Everts v Liepins

[2022] NSWSC 1021

Supreme Court

New South Wales

Medium Neutral Citation:

Everts v Liepins [2022] NSWSC 1021

Hearing dates:

14 July 2022

Date of orders:

14 July 2022

Decision date:

29 July 2022

Jurisdiction:

Equity

Before:

Hallen J

Decision:

See [79]

Catchwords:

SUCCESSION – PRACTICE AND PROCEDURE – succession – Filing and verification of estate accounts

Legislation Cited:

Civil Procedure Act 2005 (NSW) ss 56-60

Legal Profession Act 2014 (NSW)

Probate and Administration Act 1898 (NSW) s 85

Supreme Court Act 1970 (NSW) s 53(3)(a)

Uniform Civil Procedure Rules 2005 rr 18.7, 54.1, 54.3

Cases Cited:

Allesch v Maunz (2000) 203 CLR 172; [2000] HCA 40

Council of the Law Society of New South Wales v Liepins (No 3) [2016] NSWCATOD 51

Gertsch v Roberts; The Estate of Gertsch (1993) 35 NSWLR 631

Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230

Hons v Hons (2010) 3 ASTLR 278; [2010] NSWSC 247

Jordan v Goldspring No 2 [2022] NSWSC 780

Kemp v Burn (1863) 66 ER 740

Lezaja v Hannover Life Re of Australasia Ltd (No 2) [2016] NSWSC 167

McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623; (1985) 9 ACLR 926

Nobarani v Mariconte (2018) 265 CLR 236; [2018] HCA 36

NSW Trustee and Guardian as Executor of the Will of Michael Robert Walsh (Dec’d) v Gregory (2012) 18 BPR 35,153; [2012] NSWSC 681

Palmer v Ayres; Ferguson v Ayres (2017) 259 CLR 478; [2017] HCA 5

Phillip Allan Yates v John Norman Phillips Halliday [2006] NSWSC 1346

Re Craig (1952) 52 SR (NSW) 265

Re Estate Schwartz, Deceased; Application of Gellert; Gellert v Bentwood and Schwartz [2015] NSWSC 1484

Re Watson (1904) 49 Sol Jo 54

Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365

Schmidt v Rosewood Trust Ltd [2003] 2 AC 709; [2003] UKPC 26

Stamoulos v Constantinidis; Constantinidis v Constantinidis [2017] NSWSC 1808

Taylor v Taylor (1979) 143 CLR 1; [1979] HCA 38

The Estate of Frances Kedesch Michell [2020] NSWSC 1300

The Estate of Maureen Laila Huber, of Cobram VIC; The Estate of Dolf Paul Huber [2020] NSWSC 1539

UBS AG v Tyne (as trustee of the Argot Trust) (2018) 265 CLR 77; [2018] HCA 45

Williams v Stephens (1986) 17 BPR 33,839

Category:

Principal judgment

Parties:

Bernt Everts (Applicant)
Juris Liepins (Respondent)

Representation:

Counsel:
Mr T Maltz (Applicant)

Solicitors:
HWL Ebsworth Lawyers (Applicant)

File Number(s):

2013/143016

Publication restriction:

Nil

Judgment

The Proceedings

1. HIS HONOUR: By notice of motion filed on 12 April 2022, the applicant, Bernt Everts, seeks orders that the respondent, Juris Liepins, the executor of the Will, and trustee of the estate, of Asja Everts ("the deceased"), to whom Probate was granted, verify and file accounts in respect of his administration of the estate of the deceased from the date of death, until the date of the filing of the accounts; that the respondent, thereafter, take all such steps as may be necessary to vouch and to pass the accounts; that the respondent pay to the estate, all monies found to be due to the estate upon the taking of such accounts, together with interest thereon; that the respondent not be allowed any costs related to resisting the motion, without prejudice to any rights the respondent may have in relation to the costs of complying with the orders; and an order that the applicant’s costs be paid out of the estate of the deceased.

2. The notice of motion was returnable, first on 26 April 2022 for directions. The respondent did not appear, and the Court directed the applicant to serve the notice of motion and any affidavits upon which reliance was to be placed upon him by 4:00 p.m. on 16 May 2022. The matter was stood over to 30 May 2022 for further directions.

3. On 30 May 2022, again, there was no appearance, by, or on behalf of, the respondent. Having read an affidavit sworn on 2 May 2022, by Joseph Khoury, a licensed process server, I was satisfied that the notice of motion, a copy of a letter dated 29 April 2022 from the applicant’s solicitors, and the affidavit sworn 16 February 2022, of Mr G J Moloney, solicitor, together with the exhibit to that affidavit, had been served, personally, upon the respondent on 2 May 2022.

4. On this occasion, Mr T Maltz, counsel for the applicant, informed the Court that the applicant wished to consider whether to file and serve a Statement of Claim seeking revocation of the grant of probate made to the respondent or whether that could be done by filing and serving an amended notice of motion seeking additional prayers for relief. The Court granted leave to the applicant to file and serve an amended notice of motion by 4:00 p.m. on Friday, 10 June 2022 and adjourned the proceedings until 27 June 2022.

5. On 27 June 2022, again, there was no appearance, by, or on behalf of, the respondent. Having read an affidavit affirmed on 23 June 2022 by Mr Moloney, I was satisfied that the respondent had been informed that the notice of motion was before the Court on 27 June 2022.

