Crossingham v Crossingham
[2012] NSWSC 95
•02 February 2012
Supreme Court
New South Wales
Medium Neutral Citation: Crossingham v Crossingham [2012] NSWSC 95 Hearing dates: Tuesday, 31 January 2012;Wednesday, 1 February 2012 Decision date: 02 February 2012 Jurisdiction: Equity Division Before: White J Decision: Refer to end of judgment.
Catchwords: EQUITY - application for the taking of accounts - fiduciary duty - duty to pay expenses and care for the deceased - authority from deceased to withdraw moneys from the account for maintenance and care - control of money in the account - admitted use for personal benefit - no intended obligation to account - no failure in duties to deceased - application for the taking of accounts dismissed
EQUITY - application for the taking of accounts - authority to draw from the account for own purposes revoked on death of deceased - requirement to account for moneys to be restored to the estate - account for restoration to estate subject to any entitlement to creditLegislation Cited: Civil Procedure Act 2005 Cases Cited: Chan v Zacharia (1984) 154 CLR 178
Peninsular & Oriental Steam Navigation Co v Johnson (1938) 60 CLR 189
Regal (Hastings) Ltd v Gulliver (1967) 2 AC 134
Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417
Jodrell v Jodrell (1851) 14 Beav. 397; (1851) 51 ER 339
Brown v Smith (1878) 10 Ch D 377
Clay v Clay [2001] HCA 9; (2001) 202 CLR 410
Klotz v Neubauer [2001] SASC 454; (2001) 82 SASR 6
Morris v Morris [1982] 1 NSWLR 61
Plunkett v Ball [1915] HCA 14; (1915) 19 CLR 544
Maguire v Makaronis (1997) 188 CLR 449 Commonwealth Bank of Australia v Smith (1991) 102 ALR 453Texts Cited: Seaton on Decrees, 3rd ed, Vol 2 Category: Principal judgment Parties: Cathrine Ann Crossingham (1st Plaintiff)
Megan Elizabeth Crossingham (2nd Plaintiff)
Kimberley Edward Crossingham (Defendant)Representation: A Combe (Plaintiffs)
In person (Defendant)
Makin Churchill Lawyers (Plaintiffs)
File Number(s): 2011/166314
Judgment
HIS HONOUR : In Chan v Zacharia (1984) 154 CLR 178 Deane J said at 205:
" ... one cannot but be conscious of the danger that the over-enthusiastic and unnecessary statement of broad general principles of equity in terms of inflexibility may destroy the vigour which it is intended to promote in that it will exclude the ordinary interplay of the doctrines of equity and the adjustment of general principles to particular facts and changing circumstances and convert equity into an instrument of hardship and injustice in individual cases ... There is 'no better mode of undermining the sound doctrines of equity than to make unreasonable and inequitable applications of them.'" [Citation of authority omitted.]
These proceedings raise those considerations. The proceedings are for an account. The plaintiffs, Cathrine and Megan Crossingham, are sisters. The defendant, Kimberley Crossingham, is their brother. From about December 2003 the defendant became the carer of the parties' father, Ernest Crossingham, following Ernest Crossingham's suffering a stroke. The defendant continued in that role until Ernest Crossingham's death on 3 September 2010. The defendant had access to his father's bank account with the Commonwealth Bank of Australia ("CBA"). His father had given him the PIN for the account. The defendant withdrew moneys from the account to pay household bills and for the care and maintenance of his father. He also admits using money drawn from the account for his own purposes.
Ernest Crossingham made a will on 30 January 2004. By his will the deceased appointed his son Kimberley and his daughter Cathrine as the executors and trustees of the will. He left his estate to his children in equal shares. The defendant had four children, namely, Kimberley, Cathrine, Megan and Lisa Arscott.
The estate is modest. It consisted of a house in Murrie Street, Windang (that was purchased by the first plaintiff Cathrine Crossingham for $385,000), a credit balance in the account with the CBA of $7,381.15, and superannuation with Colonial First State to the value of approximately $34,000.
