Evans v Von Stanke - [2012] SASC 122

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
EVANS v VON STANKE & ORS
[2012] SASC 122
Reasons of Judge Withers a Master of the Supreme Court
24 July 2012
PROCEDURE
DISCOVERY - Executors' obligations on discovery.
Inheritance (Family Provision) Act 1972 (SA) s 8; Supreme Court Civil Rules 2006 (SA) r 4, r 136, r 145; Corporations Act 2001 (Cth) s 198F(1)(a), s 290, referred to.
Buchanan-Michaelson v Rubinstein & Ors [1964] 3 All ER 850; Szental v Szental [2001] VSC 42, applied.
Taylor v Santos Limited (1998) 199 LSJS 122; Gerblich v Adplan Pty Ltd [2012] SASCFC 79; Discovery and Interrogatories Simpson, Bailey & Evans, 1984, considered.

EVANS v VON STANKE & ORS
[2012] SASC 122

JUDGE WITHERS. This is an action for further provision under the Inheritance (Family Provision) Act 1972 (SA) (“IFP Act”) initiated by a summons filed on 20 April 2010. The first and second defendants are both executors and beneficiaries of the estate of Mary Von Stanke (hereinafter called “Mary” or “the deceased”). Mary died on 12 February 2008. Probate of her will and codicil was granted by order of this Court on 16 October 2009.
The plaintiff is a granddaughter of the deceased. By her will Mary left the residue of her estate to her trustees to be divided into six equal parts with one of those parts going to each of the first and second defendants, a further one part to each of Christopher Von Stanke and Martin Von Stanke, both sons of the deceased, and the remaining two parts being left in trust for two other children of the deceased, Stephen and Rohan.
The plaintiff, as a granddaughter of the deceased, received an amethyst and diamond ring for her benefit during her life, which ring is to pass to the plaintiff’s daughter upon the plaintiff’s death. She was otherwise not a beneficiary under the will and codicil.
From the plaintiff’s supporting affidavit filed on 20 April 2010 – FDN 2 – it is apparent that the statement of assets and liabilities filed for probate purposes put the net value of the assets in the estate at $69,415.72. However, the plaintiff alleges that the statement of assets and liabilities omitted to disclose that the deceased owned one of nine shares in the company RCV Stanke Estates Pty Ltd. Exhibit “KAE1”, or Court document FDN 2A, is an ASIC extract of that company which discloses that the deceased was the beneficial owner of one fully paid B Class share in that company. Christopher Von Stanke, who is the third defendant, is the beneficial owner of one fully paid E Class share in the company. The fifth defendant is the beneficial owner of one fully paid H Class share in the company. The first, third and fifth defendants are joint owners of one fully paid F Class share in the company. The second defendant owns one fully paid G Class share in the company. The first defendant is the beneficial owner of one fully paid I Class share. H Stanke & Sons Pty Ltd and Cape Banks Processing Company Pty Ltd jointly own one fully paid I Class share. The sixth defendant does not appear to own any shares in the company.
The ASIC search of the company H Stanke & Sons Pty Ltd – see Court document FDN 2B – discloses that one of its members is RCV Stanke Estates Pty Ltd holding one fully paid ordinary class share in the company. An ASIC search of Cape Banks Processing Company Pty Ltd – see Court document FDN 2C – discloses that RCV Stanke Estates Pty Ltd holds one fully paid ordinary class share in that company.
It is apparent from an affidavit of the plaintiff filed on 22 June 2011 – FDN 21 (see paragraph 6) – that she makes no claim against the funds already distributed in the estate and only pursues her claim for further provision under the IFP Act from what she describes as “undistributed and undisclosed assets of the Estate”. The plaintiff contends that those assets comprise the value of the deceased’s shareholding in RCV Stanke Estates Pty Ltd and some real estate. The identified real estate is presently registered in the name of Mary’s deceased husband Robert Charles Von Stanke who died on 23 June 1994. A half share in the real estate passed to Mary on Robert’s death with the remaining half share to his children. The plaintiff asserts that Mary’s estate is entitled to undistributed assets in the form of that real estate and that this asset has not been disclosed in the statement of assets and liabilities filed with the Court.
