as follows:
By an agreement made on or about 12 February, 1993, the Plaintiffs and the Defendant agreed that [both County Court proceedings] … be settled on terms that:
(a)Osborn and Bernotti pay to McDermott (or his nominee) the sum of $18 000;
(b)McDermott deliver up … the S2 Bentley motor vehicle the subject of [the proceedings];
(c)the payment of $18 000 is to be simultaneous with the delivery of the Bentley motor vehicle within 7 days;
(d)the parties each bear and be responsible for their own costs of [the proceedings]; and
(e)there be mutual releases between the parties to the first proceeding and the second proceeding in respect to the subject matter of those proceedings.[26]
[26]Osborn v McDermott [1998] 3 VR 1, 4–5.
The County Court judge ordered that the agreement reached on 12 February 1993 was an accord and satisfaction and that, accordingly, the agreement could be sued upon and specifically enforced.
Phillips JA engaged in a lengthy and detailed consideration of the principles and identified that there are, in fact, three ways to categorise the agreement of 12 February:
there are three possibilities, not two. First, there is the mere accord executory which, on the authorities, does not constitute a contract and which is altogether unenforceable, giving rise to no new rights and obligations pending performance and under which, when there is performance (but only when there is performance), the plaintiff's existing cause of action is discharged. Secondly, at the other end of the scale is the accord and satisfaction, under which there is an immediate and enforceable agreement once the compromise is agreed upon, the parties agreeing that the plaintiff takes in satisfaction of his existing claim against the defendant the new promise by the defendant in substitution for any existing obligation. Somewhere between the two, there is the accord and conditional satisfaction, which exists where the compromise amounts to an existing and enforceable agreement between the parties for performance according to its tenor but which does not operate to discharge any existing cause of action unless and until there has been performance.[27]
[27]Ibid 10.
His Honour noted that it was common ground that the resolution of the question depends upon the particular facts of the case and that reference to similar cases is only of limited value.[28]
[28]Ibid 11–12.
What Kind of Agreement Is the Binding Heads of Agreement?
Although Osborn was a claim for damages and payment of moneys owing under contract, the principles in it are applicable to the current facts now before the Court. As in Osborn, the relevant question is whether the Agreement could be enforced by one party against the other, notwithstanding non-performance in the meantime.
The fundamental distinction between the effect of a compromise, which is a mere accord executory, and a comprise by way of accord and satisfaction, is that a mere accord executory is not intended to operate to discharge existing rights and duties until the accord is performed. An accord and satisfaction, on the other hand, operates as a discharge immediately when the accord is achieved.[29]
[29]Ibid 7–8.
The classic statement is from Dixon J in McDermott v Black:
The distinction depends on what exactly is agreed to be taken in place of the existing cause of action or claim. An executory promise or series of promises given in consideration of the abandonment of the claim may be accepted in substitution or satisfaction of the existing liability. Or, on the other hand, promises may be given by the party liable that he will satisfy the claim by doing an act, making over a thing or paying an ascertained sum of money and the other party may agree to accept, not the promise, but the act, thing or money in satisfaction of his claim. If the agreement is to accept the promise in satisfaction, the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed.[30]
[30](1940) 63 CLR 161, 184–5.
Phillips JA further explains:
Where there is an accord and satisfaction, the agreement for compromise may be enforced, and indeed only that agreement may be enforced, because ex hypothesi the previous cause of action has gone; it has been ‘satisfied’ by the making of the new agreement constituted by abandonment of the earlier cause of action in return for the promise of other benefit. If there be mere accord executory, there is no compromise unless and until what has been agreed upon is performed, with the consequence that not only is there no discharge of the existing cause of action pending that performance, but also there is no completed agreement which can be enforced. In that sense, the enforcement of performance under a mere accord executory is a contradiction in terms. The agreement is conditional upon performance so that until performance there is nothing to enforce; and although once performance occurs the agreement becomes unconditional, there will ordinarily then be no performance left to enforce — although the resultant discharge of existing obligations may of course be insisted upon.[31]
[31]Osborn v McDermott [1998] 3 VR 1, 8.