The defendant continued to draw on the account after his father's death. Between 3 and 30 September 2010 he withdrew $8,230, most of which appears to have been used for his own purposes.
The plaintiffs seek an order that the defendant account to the estate on a wilful default basis both for the moneys withdrawn after the deceased's death and also in respect of all moneys that the defendant withdrew from his father's account during his father's lifetime.
The orders sought include that the defendant file and serve a detailed account on a wilful default basis as follows:
" The Court:
1. Directs that the Defendant, within 21 days of the date of these orders, file and serve on the Plaintiffs a detailed account on a wilful default basis ('Account') as follows:
a. setting out the dealings and transactions of the Defendant in relation to the Commonwealth Bank of Australia Pensioner Security Account (Statement Option) number [xxxx xxxxxxxx] ; and
b. specifying in respect of each withdrawal from Commonwealth Bank of Australia Pensioner Security Account (Statement Option) number [xxxx xxxxxxxx] the date and amount of the withdrawal, for what reason the withdrawal was made and to whom each withdrawal was paid; and
c. vouching each withdrawal Commonwealth Bank of Australia Pensioner Security Account (Statement Option) number [xxxx xxxxxxxx] by attaching the original receipt or other document supporting each withdrawal; and
d. specifying the amount of interest that would have been payable on each withdrawal. "
The defendant's drawings on the account date back to at least 2004. Regular payments were made to the deceased's account from two sources. The deceased received a fortnightly Centrelink pension. At the end of 2004 this was in the order of $476.50 per fortnight. By September 2010 it had increased to $701.10 per fortnight. The deceased also received a monthly superannuation pension from Colonial First State of $884.17. At all relevant times the defendant's only source of income was a Centrelink carer's pension. By 2010 this was in the order of $807.78 per fortnight. It was paid to the defendant's ANZ account.
The defendant made withdrawals from both accounts to pay the expenses of the household. The household, subject to a qualification that is presently immaterial, consisted of the defendant and his father. He said, and I accept, that their moneys were pooled. He admitted that some parts of his father's money were used for his personal benefit. This included money he spent on gambling, alcohol and golf.
The defendant is unmarried and has no dependants. He moved into his parents' house at Windang in 2000. The deceased's wife died on 28 September 2003. In November or December 2003 the deceased suffered a stroke. This affected his ability to swallow, his speech and the sight in one eye. Because of the difficulty in swallowing occasioned by the stroke, a tube had to be inserted into the deceased's abdomen to receive blended foods and liquids. This remained in place for some months. Then some time in 2004 until about 2009 the deceased could eat mashed food. He suffered further strokes in 2006.
From 2004 the deceased required the assistance of a wheelchair and a carer. Up until about 2008 the defendant occasionally took his father out in his wheelchair to go shopping. He took him out at approximately fortnightly intervals to the local club. He did this at times when his father was not in hospital or in respite care. Those outings stopped in 2008 when the deceased's condition worsened and he was unable to travel.
From about 2005 the deceased was incontinent. He required a high level of care. There is no issue in these proceedings but that the defendant provided a high level of care. His sister Lisa Arscott said that her brother went to extraordinary lengths to ensure the highest quality of life for her father. A respite carer, Mr James Campbell, who moved into a room in the house at Windang in about July 2010 to provide respite care on two afternoons a week and who had provided respite care for some years before then, observed that the defendant was totally dedicated and attentive to his father's needs and displayed a high degree of compassion and understanding towards him. The deceased told Mr Campbell on occasions that his son was " my rock and I do not know what I would do without him ".
On 30 January 2004, at the same time as he made his will, the deceased executed a general enduring power of attorney in favour of Kimberley and Cathrine Crossingham. That power could be exercised jointly or severally. Thus from December 2003 the defendant stood as carer for his father. He assumed the function of guardian. It was he who, as his father's guardian, gave consent from time to time to medical treatment for his father. From January 2004 he was also the donee of a general power of attorney. He had access to the deceased's account. At least if he was to draw money from that account to pay for the deceased's expenses, he would have done so as the deceased's agent. From his father's death he was also executor.