The plaintiff attests that she does not know the reason for the non-disclosure of these assets in the statement of assets and liabilities filed with the Court. She seeks to pursue her claim against these undisclosed assets.
Exhibit “KAE4” to the plaintiff’s affidavit FDN 2 is a copy of a letter from CaroMel Ocean Ltd dated 2 September 2009 addressed to Christopher Robin Von Stanke as director of H Stanke & Sons Pty Ltd, RCV Stanke Estates Pty Ltd and Cape Banks Processing Pty Ltd, in which a Mr McLardie, as managing director of that company, puts forward an offer to purchase all or part of H Stanke & Sons Pty Ltd quota ownership and the entire business of Cape Banks Processing Pty Ltd for a purchase price of many millions of dollars. It is apparent, and not unreasonable in those circumstances, that the plaintiff anticipates that the value of the deceased’s shareholding in RCV Stanke Estates Pty Ltd is therefore likely to be significant, as is the value of the other undistributed assets from the estate of the deceased’s husband.
Solicitors filed a notice of appearance for the first and second defendants as executors on 19 May 2010. Another solicitor filed a notice of appearance for the same two defendants and the remaining four defendants as beneficiaries on 7 July 2010.
On 31 August 2010 an affidavit of the solicitor for the plaintiff was filed setting out that a notice to potential claimants had been forwarded on 17 July 2010 to a large number of potential claimants with one further notice being forwarded on 18 August 2010 to a remaining grandchild of the deceased.
On 20 September 2010 by an interlocutory application, the plaintiff sought an extension of time to 10 May 2010 within which to make the application in this matter. That interlocutory application was supported by an affidavit of her solicitor filed on the same day – FDN 7 – setting out that the solicitor had personally lodged the summons and the plaintiff’s affidavit at the Mount Gambier Registry of the Supreme Court on 15 April 2010, two day’s before the expiry date of the time within which the application could be filed. However, when the documents were returned to him as sealed they were marked as having been filed and received on 20 April 2010.
On 29 April 2010 the plaintiff’s solicitors sought to have that filing date corrected but were advised by the Registrar – see Court document FDN 7B – as to the circumstances in which the latter date had come to be placed on the summons. The Court refused to alter the date. In essence it was acknowledged that the documents had been lodged at the Mount Gambier Registry with the relevant fee on 15 April 2010. The staff had faxed a copy of the documents to the Supreme Court Registry that day. An officer of the Court approved the filing of the documents and sent a facsimile to the Mount Gambier Court that day so advising. Thereafter the staff at the Mount Gambier Registry forwarded the original documents to the Supreme Court Registry in Adelaide. Those documents, together with the filing fee, were received at that Registry on 20 April 2010 when the summons was sealed and issued. The documents were then sent by facsimile to solicitors then acting for the first and second defendants on 5 May 2010. In those circumstances the proceedings were issued and served beyond the six month time limit and for that reason an extension of time was sought.
Each of the defendants opposed any extension of time being granted and filed an affidavit in support of that opposition. The defendants complained about the delay in processing the action as well as the delay in instituting it. The plaintiff’s application for an extension of time has yet to be determined. The affidavits filed by the defendants – FDN 8, FDN 14 to FDN 20 – generally oppose the grant of an extension of time, note the receipt of monies from the estate and attest that the deponent is not in a position to repay those monies. These affidavits were followed by the affidavit of the plaintiff limiting her claim to undisclosed and undistributed assets of the estate.
A recent decision in this Court of Gerblich v Adplan Pty Ltd [2012] SASCFC 79 suggests that it is likely that the plaintiff’s application for an extension of time will be granted. However, that is not an issue presently before the Court.
