Equity Trustees Ltd v White & Ors

[2006] VSC 509

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 8507 of 2005

EQUITY TRUSTEES LIMITED (ACN 46 004 031 298, AFSL 240975) (which is sued as the Executor and Trustee of the Will and Estate of GWENDOLINE ADELAIDE GILMOUR, deceased)	Plaintiff
v
JANE WHITE (aka JANE HUGHES HAYGARTH) & OTHERS	Defendants

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JUDGE:	HARPER J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	17 & 18 OCTOBER;  5 & 14 DECEMBER 2006
DATE OF JUDGMENT:	21 DECEMBER 2006
CASE MAY BE CITED AS:	EQUITY TRUSTEES LTD v J WHITE & ORS
MEDIUM NEUTRAL CITATION:	[2006] VSC 509

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Compromise – Settlement of proceeding brought by executor of deceased estate against a beneficiary alleged to have exercised undue influence - Application by executor for approval of compromise – Compromise opposed by two beneficiaries but supported by another – Willingness of one of the two opposing beneficiaries to secure the position of other beneficiaries in the event the claim by the executor should fail – Refusal to approve compromise on certain undertakings to be given. 

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R.T.A. Waddell	Harry M. Hearn
For the First and Second Defendants	Mr C. Gunst QC with Mr S. Newton	Minter Ellison
No appearance for the Third Defendant

HIS HONOUR:

1. I have now heard extensive argument on the question whether the court should proceed to hear the application for approval of a compromise reached in the principal proceeding (No. 7207 of 2004) between the present plaintiff and Mr Marshall.

1. In my opinion, the interests of the estate and therefore the interests of public policy generally would be best served if (given that there is power in the court to make the appropriate orders) the two sisters who are beneficiaries under the Will of the late Mrs Gilmour, were facilitated in their desire to pursue the principal proceeding against Mr Marshall.

1. This is an unusual if not unique situation.  The late Mrs Gilmour left a Will in which the present plaintiff was named as her executor and trustee.  In exercise of its powers and duties as such, the plaintiff determined that it was appropriate to issue proceedings against one of the four beneficiaries under the Will, Mr Michael Marshall.  Having instituted the proceedings, the plaintiff then engaged in negotiations with the defendant in those proceedings, Mr Marshall, with a view to reaching a compromise.  In so doing, the plaintiff proceeded pursuant to its undoubted power to reach such a compromise, at least were it to be made subject to the approval of the court.

1. After some negotiations, a compromise was reached.  The plaintiff did ensure that the compromise provided that it would be put to the court for the court's approval; and accordingly, until such approval is granted, the compromise is not final.  In the meantime, however, it does constitute a conditional agreement between the plaintiff acting on behalf of the estate and Mr Marshall, an agreement by which those parties are for the time being bound.

1. When the compromise came before me for my approval, the case was opened by the plaintiff on the basis that it was a compromise that ought be approved because it took appropriately into account the interests of the estate as a whole and therefore of the beneficiaries.  Those interests are, however, in the present circumstances, in fact irreconcilable.

1. On the one hand, two of the beneficiaries, Jane Hughes White and Ann Hughes Shields, submit that it is in their interests that the compromise not be approved and that the principal proceeding continue to judgment.  A third beneficiary, Ian Hughes Gilmour, is of the view that his interests would best be served were the compromise approved, and the estate then wound up, with his entitlement being calculated having regard to the terms of the compromise.

1. The final beneficiary, Michael Marshall, being the defendant to the main proceeding, of course takes the view that the agreement he reached with the plaintiff was a proper one and that it is in not only his personal interest, but in the interests of the estate as a whole, that it be approved.

1. It has been submitted (in opposition to the position put to the court by Jane White and Ann Shields) that public policy and the interests of the estate together indicate that the compromise should not be approved or, at the very least, that the court should continue to hear on its merits the application for approval of the compromise.

1. I have not heard that application on its merits in the sense that I have not heard the plaintiff's case in full in support of the proposition that the compromise (looked at as the plaintiff would have me do) is in the interests of the estate as a whole.

1. This unusual situation has arisen because, as it seems to me, the interests of the estate as a whole would in the particular circumstances of this case be best served were a court to finally determine the rights of the parties in the principal proceeding.  It is only then that a final view of the appropriateness of the compromise can be reached.  Only then will all the evidence relevant to the issues raised by the plaintiff in bringing the proceeding against Mr Marshall be resolved.  Only then will the two beneficiaries who wish to proceed with the principal litigation know whether the rights they say ought be vindicated should be vindicated. 

1. Their interests and their wishes cannot be ignored by the court; nor can the interests and the wishes of the other beneficiaries.  Those other interests and wishes can however, it seems to me, be appropriately accommodated, while also allowing the wishes of the two sisters/beneficiaries to be given effect.  It seems to me clear that if the interests of Mr Gilmour and Mr Marshall can be appropriately protected while at the same time the interests of Mrs White and Mrs Shields be appropriately recognised, then that is the outcome which will best serve the interests of the estate and accordingly will be consonant with general public policy.

1. I am satisfied, on the arguments that I have heard, that the interests of Mr Gilmour can be protected if appropriate security is provided to him against the possibility that the ultimate outcome of the principal proceeding would be less favourable to him than would be the position were the compromise approved.

1. It has been submitted on behalf of the first defendant, Mrs White, that Mr Gilmour's position will be secured if, as she is prepared to do, she provides an indemnity by which no matter what the ultimate outcome, Mr Gilmour will not be financially worse off than he would be were the compromise approved.

1. The final beneficiary, Mr Michael Marshall, is in a peculiar position as both a beneficiary and as the defendant in the principal proceeding.  His interests too must be taken appropriately into account.  In my opinion, that result can be achieved if the first defendant is prepared to give an undertaking that she will pay his costs on an indemnity basis should the court ultimately reach a conclusion which is no less favourable to him than that which would obtain were the compromise approved.

1. It may be that Mrs White and Mrs Shields will be vindicated ultimately when the judgment in the principal proceeding is handed down.  If that be the case (and I say nothing about the ultimate merits of the main proceeding), then it will be demonstrably a fact that this compromise was not in the best interests of the estate as a whole: Mr Gilmour will be further benefited by an additional amount, being the share which the court will then determine he ought to take in the estate, Mrs White and Mrs Shields will similarly benefit by the amount which the court will then determine is their appropriate share in the estate; and Mr Marshall will suffer no injustice if the court determines that the justice of the case is such as to dictate a judgment in favour of Mrs White and Mrs Shields.

1. On the other hand, should Mr Marshall succeed in resisting the claims made in the principal proceeding, then he will be no worse off if his costs are paid on an indemnity basis and he then recovers the share which the court on this hypothesis accepts should be his.  In the meantime, that share, as I understand it, will not be at risk, and the court will be in a position to ensure that Mr Marshall receives, if this be the ultimate judgment, the quarter share of the estate to which on this hypothesis he will be entitled.

1. For these reasons it is my opinion that it is in the best interests of the estate that this compromise not be approved, provided that there is a lawful basis for continuing the proceeding against Mr Marshall.  I have not heard argument on this point.  I am not yet convinced that it would be appropriate to substitute Mrs White and Mrs Shields as the plaintiffs in the principal proceeding for the present plaintiff.

1. It may be that the only appropriate and lawful means forward is for the principal proceeding to continue to be conducted by the present plaintiff; but I will hear the parties on that point.  I will also hear them on the orders to be made should the requisite undertakings be forthcoming.  Indeed the terms of undertakings may be the subject of debate. 

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