A third scenario is where there is an accord and conditional satisfaction. Phillips JA set out that scenario as described by Fullagar J in Scott v English:
The essence of the matter may be said to be that a mere ‘accord’ is not a contract at all. But, if we find in any particular case that there is a contract — a promise accepted in ‘satisfaction’ against a promise — our problem is not necessarily at an end. We have still, I think, in some cases to construe the contract to see whether its effect is to discharge the original cause of action absolutely, so that the plaintiff can never thereafter sue on it but can only sue on the new contract, or whether it effects only a conditional discharge, merely suspending the original cause of action, so that, if it is not performed by the defendant according to its tenor, the plaintiff may still maintain that original cause of action.[32]
[32][1947] VLR 445, 453.
In this application, the entire Agreement is ‘subject to and conditional upon the parties executing Terms of Settlement embodying these Heads of Agreement and the parties will in good faith take all steps to enable preparation thereto’. Clause F of the Agreement contemplates that, on the return date of the proceeding, the parties shall seek orders dismissing the proceeding but, of course, this is subject to the execution of settlement terms by the parties. On that analysis, until those terms are executed or that accord performed, the compromise does not discharge the existing rights and duties of the parties. The Agreement, therefore, is not, in my view, an accord and satisfaction. The Agreement entered into at mediation is a precursor to a final binding agreement, not a binding contract between the parties. In the absence of the execution of Terms of Settlement, contemplated by Clause G, there is no enforceable agreement between the parties. The Agreement does not create an obligation on the parties to apply to the Court to seek to have the proceeding dismissed (thereby extinguishing the cause of action) until the Terms of Settlement are executed. Without this final step, the Agreement is aspirational only and is, therefore, unenforceable. In other words, it is a mere accord executory and, in the absence of a binding contract, there is no agreement to which the Court can give effect and specific performance is not open on the facts to either party.
Consideration of the Defendant’s Submissions
As I have determined that the Agreement is a mere accord executory, the defendant’s submissions that the plaintiffs’ case is one seeking specific performance of part of an agreement are, in my view, not arguable: ‘specific performance is not ordered unless a subsisting contract enforceable at law is established’.[33] Nonetheless, for the sake of completeness, I propose to consider those submissions on specific performance, as well as the defendant’s other submissions, using the same headings that the defendant used in his written submissions of 22 April 2013.
[33]Dr Ian C F Spry, Equitable Remedies (Lawbook Co, 8th ed, 2010) 52.
Orders Sought
Counsel for the defendant submits that the plaintiffs’ application under O 54 of the Rules is not properly made and that it ought to have been commenced by summons in accordance with r 46.02 of the Rules. These Rules are as follows:
46.02 Application by summons
(1) An application made on notice to any person shall be by summons, unless the Court otherwise orders.
(2) An application by summons is made when the summons is filed in accordance with Rule 46.04.
(3) An application not by summons is made when it comes on for hearing.
54.02 Relief without general administration
(1) A proceeding may be brought for any relief which could be granted in an administration proceeding and a claim need not be made for the administration or execution under the direction of the Court of the estate or trust in respect of which the relief is sought.
Counsel for the defendant submits that, without a summons, the orders sought by the plaintiffs by their application are not clear. The defendant points to the affidavit of Mr Tony Joyce, the former solicitor for Mrs Cody, sworn 3 April 2013, which states that the orders sought are ‘in relation to the Falls Creek property, such orders to be in the form set out in the Binding Heads of Agreement’. The defendant submits that this means that the orders sought are those set out in Clause F of the Agreement, namely, that the proceeding be dismissed with an agreed costs order.
In my view, it is clear from the plaintiffs’ written submissions of 23 April 2013 that they seek orders that the Falls Creek Apartment be sold. The submissions state that such orders should be made pursuant to Clause C of the Agreement; however, that clause relates to the defendant indemnifying the trustee and the trust assets of the Cody Family Settlement. It is apparent that the reference to Clause C is an error in the submissions and that the plaintiffs intended to refer to Clause D, which provides:
Falls Creek shall be placed on the market for sale at the end of the 2014 ski season unless a majority of family members … agree that the Falls Creek unit shall be retained. Such sale shall be made at a reserve to be agreed by all family members or in the event that agreement cannot be reached to be fixed in accordance with a sworn valuation prepared by a local valuer, the property to be sold by RT Edgar.