From mid-2011 the plaintiff has been concerned to value the assets of the estate that she asserts are undistributed. The plaintiff sought a number of documents to assist in this endeavour. The solicitors for the executors indicated that those executors would provide a copy of documents that they had in their possession but that some of the documents sought were not in their possession and never had been.
On 3 November 2011 the plaintiff’s counsel intimated that it was intended that an application for further and better disclosure by the executors would be filed to facilitate the plaintiff obtaining an expert opinion on the value of the shares.
The first and second defendants filed a list of documents pursuant to a direction of the Court made on 3 November 2011 setting out those documents in their possession and noting that there were no documents for which privilege was claimed and no documents formerly but no longer in their possession that were directly relevant to any issues arising on the pleadings.
On 19 January 2012 the plaintiff sought an extension of time within which to file the application for further and better disclosure. On 9 February 2012 an interlocutory application seeking further and better disclosure was filed.
The plaintiff’s interlocutory application sought further and better disclosure in terms of a letter dated 15 June 2011 from the plaintiff’s solicitors setting out information sought by the forensic accountant who had been appointed by the plaintiff to provide the valuation. A copy of that letter is Exhibit “HAB1” to an affidavit of the plaintiff’s solicitor filed on 9 February 2012 – see Court document FDN 24A. The first and second defendants’ response was that the only documents that their clients could provide were those which they held as executors of the estate of the deceased. Such documents were available upon payment of reasonable copying costs – see Court document FDN 24B. Document FDN 24C on the Court file is a copy of a letter from the solicitors for the executors enclosing copies of the financial reports for the company RCV Stanke Estates Pty Ltd for the financial years from 30 June 2006 through to 30 June 2010.
Following the provision of this material the forensic accountant provided a letter of 7 February 2012 setting out the further documentation that he sought in some 17 categories. A copy of that letter is document FDN 24D on the Court file.
The documents sought are as follows:
1.A copy of the financial statements of the company for each of the 1984 through 2011 financial years. (In the case of RCV Stanke Estates Pty Ltd you have supplied me with 2007 through 2010 financial statements for RCV Stanke Estates Pty Ltd).
2.A copy of the 2009, 2010 and 2011 income tax returns.
3.A copy or access to all Director minutes for the period 1984 through 2011.
4.A copy of all dividend notices issued by the company and or details of dividends paid during the period 1984 through 2011.
5.A copy of all finance applications submitted by or on behalf of the company since 2005.
6.Details of all transactions involving company property to shareholders or associates of shareholders since 1984.
7.Details of all benefits provided by the company to members of the extended von Stanke family group and to residents of Carpenter Rocks in accordance with the “conventional understanding” described in the proceedings in the matter of FWW Stanke Holdings Pty Ltd v O’Meara (2007) SASC including details of the benefit provided, the value of the benefit, to whom the benefit was provided and the date the benefit was provided.
8.Details of all remuneration and benefits paid by the company to any member of the von Stanke family or their associates.
9.Copies of valuations of any company property obtained since 1 July 2004.
10.Copies of any Business Plans prepared in the last three years.
11.Copies of any budgets or projections prepared in the last two years.
12.Details of any share transactions in respect of company shares.
13.Copies of the most recent insurance policies held by the company.
14.Details of any quota/licences or similar held or made available to the company.
15.Details of any assets or liabilities held/owed by the company not recorded in the financial statements of the company.
16.A copy of the company constitution (or similar) and any amendments thereto.
17.As above in respect of any entity in respect of which this company holds a direct or indirect interest.
I also seek a copy of all documentation that supports the purchase of the shares in JHV Stanke Properties Pty Ltd including, but not limited to, copies of any valuation and correspondence between the companies.
I note the provision of information may lead to a request for further information. I cannot provide an exhaustive list and expect I will identify additional documents required once I have received and reviewed the first tranche of documents.