The plaintiffs argued that those factors gave rise to a fiduciary relationship between the defendant and his father. He had undertaken to act in the interests of his father. The defendant had been given access to the bank account. The deceased was vulnerable to the way in which the defendant exercised the power to operate that account. He could operate that account wholly to the deceased's benefit or potentially to his detriment.
The plaintiffs argued that as the defendant had control of the money in the defendant's account he could be ordered to account. They cite what was said by Latham CJ in Peninsular & Oriental Steam Navigation Co v Johnson (1938) 60 CLR 189 at 218 that:
" Any person who, as agent or manager or director, has in fact the disposition or control of the moneys or other property of another person is a person who may be ordered to bring in an account. "
There is no doubt that the defendant can be ordered to bring in an account in respect of his dealings with his father's money both before and after his father's death. The question is whether an account should be ordered.
The plaintiffs argued that as a fiduciary the defendant is liable to account for any profit he derived from his relationship with his father unless he can demonstrate that it would be inequitable to require an account because any personal benefit or profit was made with the knowing assent of the deceased. (See Regal (Hastings) Ltd v Gulliver (1967) 2 AC 134 at 154.)
Whilst these general principles are unexceptionable and have full application to the position of an executor, the general principles do not take account of the fact that prior to his death the relationship between the deceased and the defendant was analogous to that of a guardian and ward or persons having management of a disabled person's estate and the disabled person. The relationship was not that of strangers, or businessmen, or professionals, but of a son providing day-to-day care of his father in a way analogous to the care provided by a parent or guardian for a child. Whilst the relationship of guardian and ward is a fiduciary one, if the guardian performs his or her duty adequately to maintain the person entrusted to his or her care, the guardian is not ordinarily required to account for the expenditure of income available for that purpose ( Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 at 420-421).
In Jodrell v Jodrell (1851) 14 Beav. 397; (1851) 51 ER 339 the husband covenanted to pay his wife an annual sum to keep up an establishment for herself and her children on such scale as she thought fit, and to pay any surplus to the husband. The wife contended that for so long as she performed her obligations to keep up the establishment and maintain the children she was entitled to the whole of the annual sum contracted to be paid, or so much of it as she might think fit to require. The husband contended that any part of the annual sum not required for the purposes mentioned in the deed should be paid to him.
Sir John Romilly MR held that provided the wife duly performed the obligations imposed on her, she was not liable to account for any surplus. In reaching that conclusion his Lordship said (at 411-414; 344-345):
" In the absence of any express provision in the deed regulating the rights and duties of both parties to this deed, there can be no question as to what the doctrine of a Court of Equity is, as applied to this subject. It is a payment to be made to Lady Jodrell for the purpose of maintaining and supporting an establishment: it is analogous to the case of money paid to a guardian for the support and maintenance of an infant, or to the committee of the person of a lunatic for the support of that person. In such cases, the Courts of Equity have always held, that the money is paid to the dispensing hand, coupled with an obligation duly to perform the condition on which the annuity is paid; and that provided the condition is duly and properly performed, the Court requires no account of what (if any) surplus remains after the proper performance of it.
Were it otherwise, the trust of guardian to an infant would be the most onerous and difficult to be discharged that could by possibility exist. In the case of executors, the account may easily be kept with perfect accuracy, the whole estate must be got in, and only strict legal payments are to be allowed to the executors: but, in the instance of a guardian maintaining a ward in his own family, such an account could not accurately be kept. An estimate or calculation of the extent to which his household expenses are increased by the residence of the ward, would be a matter of great difficulty, and open to endless discussion and opposing evidence. Various sums may properly be expended on a ward, of which no account could be kept at the time. The expense of amusements, of which the ward had partaken with the other members of the family of the guardian, would give rise to endless litigation as to the propriety of the amount, the reasonableness of the charge, and the propriety of the proportion charged to the account of the ward. If the ward had a separate establishment, similar questions would arise, both as to the propriety of the items, and as to the amount of the charges made in respect thereof, and the necessity of keeping vouchers or obtaining evidence for various payments, incapable of being vouched or evidenced according to the ordinary transactions of life, and would result in this: that the guardian would, in fact, in few instances, be able to prove or to obtain an allowance of the money which he had actually and bona fide expended for the benefit of his ward. The same observations would apply, in an equal degree, to the case of the committee of a person requiring personal care; and the same observations would also apply to the duties which had to be performed by Lady Jodrell in the present case.
