Dimos v Skaftouros

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No.5667 of 2001

LEO DIMOS
	Appellant
v.
LEE ANTHONY SKAFTOUROS & ORS.	Respondents

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JUDGES:	WINNEKE, P., BATT, J.A. and DODDS-STREETON, A.J.A.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	19 and 20 May 2004
DATE OF JUDGMENT:	20 August 2004
MEDIUM NEUTRAL CITATION:	[2004] VSCA 141	First Revision: 27 September 2004

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ADMINISTRATION AND PROBATE – Executor - Removal of – “Unfit to act” – Section 34(1)(c) of Administration and Probate Act 1958 applies to breach and neglect of duty – In Re Turner [1923] V.L.R. 189 not to be followed, despite subsequent consolidation of section in same terms.

ADMINISTRATION AND PROBATE – Whether particular findings of trial judge not open because based on allegations which were not put, erroneous principles or insufficient evidence – Although not pleaded or expressly articulated, allegations clearly in issue and relevant evidence admitted without objection – Trial judge applied correct principles; obliged to form view on basis of all the evidence – Cumulatively, case for executor’s removal unanswerable.

APPEAL – Leave to appeal - Order as to costs – Order for costs on solicitor and client basis - Leave refused – No miscarriage of trial judge’s discretion.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr. F.G.A. Beaumont Q.C. with Dr. T.J.F. McEvoy	Leo Dimos & Associates
For the Respondents	Mr. C. Gunst Q.C. with Mr. M.R. Simon	Woodhams O’Keeffe & Co.

WINNEKE, P.:

I agree with Dodds-Streeton, A.J.A. that this appeal should be dismissed, and generally for the reasons which her Honour gives. However, I desire to add some comments of my own about the proper construction of s.34(1)(c) of the Administration and Probate Act 1958. Relevantly, that sub-section provides as follows:

“Notwithstanding anything contained in any Act where an executor or administrator to whom probate or administration has been granted whether before or after the commencement of this Act or where an administrator has been appointed under this section or any corresponding previous enactment –
(a) remains out of Victoria for more than two years;
(b)desires to be discharged from his office of executor or administrator; or
(c)after such grant or appointment, refuses or is unfit to act in such office or is incapable of acting therein –

the Court upon application in accordance with the rules of court may order the discharge or removal of such an executor or administrator …”

The words of this sub-section have been in substantially the same form since they were first introduced into the statute law of Victoria in 1907. The primary submission (so described) of senior counsel for Mr. Dimos (whom I shall call the “appellant”) is that such of the words as empower a judge of the court to remove an executor on the grounds of “unfitness” have a restricted meaning which does not include neglect or disregard of duty by an executor.

Counsel submitted that the provisions of s.34 are peculiar to this State and are not replicated in other States of Australia or, indeed, in the United Kingdom. It was submitted that recourse to the parliamentary debates at the time when the Bill was introduced into the Parliament reflected the restricted meaning to be given to the words “unfit to act in such office” contained in the current s.34(1)(c). That restricted meaning, so it is said, was further given effect to in one of the earliest cases which considered the extent of the court’s power; namely Re Turner[1]. In that case Weigall, A.J. held that the words “unfit to act” referred to an unfitness occasioned by some disqualification such as bankruptcy or felony conviction but not to unfitness indicated by a breach or neglect of duty as an executor. Counsel for the appellant in this Court submitted that that decision truly reflects the limitations inherent in the words “unfit to act” and is consonant with the intention of the Parliament. Counsel supported this submission by referring to the fact that the 1928 consolidation of statutes in Victoria replicated the relevant section (then s.29) in the same terms and added as a footnote a reference to the decision in Re Turner, albeit misdescribing the case as “Re Taylor”. Counsel drew on the so-called principle of statutory interpretation that where the Parliament, with knowledge of a decision, passes a relevant section in the same form, it infers that the Parliament understood and approved the decision of which it had knowledge[2].
[1][1923] V.L.R. 189.
[2]cf. R. v. Connors (1990) 20 N.S.W.L.R. 438 at 449, per Gleeson, C.J.

In amplifying his submissions that the word “unfit” in s.34(1)(c) of the Act was restricted in the manner for which he contended, counsel recognized that there had developed in this State, subsequent to the decision of Weigall, A.J. in the case of Re Turner, a considerable body of authority suggesting that the words “unfit to act” were as broad as their literal meaning would suggest, and certainly wide enough to comprehend neglect of duty and breach of duty. Reference was made to Monty Financial Services Limited v.Delmo[3]; Fysh v. Coote[4]; Old Colonists Association of Victoria v. Cox[5]; and Hoxha v. Hoxha[6]. Undaunted by this considerable body of authority, counsel advanced the submission that it proceeded upon an incorrect interpretation of the limits of the words in the sub-section, which limits could only be found by reference to the parliamentary debates in 1907 when the section was introduced into the statute law of the State, and were properly reflected in the decision of Weigall, A.J. in 1923. The failure to properly grasp the true meaning of the words “unfit to act” and the adoption by the trial judge of the more recent authorities to which I have referred, had led him into error – so counsel submitted – and to exercise jurisdiction when none existed.
[3][1996] 1 V.R. 65 (a decision of Ashley, J.).
[4][2000] VSCA 150 (a decision of this Court, particularly that of Ormiston, J.A.).
[5]Unreported, Supreme Court of Victoria, 30 August 1991.
[6]Unreported, Supreme Court of Victoria, 22 September 1975 (Jenkinson, J.).

That submission ran up against substantive and procedural obstacles upon the hearing of this appeal. In the first place, the notice of appeal contained no ground suggesting that such error had been made. Counsel submitted that the existing ground 1 in the notice of appeal was wide enough to cover the point; a ground that asserts (inter alia) that:

“In the exercise of his power under s.34(1)(c) of the Administration and Probate Act the trial judge:
1.1 took into account irrelevant matters;
1.2 failed to have regard, or any proper regard, for relevant matters;
1.3in particular, wrongly took into account the errors in conclusions and findings of fact referred to below; and
1.4in particular, failed to take into account the conclusions and findings which he should have made referred to below;

with the consequence that he erred finding the appellant was unfit to act as an executor and erred in ordering that the appellant be removed as executor of the will and estate of [the deceased].”

In response to the Court’s indication that it did not regard that “catch all” ground of appeal as sufficient to comprehend the issue to which I have referred, counsel sought leave to amend the grounds of appeal to add a further ground (delineated 1A.1 and 1A.2) to squarely raise the ground that the trial judge erred in his construction of s.34(1)(c) of the Act and that, on the facts found by him, there were no grounds for removal under s.34(1)(c) of the Act.

The application for leave to amend in the manner described in the preceding paragraph was objected to by counsel for the respondents on the basis that the point being argued by counsel for the appellant had not been argued before the trial judge; but, to the contrary, it had been conceded before him that he should proceed on the basis that the words “unfit to act” in s.34(1)(c) of the Act bore the construction attributed to them by Ashley, J. in the case of Monty Financial Services Limited v. Delmo (supra). Thus, at the outset of the final address of the appellant’s then counsel, it was put:

“This application is based on s.34 of the Administration and Probate Act and it is perhaps appropriate to turn to the decision of Justice Ashley in Monty Financial Services v. Delmo where his Honour has, relatively recently, looked at the decisions and matters associated with removals of executors and has endeavoured to summarise and set out in a cogent form, exactly what it is that the Court has to do in order to determine whether or not the executor should be removed.”

Counsel for the respondents, in resisting the appellant’s application to now amend his grounds of appeal, has submitted – with some justification – that the appellant should be bound by the manner in which he conducted his case below. Counsel conceded that where a question of law is raised for the first time in an appellate court upon established facts, the appellate court may find it expedient and in the interests of justice to allow that point to be argued[7]. Nevertheless, counsel submitted that where the appellant’s trial counsel had conceded before the trial judge that the appropriate principles to be applied in the construction of the relevant section of the Act were those stated by Ashley, J. in Monty’s case, it should only be “in the clearest case and for the most cogent reasons that a party who has conceded matter at trial should be allowed to make the validity of what is being conceded the basis for overturning the result of the trial”[8].

[7]cf. Suttor v. Gundowda Pty. Ltd. (1950) 81 C.L.R. 418 at 438, per Latham, C.J., Williams and Fullagar, JJ.

[8]Per Barwick, C.J. Port Jackson Stevedoring Pty. Ltd. v. Salmond & Spraggon (Aust) Pty. Ltd. (1978) 139 C.L.R. 231 at 241; O’Sullivan v. Watson (1986) 7 N.S.W.L.R. 693 at 699 per Mahoney, J.A., at 703 per McHugh, J.A.

Additionally, counsel for the respondents asked rhetorically:

“Why should this Court now entertain an argument on the construction of s.34(1)(c), and in particular in respect of the meaning of the words ‘unfit to act’, when, so recently, this Court in Fysh v. Coote [2000] VSCA 150 (21 August 2000) approved the meaning of those words given to them by Ashley, J. in Monty’s case?”

In Fysh v. Coote at paragraph [20] Ormiston, J.A., with whose reasons Batt and Chernov, JJ.A. agreed, said:
“Turning to those grounds of appeal which raise generally the issue whether the order removing the appellant as executor should have been made, I would note briefly the basis upon which the Court should act in the circumstances. Not surprisingly, there was no argument before the Court as to the basis upon which an executor might in law be removed pursuant to s.34 of the Administration and Probate Act 1958. For this purpose the learned judge had referred to the recent decision of Monty Financial Service Limited v. Delmo in which, if I may say so with respect, Ashley, J. describes in careful and well reasoned terms the nature of the Court’s jurisdiction and the factors which are relevant to the exercise of its discretion under the section. His Honour gives compelling reasons why an executor’s conflict of duty and interest of a kind likely to affect the efficient and satisfactory administration of the estate is a proper basis for removing an executor and substituting another. I would refer to only one other general statement of principle which, for many years, has been accepted as the basis for removing trustees and executors alike, making due allowance for the duties which each has to perform and the possible effect of the relevant ‘unfitness’ of such a person to carry out those duties. Consistently with statements of principle by the Privy Council in Letterstedt v. Broers[9], Dixon, J. said in Miller v. Cameron[10]:
‘The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. But in a case where enough appears to authorise the court to act, the delicate question of whether it should act and proceed to remove the trustee is one upon which the decision of the primary judge is entitled to special weight.’

Not dissimilar views appeared in the judgments of the other members of the High Court, including Latham, C.J. and Starke, J. [11]. Ashley, J. in applying these principles noted that unfitness could be constituted by ‘matters such as unwarranted delay in the administration of the estate, failure to communicate with beneficiaries, failure to account, and unreasonable delay in paying beneficiaries their entitlements’, but said, although there is very little direct authority touching the matter, ‘that unfitness to act does comprehend a situation in which an executor has a conflict of duty and interest in carrying out his executorial duties’.”

Ormiston, J.A. went on to note that although the principles which were stated in Miller v. Cameron referred to a trustee and the duties of a trustee, there was nevertheless no reason why those principles should not apply to removal of an executor so long as one took account of the fact that the jurisdiction is being invoked so as to deny an executor the right to perform his or her duties as such. As in that case, so in this case, it is clear that no question has arisen as to whether the executor has become a trustee because – at the time of the appellant’s removal – it was clear that his executorial duties had not been completed to the extent that one could infer that he had come to hold the estate’s assets as trustee for the testamentary beneficiaries.