6. As no amended notice of motion had been filed, or served by, or on behalf of, the applicant, the notice of motion was listed, for hearing before me, on 14 July 2022, with directions made for written submissions, including an index of affidavits to be delivered in hard and soft copy, to my Chambers by 4:00 p.m. on 7 July 2022. I considered that the matter be dealt with in stages, with the first question to be determined relating to the filing and verification of estate accounts.

7. The applicant’s counsel provided written submissions dated 6 July 2022 and an index of affidavits.

The Hearing

8. At the commencement of the hearing of the notice of motion, counsel for the applicant read an affidavit of service, of Joseph Khoury, sworn on 11 July 2022, which revealed that the respondent had been served, personally, on 6 July 2022 with a copy of the documents that had previously been served on him, with a copy of the affidavits of service to which I have referred, as well as a copy of the affidavits of Mr Moloney, filed on 30 May 2022, another on 24 June 2022 and a third, on 5 July 2022.

9. At 10:00 a.m., the matter was called three times outside the Court. It was called, again, at about 10:15 a.m., again, at 11:20 a.m., and once more, at 2:00 p.m., on none of which occasions, was there an appearance by, or on behalf of, the respondent to answer the application.

10. Rule 18.7 of the Uniform Civil Procedure Rules 2005 (NSW) (‘UCPR’) provides that if service of a notice of motion on any party is required by the Rules, and if the notice of motion has been duly served on that party, the court may hear, and dispose of, the motion in the absence of that party.

11. In Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365, Barrett J explained the role that the Court should play when dealing with a hearing where a party has not attended. The Court should be satisfied that there has been full and proper notice of the hearing date, and give careful regard to the evidence, so that the relevant issues are considered in a manner that is fair and just.

12. Subsequently, I have written that a party is relevantly absent only if he, or she, had knowledge, or notice, of the hearing date, and is neither present, nor represented, when the matter is to be heard: NSW Trustee and Guardian as Executor of the Will of Michael Robert Walsh (Dec’d) v Gregory (2012) 18 BPR 35,153; [2012] NSWSC 681. I refer to what I wrote in that case, at [17]-[22].

13. One purpose of UCPR r 18.7 is the efficient dispatch of court business. More recently, in Lezaja v Hannover Life Re of Australasia Ltd (No 2) [2016] NSWSC 167 (a case in which a plaintiff had failed to appear at the hearing), after referring to some of the passages cited above, I added, at [37] and at [40]:

“Of course, I must also have regard to the obligations imposed by s 56 to s 60 of the Civil Procedure Act 2005 (NSW). Section 56 emphasises that the overriding purpose of the Act and the rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. The court is required to give effect to the overriding purpose when it exercises any power given to it by the Act or by the rules of court. Section 57 in turn requires the court to have regard to specified matters. Section 58 requires the court, in deciding whether to make any order or direction for the management of the proceedings, to act in accordance with the dictates of justice, and the court must have regard to the provisions of ss 56 and 57. These sections recognise the fact that delay and case backlog are matters which affect not only the public cost in delivery of justice, but the court’s ability to provide individual justice, and that the reforms introduced by the Civil Procedure Act promote the provision of individual justice notwithstanding that they may have adverse effects on the claims of individual parties in particular circumstances: Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at [37] (Allsop P).

...

... The Court is not required to indefinitely delay the completion of the hearing in the hope that he might change his mind and appear: Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172, at [182]-[186], [189]-[191]; Taylor v Taylor [1979] HCA 38; (1979) 143 CLR 1 at [4]. The Plaintiff, proved to be on notice of the proceedings, has been afforded the opportunity to appear and to be heard. He has chosen not to do so. It follows that it is appropriate for the proceedings to be determined in his absence.”

14. In addition to those comments, it should also be noted that s 59 of the Civil Procedure Act 2005 (NSW), requires the Court to, as far as possible, eliminate delay between the commencement of proceedings and their final determination. Section 60 requires the Court to endeavour to resolve issues in such a way that the cost to parties is proportionate to the importance and complexity of the subject-matter in dispute.

15. Both sections recognise the fact that delay and case backlog are matters that affect not only the public cost in delivery of justice, but the court's ability to provide individual justice, and that the reforms introduced by the Civil Procedure Act promote the provision of individual justice notwithstanding that they may have adverse effects on the claims of individual parties in particular circumstances: Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at [37] (Allsop ACJ). Also see UBS AG v Tyne (as trustee of the Argot Trust) (2018) 265 CLR 77; [2018] HCA 45 at [38] (Kiefel CJ, Bell and Keane JJ).

16. The Court is not required to indefinitely delay the completion of the hearing in the hope that the respondent might change his mind and appear: Allesch v Maunz (2000) 203 CLR 172 at 186, 189-191; [2000] HCA 40 (Kirby J); Taylor v Taylor (1979) 143 CLR 1 at 4; [1979] HCA 38 (Gibbs J). The right to have the opportunity to be heard is not a right to frustrate the hearing of proceedings by not attending to, or appearing, thereat. Justice requires consideration to be given to all the parties.

17. The respondent has had the right to be heard at the hearing, and otherwise, although he has chosen not to take advantage of it, and he has not communicated any explanation for his non-appearance to the Court or, it appears, to the applicant.