It has been probably for these reasons that Courts of Equity ... have held, that in cases of this description the ordinary rule as applied to strangers or to persons not placed in that peculiar relation do not apply; but a new and a distinct set of principles are applicable to the peculiar relation which subsists between them; the foundation of which principle is a due regard for what, in the most extended view of the matter, has been found to be most for the interest of families. Accordingly, equity, in such cases, holds that no account can be required or enforced, but treats them as cases where the best interest of mankind and the peace of families, and the security and advantage of those relations which tend to the support and education of infants, who may be deprived of a parental care, may be best promoted, by considering at first what is a fair and proper sum to be allowed for the maintenance of the infant: and provided that condition be performed, of requiring no further account of the sum allowed for that purpose. That the guardian or committee derives an advantage from it, is well known and recognised; but that advantage is considered to be beneficial, on the whole, to the infant, and to promote the relative strict care, without which the office of guardian or committee would hardly ever be accepted by anyone, unless someone bound by very peculiar ties of personal affection to the object of his care.
... The principle of the rule is not confined to the case of guardian and ward, but extends to all others of a similar description, where an annual sum is given for what may properly be called maintenance. It is in truth a sum paid to the dispensing person, subject to an obligation, which the Court will require strictly to be performed, of doing that for which the annual sum is given. But if the condition is performed, the dispensing person is entitled to the advantage, which, by his care and attention, may be derived from the mode of executing the trust. "
Jodrell v Jodrell was cited in Seaton on Decrees , 3 rd ed, Vol 2 at p 705 for the proposition that " But guardians and committees, having allowances for maintenance, are not accountable for the expenditure, while they duly maintain ".
In Countess of Bective v Federal Commissioner of Taxation Dixon J observed at 419 that " no exact account of expenditure upon maintenance is required in equity ". Authority for this, if any authority beyond the statement of Dixon J himself were required, would include Jodrell v Jodrell and Brown v Smith (1878) 10 Ch D 377.
Dixon J also said (at 420-421):
" It is a general rule that guardians of infants, committees of the person of lunatics, and others who are entrusted with funds to be expended in the maintenance and support of persons under their care, are not liable to account as trustees. They need not vouch the items of their expenditure, and if they fulfil the obligation of maintenance in a manner commensurate with the income available to them for the purpose, an account will not be taken. Often the person to be maintained is a member of a family enjoying the advantages of a common establishment; always the end in view is to supply the daily wants of an individual, to provide for his comfort, edification and amusement, and to promote his happiness. It would defeat the very purpose for which the fund is provided if its administration were hampered by the necessity of identifying, distinguishing, apportioning and recording every item of expenditure and vindicating its propriety.
Although these considerations furnish an independent foundation for the general rule, yet after all it is a doctrine regulating the application of moneys payable under an instrument, whether a will, a settlement, or an order of a court of Equity, and the operation of the doctrine must depend upon the provisions contained in the instrument, both express and implied. But the effect of the instrument will often be governed by the circumstances to which it was intended to apply, and in particular by a consideration of the nature of the actual abode, the condition of the household, and the state of the family of the infant or other person to be maintained. Courts of Equity have not disguised the fact that the general rule gives to a parent or guardian dispensing the fund an opportunity of gaining incidental benefits, but the nature and extent of the advantages permitted must depend peculiarly upon the intention ascribed to the instrument. "
This passage was approved in Clay v Clay [2001] HCA 9; (2001) 202 CLR 410 at 430.
