Garrett v Mullins-Trnovsky
[2014] SASC 138
•19 September 2014
SUPREME COURT OF SOUTH AUSTRALIA
(Testamentary Causes Jurisdiction: Application)
GARRETT v MULLINS-TRNOVSKY
[2014] SASC 138
Reasons for Decision of The Honourable Justice Gray
19 September 2014
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - JURISDICTION AND DISCRETION OF COURT - SOUTH AUSTRALIA
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - ALTERATION AND REVOCATION OF GRANTS - GENERALLY
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - ALTERATION AND REVOCATION OF GRANTS - CIRCUMSTANCES - OTHER CASES
Application to remove an executor of a deceased estate and appoint a new executor. The executor’s will named four executors: Michael Cowan Garrett, Barbara Wanda Mullins, Eric Dawson Mullins and Peter Grant Pain, now known as Peter Grant Adams. Probate was granted to Mr Garrett, Barbara Mullins and Eric Mullins. Leave was reserved for Mr Adams to apply. Barbara and Eric Mullins have since died. Mr Garrett sought to resign to address a perceived conflict of interest arising out of the provision of allegedly negligence tax advice to the estate. Mr Adams applied to be appointed executor. Neither the removal of Mr Garrett nor the appointment of Mr Adams were opposed.
Whether grounds made out to warrant an order for the removal of Mr Garrett. Whether to appoint Mr Adams.
Held per Gray J (granting the application):
1. Mr Garrett cannot continue to effectively administer the estate given the seriousness of the conflict of interest.
2. In all the circumstances, it is appropriate to make an order for the removal of Mr Garrett.
3. In all the circumstances it is appropriate to appoint Mr Adams as executor.
4. Grant of probate to Michael Cowan Garrett revoked.
5. Grant of probate issued to Peter Grant Adams.
Income Tax Assessment Act 1936 (Cth), referred to.
Mullins-Trnovsky v Adams [2014] SASC 116, considered.
GARRETT v MULLINS-TRNOVSKY
[2014] SASC 138Testamentary Causes Jurisdiction
GRAY J.
This is an application to remove an executor of a deceased estate and appoint a new executor.
Background
Douglas Dawson Mullins died on 21 March 2006. His last will was dated 15 July 2005 and named four executors: Michael Cowan Garrett, the first plaintiff and a director of the accountancy firm BDO Advisory (SA) Pty Ltd; Barbara Wanda Mullins, the testator’s wife; Eric Dawson Mullins, the testator’s son; and Peter Grant Pain, now known as Peter Grant Adams, the testator’s step-son and the second plaintiff. The defendants are beneficiaries of the estate.
On 28 July 2008, the will was admitted to probate. The grant was made to Mrs Mullins, Eric Mullins and Mr Garrett. Leave was reserved for Mr Adams to apply. In his affidavit of 15 August 2014, Mr Adams explains that he did not apply for probate at the same time as the other executors because it was considered unnecessary at the time. Mrs Mullins and Eric Mullins died on 20 February 2012 and 21 March 2006, respectively, making Mr Garrett the sole executor of Mr Mullins’ estate.
Mr Garrett and Mr Adams were also appointed executors of Mrs Mullins’ estate. The administration of that estate is the subject of separate proceedings in this Court.[1] Those proceedings arise out of alleged delays in the administration of the estate and the provision of allegedly negligent tax advice by Mr Garrett and BDO, which may have resulted in the estate incurring a significant liability under Division 7A of the Income Tax Assessment Act 1936 (Cth). Mr Mullins’ estate also faces this potential tax liability. It is to be understood that the administration of the two estates is closely related, having regard to the common assets and beneficiaries in each estate.
[1] Mullins-Trnovsky & Ors v Adams & Ors SCCIV-13-1391.
Mr Garrett sought an order removing him as an executor of Mrs Mullins’ estate to address a perceived conflict of interest. On 20 August 2014, I made orders giving effect to his resignation.[2]
[2] Mullins-Trnovsky v Adams [2014] SASC 116.
Mr Garrett also formed the view that he should no longer act as an executor of Mr Mullins’ estate. To that end, on 17 May 2013, Mr Garrett executed a deed appointing Trevor Paul Edmond, a solicitor, as a trustee of the estate. Mr Edmond is also an executor of Mrs Mullins’ Estate. On 17 December 2013, Mr Garrett executed a deed effecting his resignation as a trustee of the estate. On 19 December 2013, Mr Edmond executed a deed appointing Mr Adams as a trustee of the estate.
On 15 August 2014, Mr Garrett swore an affidavit in support of his application to be removed as an executor of Mr Mullins’ estate. Mr Garrett expressed the belief that the deeds referred to above were not effective as a matter of law. Accordingly, Mr Garrett sought an order from this Court removing him as an executor of Mr Mullins’ estate at the same time that I made orders removing him as an executor of Mrs Mullins’ estate. In his affidavit of 15 August 2014, Mr Adams applied to be appointed as executor of Mr Mullins’ estate. These applications were not opposed by the defendants.
The Applications
In Mullins-Trnovsky v Adams, I conducted a detailed review of the authorities addressing the removal of an executor and said:[3]
The authorities ... make it clear that the guiding principle in determining whether to revoke a grant of probate is ensuring the due and proper administration of the estate and the interests of the parties beneficially entitled thereto.
[3] Mullins-Trnovsky v Adams [2014] SASC 116, [18].
Mr Garrett has a duty as executor to address the potential tax liability incurred by the estate. This may involve, inter alia, making an application to the Commissioner of Taxation on behalf of Mr Mullins’ estate, investigating a potential claim for professional negligence against himself and BDO and co-operating with the executors of Mrs Mullins’ estate, who will be in a similar situation.
Mr Garrett’s duty as executor directly conflicts with his personal interests and duties as a director of BDO, namely, his duty as a director of BDO to defend any claim against his firm and his personal interest in defending a claim against himself or his firm. This conflict cannot be reconciled. Further, this conflict arose in the course of the administration of the estate and was not a conflict of which Mr Mullins was aware at the time of making his will. This conflict prevents the resolution of what, on Mr Garrett’s evidence, is the last substantial matter to be addressed in the administration of the estate. It is appropriate for Mr Garrett to be removed as an executor.
Mr Adams was named as an executor in the will. Leave was reserved for him to apply for a grant of probate and his appointment as executor is not opposed. It is appropriate to issue him with a grant of probate.
Conclusion
I allow the application to remove Michael Cowan Garrett as executor. I revoke the grant of probate to Michael Cowan Garrett and direct that a new grant of probate be issued to Peter Grant Adams.
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