18. As stated, I am satisfied, from the affidavits of service, and otherwise, that the respondent has been made aware of the orders sought by the applicant and of the hearing date. I am also satisfied that he is well aware of the bases upon which the applicant seeks the relief, namely that there has not been a proper accounting, by him, to the applicant, who is one of several residuary beneficiaries named in the Will dated 26 October 2012.

19. Naturally, I considered whether the Court should adjourn the proceedings to give the respondent one further opportunity to appear. However, there is no utility in doing so, in the absence of any reasons for him not having filed an Appearance, or for not having appeared at any of the directions hearings, or the hearing. There is no reason to believe that he would be more likely to appear on any subsequent occasion to which the hearing of the notice of motion was adjourned.

20. In the circumstances the Court determined that the hearing of the application should proceed in the absence of the respondent.

21. Following the reading of the evidence and the making of some oral submissions, the matter was stood down until 2:00 p.m., as I wished to consider the evidence and prepare and make a form of orders, which I set out at the conclusion of these reasons. (Another reason for adjourning the matter was to enable the applicant’s solicitors to confirm that only one distribution of $800,000, had been made to the applicant by the respondent.)

22. As previously mentioned, immediately before the Court made the orders, at 2:00 p.m., the matter was called, and again, there was there no appearance by, or on behalf of, the respondent. I informed the legal representatives of the applicant that I would publish reasons as soon as I am able. These are the reasons.

Background Facts

23. The deceased died on 22 February 2013, leaving property in New South Wales, almost 9.5 years ago.

24. This Court granted Probate of the deceased’s Will to the respondent, on 6 June 2013, as one of the executors named in the Will. The Probate parchment noted that “Inese Ronis, the other executor renounced probate”.

25. At the time of the grant of Probate to him, the respondent was a solicitor. However, his practising certificate was suspended on 22 June 2011 and had not been renewed. Proceedings, subsequently, were commenced by the Law Society of New South Wales, on 16 October 2012, in the Administrative Decisions Tribunal, now the Civil and Administrative Tribunal of New South Wales, being a disciplinary action, claiming that he had engaged in professional misconduct, in which orders had been sought, including that he be removed from the Roll and that he pay the Law Society’s costs.

26. In a liability decision published on 26 February 2015, the Tribunal held that the admitted evidence sufficiently proved the conduct of the respondent, as described in the application, and that this conduct constituted professional misconduct both at common law and under the Legal Profession Act 2014 (NSW). The hearing on penalty and costs was set down for 16 and 22 December 2015 and reasons for judgment were delivered on 3 May 2016. The Tribunal concluded that “the probability is that the Solicitor is permanently unfit to practise. We accordingly order under s 562(2)(a) of the LP Act that his name be removed from the local roll”: Council of the Law Society of New South Wales v Liepins (No 3) [2016] NSWCATOD 51 at [160].

27. (It is unnecessary for the Court to rehearse the conduct of the respondent giving rise to the removal of his name from the local roll. I have not relied upon it in reaching my decision. I have referred to the proceedings as background.)

28. By her Will, the deceased left a pecuniary legacy of $25,000 to each of 7 named beneficiaries, a pecuniary legacy of $50,000 to each of 2 named beneficiaries, a legacy of $60,000 to two named beneficiaries as tenants in common in equal shares, and a legacy of $100,000 to Ms Ronis. She then made specific devises of different parcels of real estate to named devisees, and divided her residuary estate into 6 equal parts, two of which passes to the applicant.

29. In the Inventory of Property that was attached to, and placed inside, the Probate document, the deceased’s estate was stated to have an estimated or known value of $6,137,656.66. It was a large estate.

30. There is evidence that, despite the passage of over 9 years, the estate of the deceased has not yet been fully administered, although there is evidence that some interim distributions had been made.

31. Furthermore, the respondent does not appear to have provided any estate accounts despite requests having been made, on behalf of the applicant, since 2018. What the respondent has done is provide a copy of some bank statements.

32. Relevantly, in an email dated 4 September 2020, sent to the respondent, by the applicant’s solicitor, Mr Moloney, it was written:

“Dear Mr Liepins,

As you know, we act for Bernt Everts, beneficiary of the estate of the late Asja Everts (the Estate) as to a 1/3^rd share of residue. You have previously distributed $800,000 to our client.

Thank you for confirming in our discussions yesterday that the Bankstown property has now been sold. We have spoken with Mr Huggett, the Estate accountant, today who confirms that the Estate’s tax return will be lodged, assessed and paid within the coming weeks.

Please confirm the following by reply:

1.   The balance as at today’s date in the Estate bank account.

2.   Your best estimate of the Estate’s anticipated tax liability.

3.   Your best estimate of our client’s entitlement, being 1/3rd [sic] of the balance of the Estate’s funds minus the 1/3^rd of the estimated tax liability.

4.   A copy of the Estate accounts by reply, consistent with your obligations as trustee.

We look forward to hearing from you.”