[9](1884) 9 App. Cas. 371 at 385-7.

[10](1936) 54 C.L.R. 572 at 580-581.

[11]At 575 and 579 respectively.

Whilst the appellant’s counsel has struggled manfully to submit that the power given by s.34 of the Act is far narrower than the authorities to which I have referred suggest, and that the limits thereof are to be found in the case of Re Turner (supra), I am quite satisfied that such is not the case, and that the time has come to put an end to any suggestion that the limits of the Court’s discretion to remove an executor pursuant to s.34(1)(c) of the Act are to be found in the reasons given in that case.

It is sufficient for the purposes of disposing of this aspect of the appeal to refer briefly to the development of the views of the judges of the Supreme Court as to the breadth of the discretion afforded by s.34(1)(c) of the Act and of the view that it travels beyond an “unfitness occasioned by some such disqualification as an adjudication of bankruptcy or a conviction for felony, but not to unfitness indicated by a breach or neglect of duty” as Weigall, A.J. stated in 1923. Perhaps it can be noted at the outset that the words of the sub-section investing a discretion in the Court do not themselves suggest any such limitations. Unfitness to act in the office of executor is used in the sub-section in contradistinction to incapacity to act. In those circumstances, it would seem to me to be unlikely that “unfitness” is intended to be limited to bankruptcy or felony conviction. Indeed, it is to be noted that in the parliamentary debates in 1907 which led to the introduction of the forerunner of s.34 (in almost identical terms to the current section), the Attorney General (the Honourable J.M. Davies) said[12]:

“The court, it seemed, had no power to remove an administrator or executor in cases of misconduct or neglect of duty. In an administration suit, the court could appoint a receiver. There were many cases where the executor became trustee and the court could and did remove him, but the executor, although removed as trustee, still remained executor with reference to portions of the estate. It seemed an absurdity.”

There is nothing in these debates which suggest to me that the Parliament did not intend “misconduct” or “breach or neglect of duty” to come within the meaning of “unfitness to act”. If anything, it is to the contrary.

[12]Hansard, Legislative Council, 17 September 1907 at p.1168.

Since the decision in Re Turner there have been a number of decisions in the Supreme Court, reported and unreported, which confirm that the judge’s discretion to remove an executor on the grounds of “unfitness” is wider than that attributed to it by Weigall, A.J. In Willis v. Stephens[13], Lowe, J. was asked to exercise his jurisdiction under s.29 of the Administration and Probate Act 1928 to remove the executor as “unfit to act” in circumstances where the executor had been guilty of continued default in the payment to beneficiaries of moneys which had been found on the taking of accounts to be due to them. His Honour is reported only as saying (at page 22):
[13][1934] V.L.R. 19.

“I have given consideration to this matter, and I am satisfied that I have jurisdiction to make the order asked for and that on the facts I should make the order.”

The report shows that the application made was ex parte, but demonstrates that counsel for the plaintiff beneficiaries referred to the case of Re Turner at the outset of his submissions, in the course of which he put:
“The meaning given to the word ‘unfit’ by Weigall, A.J. in In Re Turner is too narrow. The conduct of the executor in the present case has been such as to render him unfit to act in the office.”

Counsel further submitted that the court had an inherent jurisdiction to remove a trustee whose continuance in office would be detrimental to the interests of the beneficiaries; and that it would be “unreasonable” to conclude that the legislature intended an executor to have any “immunity”. Section 29 of the Administration and Probate Act 1928 (the equivalent of the present s.34) was intended, so it was submitted, to give the court the power to remove an executor who was not fulfilling his duties. Accordingly, counsel submitted:
“There is nothing in the history of the legislation or of the law which suggests that the word ‘unfit’ in that section should have the limited meaning attributed by In Re Turner to that word in s.36(1) of the Trustee Act 1928. … That case also appears to have overlooked the fact that trustees guilty of breaches of trust or neglect or disregard of duty can be dealt with by the court in its inherent jurisdiction when their conduct is sufficiently flagrant.”

It was in response to those submissions that Lowe, J. considered that he had jurisdiction to make the order which was asked for. In so concluding, it should not be overlooked that in the course of counsel’s submissions, Lowe, J. was referred to a number of decisions both in Victoria and New Zealand (whence, so it appears, the substance of the Victorian section derived), including a decision of Cussen, J. in The King v. Registrar of Titles; ex parte Irish[14]. In the course of his decision, Cussen, J.[15] said:
“Seeing that the mode of procedure is expeditious and cheap, it is obviously desirable that a liberal construction should, if possible, be given to the section.”[16]

[14](1915) 37 A.L.T. 108; [1915] V.L.R. 622.

[15]V.L.R. at 627; A.L.T. at 109.

[16]It should be noted that Cussen, J. was considering a different question from the one with which we are concerned. However his remark was general.

In his work Probate Law & Practice in Victoria (The Law Book Co. Limited 1965), R.G.DeB. Griffith, LL.M., as he then was, referred to the views of Cussen, J. that the section was to be “construed liberally”, and said in respect of the words “unfit to act”:

“In Re Turner, Weigall , J. (sic) held that these words referred to unfitness occasioned by some disqualification such as bankruptcy or conviction for felony but not to unfitness indicated by breach or neglect of duty as executor. This case was not followed by Lowe, J. in Willis v. Stephens in which an order for removal was made in a case where the executor had been guilty of continued default in the payment of beneficiaries.
The use of the words ‘unfit’ and ‘incapable’ in apparent contradistinction seems to indicate that the section was not intended to be read as by Weigall, J. (sic).”[17]

[17]Subsequent editions of this work, edited by R.A. Sundberg (as he then was), have continued to doubt the authority of Re Turner.

In an unreported judgment of Jenkinson, J. in the case of Hoxha v. Hoxha[18], his Honour was faced with an application on summons for the removal of an executor who had procrastinated in the administration of the estate and had indulged in some “economic exploitation” of some of the real estate contained in the estate without proper accounting. The executor was one of two sons of the testator to whom the testator had devised the whole of his estate in equal shares as tenants in common. The other son and beneficiary was the applicant for the removal of the executor. His Honour did not believe the executor’s explanation for his delays in the administration of the estate and failure to account. He said[19]:

“The delay in the administration of the estate which is disclosed by the evidence adduced on behalf of the applicant has not in my opinion been in any way satisfactorily explained and I think it raises a strong inference that the respondent is unfit to act in his office as executor. I think that the construction was too narrow which Weigall, A.J. put upon the word ‘unfit’ in s.8 of the Administration and Probate Act 1915 in Re Turner Deceased (supra). In my opinion, the word ‘unfit’ in s.34(1)(c) of the Administration and Probate Act 1958 may be satisfied by demonstrated incapacity to perform the duties of the executorial office within a reasonable time and it may be satisfied by demonstrated unwillingness to perform those duties within a reasonable time. In this case it is, in my judgment, either incapacity or unwillingness on the part of [the executor] which has caused the gross and prolonged neglect of executorial duties which the evidence discloses.”

[18]Supreme Court of Victoria, 22 September 1975.

[19]At pages 2-3 of his judgment.

Each of the authorities to which I have referred was examined by Ashley, J. in his careful judgment in Monty Financial Services Limited v. Delmo[20] before coming to his conclusion that, apart from Re Turner, the authorities are all consistent in holding that “unfitness” can be demonstrated by the presence of factors which involve misconduct or neglect of duty by the executor in the period (inter alia) between the grant of probate and the application for removal. Indeed, Ashley, J. referred to further authorities where statements had been made (in obiter) pointing to the same conclusion[21]. As I have previously indicated, this Court has recently approved[22] the principles upon which Ashley, J. concluded that the circumstances, upon which the Court’s power to remove an executor pursuant to s.34(1)(c) rests, extend beyond those delineated by Weigall, A.J. in Re Turner and include breach of, or neglect of, duty in the administration of the estate including such matters as unwarranted delay and failure to communicate with beneficiaries, failure to account as well as conflict of interest and duty. Furthermore, since the decision in the case of Monty Financial Services, the principles expounded by Ashley, J. have been followed by other single judges in the Supreme Court[23].
[20]Supra.
[21]In the matter of Old Colonists Association of Victoria v. Cox, Supreme Court of Victoria, unreported, 30 August 1991; Dare v. Darcy; Darcy v. Dare, Supreme Court of Victoria, unreported, 10 November 1993.
[22]In Fysh v. Coote & Ors. (supra).
[23]See Morgan v. Morgan [2000] VSC 445, per Beach, J., 2 November 2000 at paragraphs [21] ff.; Tuohey v. Tuohey [2002] VSC 180, 8 May 2002, per McDonald, J. particularly at paragraphs [56] ff.

Consistently with the matters to which I have referred in the preceding paragraphs, I do not accept the submission made on behalf of the appellant in this Court to the effect that the Court’s discretionary power pursuant to s.34(1)(c) of the Administration and Probate Act is limited to the circumstances identified by Weigall, A.J. in Re Turner (supra); and does not extend to the circumstances identified by Ashley, J. in Monty Financial Services (supra). It was the principles identified by Ashley, J. which were applied by the trial judge in this case. They were so applied, as I have previously said, in accordance with the submissions of both parties; and –

in my view – they were correctly applied. It is unnecessary, and I think unhelpful, for this Court to seek to exhaustively state the limits of the Court’s discretionary power to remove executors. It must be steadily borne in mind, as the trial judge in this case bore in mind, that the Court will not lightly exercise its discretion to remove a person who has been chosen by the testator as the personal representative. However, it is the welfare of the beneficiaries and the protection of their interests in the estate which must be regarded by the Court as the paramount considerations in exercising the discretion. Bearing those matters in mind, and correctly applying the principles which he did to the facts which have been exhaustively examined by Dodds-Streeton, A.J.A., I can discern no error in the trial judge’s conclusion that the appellant was unfit to act in the office of executor of this estate, or in the exercise of his Honour’s discretion to order the appellant’s removal as executor and his replacement by the trustee company appointed. For reasons which I have given, I would not be prepared to grant leave to the appellant, as sought, to amend the notice of appeal by adding the proposed grounds 1A.1 and 1A.2 to which I have previously referred; and, as I have indicated, I would dismiss the appeal.

During the course of the hearing, the Court queried whether the order of the trial judge was interlocutory in nature, and whether, if that was so, leave was necessary before the appeal could be instituted. In the light of the views which I have already expressed, it is unnecessary to finally determine the status of the orders made by the trial judge. It will be sufficient, I think, if the Court were to order that the application for leave, if leave be necessary, be granted; but that the appeal be dismissed. I agree with Dodds-Streeton, A.J.A. that the application by the appellant for leave to appeal against the trial judge’s orders for costs should be refused.

BATT, J.A.:

I agree with the President and Dodds-Streeton, A.J.A. I would only add, with regard to the appellant’s principal contention on appeal, that, whilst the enactment of a consolidated Act containing the words interpreted by Weigall, A.J., particularly when the Bill for the consolidating Act contained a footnote to that decision (albeit

misnamed), would ordinarily be a fairly powerful factor in favour of that interpretation, that factor is in this case far outweighed by the other considerations to which their Honours refer.

DODDS-STREETON, A.J.A.:

Introduction

The appellant, Leo Dimos, a solicitor, was the executor of the will of a deceased client who died in October 1998. The respondents are the principal beneficiaries under the will who, as the plaintiffs below, successfully applied for Mr Dimos’ removal pursuant to s 34(1)(c) of the Administration and Probate Act 1958 (“the Act”) on the grounds of misconduct and neglect of duty.