On 23 May 2012, the first defendant, with the authority of the second defendant, swore an affidavit in opposition to the plaintiff’s application – FDN 25. He noted that the cash assets had been distributed in accordance with the affidavits of beneficiaries earlier filed – FDN 14 and FDN 20. In paragraph 15 of FDN 25 the first defendant attests as follows:
15.Other than those documents already provided as set out in paragraph 12 above [the documents disclosed in the list of documents], the Executors do not have the documents requested in the application in our capacities as Executors of the Estate of Mary, or at all. [Italics mine.]
He attested that the only task which remained in respect of the administration of the estate was the transfer of the shares in RCV Stanke Estates Pty Ltd to the beneficiaries of the estate. He does not address the issue of the undistributed real estate.
The first defendant attested that he was a fisherman who had left school at the age of 15 years. He was now 65 years of age but was continuing to fish in order to meet financial commitments. The second defendant and other executor had left school at a similar age and maintains herself on wages earned working in a fish processing factory at Carpenter Rocks. He attested that neither she nor he were in a position to fund the litigation on the part of the estate because there were no funds in the estate, nor did they have resources of their own sufficient to fund the litigation.
The obligation to disclose documents is set out in Rule 136 of the Supreme Court Civil Rules 2006 (SA). That rule provides as follows:
136 (1) Each party must disclose the documents that are, or have been, in the party’s possession and—
(a)are directly relevant to any issue raised in the pleadings; or
(b)are to be disclosed by order of the Court.
(2) The disclosure is made by filing in the Court a list of documents in the approved form.
…
(5) If a document is no longer in a party’s possession, the list must state how the document left the party’s possession and any information the party may have about where the document might be found.
…
(7) If a party required to disclose a document claims that the document is privileged from production, the list must state the nature of the privilege and the grounds on which it is claimed.
(8) If a party who has filed a list of documents later becomes aware that the list is defective or incomplete, the party must file a supplementary list as soon as practicable.
The obligation is to disclose documents that are or have been in the party’s possession. The documents must be directly relevant to an issue raised on the pleadings.
“Possession” is defined in Rule 4 in the following terms:
possession—a person is taken to be in possession of a document or object if—
(a)the document or object is in the person’s custody or control; or
(b) it lies within the person’s power to obtain immediate possession of the document or object or to control its disposition (whether or not the power is one that would be recognised at law or in equity);
On the evidence filed in this matter to date there is no evidence that any of the documents sought beyond those already disclosed are or have been in the custody or control of the first and second defendants. Nor in my view is there sufficient material before the Court for it to draw an inference that such material had been in the possession of those defendants in light of the list of documents and the first defendant’s affidavit.
An issue raised in the argument between the parties was whether the documents sought fell within a group or category of documents in respect of which the first and second defendants had the power to obtain immediate possession.
The meaning of “power” was considered in the rule that preceded Rule 136 by the Full Court in the matter of Taylor v Santos Limited (1998) 199 LSJS 122, where Doyle CJ (at 125) explained:
In my opinion the court should be cautious in extending the concept of power beyond the concept of a presently enforceable legal right, even though it may be appropriate to do so. Reading r58 as a whole, my view is that the obligation to discover a document is limited to a document that the person in question has the legal power or (I can think of no better expression) actual and immediate ability to inspect, even though the document is the property of or is held by another person. That power or ability might exist in relation to a document that a person is not able to produce for inspection to a third person, eg a document in which a person has joint property with another person. But, in my opinion, the obligation to discover hinges upon having a right or actual and immediate ability to examine a document. A person does not have that right or actual immediate ability if the person is able to inspect the document only if a third person, who has control of the document, agrees to permit inspection, or agrees to refrain from so exercising that person’s control as to prevent inspection. … [Italics mine.]