33. By email dated 10 September 2020, the respondent responded:

“Dear Mr Moloney,

Thank you for your email of 4 September 2020. My replies are:

1.   Your client is not entitled to this information.

2.   I am not able to give an estimate.

3.   Your client may not have any entitlement.

4.   Accounts are done on completion of the Estate.”

34. In another email, sent on 10 September 2020 to the respondent, Mr Moloney set out what he asserted were the bases for the entitlement to information. A request was made for:

1.   “The current balance of Estate funds;

2.   My client’s estimated entitlement, as a beneficiary as to 1/3rd of residue; and

3.   Your estimate of tax liability; and

4.   A copy of estate accounts maintained by you,

Within 14 days, being by Thursday, 24 September 2020, failing which I will seek instructions to commence proceedings seeking your removal as trustee for, amongst other reasons, gross delay in accordance with principles in Mavrideros v Mack (1998) 45 NSWLR 80 and breach of your duty to account in accordance with the authorities set out above.”

35. This prompted an email dated 24 September 2020 from the respondent in the following terms:

“I refer to your email of 10 September, 2020 and advise that I have previously advised you of my position.

1.   Your client is not entitled to details of those Estate assets to which he has no entitlement.

2.   As previously advised, such details are not available apart from my previous statement that your client may not be entitled to any further payment apart from that which has [sic] already received from me.

3.   I have not made such an estimate.

4.   Your client’s entitlement is limited to one-third of the residue by not to other assets.”

36. On 1 April 2021, the solicitors for the applicant sent an email to the respondent, which relevantly, was in the following terms:

“I refer to my several phone conversations with you (for example, on 9 March 2021; 18 February 2021; 17 September 2020 and 9 September 2020).

In our conversations last year, you:

1.   confirmed the Bankstown property had been sold;

2.   stated that the tax returns were complicated and needed to be completed by Mr Greg Huggett; and

3.   refused to provide estate accounts

(…)

As you know, our client has instructed us, and we have drafted, an application to remove you as trustee. We now hold instructions to file and serve that application, including an application for proper accounting, unless, by 5pm on 1 June 2021, you do the following:

1.   Furnish our firm by reply with a copy of your accounts of the estate in proper form; and

2.   Take all steps necessary to finalise the estate.

We look forward [sic] your reply and will proceed with the application if none is forthcoming.”

37. On 31 May 2021, the respondent sent an email to the applicant’s solicitor stating that:

“The estate of A everts will be finalised as soon as the 2020/2021 tax returns have been completed by the accountant.”

38. On 22 June 2022, the applicant’s solicitor sent the following email to the respondent’s email address, although the email was addressed to his wife:

“1.1   As discussed, to bring the estate to a conclusion, we ask that Juris do the following 3 things:

(a)   Provide an accounting in proper form (see further below);

(b)   Make an interim distribution of any estate funds to the residuary beneficiaries (…)

(c)   Once Juris is satisfied all liabilities are paid, make a final distribution of any remaining balance to residuary beneficiaries.

(…)

3.1   Further to my email sent on Monday, if Juris is content to provide an accounting as sought, by 27 August, he should sign the attached consent orders and return them to us to countersign and provide to the Court, by today if possible. (…)

3.2   If the orders are provided to the Court today it is possible there will be no need for the matter to proceed on Monday.”

39. On the same day, the respondent replied, in the following terms:

“I refer to your email of today’s date to my wife. Your client is only one of several residuary beneficiaries. Not one of the large number of other beneficiaries has raised any concerns about my administration of the estate. He is not entitled to an account of other parts or the whole of the estate. I shall seek to let you have details of my accounts by 27 June, 2022.”

40. On 26 June 2022, the applicant’s solicitor received another email from the respondent which email was in the following terms:

“Further to my email of 22nd June 2022, I advise that afer [sic] the deduction of amounts payable to other beneficiaries and claim for commission, I am holding $261,1656.41 [sic]. I enclose the most recent bank statement.”

41. On the same day, the applicant’s solicitor responded to the respondent’s email, in the following terms:

“Thank you for providing the bank statement showing the estate account has a balance of $1,058,496.23 at 31 May 2022.

Please clarify your reference to you now holding “$261,1656.41.” There appears to be a typographical error in this figure. It does not match the figure in the bank statement.

Please identify what amounts you have distributed, to whom, and the balance left in the estate account.

(…)

Finally, we note you apparently have deducted an amount as a ‘claim for commission.’ Commission is only payable by agreement between beneficiaries or application to the Court. Please clarify by reply the following matters regarding the claimed amount:

1.   Have you paid yourself commission already? Or are you reserving an amount from which to eventually deduct commission?

2.   What amount do you propose to claim by way of commission?

3.   On what basis have you calculated (and if applicable, charged) any commission?

4.   Have you obtained the approval of any beneficiary to the payment of your own commission?

We put you on notice that, subject to instructions, in light of the extraordinary delay that has attended the administration of this estate, we anticipate our client will be opposed to the payment of any commission to you at all.”

42. Later that day, the respondent replied:

“Sorry, it should be $261,165.41.

43. The applicant’s solicitor sent one further email on 26 June 2022, to the respondent, in the following terms:

“Thank you Mr Liepins,

Could you kindly answer the balance of the questions in my email sent this morning?”

44. The applicant’s solicitor deposes that he has not received any other emails from the respondent since his last email sent on 26 June 2022.

The Legal Principles

Jurisdiction

45. The filing and passing of accounts is a formal process. There are several sources for the Court’s power to compel an executor to file and pass accounts.