The appellant appeals from the judgment of Mandie, J. given on 31 May 2002 and from his Honour’s orders made on 31 May 2002 including orders that:

(a)The appellant be removed from the office of executor of the will and estate of Dimitrios Skaftouros (“the deceased”) pursuant to s.34(1)(c) of the Act as being unfit to act in that office;
(b)The appellant pay the costs of the respondents, including all reserved costs, to be taxed on a solicitor/client basis.

The appellant did not seek leave to appeal from the costs order made by the learned trial judge within the time prescribed by the Supreme Court (General Civil Procedure) Rules 1996.

His Honour also ordered that the Trust Company of Australia Ltd be appointed administrator and trustee of the deceased’s will and estate in place of Mr Dimos, that the trust property vest in the new trustee and that Dimos deliver up all books, records, documents, money and titles belonging to the estate, provide accounts and repay certain sums with interest.

Summary of the facts

The relevant facts of the administration are stated in detail in the findings of the trial judge, set out below. At this point, I summarise only the principal events and features of the administration.

The appellant, Leo Dimos (the defendant below) is and was a solicitor carrying on business as a sole practitioner under the name Leo Dimos and Associates. He was appointed the executor of the will dated 7 April 1994 (“the will”) and trustee of the estate of the deceased, who died on 24 October 1998.

Clause 11 of the will provided:
"I APPOINT the firm of LEO DIMOS & ASSOCIATES of 226 Swanston Street Melbourne or any firm carrying on business in succession thereto as solicitors of my estate and also solicitors in connection with the execution of the provisions of this will … and any other matter relating to the administration of my estate…"

The respondents (the plaintiffs below) are the deceased’s children Lee Skaftouros (“Lee”), Paul Skaftouros (“Paul”) and Catherine Pearce (“Catherine”), and his brother Panagiotis Skaftouros (“Peter”). The respondents are the principal beneficiaries (“the beneficiaries”) under the will, which made the following relevant specific devises and bequests:

(a)The deceased’s former residence situated at 5 Alden Court, Cheltenham (“Alden Court”) was devised to his son Lee, and his daughter, Catherine;

(b) A total of $40,000 was bequeathed to legatees as follows:
(i)the deceased’s granddaughter, Britt (daughter of the deceased’s son Paul) [$12,000];
(ii)the deceased’s granddaughter, Jasmine (daughter of the deceased’s son Paul) [$8,000];
(iii)the deceased’s grandson, Michael (son of the deceased’s son, Lee) [$10,000];
(iv)the deceased’s granddaughter, Josie (daughter of the deceased’s son Lee) [$10,000].

(c)The deceased’s residential rental property (comprising eight flats) situated at 40 Whitby Street, West Brunswick (“Whitby Street”) was given as to one quarter to the deceased’s brother Peter, as to one half to Lee and as to one quarter, to Catherine.

The deceased’s residuary estate (after payment of debts and expenses) was to be divided equally between Lee, Paul and Catherine.

The residuary estate comprised: (a) real estate consisting of a rental property (a house and two units) situated at Mena Avenue, Cheltenham (“Mena Avenue”) and a residential unit in Queensland (“the Queensland property”), and (b) personal property consisting of a bank bill to the value of about $100,000 and cash at bank (about $15,000).

The total value of the deceased’s estate for probate purposes was approximately $1,200,000.

The will omitted any reference to the deceased’s second daughter, Anita. Further, the deceased’s son Paul did not receive a benefit equal to that of Lee and Catherine.

The appellant delegated the conduct of much of the administration to employees of his legal firm, subject to his overall supervision and control.

An initial meeting on 27 October 1998 between Mr Dimos and the beneficiaries which took place at the offices of Mr Dimos’ firm, did not go smoothly. The beneficiaries did not receive a satisfactory response to their enquiries about Mr Dimos’ fees and charges. The parties did not establish a good working relationship at the outset. Matters did not improve subsequently.

Although the deceased died in October 1998, Mr Dimos did not apply for a grant of probate until April 1999. Probate was granted on 22 June 1999.

On 12 November 1999 (within the six months' period for bringing a proceeding for further provision from the deceased’s estate pursuant to Part IV of the Act) Anita and Paul commenced a Part IV proceeding, initially against the appellant, and subsequently including Lee and Catherine as defendants. The Part IV proceeding necessarily delayed any distribution of the deceased’s estate until its resolution.

On 6 December 1999 the Dimos firm terminated the appointment of Harry Skaftouros (“Harry”), the deceased’s nephew, who had been the deceased’s, and subsequently the estate’s, accountant. It did not provide the information requested by Harry and did not pay his account until April 2000.

On 4 May 2000 Lee’s solicitor, Woodhams O’Keefe & Co (“Woodhams”), advised Mr Dimos that the Part IV action had been settled “save for the level of costs”. The precise terms of settlement were not resolved until August 2000. By letters dated 14, 19 and 22 September 2000 to Middletons (Catherine’s solicitors) the Dimos firm suggested or sought that the executor’s commission of 3% and costs of the administration be included in the terms of settlement. The settlement was effected by payments made to the claimants directly from the personal funds of the beneficiaries, Lee and Catherine. They had to borrow in order to fund the settlement.

Terms of settlement for the Part IV proceeding were executed on 5 October 2000. They provided for the payment of the beneficiaries’ legal costs. The quantum of the beneficiaries’ legal costs was agreed by December 2000. Despite numerous demands by the solicitors for the beneficiaries, Mr Dimos did not authorise the payment of their costs until August 2001 and they were not paid until 6 September 2001. By letter dated 22 December 2000 to the beneficiaries’ solicitors, the Dimos firm enclosed a note of its costs for the Part IV proceeding which, at approximately $20,000, were more than double the costs of the beneficiaries’ solicitors. The letter stated that unless notified within 14 days, the Dimos firm’s fees would be deemed approved and paid. Mr Dimos ultimately reduced the claimed costs to approximately $11,000 in August 2001. At trial, Mr Woodhams gave uncontradicted evidence that Mr Dimos’ employee, Mr Johnson, told him in the course of a telephone call on 2 March 2001 that he had instructions not to pay the beneficiaries’ legal costs until Mr Dimos’ costs and commission were agreed and paid.

By a letter dated 20 March 2000 to the Dimos firm, the managing agents for the Whitby Street property raised the subject of a vacant unit at the property, which needed repairs. A further letter from the agents in April 2000 enclosed a quotation of $4,800, as the cost of repairs to render it lettable. Despite further correspondence from the agent, the appellant did not authorise the works to be performed. The beneficiaries discovered that the unit had been vacant for a year only when they took possession of Whitby Street in September 2001.

On 17 November 2000 the beneficiaries signed a long letter of complaint addressed to Mr Dimos, complaining of alleged unnecessary delays and the unjustified sacking of the accountant and of the Whitby Street property agent. There was no reply. Lee complained of Mr Dimos’ conduct to the Law Institute by a letter dated 10 December 2000.

The appellant did not pay the modest pecuniary legacies of $12,000 and $8,000 to Britt and Jasmine Skaftouros respectively until 27 February 2001, after having received a letter from Britt Skaftouros dated 16 February 2001 which explained her serious illness and urgent financial need. No interest was paid on those legacies. The appellant did not invest and set aside the pecuniary legacies for Michael and Josie Skaftouros until 7 November 2001.

In February 2001 the beneficiaries became registered proprietors of the Alden Court and Whitby Street properties. The duplicate certificates were sent to the Dimos firm, which did not forward them to the beneficiaries and continued to collect the rents.

By originating motion dated 7 May 2001 Lee, Paul, Catherine and Peter (the deceased’s brother) as plaintiffs commenced this proceeding (“the removal proceeding”) in which they sought an order that Dimos be removed as executor of the deceased’s estate.

The appellant filed an affidavit sworn 29 June 2001 in the removal proceeding which deposed that by February 2001 “virtually all the estate had been administered” save for the transfer of the Queensland property and Mena Avenue, which transfer was said to be prevented by the payment of the accounts of the estate and the completion of the executor’s accounts, and by the alleged need for information contained in documents retained by Harry, the accountant, whose appointment Mr Dimos had terminated.

Following further correspondence, including requests by Woodhams for access to books and accounts of the estate and inspection of trust account records (to which neither Mr Dimos nor the Dimos firm responded), Woodhams, by letter dated 17 September 2001, sought the titles to the Queensland property and Mena Avenue.

The titles to Alden Court and Whitby Street were delivered to Woodhams on 11 September 2001. The keys and certain tenancy documents were delivered to Woodhams only on 19 September 2001, after the service of a summons returnable in the Practice Court seeking, inter alia, orders for delivery up of such items and “a true and just account” of the estate.

At the hearing of the summons on 24 September 2001 Balmford, J. ordered, inter alia, the appellant to deliver up outstanding rent, documents and items relating to Whitby Street within 14 days. She also ordered that the appellant within 30 days deliver to the beneficiaries a report giving an account of the estate, which was to be prepared by Ernst & Young, Chartered Accountants.

The outstanding rental for Whitby Street was remitted to Woodhams early on 8 October 2001 pursuant to the order of Balmford, J.

Although the beneficiaries’ summons had related only to Whitby Street, the appellant had also failed to provide certain outstanding documents and rental for Alden Court, to which the beneficiaries were entitled. They were provided only on 16 October 2001, following Woodhams’ request made by letter dated 26 September 2001.

By letter dated 10 October 2001 Woodhams wrote to the Dimos firm repeating the request to transfer the Mena Avenue property in specie, noting that it was over 16 months since the first request. The Dimos firm replied by letter dated 15 October 2001 which stated, inter alia:

“The property at 21 Mena Avenue, Cheltenham is held and retained as part of the residue of the deceased’s estate. In that regard we draw your attention to the absolute discretionary powers conferred on the executor pursuant to, inter alia, clauses 6 and 7 of the Will, including discretionary powers relating to:
‘any part of the real and personal estate’ of the deceased.

As you would be well aware, the executor was a long-standing friend and confidante of the deceased, as well as being his solicitor; in that context, prior to his death the deceased expressed to the executor his grave concerns as to the personal animosities between his children (including, of course, your clients) and the implications that this would have on the fair, orderly and efficient administration of the deceased’s estate. It is for that reason he appointed Mr Dimos as the executor.

Regrettably, the conduct of the deceased’s children inter se subsequent to his death has more than justified those concerns.
Accordingly, the executor reserves all his rights in respect of the exercise of his absolute discretionary powers to deal with the Mena Avenue property pursuant to the terms of the Will, including but not limited to the right to sell same in the interests of all beneficiaries, including the infant beneficiaries …”

Despite a warning from Woodhams by letter dated 24 October 2001 that the sale would proceed at the executor’s peril, the Dimos firm, on the instructions of the appellant, wrote to Woodhams advising as follows:

“The executor and trustee does not propose to transfer the Mena Avenue, Cheltenham, property to the beneficiaries in specie as the estate does not have sufficient funds to meet its liabilities. Therefore he proposes to sell the property by public auction on Friday 30 November 2001 and for that purpose has appointed the local managing agent, Beaches, in conjunction with a city real estate agency, Alexander Robertson, to conduct the auction.
The trustee is of the opinion that now is the best time to maximise the return to the estate from the sale of the property.
Furthermore the executor and trustee wishes to set up a trust fund for the benefit of the two infant beneficiaries over and above the specific gifts. He believes that such power is vested in him by the provisions of the Will and the Trustee Act 1958.
If, however, your clients disagree with such proposal for the infants, the executor and trustee would be willing if requested by them to apply to the court for Directions in respect thereof.”

