Executor Trustee Australia Ltd v Henderson - [2005] SASC 446

Supreme Court of South Australia
(Civil)
EXECUTOR TRUSTEE AUSTRALIA LTD v HENDERSON
Reasons for Decision of The Honourable Justice Perry (ex tempore)
25 November 2005
SUCCESSION - EXECUTORS AND ADMINISTRATORS - RIGHTS, POWERS AND DUTIES
The defendant obtained probate in common form of what she asserted was the last will of her deceased aunt, pursuant to which she is the residuary devisee and legatee entitled to the whole of the residue of the estate, which is likely to include a large parcel of shares in a brewing company ("Coopers") - the plaintiffs challenge the will, and propound two earlier wills of the deceased pursuant to which the second to fifth plaintiffs stand to succeed to some of the shares - the entitlement to the shares varies significantly under the three wills - an administrator pendente lite was appointed to hold the shares until the dispute over the wills was resolved - before the proceedings had come to trial, the administrator sought leave to exercise the voting rights attached to the shares at a general meeting to consider a motion to amend the Memorandum and Articles of the company, the effect of which would be to lock out another brewing company which had made a take-over offer involving the purchase of Coopers' shareholding - the administrator would, if the application was to be granted, vote against the proposed amendments, claiming that the value of the shares would best be preserved by that course - the defendant supported the administrator's action, as she likewise opposed the amendments - the second to fifth plaintiffs were in favour of the amendments - held, refusing the application, that it would not be right for the Court to sanction the exercise of the voting rights to the shares in a particular way, when the dispute as to the wills was unresolved, and a vote one way or the other could adversely and irreversibly affect the position of some of the parties who might ultimately succeed to the shares.
In the Estate of Just (Dec'd) (No 2) (1973) 7 SASR 515; Administration and Probate William Mortimer and Sunnucks, (18th Ed) Sweet & Maxwell [78.04] page 1066, considered.