46. A primary source of the power to make orders compelling an executor to file and pass accounts, at the request of “interested” persons, is found in s 85 of the Probate and Administration Act 1898 (NSW). Relevantly, the section provides:

85   Executor, administrator or trustee to pass accounts

…

(1AA)   In respect of the estate of a person who dies on or after 31 December 1981 every person to whom probate or administration has been or is granted and who is …

(e) a person otherwise required to do so by the Court…

shall verify and file or verify, file and pass the person’s accounts relating to the estate within such time, and from time to time, and in such manner as may be fixed by the rules, or as the Court may order.

…

(1A)   Every trustee of the estate of a deceased person shall verify and file or verify, file and pass the trustee’s accounts relating thereto within such time, and from time to time, and in such manner as may be fixed by the rules, or as the Court may order.

…

(2)   Every such person shall be subject to any order that the Court may on the application of any person interested make as to the production and verification of the accounts concerned.

47. The proceedings brought under s 85 are not an administration suit. The section, relevantly, deals with the obligation of an executor to render to the Court accounts relating to his, her, or its, administration.

48. The Court’s jurisdiction to deal with matters of breach of trust, what assets are part of the estate and what the executors have received, which do not fall within s 85 is vested in the Equity Division under Supreme Court Act 1970 (NSW) s 53(3)(a): The Estate of Maureen Laila Huber, of Cobram VIC; The Estate of Dolf Paul Huber [2020] NSWSC 1539 at [63] (Slattery J).

49. The obligation under s 85 is specified as one to be carried out “within such time, and from time to time, and in such manner as may be fixed by the rules or as the Court may order”. Here, it is asserted that no accounts have ever been prepared and provided by the respondent.

50. Often, a common response, when complaints are made to the court about failure, or delay, by a legal personal representative to proceed with due administration, is to give notice to the executor to file and pass accounts under s 85. In some cases, that is sufficient to urge a dilatory executor to act, but in some cases, as here, the requests have been, effectively, ignored. Furthermore, no reasons have been given explaining why, as the executor, the respondent is not under an obligation under s 85(1) of the Act to file an inventory of the estate of the deceased and to file, or file and pass, accounts in relation to the administration of the estate of the deceased.

51. The next step, as has occurred here, has been to institute proceedings against the executor under s 85 with a view to obtaining an order for him to verify and file accounts.

52. As is well-known, probate litigation is "interest litigation": Nobarani v Mariconte (2018) 265 CLR 236; [2018] HCA 36 at [49] (Kiefel CJ, Gageler, Nettle, Gordon and Edelman JJ); Gertsch v Roberts; The Estate of Gertsch (1993) 35 NSWLR 631 at 634B-C (Powell J).

53. To commence, or to be a party to proceedings, relating to a particular estate, a person must be able to show that his, or her rights will, or may, be affected by the outcome of the proceedings. The applicant must establish his standing to seek accounts.

54. The applicant, being a residuary beneficiary, plainly has a sufficient interest in the distribution of the estate to be an “interested person”: Kemp v Burn (1863) 66 ER 740 as cited in Williams v Stephens (1986) 17 BPR 33,839 (Young J).

55. Another ground of jurisdiction upon which reliance may be placed is UCPR rule 54.3, which, relevantly, provides:

54.3 Relief without general administration

…

(3) Proceedings may be brought for an order directing any executor, administrator or trustee—

(a) to furnish accounts, or

(b) to verify accounts, or

(c) to pay funds of the estate or trust into court, or

(d) to do or abstain from doing any act.

(4) Proceedings may be brought for—

…

(b) directing any act to be done in the administration of an estate that the Supreme Court could order to be done if the estate were being administered under the direction of the Court …

...

56. UCPR r 54.1 defines “estate” to mean a deceased person’s estate.

57. During oral submissions, counsel for the applicant agreed that r 54.3 is an alternate source of power stating (Tcpt, 14 July 2022, p 6(32-34)):

“I have not considered 54.3 but it reads as an additional source of pourer [sic] to do the same kind of things that we are seeking so I accept and adopt that it's an alternative source of power.”

58. The object of the jurisdiction set out in UCPR Pt 54 is to enable questions to be settled between beneficiary and executor.

59. In McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 636B-D; (1985) 9 ACLR 926 at 935, Young J explained the right of a beneficiary to an order in the following way:

“A beneficiary, if he complains to the court about the administration of a trust is, as a matter of course, entitled to the appropriate order, either to answer his question as to the construction of a trust instrument, or to settle a dispute as to the administration of the trust in whole or in part under the authority of the court, unless the court is satisfied that there is no question which requires its decision. Suspicion of irregularities on very scanty material with respect to maladministration may be sufficient because the sanction is if, on the court’s further inquiry, its initial order is made wrongly, then it will be discharged and the plaintiff must pay the costs of the inquiry. A fortiori, if the affairs of the trust are in great confusion or there have been significant breaches of trust.”

60. In Re Estate Schwartz, Deceased; Application of Gellert; Gellert v Bentwood and Schwartz [2015] NSWSC 1484 at [12], Lindsay J described UCPR Pt 54 as a “procedural expedient” that is “designed to provide [a] summary, cost-effective [alternative] to an application for general administration of a trust by the Court” (citations omitted).