By letter dated 2 November 2001 the Dimos firm wrote to Lee’s wife, Mrs Leanne Skaftouros, advising that Mr Dimos believed that he might have power to make additional provision for infant beneficiaries, her children, Michael and Josie, in addition to the $10,000 left to each by the deceased. It stated that the executor might wish to apply to the Supreme Court for directions shortly and would be assisted by discussing the matter.

Ernst & Young did not complete the report ordered by Balmford, J. by the precribed date. The Dimos firm unsuccessfully sought Woodhams’ consent to a new completion date of 7 November 2001. Mr Dimos did not comply with the deadline and did not seek an extension of time for compliance with the order of Balmford, J. The respondents, by summons dated 8 November 2001, sought orders committing Mr Dimos to prison for contempt and an injunction restraining the sale of Mena Avenue.

On 12 November 2001, the appellant received certain reports in summary form from Ernst & Young.

The appellant swore an affidavit on 14 November 2001 exhibiting the Ernst & Young reports and estimating the estate’s liabilities as $34,226 for tax, $10,000 for Ernst & Young’s fees, and the parties’ costs of the removal proceeding as $80,000 - $90,000. It estimated further costs of the proceeding and of a proposed summons for directions as to the executor’s power to establish a trust fund for the infant beneficiaries, over and above their specific bequests totalling $20,000. It concluded that, in view of those matters, Mr Dimos had considerable doubt as to whether sufficient liquid funds would be available in the estate from which to meet the current and contingent liabilities.

On 15 November 2001 Beach, J. made orders restraining the appellant from selling or dealing with Mena Avenue until determination of the removal proceeding or further order, and adjourning the committal application to 5 February 2002 (the commencement of trial of the removal proceeding).

On or about 16 November 2001 the appellant authorised the payment of $45,440 from the firm’s trust account for the estate for counsels’ fees he had incurred in relation to the removal proceeding for the period from May 2001 to November 2001. Dimos claimed that some of the fees owed to counsel had been outstanding since May 2001.

On 5 December 2001 the Dimos firm paid Ernst & Young $11,165 out of the trust account for the estate, for accountancy work.

On 18 January 2002 the appellant commenced a new proceeding by originating motion seeking directions on issues including whether he, as executor, had power to apply any part of the income and capital of the estate for the maintenance, benefit and support of infant beneficiaries. At trial Mandie, J. adjourned that proceeding.

In addition to the above, the appellant’s recurring or continuing conduct throughout the course of the administration included the following:

(i)The appellant or his firm repeatedly failed to answer enquiries and correspondence from the beneficiaries and their various solicitors, agents, accountants and other relevant parties, in relation to different aspects of the administration of the estate.
(ii)The appellant or his firm repeatedly failed to communicate with the beneficiaries or to account to them on request and failed to provide requested access to books and accounts of the estate and copies of the trust records.
(iii)The appellant did not maintain such records and accounts as would enable him to provide a true and just account of the financial affairs of the estate.
(iv)The appellant failed to lodge income tax returns for the estate for three years.
(v)The appellant was overseas on several occasions and was unable to deal with the administration during his absences.

The Beneficiaries’ Complaints

The learned trial judge paraphrased the broad complaints of the respondents as follows:

“(i)serious and inexcusable delays in obtaining probate and in administration of the estate;
(ii)failure to properly administer the estate;
(iii)failure to provide accounts and information to the beneficiaries when requested and generally to communicate with the beneficiaries;
(iv)failure to pay creditors of the estate;
(v)making exaggerated or unlawful demands for commission and costs for himself;
(vi)exhibiting an offensive and adversarial attitude towards beneficiaries.”

On appeal, Mr Beaumont, senior counsel for the appellant, conceded that his Honour’s paraphrasing was an accurate summation of the respondents’ complaints.

Findings of the Trial Judge

On appeal, the respondents’ outline of submissions summarised the learned trial judge’s findings. Mr Beaumont conceded that the “bare factual matters” contained in the summarised findings were correct, save for the failure to distinguish between Mr Dimos and his firm. However, he complained that the learned trial judge’s findings on the motivation, mental state and antagonism of the appellant were not supported by the evidence or were made on the basis of matters not relied on by the respondents in the trial below. The appellant also disputed the trial judge’s conclusions that particular actions were improper, wrong or evidenced misconduct or unfitness. Those matters constitute a subsidiary basis of the appeal and are discussed below.

The respondents summarised the learned trial judge’s findings as follows[24]:
[24]The brackets are references to the relevant paragraphs of the judgment. Quotations are from the judgment.
(a)Dimos was gruff and terse with the beneficiaries on the first occasion he met them in late 1998: [17]-[18].
(b)Matters which were raised with Dimos by the Estate’s accountant concerning the Estate’s income tax position were not dealt with by Dimos: [22]-[25].
(c)Dimos did not apply for probate until 16 April 1999, some six months after the death of the deceased: [188]. He had all the necessary information to make the application by December 1998: [188]. There was no good reason for this delay: [189].
(d)Dimos gave evidence that in late 1998/early 1999 he had difficulty in obtaining a valuation of the Queensland property, which he put forward as an explanation for his delay in applying for probate. His evidence was not corroborated by his employee dealing with the matter (Giavris), and was not accepted: [26].
(e)Dimos was overseas, and unable to deal with the administration of the Estate, from 18 March 2001-5 April 2000, 24 June 2001-26 August 2000, 14-28 March 2001, and 30 June-25 August 2001: [59], [63], [109], and [122].
(f)Dimos received, and failed to respond in writing to, a letter from a beneficiary, Lee Skaftouros, dated 7 January 1999, which sought information about progress in the application for probate. Dimos gave evidence that he responded in a telephone conversation on 25 January 1999, but his evidence was disputed by Lee Skaftouros, whose evidence was accepted. Dimos’ evidence on this point was rejected: [28]-[30].
(g)Dimos received, and failed to respond to, a letter from the Estate’s accountant dated 24 January 1999: [32]-[33].
(h)Dimos received, and failed to respond to, a letter dated 1 February 1999 from a solicitor Collins acting for two children of the Deceased: [34]-[35].
(i)Dimos received, and failed to respond to, a further letter dated 10 March 1999 from the solicitor Collins acting for two children of the Deceased: [36]-[37].
(j)Dimos received, and failed to respond to, a letter from the Estate’s accountant dated 9 August 1999: [49]-[50].
(k)Dimos received, and failed to respond to, a letter from the Estate’s accountant dated 7 December 1999: [53]-[54].
(l)Dimos received, and failed to respond to, letter from the Estate’s accountant dated 19 January 2000: [54]-[55].
(m)Dimos received, and failed to respond to, a letter dated 22 February 2000 from solicitors (Woodhams) acting for a beneficiary (Lee Skaftouros) seeking information about the estate: [56].
(n)Dimos received, but failed to respond to or deal with the substance of, letters dated 20 March 2000, 5 April 2000, 22 March 2001 and 18 July 2001 from the Estate’s managing agents for the 40 Whitby Street West Brunswick property, seeking permission to effect repairs to put the property into a lettable condition: [59]-[59] and [60], [107]-[108] and [118]-[119].
(o)Dimos received, and failed to respond to, a letter dated 10 May 2000 from solicitors (Woodhams) acting for three beneficiaries asking that the real estate be transferred to the beneficiaries and not sold: [62]-[63].
(p)Dimos received, and failed to respond to, a letter dated 17 November 2000 from the beneficiaries about delays to the administration of the Estate: [77]-[78].
(q)Dimos received, and failed to respond to, a letter dated 1 December 2000 from solicitors (Middletons) acting for one beneficiary (Catherine Pearce): [79]-[80].
(r)On 7 December 2000 Dimos drew a cheque for $9,010.65 to pay a creditor of the Estate, but cancelled it five days later. His explanations for this in evidence were rejected: [81].
(s)Dimos received, and failed to respond to, a letter dated 8 January 2001 from solicitors (Woodhams) concerning delays in the administration of the Estate, and Dimos’ failure to pay moneys from the Estate until his own costs and commission were paid: [87]-[88].
(t)Dimos received, and failed to respond to, a letter dated 22 January 2001 from solicitors (Woodhams) concerning the failure to pay costs: [90].
(u)Dimos received, and failed to respond to, a letter dated 12 February 2001 from solicitors (Woodhams) concerning the failure to pay costs: [90].
(v)Dimos received, and failed to respond to, a letter dated 14 February 2001 from solicitors (Middletons) concerning the failure to pay costs: [96]-[97].
(w)Dimos delayed paying costs out of the Estate, to put pressure on the beneficiaries to agree to the quantum of his own costs. This "was deliberate conduct by the Defendant to put pressure on the Plaintiffs (who were anxious to have the estate finalised) to accept or perhaps compromise those costs (and his commission) without risking the embarrassment of submitting his file to an independent costing consultant": [98]. Dimos’ claimed costs were "probably overstated": [128] by the amount of their eventual reduction (from $20,163 claimed to $11,150 accepted: [84] and [123]). The other parties’ claims for the costs for the same proceeding were agreed at $9,502, $6,760 and $9,010 respectively: [84].
(x)Dimos failed to advise the beneficiaries in or after February 2001 that they had become registered proprietors of the 5 Alden Court Cheltenham and 40 Whitby Street West Brunswick properties: [101].
(y)Dimos delayed paying two cash legacies totalling $20,000 out of the Estate from October 2000 until 27 February 2001, and could give no explanation for delay: [102].
(z)Dimos received, and failed to respond to, a letter dated 21 February 2001 from solicitors (Woodhams) concerning the failure to transfer properties to beneficiaries: [103]-[104].
(aa)Dimos deliberately refused to pay beneficiaries’ costs or to finalize the Estate until his own costs and commission were agreed and paid. "..it was the Defendant’s deliberate stance by March 2001 not to pay the beneficiaries’ costs or to finalise the estate unless and until his costs and commission were agreed and paid.": [106].
(bb)Dimos could not give a credible explanation for a letter he wrote seeking to blame an accountant for delays in administering the Estate: [113]-[114].
(cc)Dimos received, and failed to respond to, a letter dated 14 May 2001 from solicitors (Woodhams): [115]-[116].
(dd)Dimos conceded that there was no good reason why the beneficiaries’ costs had not been paid by February 2001 [126], and were not paid until 6 September 2001: [134]. He gave contradictory and false evidence about whether he knew that the costs had not been paid during that period, he "knew at all times that the costs had not been paid": [126].
(ee)On Friday 31 August 2001 Dimos’ employee Giavris promised that Certificates of Title would be delivered to the beneficiaries’ solicitors on the following Monday, but they were not: [130].
(ff)Dimos received, and failed to respond to, a letter dated 6 September 2001 from solicitors (Woodhams): [133]-[134]. "The defendant and his firm wrongfully ignored Woodham’s reiterated request to have access to and inspect the books and accounts of the estate and failed to provide copies of the trust records as requested": [134].
(gg)By a letter dated 14 September 2001 Dimos blamed the beneficiaries for the delay in administering the Estate: [138]. There was "no reasonable basis" for this "unjustified assertion": [139].
(hh)When brought before the Court (Balmford J.) on 24 September 2001, on a summons to compel him to deliver up to the beneficiaries the keys, rental books, rent and the like in respect of the properties which had been transferred to them seven months earlier (in February 2001), Dimos’ employee swore an affidavit which was ‘in material respects unsatisfactory, to say the least’: [149], and caused the Court to be misinformed about the preparation of accounts for the Estate [150]. An order was made that the rental be paid over within 14 days, and that a report from a firm of accountants about the Estate be provided within 30 days: [148].
(ii)The beneficiaries "should not have been required to obtain a court order to receive the rental to which they were entitled": [155] and [204].
(jj)There was "no satisfactory explanation for the long delay in remitting this rental to those entitled to it": [163]. The order of Balmford J. was not complied with as the financial information was not provided until 12 November 2001: [175] and [205].
(kk)Dimos received, and failed to respond to, letters dated 26 September 2001 and 27 September 2001 from solicitors (Woodhams): [151]-[153].
(ll)Dimos ought to have sought an extension of time to provide the accounting information ordered by Balmford J. on 24 September 2001, but failed to do so: [169] and [205].
(mm)Dimos’ decision in October 2001 to sell the Mena Avenue property was not a bona fide decision, but intended in spite to thwart the repeated requests of the residuary beneficiaries to receive the property in specie: [178] and [213].
(nn)Dimos gave a spurious explanation in evidence for not having prepared income tax returns for the Estate for three years: [179].
(oo)On 16 November 2001 Dimos appropriated $45,440 of the Estate’s money to pay his own legal expenses in defending this proceeding: [180]. It was improper of him to have done so: [211]. The "relative speed with which the defendant’s costs were paid or reimbursed out of the estate might significantly be contrasted with his lengthy delays in the payments of other parties’ costs and of the pecuniary legacies and with his failure to pay a relatively small amount to put Unit 2, Whitby Street in a lettable condition" [212].
(pp)Dimos put "his financial interest ahead of his duty to the beneficiaries" by "withholding his consent to the settlement of the Part IV proceeding unless and until his commission was agreed": [192]. "It was wrong, in my view, for the Defendant to ‘require’ executor’s commission at 3% of the probated value of the estate as a condition of accepting the terms of settlement: [192]. This showed a ‘tendency for the defendant to put his own interest first in his conduct of the administration …": [194] and [195].
(qq)"There was a very serious and persistent failure by the defendant to respond to correspondence from beneficiaries, their solicitors and others and to provide any or any sufficient information to beneficiares upon request": [197].
(rr)Other conduct and neglect in relation to the administration of the Estate which were material and of substance [199] were the:
·    failure to lodge income tax returns for the estate;
·    failure to authorise works in relation to vacant Unit 2, Whitby Street or to inform or obtain instructions from the beneficiaries in relation to the works needed to make the unit lettable;
·    failure to pay the pecuniary legacies to Britt and Jasmine Skaftouros within a reasonable time after 5 October 2000 and not until 27 February 2001;
·    failure to invest and set aside the pecuniary legacies for Michael and Josie Skaftouros (until 7 November 2001);
·    failure to pay interest on the said pecuniary legacies.
(ss)"…in this case, the conduct of the defendant since the institution of this application for his removal has in my view exacerbated the situation and further demonstrated his unfitness to act as executor of the estate": [200].
(tt)Dimos has "a strongly antagonistic attitude towards the plaintiffs [beneficiaries] and a recalcitrant attitude to their attempts to pressure him to perform what they considered to be his obligations as an executor": [201].
(uu)The "defendant’s seriously unsatisfactory conduct’ included [202] the following:
·    the attempts to blame the accountant for the delays in finalisation of the estate;
·    a continuing failure to reply to correspondence or to provide information;
·    the failure until 6 September 2001 to pay the parties’ costs of the Part IV proceedings;
·    the failure to pay to the relevant beneficiaries the net rental from Whitby Street and Alden Court for the period from 14 February 2001 onwards;
·    the failure to provide access to the books and accounts or to permit inspection of the trust account records or to provide copies thereof at the plaintiffs’ cost; and
·    the continuing failure to lodge income tax returns".
(vv)"…it was unreasonable of the defendant, in light of the various requests [sic] made, to refuse to provide proper accounts to the plaintiffs": [203].
(ww)There is a "serious risk that the defendant is not capable of exercising any such power in a proper and objective manner, unaffected by the evident antagonism which he now bears to the plaintiffs": [213].
Issues on Appeal
1. Scope of Section 34(1)(c) of the Act