The point I wish to emphasise is that to the extent that the concept of power extends beyond a presently enforceable legal right, it should be held to so extend only when the court can say that the person in question does have the actual immediate ability to inspect the document. Otherwise, I consider, the law would place an impossible obligation upon a party. I consider that the cautious extension which I contemplate was the sort of thing that Lord Diplock had in mind in the second of the above excerpts from his speech. That was the approach of Dillon LJ in Re Tecnion Investments Ltd [1985] BCLC 434. There, dealing with a case in which a company was alleged to be directly or indirectly controlled by two individuals, Dillon LJ said that the question of whether documents in the possession of that company were in the power of the relevant individuals depended upon (at 439):
… whether the other companies are under the unfettered control of the respondents so as to be their alter egos in accordance with the exception to the general rule as possibly envisaged by Lord Diplock.

At 127, Doyle CJ further said:
I do not accept that a document is in the power of a person because, by the exercise sequentially or concurrently of rights such as voting rights attached to shares, or by the exercise sequentially or concurrently of powers such as a power to give a direction to another person to exercise a right or power, the person in question can bring about a situation in which that person will ultimately be able to insist upon inspection and perhaps production of a document. I refer here to a document which at the relevant time is not in the possession or custody of the person in question, but in the possession or custody of some other person. I accept the fundamental distinction made by Lord Diplock between on the one hand a present right and, I would add, an actual immediate ability, to obtain inspection of a document without meeting the consent of another person, and on the other hand the later acquisition or creation of such a right or ability.
The obligation of an executor to make disclosure of documents extends beyond documents received by the executor in their capacity as executor. In Buchanan-Michaelson v Rubinstein & Ors [1964] 3 All ER 850, executor defendants were sued on an alleged oral contract in their capacity as representing the estate of the deceased. The first defendant was a solicitor and the second defendant was the widow of the deceased. The second defendant had been given documents in her individual capacity. Pennycuick J held (at 854):
… because where parties occupy a representative capacity their rights against, and liabilities to, another party are conditioned by that capacity. But I do not think it follows that, where parties are sued in a representative capacity, for all the purposes of the action, including discovery, they must be treated as though there were a cleavage of personality between them in their representative capacity and them in their individual capacity, as if they were two distinct persons. The fact is that the party to the action is a human person—I am not talking here of corporations—he is one person, and, although the claim must be made against him in one or other capacity, or both, he is not, so to speak, two distinct persons, one of whom is not before the court at all. In relation to discovery the contention advanced by counsel for the defendants would lead to the most extraordinary results. It would follow, for example, that if documents came into the possession of persons as executors and they then handed over those documents to themselves in their capacity as trustees of the same will, the moment they have done so they would be exempt from discovery in an action in which they were sued as personal representatives. The same position would arise, as it does in the present case, where the executors hand over documents which come to them in that capacity to one of themselves only, either as beneficiary or on some trust, it matters not. Again apparently it would mean that executors were not bound to disclose documents handed over to them by the testator while he was still alive, with a view to their administration of his estate.
I do not think that there is anything in the rules, … which leads me to what I think is such an unreasonable conclusion. …
The approach of Pennycuick J was followed by Balmford J in the Supreme Court of Victoria in the matter of Szental v Szental [2001] VSC 42. In that matter the plaintiff and the defendant were beneficiaries under a will, probate of which had been granted to the defendant. One of the questions for determination was whether an order for discovery should be limited to discovery of documents in the possession, power or control of the defendant in his capacity as the executor of the estate. At [10] his Honour cited the passage from Buchanan-Michaelson v Rubinstein earlier cited in these reasons. At [14] Balmford J said:
[14] However, by virtue of Rule 1.14, the Court may exercise any power under the Rules of its own motion. My view is that the decision of Pennycuick J in Buchanan-Michaelson v Rubenstein [sic] is founded on common sense, and that I should follow that decision in the matter here before me. …
In Simpson, Bailey & Evans, Discovery and Interrogatories, 1984, (at 43), dealing with representative parties, the learned authors say:
A party suing or being sued in a representative capacity must discover all relevant documents in the possession, custody or power of those he represents and himself.