The defendant submits that, owing to this alleged uncertainty in the form of orders sought, the defendant understands that the plaintiffs seek orders for specific performance of the parts of the Agreement relating to the Falls Creek Apartment.
It is also clear, however, that the plaintiffs have not applied to the Court for specific performance because, in their originating motion filed 27 September 2012, the plaintiffs set out the relief or remedy sought by them as follows:
1.An order that the executors of the estate of the deceased take all steps to effect a sale of Apartment 1 Spion Kopje corner Sitzmark and Falls Creek Road, Falls Creek.
2.Such other orders as the Court deems just.
3.Costs.
The fact that this application was made pursuant to O 54 of the Rules was confirmed orally by counsel for the plaintiffs.[34] In particular, counsel said:
this was a proceeding that was brought in the administration of the estate seeking an order in relation to [the] Falls Creek [Apartment]. The parties have resolved that issue, they've agreed that it should be sold in a particular way. The proceeding is completed, Your Honour can make an order in relation to that.[35]
[34]Transcript of Proceedings, Cody v Cody (24 April 2013, McMillan J, Supreme Court of Victoria, S CI 2012 05489) 16–17.
[35]Ibid 17.
Order 54 of the Rules enables the Court to do all things that it could previously do in a general administration proceeding, without the need for such a proceeding. Although the power conferred by the order is broad and extends to directing a personal representative or trustee ‘to do or abstain from doing any act’,[36] the Court is confined within the limits of the trust.[37] In this case, the deceased’s will authorises the executors to sell estate property.[38]
[36] Supreme Court (General Civil Procedure) Rules 2005, r 54.02(2)(b)(iii).
[37] Gonzales v Claridades (2003) 58 NSWLR 211, 218 (Mason P).
[38]Will of Pierce Thomas Cody, deceased, dated 23 December 1999, [15].
A proceeding may also be brought under O 54 for an order ‘approving any sale, purchase, compromise or other transaction by an executor, administrator or trustee’ or ‘directing any act to be done in the administration of an estate or in the execution of a trust which the Court could order to be done if the estate or trust were being administered or executed under the direction of the Court’.[39] Where the Court makes an order for the sale of property comprised in an estate, or trust property, the executors or administrators, or the trustees, as the case requires, shall, unless the Court otherwise orders, have the conduct of the sale.[40]
[39] Supreme Court (General Civil Procedure) Rules 2005 r 54.02(2)(c)(i)–(ii).
[40]Ibid r 54.07.
Under r 54.02 the Court has a broad jurisdiction and power to advise and direct trustees and executors in relation to the performance of their trusts and, where appropriate, to approve their entering into and performance of any transaction. In Hornsby v Playoust (No 2), Mandie J said:
The Court has undoubted jurisdiction and power to advise and direct trustees and executors in relation to the performance of their trusts and, where appropriate, to approve their entering into and performance of a transaction — for example see Re Green deceased[1972] VR 848, 850 and see the discussion in Templeton v Leviathan Pty Ltd (1921) 30 CLR 34, 41, 74 and what was said by Gillard J in Re Atkinson deceased[1971] VR 612, 615.[41]
[41][2005] VSC 125 (28 April 2005) [10].
In Macedonian Orthodox Community Church v Eminence Petar, a majority of the High Court considered that it was appropriate to consider the principles relevant to the application of equivalent English rules of Court as they ‘may provide useful guidance in considering how the powers given by s 63 of the [Trustee Act 1925] should be exercised in a particular case’.[42] Section 63(1) of the Trustee Act 1925 (NSW) is a similar provision to O 54 of the Rules and provides that:
A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.
[42](2008) 237 CLR 66, 86.