Section 34 of the Act provides:

“34. Discharge or removal of executor or administrator
(1)Notwithstanding anything contained in any Act where an executor or administrator to whom probate or administration has been granted whether before or after the commencement of this Act or where an administrator who has been appointed under this section or any corresponding previous enactment-
(a) remains out of Victoria for more than two years;
(b)desires to be discharged from his office of executor or administrator; or
(c)after such grant or appointment refuses or is unfit to act in such office or is incapable of acting therein-

the Court upon application in accordance with the Rules of Court may order the discharge or removal of such an executor or administrator and also if the Court thinks fit the appointment of some proper person or trustee company as administrator in place of the executor or administrator so discharged or removed upon such terms and conditions as the Court thinks fit; and may make all necessary orders for vesting the estate in the new administrator and as to accounts and such order as to costs as the Court thinks fit.
(2)Notice of such application may be served if the Court thinks it necessary upon such persons as it directs.
(3)An executor or administrator so removed or discharged shall from the date of the order cease to be liable as such for acts and things done after that date.
(4)Upon such appointment the property and rights vested in and the liabilities properly incurred in the due administration of the estate by the executor or administrator so discharged or removed shall become and be vested in and transferred to the administrator appointed by such order who shall as such have the same privileges rights powers duties discretions and liabilities as if probate or administration had been granted to him originally.”

On appeal the appellant’s primary argument was that the learned trial judge erred in adopting an unduly wide construction of the term “unfit to act” in s.34(1)(c) of the Act in extending it to breach or neglect of duty. The appellant contended that on a proper construction, “unfit to act” was limited to cases of disqualification by reason of bankruptcy, conviction for felony or closely related circumstances. As such, it was submitted that the learned trial judge had had no jurisdiction to order the appellant’s removal from office on the basis of the facts he had found. Alternatively, the appellant argued that if s.34(1)(c) did extend to misconduct and neglect of duty, the trial judge’s findings of misconduct or neglect of duty were not supported by the evidence or were made in breach of the rules of procedural fairness.

The narrow construction of “unfit to act,” which the appellant asserted, was adopted by Weigall, A.J. in In Re Turner[25], the first decided case on the ambit of the term in the context of the provision, which was introduced by legislation enacted in 1907. The construction adopted in In Re Turner was not applied in a body of later Victorian decisions culminating in Monty Financial Services Ltd v. Delmo[26], where Ashley, J., expressly rejected it. He held instead that “unfit to act” comprehended cases of conflict of interest and breach or neglect of duty. Ashley, J.’s analysis of the meaning of “unfit to act” was expressly approved in Fysh v. Coote[27] by Ormiston, J.A., with whom Batt and Chernov, JJ.A. agreed.
[25][1923] V.L.R. 189.
[26][1996] 1 V.R. 65.
[27][2000] VSCA 150.

In the trial below, the correctness of the construction adopted in Monty Financial Services Ltd v. Delmo and approved by this Court in Fysh v. Coote was not questioned. With the concurrence of all counsel, his Honour proceeded on the basis that those cases correctly stated the law.

The appellant’s notice of appeal dated 13 June 2000 made no reference to the present argument that his Honour’s construction of s.34(1)(c) of the Act, and the authorities on which he relied, were wrong.

By summons filed 20 April 2004 the appellant sought leave to amend the notice of appeal in order to include the new grounds on the following terms:

“1A.1 That his Honour erred in his construction of section 34(1)(c) of the Administration and Probate Act 1958.
1A.2 That on the facts found by his Honour there were no grounds for removal under section 34(1)(c) of the Administration and Probate Act 1958.”

At the hearing of the appeal, Mr Beaumont, submitted that the new grounds involved pure questions of law and that leave should therefore be granted in accordance with the principles stated in Connecticut Fire Insurance Company. v. Kavanagh,[28] where Lord Watson observed[29]:

“When a question of law is raised for the first time in a court of last resort, upon facts either admitted or proved beyond controversy, it is not only competent but expedient, in the interests of justice, to entertain the plea”.

[28][1892] A.C. 473.

[29]Ibid, at 430.

Mr Gunst, senior counsel for the respondents, submitted that even where a pure point of law was at issue, leave should not be granted in the absence of exceptional circumstances, given the concession on the correctness of the principles stated in Monty Financial Services Ltd v. Delmo[30] made below.
[30][1996] 1 V.R. 65.

The question whether leave to appeal from an order removing an executor pursuant to s.34(1)(c) of the Act was required was recognised, but not determined, in Fysh v. Coote[31] where Ormiston, J.A. observed that it was “not necessary to express an opinion on whether such an order is interlocutory, as having regard to the merits of the appellant’s case, such an application would otherwise have failed”.[32] Mr Beaumont submitted that if leave to appeal were required, it should be granted in the present case, as the decision below was attended by sufficient doubt, and substantial injustice would result if the decision were permitted to stand.
[31][2000] VSCA 150.
[32][2000] VSCA 150, BC200005175 at [1].

Mr Beaumont conceded that if the construction of “unfit to act” in s.34(1)(c) adopted by Weigall, A.J. in In Re Turner[33] were correct, there was a significant lacuna in the legislation, in that there would be no curial power to remove a delinquent or negligent executor, or an executor with a conflict of interest, other than by the indirect means of revocation of the grant of probate.
[33][1923] V.L.R. 189.

While acknowledging the significant body of hitherto unquestioned modern decisions which either did not follow In Re Turner or expressly adopted a contrary construction, Mr Beaumont contended that those decisions were wrong. In his submission, Ashley, J. in Monty Financial Services Ltd v. Delmo[34] had misconstrued the legislation and Ormiston, J.A. in Fysh v. Coote[35] had subsequently accepted Ashley, J’s analysis at face value. This Court was therefore constrained to reconsider the authority of those decisions and give effect to Weigall, A.J.’s construction because it accorded with the legislature’s manifest intentions, although, in consequence, the only direct avenue for relief against an inactive or delinquent executor would be shut off.
[34][1996] 1 V.R. 65.
[35][2000] VSCA 150.

In that context the appellant relied on the parliamentary debates recorded in Hansard on the Second Reading of the Administration and Probate Act Further Amendment Bill (“the Bill”) in 1907. Mr Beaumont submitted that it was not directly stated at any point in the explanations given during the formal Second Reading of the Bill, in either the Assembly or the Council, that clause 5 of the Bill (now s.34(1)(c)) was intended to permit executors to be removed for misconduct. He argued that, on the contrary, the observations of legislators showed that the amendment was intended to ameliorate the hardships experienced by executors or administrators who wished to retire from office or to leave the state for a prolonged period. Mr Beaumont contended that the tenor of the parliamentary debates contemplated voluntary relinquishment of office on the application of the executor, rather than forcible removal at the instance of beneficiaries.

The appellant submitted that a comment made by the Honourable J.M. Davies in the course of the debates, taken by Ashley, J. in Monty Financial Services Ltd v. Delmo[36] to express an intention to permit removal for misconduct, was misconstrued by his Honour. Rather, the appellant contended that Mr Davies’ comments were made in response to another member’s question and did not clearly relate to clause 5 of the Bill.
[36][1996] 1 V.R. 65.