61. In Stamoulos v Constantinidis; Constantinidis v Constantinidis [2017] NSWSC 1808 at [50]-[51], Parker J in discussing the rule, stated:

“Under UCPR Pt 54, the Court has power to grant relief of the type which could formerly have been granted in what were known as administration proceedings. The Court has wide powers to direct acts to be done in the administration of the estate and to determine questions arising in the administration of the estate, including questions as to the rights or interests of a person who claims to be a creditor of the estate: r 54.3(2)(c).

These powers are amply wide enough to ensure that the interests of the estate can be protected. But, of course, the making of such orders is not a matter of right on the part of the beneficiary who applies for them. Ultimately, it is a matter for the Court to consider whether the orders should be made and, in doing so, the Court will take into account such questions as to the strength of potential claims or arguments available to the estate as against creditors or other third parties, and other practical questions such as the degree of likely recovery.”

62. Finally, should it be necessary, the Court has an inherent jurisdiction, as part of its equitable jurisdiction, to supervise the administration of trusts to make an order of the type that is sought: Palmer v Ayres; Ferguson v Ayres (2017) 259 CLR 478 at 510–511; [2017] HCA 5 at [84] (Gageler J), citing Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at 724; [2003] UKPC 26 at [36] (Lord Walker for the Board). It is unnecessary, however, in this case, to rely upon the inherent jurisdiction.

63. The Court's power to require an executor to file and pass accounts is an important part of the Court's armoury of powers in the administration of estates. The Court’s ultimate purpose in doing so is to ensure that there is due and proper administration of the deceased’s estate and that the interests of the parties beneficially entitled to it are ensured. In this regard, an executor has an obligation to provide a full and candid record of his or her stewardship, including all appropriate financial accounts.

64. “Maintenance of proper records and accounts is fundamental to good management of a deceased estate”: Williams v Stephens, quoting Re Craig (1952) 52 SR (NSW) 265 at 267 (Roper J). It is usually the executor who is in absolute control of the administration of the estate and who is ultimately responsible for its proper administration.

65. The consequences of filing accounts and having them passed also benefits an executor. In Hons v Hons (2010) 3 ASTLR 278; [2010] NSWSC 247, at [111]-[112], Ward J (as the President of the Court of Appeal then was) wrote:

“In Ludwig v The Public Trustee [2006] NSWSC 890, Campbell J (as His Honour then was) noted (in passing) (at [247]) that:

Sometimes, but not always, administrators can be required to file, or file and pass, accounts concerning the administration: section 85 Wills Probate and Administration Act 1898. Filing and passing accounts has some consequences analogous to a release, in that it provides the opportunity to question the various dealings that the administrator has engaged in concerning the estate. (my emphasis)

The consequence of passing the accounts, as noted by Campbell J, is to provide a release in favour of the accounting party. The consequences of the accounts not being passed is that the accounting party is not in a position to claim commission and that the accounting party would remain (subject to any limitations or defensive equities) open to a claim by the beneficiaries in relation to any alleged breach of duty in relation to the administration of the estate.”

66. As was held by Kekewich J In Re Watson (1904) 49 Sol Jo 54, and cited by Young J in Williams v Stephens, the duty of an executor is threefold; first, the executor has a duty to keep accounts, second, a duty to deliver accounts and third, a duty to vouch accounts. Yet, the considerations to be applied to each of these three duties is not the same. The duty to keep accounts is an essential duty, and the executor must keep such accounts so as to be able to deliver a proper account within a reasonable time, if called upon to do so by a beneficiary. Different considerations apply to the duty of delivering accounts. If the account requested is very long, such that the executor may incur considerable expense, the executor does not have a duty to deliver accounts until the executor’s expenses have been guaranteed. Again, different considerations apply to the duty to vouch accounts. That duty cannot arise until after the accounts have been delivered.

67. In Jordan v Goldspring No 2 [2022] NSWSC 780 at [98], Henry J wrote:

“As the authorities to which I was referred make clear, an order to file and serve accounts in common form by executors requires them to account only for what they have actually received and any disbursements and distribution of the amounts so received and disposed of. The other party to the accounting can challenge the account by asserting that more was received (referred to as surcharging) or by asserting that less was disposed of (referred to as falsifying). Accounts in common form are to be contrasted with an order for taking accounts on the basis of wilful default, under which the accounting party must account not only for what was actually received but also for what should have been received; that is, for what would have been received if the relevant duties of the accounting party had been properly discharged: Juul v Northey [2010] NSWCA 211 at [186], citing Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146 at [13]-[15]. The common account has been referred to as a procedure, which involves a process to ascertain the dealings of parties in respect of the subject property and to determine with precision the balance due between them: McLauchlin v Prince at [12].”

68. It is not necessary for there to be any allegation of breach of trust on the part of the executor – the right of a beneficiary to inspect is an absolute right: Phillip Allan Yates v John Norman Phillips Halliday [2006] NSWSC 1346 at [49] (Lloyd AJ).

69. The duty to account carries with it an entitlement of the applicant to view the records and supporting evidence in order to monitor the proper administration of the estate. In Phillip Allan Yates v John Norman Phillips Halliday at [52], Lloyd AJ added:

“It is not a sufficient answer to simply invite the plaintiffs or their representatives to sort through two boxes of documents to determine whether the estate was properly administered. It was Mr Halliday’s duty as executor and trustee to keep and produce when requested appropriate records demonstrating how the estate was administered.”