Dixon J also said (at 422-423):
" A guardian is not permitted to receive moneys for maintenance without liability to account, except upon the condition that he discharges his duty adequately to maintain, and not otherwise. Upon his default the court will administer the fund or intercept the payments, and has jurisdiction to order an account or an inquiry. ... Where, however, the condition is performed the court does not inquire whether the money has been completely expended or whether the recipient has spent small sums for his personal benefit, but nevertheless it remains an allowance to a person in a fiduciary capacity and for a definite purpose. "
Counsel for the plaintiffs, Mr Combe, correctly observed that the present case is not one involving the construction of an instrument that provides for the setting up of a fund for the payment of a sum of money to the defendant for the purpose of maintaining his father. The question is rather whether the defendant, being a fiduciary, should account for the use of his father's money when admittedly it has been applied partly for his own benefit. The distinction must be recognised, but I do not think it is a critical point of difference. The authorities treat indifferently cases of a fund being set up to pay money for the purpose of maintaining an establishment or for the maintenance of persons (for example Jodrell v Jodrell ) and cases where it is the plaintiff's own money that is to be applied for those purposes but is to be applied by a third party to whom the moneys are to be paid and applied for the plaintiff's benefit (e.g. Brown v Smith ).
Mr Combe also submitted that in this case the defendant did not " fulfil the obligation of maintenance in a manner commensurate with the income available to [him] for the purpose " ( Countess of Bective v Federal Commissioner of Taxation at 420-421). He submitted that this had both a qualitative and a quantitative aspect. He submitted that adequate maintenance had to be provided and there also had to be an approximate correlation between the amount of the father's money that was spent, and the costs of his maintenance and household expenses.
I do not think that is how this passage from Dixon J's judgment in the Countess of Bective case should be read. Rather one asks whether, having regard to the amount of money available, was the person properly maintained? For example, if the question were one of the education and maintenance of a child and an income of $4,000 a year was available for that purpose, the type of education and maintenance that would be " commensurate with the income available for the purpose " could well be substantially different than if the available sum were $40,000 per year. But this does not mean that approximately all of the available income must be spent. There is no such suggestion in, for example, Jodrell v Jodrell . In this case, as I have said, there is no issue but that the defendant provided a high level of loving care for his father.
Mr Combe cited Klotz v Neubauer [2001] SASC 454; (2001) 82 SASR 6 for the proposition that where a donee has acted pursuant to a power of attorney, particularly in respect of a deceased estate, the donee may be liable to account to the beneficiaries of the estate for any breach of the fiduciary duty resulting in a personal benefit or profit. As I have said, as a general statement of principle that is unexceptionable. It was said the facts of Klotz v Neubauer were analogous to the facts of the present case.
In Klotz v Neubauer the deceased had advanced money to his daughter and her husband for the purpose of their building an extension to their house in order that he could live in the extension during the rest of his lifetime. The basis upon which he provided the moneys for the house extension was not honoured. After 12 months he was placed in a nursing home. Debelle J found that there was a fiduciary relationship between the defendants and the deceased, that the defendants had an obligation not to profit from their father's estate and were liable to account for a profit. He found that the defendants were liable to account for the costs of the nursing home accommodation except for the cost of meals.
I do not think that the basis upon which that case was decided has any application to the present facts. It was not a case in which an account was sought of the daily expenditure of the deceased's money by the defendants where they provided care for him and also maintained the household and also derived personal benefit from such daily expenditure. Prima facie one would have thought that the appropriate remedy on the facts in Klotz v Neubauer was not the order for account that was made, but an order for repayment of the moneys that had been advanced by the deceased on a condition that was not satisfied, or on an assumption that did not eventuate, secured by a charge over the property. (Compare Morris v Morris [1982] 1 NSWLR 61.)
Mr Combe also submitted that the principles described in the passages from which I have quoted from Jodrell v Jodrell and Countess of Bective v Federal Commissioner of Taxation require re-consideration in changing circumstances. He submitted that with the advent of electronic cards with personal identification numbers that allow easy withdrawal of moneys from a person's account by another who has the PIN, the Courts should adopt a stricter approach to the taking of an account by a carer who has access to the account than might be implied from the passages I have quoted.
However, the considerations as to the endless difficulties that could arise from the taking of accounts in such circumstances are of equal application today as they were in the 19th century. Times change, but relationships between family members over property raise issues that are similar from one decade or century to the next.