Habersberger J neatly set out the principles relevant to an application made under r 54.02(2)(c) in Exxonmobil Superannuation Plan Pty Ltd v Esso Australia Pty Ltd.[43]His Honour said:
the authorities demonstrate that the court’s role is not to consider the wisdom of the trustee’s exercise of discretion but to grant the trustee’s application for an order approving the trustee’s agreement to the compromise, if the court is satisfied of the propriety of the application. That involves considering whether:
(a)the trustee’s decision to agree to the compromise was within power;
(b)there was any impropriety in the trustee’s decision;
(c)the trustee exercised its discretion in good faith; and
(d)the trustee gave fair consideration to the relevant issues. [44]
[43](2010) 29 VR 356. Note: this case concerned an application to approve a compromise.
[44]Ibid 375.
In McKinnon v Samuels, Eames J considered that:
It is the trustees who have the absolute discretion to determine whether a compromise should be reached and as to what the terms of any compromise should be. The court can do no more than state whether it is proper for the trustees to exercise the powers of compromise as they intend. The terms of the compromise are solely the concern of the trustees. It is not proper for the court to approve the compromise in terms of assessing the wisdom of the terms of compromise, whether from the point of view of the trustees or those of any beneficiaries of the estate. What the court can properly be called upon to do is to advise the trustees whether it is proper for them to agree to the compromise and, if appropriate, to rule that they be at liberty to enter the agreements contained in the terms of settlement.[45]
[45][2000] VSC 393 (21 September 2000) [14].
In view of these principles stated by Mandie J in Hornsby, it is clear that the Court has a wide discretion and, in my view, it is incorrect to say that the plaintiffs’ application was not made properly. Despite a lack of clarity as to the precise form of the orders sought by the plaintiffs in relation to the sale of the Falls Creek Apartment, the Court is, in reality, being asked to make an order ‘approving any sale’ or ‘directing any act to be done in the administration of an estate’ as opposed to making an order approving ‘a compromise’. The precise form of orders sought may be dealt with by the Court prior to final orders being made.
It follows, therefore, that, in my view, the plaintiff’s application was properly made under O 54 and that it is not an application for specific performance of part only of a settlement.
Defendant’s Submission —The Evidence
The defendant’s submissions under this heading conceive of the plaintiffs’ application as one seeking specific performance of only part of a settlement. As stated above, the Agreement is a mere accord executory and the application is not seeking specific performance but is, instead, an application made under O 54 of the Rules. Having said that, the defendant submits that the only evidence in support of the plaintiffs’ application is Mr Joyce’s affidavit sworn 3 April 2013 and that this evidence lacks any substance.[46] The defendant refers to the following part of Mr Joyce’s affidavit, which states:
Despite extensive negotiations the parties have not reached agreement in relation to the Cody Family Settlement. The Cody Family Settlement is separate to and severable from these proceeding[s].[47]
[46]Defendant’s Written Submissions dated 22 April 2013, [12].
[47]Ibid [14].
In my view, this submission cannot be sustained. There is abundant evidence upon which the Court can make a determination. Shortly after this application was issued the plaintiffs filed the lengthy and detailed affidavit of Mrs Patricia Cody sworn 28 September 2012. As outlined above, that affidavit comprehensively sets out the background to the application, the history of disagreement amongst Mrs Cody and her five adult children (who are executors and beneficiaries under the will) and attaches 29 exhibits in support of these claims.
Defendant’s Submission — Applicable Law
The defendant made submissions on the applicable law, on the basis that the Court should consider the application to be of the kind alleged by the defendant.[48]
[48]Defendant’s Written Submissions dated 22 April 2013, [16]–[18] (relevant law); [19]–[21] (application to facts).
In paragraph [16] of his submissions, the defendant states that it is accepted that the Court has inherent jurisdiction to enforce terms of settlement in the proceeding to which they relate. The defendant submits that the following principles are applicable, relying on Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd (‘Roberts’):[49]
(a)a compromise may be enforced in the original proceeding notwithstanding that it involves matters extraneous to the proceeding, provided that justice can be done;
(b)the Court has discretion as to whether it will give effect to a compromise;
(c)that discretion is wide enough to enable it to give effect to any matter of such a nature as would afford a defence to an action for specific performance; and
(d)where an application for summary enforcement of a compromise is made in a common law action, the Court should apply, so far as they are capable of application, the same principles as would be applied if the action were of an equitable nature.