EXECUTOR TRUSTEE AUSTRALIA LTD v HENDERSON
[2005] SASC 446
Civil

PERRY J. (ex tempore) I will give brief reasons for the decision which I have reached in this matter.[1]
[1] At the time of delivery of these ex tempore reasons, I reserved the right to edit them. I have added one or two references and a few more sentences by way of clarification of the reasons.
The administrator pendente lite, Mr John Hart, who was appointed by my order dated 22 September 2005, has applied to the court for specific directions as to two matters.
In the first part of the application he seeks an order varying the restriction in my order of 22 September preventing him from dealing in any way with the parcel of shares to which his administration relates without a further direction of the court. In substitution for that restriction, he seeks an order that he be entitled to vote at an extraordinary general meeting to be held on 29 November 2005, by voting against the motion to be considered at that meeting. If passed, the resolution would effect an alteration of the articles of association of Coopers, effectively removing Lion Nathan as a party entitled to a third-ranking right of pre-emptive purchase of shares.
The second part of the application deals with another meeting which has been called for 7 December 2005, as to which he seeks to be entitled to exercise the voting rights attached to the shares by voting with respect to a buyback proposal which has been put forward by the board of directors of Coopers.
In order to explain the decision which I have reached it is necessary to explain a little of the history of the matter and the legal position of the parties.
Probate in common form was granted in favour of the defendant of what has been described as the 1993 will of the deceased, on 14 November 2002.
In response to a citation from the Probate Registry, the probate was surrendered to the Registrar in April of 2003.
Under the 1993 will, the defendant is the residuary devisee and legatee entitled to the whole of the residue of the estate.
It is clear on the authorities[2] that until the residue is ascertained the defendant has no interest in any specific part of the residue, which will very likely include the shares in question. In any event, the effect of the surrendering of the grant to the Probate Registrar is to freeze her capacity to deal with any of the assets, either as executor or trustee, and to put on hold her ability to claim any interest in any part of the residue.
[2] See, for example, In the Estate of Just (Dec’d) (No 2) (1973) 7 SASR 515 per Jacobs J at 524 and William Mortimer and Sunnucks Administration and Probate (18^th Ed) Sweet & Maxwell [78.04] page 1066.
Her rights in both capacities remain on hold until the contest as to the wills is resolved. It is impossible to say that she or any of the other beneficiaries of the other wills have any rights to the shares until the contest as to the wills is resolved.
As for the position of the administrator pendente lite, he does not hold the shares on trust or in any other capacity for anyone else. No trust could arise until the administration of the estate is complete, and that will not occur until the dispute as to the wills is resolved. In the meantime, the administrator holds the shares in much the same capacity as a stakeholder, until the entitlement to the shares has been determined by the resolution of the litigation over which will is to be held valid.
On the other hand, as is conceded by all parties, in the meantime the administrator has an obligation to preserve the value of the shares.
It is this aspect of the matter which has prompted him to make the application now before me. He accompanies the application with an affidavit to which is appended a substantial number of exhibits explaining the position of the various parties. As to those positions, it is sufficient to say that the parties who have the possibility of eventually acquiring an interest in the shares, are at odds as to the course which should be taken by the administrator, should he be given the right to vote on the shares at the forthcoming general meetings.
The defendant is keen to purchase shares from Lion Nathan, and urges that the administrator be given the ability to vote on the whole of the 114,292 shares which he holds, in opposition to the motion to be considered at the meeting of 29 November.
On the other hand, the second to fifth plaintiffs inclusive, have contended through Mr Whitington QC, that the proper course to take is for the administrator to be denied the right to vote on any of the shares, or to take part in the meeting.
The administrator has made a genuine attempt to set out relevant considerations to assist the Court in determining the application. He has marshalled the various considerations and materials which bear on the decision to be made. I accept that the view which he ultimately offers is a view which he genuinely holds as to how the balancing out of the interests of the respective parties should best be approached.
In his affidavit, he concedes that whichever way he might vote, there is potential for prejudice to the interested parties on one side or the other.
He offers the view, based largely on economic considerations relative to his opinion as to the likely effect on the value of the shares, that he should be permitted to vote against the resolution. This would preserve the position of Lion Nathan, if the motion was to be lost, as the holder of a third-ranking pre-emptive right to purchase shares.
The difficulty I have in accepting that view as determinative of the application, is that clearly there are other considerations involved which do not relate entirely to the question of the value of the shares or preservation of the value of the shares. In any event, it is impossible to say whether the long-term value of the shares would best be preserved by voting one way or another on the resolution in question.
It is clear from the material that has been brought into court that commercial opinion from experienced persons as to that aspect of the matter is by no means unanimous. For example, the directors of Coopers clearly take a different view.
Putting aside economic considerations, I do not think that it would be right for the Court to sanction a particular exercise of the voting rights attached to the shares when:
·the ultimate beneficiaries of the shares cannot at this stage be identified;
·the views between those who might possibly succeed to the shares, as to how the voting rights should be exercised, differ markedly; and
·voting on the shares could irreversibly and adversely affect some of the interested parties.
I point out also, that the present situation would have been avoided if the parties to the action in which the validity of the various wills is to be resolved, had proceeded with those proceedings in a timely fashion. The plaintiffs and the defendants heave each blamed the other for the delays in bringing the proceedings which were commenced in April 2003, to trial. However, it does not matter who might be said to be to blame. The fact remains that the defendant has always had the ability to seek orders to push the matter along.
In that sense, the present situation is a product of her own failure to do so.
I have carefully considered the arguments put by counsel, but I have reached the firm view that, in all the circumstances, it would not be proper to allow Mr Hart to participate in the meeting of 29 November or to vote with respect to the resolution that is to be considered by that meeting.
I order:
1.That the application made in par 1 of the Notice for Specific Directions, being court file document No 66, is dismissed, to the intent that the restrictions imposed upon the administrator in dealing in any way with the shares in question by par 3 of my order of 22 September 2005, remain.
2.That the administrator not attend the meeting called for 29 November 2005, or any adjournment thereof, or any other meeting convened to consider the motions of which notice has been given to the shareholders, for consideration at the meeting called for 29 November 2005.
3.That as to par 2 of the application, which relates to the further meeting to be held on 7 December 2005, I understand from the parties that in light of the decision which I have made as to par 1 of the application, there is a possibility that they may be able to achieve a common attitude to the position of the administrator with respect to that meeting. In view of that, I adjourn consideration of par 2 of the Notice for Specific Directions to a date to be fixed.
4.That costs be reserved.