But just as the existence or extent of an obligation to account for a fund that has been provided for a particular purpose by an instrument would depend on the proper construction of the instrument, so the existence or extent of an obligation to account where the defendant has had use of his father's money by agreement with him depends on the nature of the agreement made between them.
If the agreement between the deceased and the defendant were that the defendant could only have recourse to his father's bank account to pay household bills or to pay household expenses, I think an account would have to be ordered whatever the difficulties that might entail, given that it is clear, and was indeed admitted, that moneys were taken otherwise than for those purposes ( Brown v Smith per Brett LJ at 386).
Nonetheless, where implications are to be drawn, I do not think that the implication is that the defendant should account for moneys withdrawn from his father's account because he was dealing with another person's money. The implication rather would be that it is unlikely that the parties intended such an obligation to account because of the practical impossibilities that would entail.
The evidence of the arrangement between the defendant and his father all comes from the defendant. His evidence must be scrutinised very carefully, given that his father is not available to tell his side ( Plunkett v Ball [1915] HCA 14; (1915) 19 CLR 544).
However, it is significant that at no time did the deceased ever ask for an account, or tell any of his daughters that the defendant should provide an account for the moneys he withdrew, or ask his daughters to keep an eye on his account.
The defendant's evidence was that he moved to live with his parents in early 2000. He deposed that when he moved in, his father said to him words to the effect:
" Kim, I want to give you my account PIN number to pay for the bills and enable you to withdraw moneys from my account. "
He gave the defendant the PIN to the account. Elsewhere in his affidavit the defendant said that he was given the PIN to the account in about mid-2003 when his mother was ill. In cross-examination the defendant said he could not remember the date of the conversation referred to above, but it would have been around the time of his first stroke. That was in November or December 2003.
The defendant also deposed that in January 2004, that is a month or two after his father's first stroke, his father said to him words to the following effect:
" Kim, you don't need to ask me how and on what you spend any of my money, use it to pay the bills and look after yourself. "
The defendant deposed that his father never showed any interest in how the money was spent by him. He said that from time to time his father would ask " How are we going with the money, have we got enough? " He would reply with words to the effect " It's alright Dad we've got enough ". His father never questioned him about the way, or on what things, the money was spent.
The defendant was cross-examined on his evidence of the first of the conversations referred to above, that is, the conversation in which he said that his father told him:
" Kim, I want to give you my account PIN number to pay for the bills and enable you to withdraw the money from my account. "
He agreed that at that time it was made clear that this was to withdraw moneys from the account for payment of the deceased's bills (T73). The defendant agreed that at no stage did the deceased say " You don't have to keep any records " (T73).
The defendant never suggested in his evidence that those words were said. The defendant was not cross-examined on his evidence that in January 2004 his father told him to use his money to pay the bills and to look after himself. The fact that the deceased did not say that the defendant did not have to keep records does not mean that the parties intended or expected that records would be kept. If that were intended something would have been said about it expressly. Silence on the topic implies there was no such obligation.
I accept the defendant's evidence in relation to these critical matters. Mr Combe submitted that his evidence should not be accepted. I do not agree. He emerged from cross-examination with his credit largely unscathed. He made appropriate concessions. Most of the attacks on his credit were misconceived, in particular as to a form he completed after the deceased's death to obtain payment of the balance of superannuation moneys.
I think it inherently probable that the deceased would take the view that provided all the bills were paid and he continued to be cared for by his son, his son was welcome to use the moneys in the account to " look after himself ". The defendant's only income was a carer's pension from Centrelink. It is inherently credible that his father should think that as his son was providing his care, he could use the moneys in his account as he saw fit provided that the bills were paid and the care was provided properly. The deceased did not tell his daughters that the defendant could draw on the account for his own purposes, but there is no particular reason he should have. He did not have to preserve his money to provide them with a greater inheritance.