[49][1956] VLR 555.
In my view, Roberts does not assist the defendant. The facts in Roberts are different from the present case and there are more precise principles available in cases such as Osborn, which, although approving of the principles set out in Roberts and similar cases,[50] provide a stronger basis for analysing the dispute before the Court.
[50][1998] 3 VR 1, 12.
The defendant further submits that the following principles are relevant:[51]
[51]Defendant’s Written Submissions dated 22 April 2013, [18].
(a)specific performance is discretionary relief;
(b)a breach of contract or its reasonable apprehension is required in order to justify equity’s intervention: Wolseley Investments Pty Ltd v Gillespie;[52]
(c)the main basis for ordering specific performance is that damages are inadequate to meet the justice of the case: Trident General Insurance Co Ltd v McNiece Bros Pty Ltd;[53]
(d)in general, the plaintiff in an action for specific performance must establish that he or she has performed the contractual obligations to be performed on his part before the commencement of the action and that he is ready and willing to perform his future obligations under the contract: Bahr v Nicolay [No 2];[54]
(e)for specific performance to be ordered the whole of the contract must be the subject of the order, unless the order relates to a severable part of a severable contract: J C Williamson Ltd v Lukey;[55]
(f)it may be unfair to order specific performance in favour of a plaintiff where the order would not secure for the defendant performance by the plaintiff and thereby leave the defendant without adequate compensation in respect of any breach by the plaintiff: J C Williamson Ltd v Lukey;[56] and
(g)the presence of hardship to the defendant or the existence of conduct on the part of the plaintiff that renders it unfair for specific performance to be granted in his or her favour are factors relevant to the exercise of the Court’s discretion: Dowsett v Reid.[57]
[52][2007] NSWCA 358 (12 December 2007) [19].
[53](1987) 165 CLR 107, 119 (Mason CJ, Wilson J).
[54](1988) 164 CLR 604, 619.
[55](1931) 45 CLR 282, 294, 314.
[56]Ibid 298.
[57](1912) 15 CLR 695, 705–6 (Griffith CJ).
In respect of breach, the defendant’s submission is that the defendant has not breached the Agreement. The question of breach is only relevant once it has been established that a binding enforceable contract is in existence. As I have concluded that there is none, this issue is not relevant.
In respect of damages, the defendant submits that the question of damages has not arisen on the facts and the main proceeding is not a claim for damages. There is no evidence in relation to this point.
In respect of obligations, the defendant submits that the plaintiffs consider it convenient and desirable to finalise the proceeding because the settlement has not been completed as quickly as they would have liked and that this is not a basis for the plaintiffs’ to seek specific performance. The defendant submits that the parties have affirmed their commitment to act in good faith and there is no evidence demonstrating that the entirety of the Settlement can not be performed. Mr Tony Joyce’s evidence is that the parties attempted to fulfil the requirements of the Agreement, but failed. There is otherwise no specific evidence about how the plaintiffs have gone about fulfilling their alleged contractual obligations under the Agreement.
In respect of severability, the defendant submits that the Agreement is one agreement and is not severable and that it is, therefore, not open to the Court to make orders enforcing one aspect of it only. The defendant says that the plaintiffs have submitted that the Agreement is severable. If a contract were found to be in existence, I do not consider that it would necessarily be open to the Court to find that it is severable. Either way, as no enforceable agreement exists, an order for specific performance has no basis.
In respect of ‘unfairness’, the defendant submits that it would be unfair to order specific performance in relation only to the Falls Creek Apartment because that would not secure for the defendant performance by the plaintiffs of the Cody Family Settlement aspect of the Agreement. They also submit that this could result in the need for separate proceedings, which would lead to an unnecessary duplication of proceedings. In my view, it is difficult to apply this principle to the present facts as it is more directly relevant to a commercial breach of contract dispute. Further, there is no evidence demonstrating that the plaintiffs, either now or into the future, in their capacity as trustees of the Cody Family Settlement, will not agree to an early distribution of capital to the defendant.