Mr Beaumont further submitted that the legislation was subsequently consolidated by parliament in full knowledge of the narrow construction of “unfit to act” adopted by Weigall, A.J. in In Re Turner[37]. In Re Turner was decided in 1923. In 1915, and subsequently in 1928, the legislation was consolidated. It was substantially amended and new provisions were passed. The predecessor of s.34 of the present Act was included in the 1928 Act as s.29. Section 29 of the 1928 Act was in the same terms of the 1907 Act. A reference to the construction of “unfit to act” adopted by Weigall, A.J. in In Re Turner was included as a footnote to s.29 in the 1928 Bill, although In Re Turner was misnamed as Re Taylor. A reference to the Weigall, A.J. construction was also included as a footnote to the 1958 consolidation (which, unlike the 1928 consolidation, was not prepared by Parliament but, after enactment of the consolidation, by the Law Book Company, albeit at the request of Parliament). The footnote was not included in the 1986 amending Act.
[37][1923] V.L.R. 189.

Mr Beaumont, in reliance on Re Alcan Australia Ltd & Ors; Ex parte Federation of Industrial Manufacturing and Engineering Employees[38] and R. v. Connors[39], contended that the consolidation, enacted with the legislature’s full knowledge of the restrictive construction, invoked the presumption that parliament intended that construction to be applied.
[38](1994) 181 C.L.R. 96.
[39][1990] 20 N.S.W.L.R. 438.

The appellant also contended that Weigall, A.J. could be credibly identified as the same person as Weigall, K.C., who was a member of the Committee of Counsel (corresponding to the modern Bar Council) which considered the 1907 Bill and made recommendations to the Attorney‑General. Mr Beaumont argued that Weigall, A.J.’s probable involvement in the drafting of the 1907 Bill gave greater weight to his construction of the term at issue in the present case.

In the 1907, 1915, 1928 and 1958 enactments, the relevant section provided for an application for discharge or removal to be dealt with in a summary way, by summons in chambers. The appellant argued that this supported the narrow construction of s.34(1)(c). Had it been envisaged that the provision would apply to alleged breach or neglect of duty, which would typically involve contested issues and disputed facts, the summary procedure would be inappropriate. In contrast, a summary procedure was said to be suitable to the narrow grounds of disqualification comprehended by the appellant’s construction of the term.

While the 1986 amendments to the Act had substituted a hearing by “the Court upon application in accordance with the Rules of Court” for a summary disposition, Mr Beaumont submitted that this signalled no fundamental change but was simply an aspect of general procedural reform. As such, the alteration did not detract from the validity of the appellant’s construction.

It should be noted that in the course of oral argument on appeal the appellant’s submissions on the meaning and scope of s.34(1)(c) shifted somewhat and several concessions were made.

Although the appellant initially contended, on the basis of Hansard, that s. 34(1)(c) was directed at facilitating an executor’s prolonged absence from the state and voluntary retirement, as Winneke, P. pointed out in the course of argument, those situations are expressly covered by s.34(1)(a) and (b). Mr Beaumont conceded that s.34(1)(c) could not have been intended to be confined only to such situations. He also acknowledged that, as Batt, J.A. observed, the reference to “discharge or removal” indicated that s.34(1)(c) could not be restricted to applications initiated by the executor or administrator.

While Mr Beaumont initially argued that “unfit” applied only to bankruptcy, lunacy and conviction for felony, he ultimately agreed that it could apply to cases of misappropriation or dishonest taking of property without a conviction.

In response to the appellant’s contentions on the scope of s.34(1)(c), Mr Gunst submitted that the argument was not put below, and was an unmeritorious exercise in historical sophistry. He argued that the parliamentary debate contained no indication that “unfit to act” excluded misconduct and that In Re Turner[40] was wrongly decided, as consistently held by the body of contrary decisions culminating in Monty Financial Services Ltd v. Delmo[41]. Mr Gunst further submitted that in so far as the decision in In Re Turner was influenced by the summary nature of the application at the time, any legitimate concern on that issue was addressed by the 1986 amendments.
[40][1923] V.L.R. 189.
[41][1996] 1 V.R. 65.

The predecessor of s.34 was introduced by the Administration and Probate Act 1907. The Principal Act was consolidated in 1915, 1928 and 1958. The provision which is now s.34 of the Act has been in identical form in all relevant respects since its introduction, save for the provision for a summary procedure which applied until the 1986 enactment, at which date it was replaced by a hearing by the Court upon application in accordance with the Rules of Court.

The 1907 legislation was enacted against a background of significant differences between the legal liability and entitlement to removal or discharge of, on the one hand, a trustee and, on the other hand, an executor (or administrator). The Court had no inherent or statutory power to remove an executor or administrator for breach or neglect of duty. Further, an executor or administrator was not entitled to resign or retire.

In contrast, the Court had inherent power to remove a trustee for breach or neglect of duty, which would be exercised in relation to those breaches which endangered the trust property, or showed a want of honesty, proper capacity to exercise the duties, or reasonable fidelity[42]. Further, under the trust deed, statute or court order, a trustee could be permitted to retire. There was also a statutory “private” right to appoint a new trustee to replace a trustee who had died, who had remained out of the jurisdiction for a year or who refused or was “unfit to act” (although the trustee so replaced would not automatically cease to be trustee).
[42]Letterstedt v. Broers (1884) 9 App. Cas. 371.

The parliamentary debates which accompanied the passage of the 1907 amending legislation must be viewed in the context of the great disparity then existing between the legal position of trustees and executors in relation to discharge and removal. The difference was especially anomalous given that the offices of executor (or administrator) and trustee were frequently concurrent in one person, or an executor frequently assumed the office of trustee at a point difficult to identify.

On moving the Second Reading of the 1907 Bill, the Hon. J.M. Davies noted those anomalies and observed that the “first object” of the Bill was to assimilate the position of administrators and executors to that of trustees in certain significant respects. In moving the Second Reading, he stated that “the first object [of the Bill] was to give and impose upon administrators and executors the same privileges, rights, powers, duties and liabilities as trustees.”[43]
[43]Administration and Probate Act Further Amendment Bill, (Second Reading), [Legislative Council, 20 August 1907] at 1166.

Although he did not expressly discuss the definition of “unfit” in clause 5, Mr Davies subsequently stated[44]:

“The Court, it seemed, had no power to remove an administrator or executor in cases of misconduct or neglect of duty. … There were many cases where the executor became trustee and the Court could and did remove him, but the executor, although removed as trustee, still remained executor with reference to portions of the estate. It seemed an absurdity. If it was proper for the Court to be able to remove a person as trustee, it was also proper for an executor or administrator to be able to resign and for the court to remove him.”

He then referred to the provisions of clause 5 of the Bill.

[44]Ibid, at 1168.

While most of the observations on clause 5 of the Bill related to cases of prolonged absence from the State or voluntary retirement, it does not follow that the legislators intended “refuses … or is unfit to act” to be read down so as to exclude the involuntary curial removal of an executor or administrator for breach or neglect of duty. There was no express consideration by any speaker of the meaning of “unfit” to act. There was no indication that the term “unfit” should not bear its ordinary meaning.

It is clear that an overriding objective of the amending legislation was to address the anomalies occasioned by the fact that executors and administrators had different rights and liabilities in relation to, inter alia, removal and discharge, from those of trustees, although the same person frequently concurrently or successively occupied the office of both executor and trustee.

In my opinion, as Ashley, J. held in Monty Financial Services Ltd v. Delmo[45], Mr Davies’ observation related to clause 5, which addressed the anomalous “absurdity” by conferring an unprecedented statutory power on the court to remove executors and administrators for misconduct and neglect of duty, equivalent to the inherent power to remove trustees.
[45][1996] 1 V.R. 65 at 77.

In In Re Turner[46], Weigall, A.J. dismissed the application of a beneficiary under a will to remove the executor and replace him with a fit and proper person. The applicant beneficiary deposed that she had made repeated fruitless applications to the executor for her share of benefits under the will. The executor did not appear at the hearing and the beneficiary’s allegations were uncontested.
[46][1923] V.L.R. 189.

Weigall, J.A. assumed that the executor was guilty of "wrongful retention of trust money…and serious neglect and disregard of his duty as executor”[47].
[47] Ibid, at 191.

His Honour recognised that the wider construction “would apparently be desirable”[48] but he was persuaded to reject it, first, on the basis of the similarity of the language of the section to that in s.14(1) of the Trusts Act 1915 (corresponding to s.41(1) of the Trustee Act 1958) which conferred a private power to replace trustees or to appoint additional trustees.
[48]Ibid, at 192.

Weigall, A.J. noted that in the context of s.14(1) of the Trusts Act 1915, which he considered to be a compelling comparative reference, "the term 'incapable' has been treated as referring to physical or mental infirmity, while the term 'unfit' has been treated as referring to unfitness occasioned by some such disqualification as an adjudication of bankruptcy or a conviction for felony, but not to unfitness indicated by breach or neglect of duty”.[49]
[49][1923] V.L.R. 189 at 192.

Secondly, Weigall, A.J. was influenced by the absence of any precedent for removal, upon summons, of an executor against his will due to apparent breach or neglect of duty. He considered that the construction would create “a precedent of serious importance, indicating a new and summary means of attack by any beneficiary against any executor”[50].
[50]Ibid.

In my opinion Weigall, A.J. did not attribute sufficient weight to the significantly different context of s.14(1) of the Trusts Act 1915, from which the narrow construction derived. He also uncritically assumed the correctness of the construction adopted under the trusts legislation and failed to consider what meaning, consistent with that construction, could be attributed to “refuses to act”.

The appellant contended first, that the evidence did not justify the finding of bad faith. Mr Beaumont submitted that the finding of bad faith required the standard of proof referred to in Briginshaw v Bringshaw[88] where Dixon, J. stated[89]:
“It is often said that such an issue as fraud must be proved ‘clearly’, ‘unequivocally’, ‘strictly’ or ‘with certainty’ …”

which his Honour did not apply.

[87]See: Lee Anthony Skaftouros & Ors v. Leo Dimos [2002] VSC 198 at [178].

[88](1938) 60 C.L.R. 336. The caveat in Neat Holdings Pty Ltd v. Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 171 should be noted.

[89](1938) 60 C.L.R. 336 at 362.

Mandie, J.’s observation that Mr Dimos did not exercise his discretion to sell Mena Avenue in good faith refers not to fraud in the sense of criminality or dishonesty, but, as the reasons for judgment at paragraph 15 make clear, to the exercise of a fiduciary discretion or power for an improper purpose – that is, a purpose external or ulterior to the purposes for which the power or discretion was conferred[90]. A want of bona fides in the context of the exercise of a fiduciary power does not necessarily denote dishonesty and is not inconsistent with good, if misdirected, intentions. As such, the appellant’s contention that the finding of bad faith was required to meet the Briginshaw[91] standard of proof for fraud is, in my view, misconceived.
[90]Mills v. Mills (1938) 60 C.L.R. 150.
[91](1938) 60 C.L.R. 336.

More fundamentally, Mr Beaumont submitted that because bad faith was not a ground advanced to justify Mr Dimos’ removal, the appellant had no opportunity to answer such a charge.

Mr Beaumont conceded that the decision of the learned trial judge could not be set aside if the appellant were vindicated only on the finding on Mena Avenue. However, he contended that the finding of bad faith permeated the entire judgment so that this Court should not re-exercise the discretion of the trial judge and leave the order for removal standing on the basis of other findings, which were not disputed. Rather, a re-trial should be ordered. He submitted that the finding of bad faith reflected the trial judge’s pervasive hostility to, and dislike of, the appellant.