I agree with Mr Combe's submission that at the time this arrangement was struck, the defendant and his father were in a fiduciary relationship and that for the defendant to be able to take advantage of that arrangement he needed his father's informed consent to it. There was a sensible possibility of conflict between the defendant's duty to care for his father and his personal interest in accessing his father's money.
What an informed consent requires is a question of fact in each case. In some cases informed consent may require that the principal be given independent advice. Counsel referred to Maguire v Makaronis (1997) 188 CLR 449 and Commonwealth Bank of Australia v Smith (1991) 102 ALR 453.
But this is not a case of a solicitor dealing with a client where there is a conflict between the solicitor's duty to his client and his own interest, as in Maguire v Makaronis , or a transaction between a banker and financial adviser and a customer, as in Commonwealth Bank of Australia v Smith .
This was a family affair. The deceased may be taken to have had a better knowledge than anyone of the foibles, the character flaws and the affections and abilities of his son. He knew that his son gambled moderately. Despite his physical ailments, his mental capacity was not disturbed. He must have known that giving his son the PIN to the account and telling him that he could use the moneys to look after himself created a risk that the moneys might be dissipated. He made the assessment that he could rely on his son to look after him and to ensure that all the bills were paid. That assessment proved substantially correct.
Much time was spent at the hearing in attempting to analyse the defendant's withdrawals from the CBA account and the purposes for which they were applied. The purpose of the line of questioning was to establish that the defendant spent considerable moneys for his own purposes, including gambling, alcohol and playing golf, and not on household expenses or his father's care. The questioning was only moderately successful. The quantum of such expenditure could not simply be determined from the location of ATMs from which cash withdrawals were made. Nonetheless, particularly during periods in which the deceased was in hospital or in a respite care facility, it is a reasonable inference that the bulk of the moneys withdrawn from the account were applied for the defendant's own benefit.
As I have said, had the arrangement between the defendant and his father been that the moneys from the account could only be applied for the deceased's expenses or for household expenses, I think an account would have been required. But given my finding that that was not the arrangement, an account is not to be ordered on proof that some, or even a substantial part, of the defendant's account was used for the defendant's own purposes; whether those purposes are stigmatised as gambling, drinking, or even playing golf. All of these came within the concept of the defendant's looking after himself as he wished. Importantly, the defendant did not fail in his duty to pay expenses and to care for the deceased.
In Jodrell v Jodrell Sir John Romilly MR said that had he come to the conclusion that an account was required in that case he would have regretted it:
" The evils arising from it to the parties themselves would have been endless, nor would there have been any question, however minute, that might not have been made the subject of contest and affidavits in this Court ... "
Had I come to the conclusion that an account was required in respect of withdrawals from the account during the deceased's lifetime, I would have had the same regret. The same evils would have arisen. The orders proposed by the plaintiffs were only that the defendant account for each item of expenditure and say how it was applied. Except where withdrawals were made for an obviously identifiable purpose, as by accounts being paid by EFTPOS, this would have been an impossible task. Most of the withdrawals were by cash. If the withdrawals could not be justified by showing expenditure on the household or the deceased, the defendant would have been bound to account. But the account would not have ended there. The defendant's and his father's income were pooled. The defendant would have been entitled to credit for expenses he paid from his own moneys towards his father's care and maintenance and possibly for household expenses. Prima facie , he would also have been entitled to a just allowance for the care he provided to his father for almost seven years. There was a real possibility, if not a likelihood, that an account would end up in the defendant's favour.
Different questions arise in relation to the application that the defendant account for his withdrawing moneys from the account after his father's death. After the deceased's death the moneys belonged to the estate. On the grant of probate, title to the moneys in the account passed to both executors as from the date of death to be held by them on the trusts of the will. The defendant could use the moneys in the account to pay funeral and testamentary expenses, but not for his private benefit. His authority from the deceased to draw on the account for his own purposes was revoked on death.