Further, to suggest that it is unfair to the defendant in these circumstances ignores the fact that the defendant is not really a party wronged by another owing to a breach of contract; he rather is an executor of his late father’s estate, a trustee of the Cody Family Settlement, a settlor of a trust, and a beneficiary under these instruments. As such, he has specific duties and obligations, but, more importantly, he has no current enforceable entitlement to be paid capital (or income for that matter) out of the estate. The Schedule to the deceased’s codicil dated 22 August 2001 to the will of the deceased provides a mechanism for the early payment of capital out of the trust, but this must be agreed between the trustees and the appointors of the Cody Family Settlement. This may occur regardless of what takes place in relation to the Falls Creek Apartment.
The concept of compensation does not sit neatly within this fact scenario and, in my view, the defendant is not entitled to compensation.
The Defendant’s Oral Submissions
In his oral submissions, counsel for the defendant relied on two cases; J C Williamson Ltd v Lukey[58] and Wolseley Investments Pty Ltd v Gillespie.[59] In J C Williamson v Lukey, the Court’s attention was drawn to the following passage:
The doctrine of the Court of chancery was against decreeing one party to perform specifically obligations which the contract imposed upon him, if it was unable to secure to him the performance by the other contracting party of the conditions upon which those obligations depended, and could only leave him to his action of damages at law in the event of the conditions being unperformed.[60]
[58](1931) 45 CLR 282.
[59][2007] NSWCA 358 (12 December 2007) [19].
[60](1931) 45 CLR 282, 298 (Dixon J).
In Wolseley Investments Pty Ltd v Gillespie, counsel for the defendant highlighted the following passage:
I do not consider that the mere existence of a contract that gives the plaintiff an equitable interest in its subject matter, is sufficient of itself to justify equity’s intervention by awarding a decree for specific performance, absent breach or its reasonable apprehension. The authorities, properly understood, demonstrate that such a proposition would be stated too widely. The discretion to award specific performance is more narrowly circumscribed. It is undoubtedly the case that unlike an action for damages at law, equity does not require actual breach. But that said, as the late R E Megarry QC (as he then was) explained in a typically pithy note in (1906) 76 LQR 200 at 203, ‘equity will not intervene to grant the remedy unless there is some good ground for doing so’.[61]
[61][2007] NSWCA 358 (12 December 2007) [19] (Santow JA).
In Wolseley, these principles apply where there is the requisite interdependency, asserted by the defendant. A court would not order specific performance ‘if it was unable to secure to him the performance by the other contracting party of the conditions upon which those obligations depended’. The plaintiffs say that the Agreement does not create any interdependency and the performance of one part of the contract is not conditional upon the performance of the other.
As I have determined that the Agreement is not a contract and does not regulate the rights between the parties, in my view, the principles in those two cases relating to breach and interdependency within contracts are not relevant.
Conclusion
In my view, the Falls Creek Apartment should be sold.
As stated above, under r 54.02 the Court has a broad jurisdiction and power to advise and direct trustees and executors in relation to the performance of their trusts and, where appropriate, to approve their entering into and performance of any transaction. In this case, the deceased’s will authorises the executors to sell estate property. The affidavit of Mrs Patricia Cody sworn 28 September 2012 and the exhibits thereto evidence deep and protracted divisions between the children of the deceased, such that it is unlikely that a set of rules on the use and enjoyment of the Falls Creek Apartment will be effective. The defendant’s solicitor confirms by way of his affidavit sworn 15 November 2012 that discussions between the Cody family relating to the administration of the estate have not been fruitful. The parties have attempted to resolve the present dispute at mediation, however, this has not led to any binding, enforceable agreement governing the parties’ relations.
Accordingly, for the reasons set out, I propose to grant the relief sought by the plaintiffs in their summons on originating motion, namely, that the executors of the estate of Pierce Thomas Cody, deceased, effect a sale of the Falls Creek Apartment.
I shall hear the parties as to the precise form of order and costs.
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