Executor Trustee Australia Ltd v McDougall

Case [2011] SASC 140

SUPREME COURT OF SOUTH AUSTRALIA

(Testamentary Causes Jurisdiction: Application)

EXECUTOR TRUSTEE AUSTRALIA LTD v MCDOUGALL & ORS

[2011] SASC 140

Judgment of The Honourable Justice Kourakis

30 August 2011

SUCCESSION - WILLS, PROBATE AND ADMINISTRATION - PROBATE AND LETTERS OF ADMINISTRATION - ALTERATION AND REVOCATION OF GRANTS - IN WHAT CIRCUMSTANCES - OTHER CASES

Application by executor for orders to revoke grant of probate and grant to remaining two executors alone - whether mere conflict of interest and duty requires revocation of probate - whether duty of executor conflicts with own interest as to impede proper administration of estate.

Held - application dismissed - more than conflict of interest and duty required before probate will be revoked - Court must evaluate circumstances and nature of conflict in determining whether to revoke probate - present conflict does not necessitate revocation of grant - best interests of the administration of the estate that applicant remain as executor.

Inheritance Tax Act 1984 (UK); Supreme Court Act 1935 (SA) s 18; Administration and Probate Act 1919 (SA) s 5, s 69; Foreign Judgments Act 1991 (Cth) s 3, referred to.
Morgan v McRae [2001] NSWSC 1017; Re Estate of Crane (2005) 93 SASR 198; Rutter v McCusker [2008] NSWSC 1289; The Uniting Church of Australia Property Trust (NSW) v Millane [2002] NSWSC 1070; Gorman v McGuire [2002] NSWSC 1089; Monty Financial Services Ltd v Delmo [1996] 1 VR 65; Upton v Downie [2007] NSWSC 1095; Her Majesty's Attorney-General in and for the United Kingdom v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30, discussed.
Re Blundell (1888) 40 ChD 370, considered.

EXECUTOR TRUSTEE AUSTRALIA LTD v MCDOUGALL & ORS
[2011] SASC 140

  1. KOURAKIS J:     The plaintiff, Executor Trustee Australia Ltd (ET Australia), is one of three executors of the last will of Elisabeth McDougall.  The first and second defendants (the McDougall executors) are the other executors.  On 11 November 2005 a grant of probate was made in this Court.  ET Australia now seeks an order revoking that grant, and granting probate to the McDougall executors alone.  ET Australia contends that it now finds itself in circumstances where its duty as an executor conflicts with its own financial interest to such an extent that its continuation in that office will impede the proper administration of the estate.  The McDougall executors and the beneficiaries who, as a class, are separately represented, oppose ET Australia’s application.  The McDougall estate comprised assets valued at in excess of ten million dollars.  Most of the assets were situated in Australia but some were also located in England.

  2. The application should be dismissed.  I accept that ET Australia is, as an executor, now in a position of conflict.  The McDougall executors and the beneficiaries have alleged that ET Australia was negligent in the provision of estate planning advice to the deceased.  They allege that, by reason of the negligence of ET Australia, the estate may be levied for inheritance tax in…

Continue reading Executor Trustee Australia Ltd v McDougall

Sign in free to access the full text

Details
AGLC
Executor Trustee Australia Ltd v McDougall [2011] SASC 140
Case
[2011] SASC 140
Decision Date

CaseChat Overview and Summary

In the matter of Executor Trustee Australia Ltd v McDougall, the court was presented with an application by an executor seeking orders to revoke the grant of probate and to transfer the grant to the remaining two executors. The executor, ET Australia, argued that its conflict of interest and duty required the revocation of the probate. The remaining executors and beneficiaries opposed the application. The court was required to determine whether a mere conflict of interest and duty warranted the revocation of the grant of probate, and if so, under what circumstances a conflict of interest and duty impeded the proper administration of the estate.

The court held that mere conflict of interest and duty did not necessitate the revocation of the grant of probate. The court must evaluate the circumstances and the nature of the conflict in determining whether to revoke the probate. In this case, the conflict did not necessitate revocation. The court found that it was in the best interests of the administration of the estate for the applicant to remain as executor. The court also noted that revoking probate would significantly increase the burden on the remaining executors and beneficiaries, and that there was an element of "cutting and running" in ET Australia's application.

The court dismissed the application of ET Australia. The court found that there were further considerations which militated against revoking probate to relieve ET Australia from its conflict at this stage. The predicament faced by the estate had come about as a result of decisions made while ET Australia was a remunerated attorney. Whether or not it was ultimately found to be negligent, it was unfair, in a broad sense, to the McDougall executors and beneficiaries to now release ET Australia from any obligation to resolve the problem. Revocation of probate would significantly increase the burden on the McDougall executors, who alone would bear any tax liability until such time as they could recover it from the beneficiaries in accordance with their right to an indemnity.

The court concluded that it was in the best interests of the administration of the estate for ET Australia to remain as executor. The court found that at this stage, in its view, the conflict did not necessitate revocation of the grant of probate. However, the court noted that if radically different courses were contended for by interested parties on the application for directions, consideration might again have to be given to the question of revocation. Revocation may also be necessary if inter-partes proceedings were brought which raised, as part of the controversy, the beneficiaries' claim of professional mismanagement.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

There are further considerations which militate against revoking probate to relieve ET Australia from its conflict at this stage. The predicament faced by the estate has come about as a result of decisions which were made whilst ET Australia was a remunerated attorney. Whether or not it is ultimately found to be negligent, it is I think, unfair, in a broad sense, to the McDougall executors and the beneficiaries to now release ET Australia from any obligation to resolve the problem. Importantly, revocation of probate will significantly increase the burden on the McDougall executors. They alone would bear any tax liability until such time as they could recover it from the beneficiaries in accordance with their right to an indemnity. They would also be left to deal with the administration of a complex problem without the assistance of the professional, remunerated executor appointed by the testator. There is an element of “cutting and running” in ET Australia’s application.Conclusion I dismiss the application of ET Australia.

Ratio Decidendi

Legal Principle Established

A wide range of orders may be made on the proposed application for directions. It is not impossible to imagine a direction which would win the support of the beneficiaries, the McDougall executors and ET Australia. If that is not so, and radically different courses are contended for by interested parties on the application for directions, consideration might again have to be given to the question of revocation. Revocation may also be necessary if inter-partes proceedings are brought which raise, as part of the controversy, the beneficiaries’ claim of professional mismanagement. However, at this stage, in my view, the conflict does not necessitate revocation of the grant of probate.Other Considerations There are further considerations which militate against revoking probate to relieve ET Australia from its conflict at this stage. The predicament faced by the estate has come about as a result of decisions which were made whilst ET Australia was a remunerated attorney. Whether or not it is ultimately found to be negligent, it is I think, unfair, in a broad sense, to the McDougall executors and the beneficiaries to now release ET Australia from any obligation to resolve the problem. Importantly, revocation of probate will significantly increase the burden on the McDougall executors. They alone would bear any tax liability until such time as they could recover it from the beneficiaries in accordance with their right to an indemnity. They would also be left to deal with the administration of a complex problem without the assistance of the professional, remunerated executor appointed by the testator. There is an element of “cutting and running” in ET Australia’s application.Conclusion I dismiss the application of ET Australia.