The amount withdrawn was $8,230. Initially the defendant deposed:
" I also withdrew and paid from my father's Commonwealth bank account moneys relating to funeral expenses in the amount of $3,200. "
He retracted that evidence. The funeral expenses totalled $3,293.73. This was after allowance of a Metropolitan Funeral Fund benefit of $2,442. The funeral account was settled by a payment by the defendant of $2,963.73 made on 21 September 2010. Payment was not made directly from the CBA account, although cash withdrawals made in the days before 21 September 2010 might have been partly used to make the payment. Unless the defendant has already been reimbursed, he is entitled to credit of $2,963.73. His is also entitled to credit for any other proper testamentary expense. Those credits are to be set off against his obligation to repay $8,230.
Lisa Arscott said that after 3 September 2010 the defendant was " fixing the pool in different areas at that time ". I infer she was saying that moneys withdrawn from the account at that time may have been applied in that way.
The defendant made a claim for reimbursement of expenses of $4,675.78 from Creswick McCarthy Solicitors. They acted for the executors and were holding the estate moneys. The defendant claimed that sum as reimbursement for estate expenses. The figure is included in a document entitled " Final Distribution Statement ", but the defendant has denied receipt of the sum.
It would be desirable, having regard to the small amounts involved, to avoid the expense of taking an account. After contacting Creswick McCarthy the parties should be able to agree on whether the payment of $4,675.78 was made to the defendant or not.
In principle, the defendant is liable to restore to the estate a sum of money to be calculated as follows: $8,230 less $2,963.73, less any other proper testamentary expense that the defendant can demonstrate he incurred, plus $4,675.78 (if that sum has been paid to the defendant), plus interest at the rates prescribed for the purposes of s 101 of the Civil Procedure Act 2005 on the balance from 21 September 2010.
Rather than order an account immediately, I will stand over the proceedings for seven days to give the parties the opportunity to agree on the amount which the defendant is liable to restore to the estate. I do so because of the cost of taking the account is likely to exceed the amount at stake.
An account was sought only against the defendant. During the hearing I raised the question as to whether the first plaintiff, Cathrine Crossingham, who is a co-executor, might also be liable to account to the beneficiaries in respect of the withdrawals from the account by having allowed them to occur. She admitted, contrary to her affidavit, that she knew that she had been appointed executor. She did not know of the existence of the CBA account at relevant times. It is clear from her affidavit that she understood that her father had had a bank account. She asked her sister, Megan, if Megan could remember with which bank the account was held. She made no enquiries about the account. It is possible that had she done so, she may have been able to stop the defendant's operations on the account. But that is no more than a possibility.
The defendant is primarily liable to restore the moneys to the account. It is only if he failed to account that any question would arise of a potential liability of Cathrine Crossingham to the other beneficiaries. If it is necessary to make an order as to an account, I will give liberty to the beneficiaries to apply. That is to say, I will give liberty to the beneficiaries, that is to say, Megan and Lisa, to apply in relation to the account. That liberty will extend to any application that either might make in respect of Cathrine Crossingham's purchase of the principal estate asset. Prima facie it was a breach of trust, a breach of the self-dealing rule, for Cathrine Crossingham as executor to purchase the Windang property. She was in a position of conflict between her personal interest and her duty to the beneficiaries. However, she would have been entitled to proceed as she did if she had the informed consent of all of the beneficiaries. It seems she had the informed consent of at least her brother and Lisa. It is not clear that she had the informed consent of the other beneficiary. But it is not possible to draw any conclusion on the material before me as to whether or not any beneficiary would be entitled to any relief in respect of that transaction.
If it is necessary to order an account, the liberty which I will extend to the beneficiaries to apply in relation to the taking of the account will extend to that matter.
For these reasons I will not at this stage make final orders.
My conclusions are that the defendant is liable to account in respect of moneys withdrawn from the account from 3 September 2010 subject to any credits to which he may be entitled as indicated in these reasons, but that otherwise the application for the taking of accounts should be dismissed.
In an endeavour to avoid the expense of taking an account, I will give the parties the opportunity to see if they can reach agreement on the amount which the defendant should be ordered to restore to the estate and I will hear the parties on costs.
[After submissions his Honour stated that he would order the plaintiffs to pay half the defendant's costs. The proceedings were settled. Orders were made by consent on 8 February 2012.]
Decision last updated: 22 February 2012
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