The Exercise of Discretion

70. In Hons v Hons at [101]-[104], her Honour outlined why the Court has a discretion as to whether or not to order the taking of accounts:

“In On Equity (at [16.1340]), the authors, having noted both that the remedy of account (there not distinguishing between an order to comply with a statutory obligation to account and an order requiring a party under an equitable duty to account to do so) is a discretionary one (and therefore aside from the defences to an application for an account), and that the court has a discretion not to order an account, give as an example the situation where the court considers that such an order would be futile or premature (Mulherin v Quinn Villages Pty Ltd [2007] QSC 231). Mr Reimer, in argument, conceded that if the court concluded that it would be futile to order an account then there would be a discretion not to do so.

At [16.1310], the authors cite Cottenham LC in North-Eastern Railway Co v Martin (1848) 2 Ph 758, at 762; 41 ER 1136, at 1138:

‘The jurisdiction in matters of account is not exercised, as it is in many other cases, to prevent injustice which would arise from the exercise of a purely legal right, or to enforce justice in cases in which Courts of law cannot afford it; but the jurisdiction is concurrent with that of Courts of law, and is adopted because, in certain cases, it has better means of ascertaining the rights of parties. It is, therefore, impossible with precision to lay down rules or establish definitions as to the cases in which it may be proper for this Court to exercise this jurisdiction … It is, therefore, necessary for this Court to reserve to itself a large discretion, in the exercise of which due regard must be had, not only to the nature of the case, but to the conduct of the parties.’ (my emphasis)

The kinds of factors which are taken into consideration on an exercise of discretion in relation to the grant of an account in equity can be seen from the decision in Mulherin v Quinn Villages, where Muir J considered a claim for an account on the basis of an admitted fiduciary relationship arising from a development agreement between the parties. His Honour stated (from [22]):

‘The remedy of account is an equitable one which is discretionary (Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, at 559), and will not be ordered if an account will serve no useful purpose (Lindley & Banks on Partnership 18th ed, at 612; Marshall v Bullock unreported, March 27, 1998 (CA England), Brown v Rivlin unreported, February 1, 1983 (CAT No 56); [1984] CLY, p 138 and Hurst v Bryk [2000] 2 WLR 740 at 748B;…). It is argued on behalf of Quinn Villages that even if an account is an available remedy it would not be ordered in the exercise of the court’s discretion. The matters which are said to count against the exercise of the discretion are as follows:

The evidence which shows that the books and records of Quinn Villages in relation to the project were open for inspection by Dr Mulherin at all times.

The absence of evidence of deficiencies in the way in which the books were kept.

The fact that it was not until after the dismissal of his appeal from the decision in the action that Dr Mulherin sought an account.

Income tax returns for years ended 30 June 2000, 2001, 2002, 2003 and 2004 were prepared and submitted in respect of the joint venture.

In 2003 a firm of consulting engineers reviewed the project accounts with a view to reconciling the respective contributions of the parties under the agreement and a copy of their findings was provided to Dr Mulherin.

[and concluded as follows]

[30] I have concluded that an account should not be ordered for a number of reasons. Firstly, in my view, the account would be premature. It would achieve nothing more than an identification, subject to the Hellen accounting, of the current state of accounts between the co-venturers. Another account would need to be ordered after the production and confirmation of the Hellen accounting and after all assets of the joint venture had been realised and all liabilities ascertained. It is desirable that there be only one account of what is or isn’t owed between the parties and “little bits of accounts” should not be ordered (Adams v Bank of New South Wales [1984] 1 NSWLR 285, at 296).

If any accounting is to be ordered, it would be sensible also to defer that until results of Mr Hellen’s enquiries were available. There is also something oppressive in the way in which Dr Mulherin has sought his further account. It was always open to him to claim such an account in the alternative in conjunction with the accounting ordered by Chesterman J. He chose not to take this course, probably as a tactical decision based on the lack of evidence that there is anything untoward with the way in which the accounts of the project have been kept.’

It is necessary, when considering a number of the discretionary factors which have been raised, to bear in mind what is comprised by such a process, since that enables an assessment to be made not only of how onerous an order for the filing of statutory accounts would be in this case but also the utility of such an order.”

71. In that case, her Honour refused the application for an order for accounts, on the grounds that more than 20 years had passed since probate had been granted, that the value of the estate was small, and because the executor, during administration, had not known that he was required to file accounts (due to incorrect advice).

72. Determination

73. In this case, in the exercise of the Court’s discretion, I considered that verified accounts should be ordered. The applicant is entitled to accounts and there has been no reason advanced by the respondent for not providing them. A mere denial of an entitlement to accounts does not provide such a reason. After all, the respondent is the only person who is able to establish the true state of affairs in relation to the estate of the deceased since her death.

74. There has been a substantial amount of time that has passed since the death of the deceased, and again, no explanation for the delay has been provided. The respondent owes a duty to all of the beneficiaries to administer the estate in accordance with the deceased’s Will and, subject to the provisions thereof, to act in the best interests of all of the beneficiaries. The respondent should have provided a prompt, and proper, response to the reasonable inquiries and requests for information by the applicant.

75. There are also some apparent anomalies raised by the applicant’s solicitor in regard to the bank account statements that have been provided. By filing and serving accounts, the respondent will be able to shine more light on what has occurred in the administration of the deceased’s estate.