The six complaints on which the respondents based their application for the removal of the appellant as executor did not include a decision to sell Mena Avenue in bad faith or indeed, any express reference to want of good faith.

Although the ground of “failing to properly administer the estate” is very wide, the appellant contended that bad faith is so serious that the possibility of such a finding must be expressly stated. Mr Gunst, for the respondents, contended that given the number and character of the allegations against the appellant, it was plain that bad faith in the relevant sense was alleged.

The proceeding below did not require pleadings and the appellant at no stage requested them. Even when pleadings are employed, they do not rigidly govern the issues between the parties. As Latham, C.J. stated in Miller v. Cameron,[92] where evidence has been led without objection in the course of the trial and is relevant to an issue which might have been raised by the pleadings to support a claim or defence, where there is no element of surprise, and where an opportunity to meet it has been afforded, the parties cannot “hark back to the pleadings” in order to invalidate the determination of an issue not pleaded.
[92](1936) 54 C.L.R. 572 at 578. Latham, C.J. stated at 578: “… where the evidence said to have been wrongly admitted is clearly relevant to an issue which might have been raised by the pleadings for the purpose of supporting a claim made or a defence raised, where it has been admitted without objection, where no party has been taken by surprise, and where all parties have had the opportunity of giving evidence on the matter, and a fortiori when they have used that opportunity… [neither party] can now ‘fairly hark back to the pleadings and treat them as governing the area of contest.”

In Miller v. Cameron[93], the circumstances leading to the appellant trustee’s composition with creditors reflected on his character. The trustee argued that because his “character” was not pleaded, the circumstances, although established by evidence at trial, were not relevant and should not have been taken into account.
[93](1936) 54 C.L.R. 572.

Starke, J. observed that[94]:

“[The appellant] contends that the misapplication by him…was not charged in the statement of claim. The relevancy of the matter . . . was hardly disputed. However, evidence was led by the plaintiffs in the action and by the appellant himself in relation to the matter without any objection being taken. The appellant is bound by the course of the trial and cannot now rely upon the contention that the charge against him was insufficiently stated.”

[94]Ibid, at 580.

Dixon, J. (with whom Evatt and McTiernan, JJ. agreed) stated that[95]:

“During the trial not only the good faith of the trustee towards his partner in reference to the amount of his drawings from the firm but also the propriety of his use of funds to answer those drawings were brought into question. The pleadings did not allege as grounds for the removal of the trustee any dishonesty or misbehaviour … but no objection was taken at trial to the evidence, and, apart from any question of pleadings, its relevance to the question before the Court could not be denied. I think the primary Judge was fully entitled, if not bound, to take it into account.”

[95]Ibid,at 582.

In the present case, evidence relevant to the appellant’s attempted sale of Mena Avenue was admitted without objection and the matter was the subject of submissions on behalf of both the appellant and the respondents at trial. The relevant evidence and submissions are set out below.

Despite the requests of the beneficiaries by letter dated 10 May 2000 that Mena Avenue be transferred to them in specie, Mr Dimos, by affidavit sworn 29 June 2001, deposed that he was unable to transfer Mena Avenue, due to the need to complete the administration of the estate, which required the payment of all accounts, including his accounts as executor.

By letter dated 15 October 2001, the Dimos firm stated that Mena Avenue might be sold for the benefit of all beneficiaries, rather than transferred in specie. The respondents’ solicitor, Mr Woodham, by letter dated 16 October 2001, responded that the respondents did not agree to the sale. By letter dated 24 October 2001 the Dimos firm stated that it was Mr Dimos’ intention to sell Mena Avenue by public auction. Mr Dimos refused to provide an undertaking that no further step would be taken in the administration until the removal proceeding was determined. He did not respond to Woodhams’ letter dated 30 October 2001 which demanded that he desist from the proposed sale of Mena Avenue.

The affidavit of Gary Woodhams sworn 8 November 2001 in support of the application for an injunction restraining Mr Dimos from proceeding with the scheduled auction of Mena Avenue, deposed that the sale would result in unnecessary costs and prevent the beneficiaries from holding Mena Avenue as tenants in common.

The affidavit of Gary Woodhams further stated:

“14.In a letter dated the 10^th May 2000, the first, second and fourth named Plaintiffs requested the Defendant transfer the Mena Avenue flats to them as tenants in common.
15.In paragraph 57 of an affidavit sworn the 29^th June 2001 the Defendant indicated the Mena Avenue flats was the only residual asset that remained to be transferred. In an affidavit of Yionoula Giavris sworn the 29^thJune 2001 it was stated the estate would have been finalised and distributed by that date but for the application to remove the Defendant as executor.
16.By a letter dated the 15^th October 2001, the Defendant wrote stating that the Mena Avenue flats were part of the residuary estate and might be sold for the benefit of all the beneficiaries. This was the first indication that the Defendant would not transfer the flats as requested on the 10^th May 2000. Now produced and shown to me and marked with the letter ‘GRW-13’ is a copy of the letter forwarded by the Defendant.
17.By a letter dated the 16^th October 2001 I wrote to the defendant advising inter alia that the Plaintiffs would not agree to the flats being sold. Now produced and shown to me and marked with the letter ‘GRW-14’ is a copy of the letter forwarded by me to the Defendant.
18.By letter dated the 24^th day of October 2001, the Defendant indicated that he was gong to sell the property at Mena Avenue Cheltenham by public auction on the 30^th November 2001. Now produced and shown to me and marked with the letter ‘GRW-15’ is a copy of the letter received by me from the Defendant.
19.In the probate application the estate originally was estimated by the Defendant to have a value of $1,200,000. It included a sum of $100,000 in a bank account and rented properties at Budina Court, Alden Court, Whitby Street Brunswick and Mena Avenue Cheltenham. The Defendant has been in possession of the interest and the incomes of those rented properties since October 1998.
20.In an affidavit sworn the 15^th March 2000 in a Part IV proceedings brought pursuant to the provisions of the Administration and Probate Act the Defendant indicated that in the period from January 1999 to February 2000 he had received $84,382.19 in rental monies. Of that sum after expenses including taxation obligations the Defendant placed the sum of $52,000 in the National Bank and held the sum of $5,640.18 in trust.
21.The suggestion made by the Defendant that he was going to increase the bequests to the infant beneficiaries is the first time such a suggestion has been made. The bona fides of such a suggestion is therefore questionable in light of the current proceedings.
22.When the application to remove the Defendant was adjourned on the 5^th September 2001 the Plaintiffs sought an undertaking from the Defendant that he take no further step in the administration until the determination of the proceeding. The Defendant declined to do so and has since then acted in the administration in a manner adverse to the applicants.
23.I sent a letter being exhibit 'GRW-12' to the Defendant 2001, demanding that he not proceed with the proposed sale as it was not necessary and that it was not the best time to maximise the return.”

By affidavit sworn 12 November 2001, Yionoula Giavris, Dimos’ employee, deposed that despite requests for the transfer of Mena Avenue, the executor did not consider it necessary to enter into correspondence concerning that property, given that the administration of the estate had not reached the stage where dealing with the residue had become relevant. She further deposed that the executor’s reasons for sale were as set out in the letter of the Dimos firm dated 24 October 2001 (which stated that the executor and trustee “does not propose to transfer the Mena Avenue, Cheltenham property to the beneficiaries in specie as the estate does not have sufficient funds to meet its liabilities. Therefore he proposes to sell the property by public auction on Friday 30 November 2001…”).

The affidavit of Mr Dimos sworn 12 November 2001 stated that his reasons for “the exercise of my discretion in not transferring the property at 21 Mena Avenue … in specie are as set out in the letters from my firm to Woodhams … dated 15 October 2001 and 24 October 2001 …”

In evidence at trial, Mr Woodhams testified that he had received the letter of the Dimos firm stating that Mena Avenue had to be sold because there were insufficient funds in the estate to meet the liabilities.

In evidence at trial, Mr Dimos testified that based on his experience, he thought November 2001 was an appropriate time to sell Mena Avenue. He agreed that he had received a clear direction in May 2001 on behalf of the residuary beneficiaries to transfer the property in specie, but had decided not to transfer it, and two years later, had still not done so.

The affidavit of Mr Woodhams sworn 8 November 2001 was in evidence at trial and is referred to in the appellant’s outline of submissions on appeal as evidence at trial in relation to the Mena Avenue issue.

Some parts of Mr Woodhams’ affidavit were read aloud at trial. The appellant pointed out that paragraph 21, which expressly questions Mr Dimos’ bona fides, was not read out. Nevertheless, affidavits, witness statements and the content of court books are taken as read when they are referred to by counsel in open court, as such documents are read by modern judges out of court.

The attempted sale of Mena Avenue, and the reasons Mr Dimos advanced for it, were the central issues at the hearing of the respondents’ successful application for an injunction before Beach, J.

Mr Dimos filed an originating motion for directions as to the effect of the will of the deceased (including Mr Dimos' ability to retain capital). A Master referred it to Mandie, J., who was to hear the removal proceeding. The respondents (as defendants) filed written submissions dated 4 February 2002, which under the heading “Not Bona Fide”, stated that Dimos’ application was unexplained and "a last desperate ploy" to delay his removal and "independent financial scrutiny of the estate and his stewardship of it…" .

The respondents’ final written submissions at trial also referred to the beneficiaries’ request for transfer of the property in specie in 10 May 2002 as follows:
“THE PROPOSED SALE OF 14[96] MENA AVENUE CHELTENHAM
Dimos waited until 15 October 2001 before suggesting that the units at 21 Mena Avenue Cheltenham be sold to satisfy the estate’s ‘debts’ (whatever they might be).
This proposed sale is highly suspicious. No documents are produced to show that a true arms-length sale was intended to be carried out. Dimos pressed on with the proposed auction sale (set for Friday 30 November) with precipitate haste, against expert advice (Ex Q) from Fitzroys (which recommended a three-month selling campaign), and had to be restrained by the Court (Beach J, 15 November 2001). There was no need for this sale, which was against the specific request of the beneficiaries. The estate had ample funds to pay its debts at this time (some $126,000 in the solicitor’s trust account and $75,000 cash at bank), and the flats themselves produced a strong positive cash-flow. One can only speculate as to why it was proposed to be carried through with such haste. The Court is entitled to regard with grave suspicion the conduct of an executor who acts in such a way.”
[96](sic) The address of the units is 21 Mena Avenue Cheltenham, not 14.
The appellant’s final written submissions at trial stated that “in relation to Mena Avenue … it is up to the defendant to determine if that property is transferred in specie”. Further, “The beneficiaries have displayed a desire to direct the actions of the executor… when the demands to transfer the Mena Avenue property were made the administration of the estate was not complete and the residuary beneficiaries had no entitlement to make such a demand”.

In final addresses at trial the following exchange occurred between the learned trial judge and Mr Berglund, senior counsel for Mr Dimos:

“HIS HONOUR: And so far as the Mena Avenue property is concerned, I am not concerned that it hasn’t been transferred, I won’t trouble you further about that. The only question I raised was why was there such a hurry to sell it?
MR BERGLUND: I will deal with that now that Your Honour has raised it …
HIS HONOUR: It doesn’t explain why there was such a rush to sell the property.
MR BERGLUND: I will come to that, Your Honour …
… Remember, Your Honour, that it is not every error of a trustee which warrants his removal. If this be an error, then so be it, but it is not an error which we say which exhibits any mala fides or anything of that kind.”