In this matter the plaintiff argues that the first and second defendants have misconceived their obligation to make disclosure in that they have asserted that the only disclosure required is in relation to documents received by them or in their possession, custody and control as executors of the estate of Mary. Authorities suggest that the obligation to disclose is broader. However, the documents sought are essentially company records in relation to five companies, namely RCV Stanke Estates Pty Ltd, H Stanke & Sons Pty Ltd, JHV Stanke Properties Pty Ltd, Cape Banks Processing Company Pty Ltd, and H Stanke & Sons (Portland) Pty Ltd.
The first and second defendants have filed a list of documents setting out that the only documents in respect of which they have possession, custody or control were the five financial statements already provided to the solicitors for the plaintiff. The list of documents sets out that there are no documents directly relevant that they did have but which are no longer in their possession. That list of documents has been substantially verified by affidavit of the first defendant – see FDN 25, paragraph 15. The affidavit goes further to assert that the first two defendants do not have the further documents sought by the plaintiff either in their capacity as executors or at all.
The plaintiff argues that the defendants as director and/or secretary of those companies are in a position to obtain the documents they seek pursuant to s 198F(1)(a) and s 290 of the Corporations Act 2001(Cth). Section 198F(1)(a) provides as follows:
198F Right of access to company books
Right while director
(1) A director of a company may inspect the books of the company (other than its financial records) at all reasonable times for the purposes of a legal proceeding:
(a) to which the person is a party; or
…
Section 290 provides:
290 Director access
Personal access
(1) A director of a company, registered scheme or disclosing entity has a right of access to the financial records at all reasonable times.
The balance of the section refers to the right of a director to apply to the Court for an order to authorise inspection by a person on the director’s behalf and the various consequential orders that can be made.
It is clear that the defendants are directors of certain of each of the companies in question. The defendants assert that the two provisions in the Corporations Act only apply in circumstances where the person to whom it applies is a party to proceedings “in his or her capacity as director of a corporation” (italics mine). It is therefore argued that the provisions are irrelevant. In any event directors owe duties to the company set out in the Corporations Act – see s 179 to s 184 of the Corporations Act.
It is not as though the first and second defendants have control of the companies in question such that they might be described as their alter egos. They are one only of a number of officers of the company and, in my view, are not in a position of their own initiative and without more make a decision in the name of the company. To paraphrase the words of Doyle CJ in Taylor v Santos Limited they do not, in my view, have an actual and immediate ability to inspect the documents as described in that decision. Rather it is a matter for the company to determine whether or not such documents should be disclosed or at the very least to be heard on an application for disclosure. The first defendant has attested that the defendants do not have custody or control of the documents sought in their capacity as executors or at all. In my view, they do not have possession of those documents within the meaning of the Rules. Accordingly, I would find on that ground alone that the plaintiff’s application should fail.
The defendants also raised the issue of whether or not the documents could be said to be directly relevant as pleadings in the matter were not complete and, further, that the application was premature as the plaintiff had not yet obtained an extension of time to pursue the action in any event. It was argued that these are issues that will need to be addressed before the ambit of disclosure obligations can be determined.
Had the defendants at some time received from the various companies documents that fell within the categories sought by the plaintiff then, in my view, subject to determinations of relevance, such documents would be discoverable. However, the defendants have attested that they do not have those documents. On the present evidence I am not satisfied within the meaning of r 145 that there is any reason to doubt that the first and second defendants have fully complied with their obligations to disclose and produce documents at this time.
For the foregoing reasons, the orders of the Court will be:
1.The plaintiff’s application FDN 23 for further and better disclosure is refused.
2.The plaintiff is to pay the first and second defendants’ costs of and incidental to the application.
3.I certify fit for counsel