76. A third reason is the irreducible fact that there has been a failure by the respondent to engage in the processes of the Court, which, in my view, gives rise to an additional cause for concern, which requires a proper investigation of the financial affairs of the estate. As part of this reason, it is, of additional concern that commission may have been deducted prematurely.

77. The provision of proper accounts, and then, the passing of the accounts may dissipate the concerns held by the applicant, and may also quell any disputes between the respondent and the beneficiaries as to entitlements under the deceased’s Will. They may also satisfy the Court that the respondent has performed his duty.

78. In The Estate of Frances Kedesch Michell [2020] NSWSC 1300 at [103]-[106], I wrote:

“Whilst neither the Probate and Administration Act, nor its predecessor legislation prescribes a format, the Court has a long and well established format for estate accounts, with an approved form of notice of motion for order for, relevantly, the passing of accounts (form 150), and commentary, was introduced in March 2018, templates of which are available on the Supreme Court’s website. There are also a number of different texts that provide alternative formats (see for example, Mason and Handler, Succession Law and Practice (NSW) (Lexis Nexis, looseleaf), at [8321] and detailed accounting methodologies (see generally, E B Smyth and J R Peden, Executorship Accounts (6th ed, 1975, Law Book Co); P Suttor and L Ellison SC et al, de Groot’s Wills, Probate and Administration Practice (New South Wales) (de Groot’s Publishing, looseleaf), at Appendix 4.178).

An essential feature of estate accounts filed in the Supreme Court for passing is that there are established categories of accounting information, including capital realisations, income collections and the value of assets transferred in specie) [sic].

The accounts ought to comprise a cashbook style statement, and separate totals for capital realisations and income collections should be provided, as different rates of commission are allowed on capital compared with income. All receipts and payments should be consecutively numbered, in order to enable the registrar to identify receipts and payments with respect to which the registrar requires, or any objectors require, further information, in the process of vouching the accounts.

The accounts procedure serves the informative purpose of allowing the beneficiaries to know the status of the property in the estate and what transformations it has undergone. The beneficiaries should be able to ascertain from the accounts which of the assets in the deceased’s estate have been realised; which have been transferred in specie; and which have been retained; what investments have been made by the administrators out of the proceeds of realizations and what income had been derived from any such investments; and, finally, what, if any, distributions have been made to, or for the benefit of, the beneficiaries.”

79. I shall not deal with the question of the costs of the application at this stage. I shall simply reserve the costs. Nor will I deal with the principles relating to the passing of the accounts. What follows hereafter will be determined, inter alia, by the steps, if any, taken by the respondent in relation to the service of the written accounts and the supporting documents, and the consideration of what is produced by the respondent.

80. In the circumstances, the Court made the following orders:

1. Orders that by 4:00 p.m. on 9 September 2022, the respondent, Juris Liepins, serve on the applicant, by his solicitors, HWL Ebsworth Lawyers, referred to in the notice of motion filed 12 April 2022, a complete form of written accounts in respect of the property comprised in the estate of Asja Everts, verified by affidavit, commencing from the date of death, being 22 February 2013, which accounts include, but are not limited to:

1. the nature and value of the estate, by way of inventory of property;   

2. all moneys (capital and income), received, including but not limited to settlement figures in respect of the sale of assets realised, contract notes for the sale of securities, and rent;

3. any assets that have been re-invested;   

4. any monies disbursed by him, or by any other person on his behalf;

5. the dealings and transactions, including, but not limited to, the transfer of unrealised assets;

6. any assets transferred, including any in specie distributions;

7. any assets that remain undistributed and unrealised;

8. if any asset loss has occurred, the nature and value of that loss;

9. Any amounts expended on professional assistance such as a solicitor, accountant, valuer, or real estate agent, and any authority to pay the amounts so expended;

10. Any amounts deducted by the respondent for commission, or otherwise, which he has obtained out of the estate; and

11. A reconciliation of the funds held as at the date of the filing of the accounts.    

2. Directs that such accounts shall also specify:

1. in respect of each payment, or receipt, the date and the amount thereof;

2. to whom the payment was made, or from whom the payment was received; and

3. the purpose or account for, or to which, the amount was paid, or received,

as the case may be.

3. Directs that any items of such account statement be numbered consecutively.

4. Directs that the respondent prepare a folder containing all invoices, receipts for disbursements, bank statements, deposit books, or documents evidencing electronic deposits or disbursements, bills for all professional work, receipts for any distributions to beneficiaries, including any assets transferred in specie to a beneficiary and any additional receipts, or other evidence of transactions shown in the accounts, as may be appropriate.

5. Directs that the respondent provide to the applicant, by his solicitors, a complete copy of the folder of documents prepared in accordance with the above paragraphs at the reasonable cost of copying documents by the applicant.

6. Directs that the form of accounts be served in Word format upon the applicant to enable him to respond, by acceptance, or objection, in regard to each item shown on the account.

7. Reserves to the respondent liberty to apply, within 14 days of service of the order upon him, for an order that the orders made be discharged or varied.

8. Orders that a copy of these orders as entered be served personally upon the respondent by 4:00 p.m. on Friday, 22 July 2022.

9. Notes that reasons for judgment will be published as soon as possible.

10. Reserves the costs of the notice of motion.

11. Stands the matter over for further directions before the Succession List Judge at 9:00 a.m. on Tuesday, 20 September 2022.

**********

Decision last updated: 03 August 2022