I am satisfied, in light of the above, that although not expressly pleaded or articulated, the bona fides of Mr Dimos’ decision to sell Mena Avenue was clearly in issue between the parties. It would, of course, have been preferable if the allegation concerning the attempted sale had been explicit from the outset. However, the parties’ correspondence and the reasons advanced by Mr Dimos (lack of funds and an ideal time to sell, and subsequently, a trust fund for infant beneficiaries) were in evidence without objection. The respondents’ allegation of antagonism was expressly made and the challenge to Mr Dimos’ explanations for the attempted sale was evident. The appellant had an opportunity to respond. His senior counsel attempted to do so in his final address.

The learned trial judge had the benefit of hearing all the oral evidence, including extensive cross-examination of witnesses, in the course of a 10 day trial and was directed to all relevant correspondence and materials. Having assessed Mr Dimos as a witness, he rejected his explanations for the attempt to sell Mena Avenue in haste and concluded that it was actuated by antagonism, as alleged by the respondents. The learned trial judge was, in my view, entitled to draw that conclusion on the basis of all the evidence and his assessment of the witnesses.

Whether Findings Open

Mr Beaumont also contended that it was not open to the learned trial judge to find that Mr Dimos was antagonistic towards the beneficiaries and that there was a risk that he would be incapable of exercising any power unaffected by that antagonism. To this, his Honour’s own observation that he had formed the view “in the light of the evidence as a whole and having had a good opportunity to observe Mr Dimos give his evidence” is a sufficient answer.

The appellant also challenged the learned trial judge’s findings[97] that:

(a) it was incorrect for the appellant to suggest that the executor’s commission “will… have to be dealt with in any settlement” (scil. of the Part IV proceeding);
(b) it was wrong for the appellant to “require” executor’s commission of 3 percent of the probated value of the estate as a condition of accepting the terms of settlement.

[97]Lee Anthony Skaftouros & Ors v. Leo Dimos [2002] VSC 198 at [192].

Further, the appellant challenged the learned trial judge’s conclusion that “I do not decide whether the amount claimed was excessive but I do consider that the terminology adopted in the letter (scil. of 19 September 2000) was inappropriate”[98]. His Honour went on to observe that although the appellant did not long delay in dropping his claim to settle at that stage, the episode showed a tendency to put his own interests first[99].
[98]Ibid, at [192].
[99]Ibid, at [194].

In my opinion, the above comments in relation to executor’s commission assumed overtones of “standover” and were therefore inappropriate. His Honour’s conclusion that the tendency did not of itself demonstrate unfitness to act was restrained. His observation that “the defendant’s conduct must be viewed as a whole and this episode should be taken into account”[100] accords with the fundamental principle stated by Ormiston, J.A. in Fysh v. Coote[101].
[100]Ibid.
[101][2000] VSCA 150.

The appellant also complained that the learned trial judge failed to distinguish between Mr Dimos and the latter’s legal firm, contending that well over half of the instances of misconduct involved the legal firm rather than Mr Dimos personally. Mr Beaumont submitted, on Austin v. Austin[102], that Mr Dimos was frequently overseas and was not fixed, in his capacity as executor, with the inaction or misconduct of his employee solicitors. He contended that Mandie, J. in effect held Mr Dimos liable for the standard of his legal work, although the Law Institute had not upheld a complaint made by one of the beneficiaries.
[102](1906) 3 C.L.R. 516.

Mandie, J., although he consistently attributed relevant correspondence and acts either to Mr Dimos or his legal firm, expressly stated that “most of the day to day administration of the estate … [was] conducted by employees of the Dimos firm under the overall supervision and control of [Dimos]”.[103] It is not disputed that all of their acts were done, and all of the correspondence written, under Dimos’ instructions and with his actual authority. In contrast, Austin v Austin[104] concerned an executor whose co-executor, a solicitor, misappropriated the estate’s funds which were in the custody of his legal firm. The will had authorised the employment of the legal firm.
[103]Lee Anthony Skaftouros & Ors v. Leo Dimos [2002] VSC 198 at [19].
[104](1906) 3 C.L.R. 516.

As Mandie, J. observed[105] at trial, “senior counsel for [Dimos] did not in general seek to distinguish between the conduct of [Dimos] in a personal capacity and the conduct of [Dimos], or his employee on his behalf, as a sole practitioner”. In Hoxha v Hoxha[106], Jenkinson, J. recognised that an executor is responsible for the inaction or conduct of a solicitor acting under instructions and authority and should, where necessary, supervise the latter effectively or engage other competent solicitors[107]. The appellant has advanced no basis for a distinction between acts of administration carried out by Dimos' employees under his instructions and supervision, and Dimos' own acts or omissions. The appellant is not entitled to rely on the flawed nature of his supervision and control, or his failure to make appropriate arrangements while overseas.
[105]Lee Anthony Skaftouros & Ors v. Leo Dimos [2002] VSC 198 at [19].
[106]Unreported, Supreme Court of Victoria, 22 September 1975.
[107]Unreported, Supreme Court of Victoria, 22 September 1975 at 2.

It should be added that although the appellant’s outline of argument states that the Law Institute “cleared” Dimos of the beneficiaries’ complaint, in fact the letter of the Law Institute to Lee Skaftouros dated 22 February 2001 merely stated that the principal complaint concerned Dimos’ performance as an executor and it had no jurisdiction over a legal practitioner other than in the capacity of legal practitioner. The Law Institute did not adjudicate on the appellant’s conduct as an executor.

The appellant also challenged the trial judge’s findings[108] that Mr Dimos should have responded to the letter of the beneficiary, Lee, dated 7 January 1999 which, inter alia, sought information on what progress had been made in applying for a grant of probate, an estimate of fees, and an itemisation of steps taken. Mr Beaumont contended that it was reasonable not to answer the letter, as it contained an implicit threat of legal action.
[108]Lee Anthony Skaftouros & Ors v. Leo Dimos [2002] VSC 198 at [31].

Mandie, J. found that whether or not all the inquiries or matters were reasonable, the failure to reply at all fell short of the standards to be expected of an executor and solicitor. He had earlier held that “an executor, like a trustee, should provide a prompt and proper response to reasonable inquiries and requests for information… Even onerous, unreasonable or antagonistic inquiries or requests should, at least in the first instance, receive some appropriate response or acknowledgment”[109]. His Honour’s statement of an executor’s obligations accords with relevant authority and principles. The appellant’s challenge to it must fail.
[109]Ibid, at [14]. (footnote omitted).

The appellant contended that the trial judge was not entitled to take into account that Mr Dimos took his costs out of the estate, contending that he had an indemnity pursuant to the principles of National Trustees Executors & Agency Company of Australasia Ltd v. Barnes[110] to which he could resort without waiting until the removal application was determined.
[110](1941) 64 C.L.R. 268.

In National Trustees Executors and Agency Company of Australasia Ltd v Barnes the High Court recognised the principle that a trustee is entitled to be indemnified out of the trust estate for all proper costs, charges and expenses incident to the execution of the trust, which could include the defence of a suit to remove the trustee. In Barnes, the trustees, having successfully defended such a suit, were "clearly entitled" to their costs[111]. While Williams, J. (with whom Rich, A.C.J. agreed) stated that even a trustee who failed in litigation might be indemnified for his costs, he acknowledged that the governing question was whether the costs were properly incurred. In my view, Barnes is not authority for the proposition that Dimos was entitled to take his costs in circumstances where, as the learned trial judge found, his resistance to removal was unjustified. The indemnity depends on the conclusion that the costs were properly incurred in the administration of the estate.
[111]Ibid, at [279].

The appellant also challenged the trial judge’s finding that the defendant should have resigned rather than resisting the application for his removal, contending that he had a duty to uphold the testator’s wishes. As Mr Gunst submitted, the fact that an executor has been appointed by the testator cannot render him immune from suit in circumstances where his removal is justified by breach or neglect of duty. Further, as the Privy Council recognised in Letterstedt v. Broers[112] "It must always be borne in mind that the trustees exist for the benefit of those to whom the creator of the trust has given the trust estate…The reason why there is so little found in the books on the subject is probably that…if it appears that the continuance of the trustee would be detrimental to the execution of the trusts…the trustee is always advised by his own counsel to resign, and does so."
[112](1884) 9 App. Cas. 371 at 386.

The appellant criticised the trial judge for failing to take into account the fact that the administration was almost complete, and the fact that his conduct had not resulted in proven loss to the estate. The transfer of property was not complete at the time of the trial and his Honour’s approach was necessarily informed by his conclusions on the appellant’s antagonism to the beneficiaries. Further, financial or economic loss is not the only legitimate consideration in determining an application for removal of an executor.

The appellant also complained that the trial judge took into account Dimos' delay in obtaining a grant of probate. While that conduct was not, as his Honour recognised, relevant to unfitness as an executor under s.34 of the Act, he noted it only as an early indication of the laxity characterising some aspects of the administration later[113].
[113]Lee Anthony Skaftouros & Ors v. Leo Dimos [2002] VSC 198 at [190].

The appellant made additional complaints of like character, with which I do not deal specifically. The general answer to all of those criticisms is that the trial judge was entitled, and indeed obliged, as he stated, to take into account all of the relevant evidence and to form an overall impression.

As Winneke, P. observed in the course of the hearing of the appeal, related circumstances, and conduct which did not itself fall squarely within the executor’s duty or constitute misconduct, were not irrelevant. They gave colour to the issues to be determined. It is inappropriate selectively to challenge individual findings divorced from the total context. The conclusions which his Honour made in the course of his meticulous and balanced judgment were the logical consequence of his findings, given the standards of conduct imposed on an executor in the performance of his fiduciary office. Cumulatively, his Honour's findings made the case for removal unanswerable. In my opinion, leave to appeal should be given so far as necessary and the appeal should be dismissed.

Costs Order

The appellant at the hearing of the appeal by summons sought leave to appeal against the learned trial judge’s order that the appellant pay the costs of the proceeding,[114] including reserved costs, on a solicitor and client basis.
[114]Compare Bass Coast Shire Council v. King [1997] 2 V.R. 5 at 29.

The order for costs was discretionary and the appellant required leave to appeal against the costs order but did not seek it within the 14 days after the decision at first instance was given, as prescribed by Order 64.03(3) of the Supreme Court (General Civil Procedure) Rules 1996. Mr Beaumont informed the Court that the failure to seek leave within the prescribed time was due to inadvertence. He contended that his Honour’s order was not supported by reference to the relevant principles expressed in decisions such as PCRZ InvestmentsPty Ltd v. National Golf Holdings Ltd[115].
[115][2002] VSCA 24.

In the appellant’s submission, the learned trial judge’s costs order was punitive. It reflected hostility to the appellant and was coloured by the findings impugned by the appellant, including, in particular, the finding of bad faith and the finding that the appellant should have resigned.

Given the findings of serious and persistent misconduct by a fiduciary, which were properly made by his Honour, the costs order was clearly consistent with a proper exercise of discretion. The learned trial judge understandably declined to visit upon the respondents the costs of the appellant’s unjustified resistance to their struggle to remove him.

There is no basis on which to conclude that the learned trial judge’s discretion miscarried, that its exercise was informed by erroneous principles or that the costs order is productive of substantial injustice. This Court should not interfere with the exercise of the discretion. The application for leave to appeal against the costs order, and the associated oral application for an extension of time in which to seek such leave, should be dismissed.

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[2004] VSCA 141

20 August 2004