Gatt v Vella

[2024] NSWSC 1009

Supreme Court

New South Wales

Medium Neutral Citation:

Gatt v Vella [2024] NSWSC 1009

Hearing dates:

On the papers

Date of orders:

13 August 2024

Decision date:

13 August 2024

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Application dismissed for the passing and filing of accounts under Probate and Administration Act 1898 s 85. Orders made but temporarily stayed subject to hearing further submissions as to the form of final orders, (1) for the defendant to provide, at the plaintiffs’ expense, to the plaintiffs copies for inspection by the plaintiffs of the accounts of the estate kept by the defendant in the ordinary course of her duty as executrix of the said estate, and (2) for the plaintiffs to pay the defendant’s costs of the present application on the indemnity basis.

Catchwords:

SUCCESSION - Administration of estates – plaintiffs sought orders for an executrix of an estate to file and pass accounts under Probate and Administration Act 1898, s 85 after the estate had been fully administered – lengthy unproductive correspondence between the plaintiffs and the executrix of the estate about access to estate accounts and documents - discretion as whether to grant relief and, if so, how and when accounts should be filed - consideration of factors relevant to exercise of discretion – whether alternative relief should be granted.

Legislation Cited:

Probate and Administration Act 1898, ss 85 and 85(1AA)(e)

Supreme Court Rules 1970, r 85(2)

Cases Cited:

DJ Singh v DH Singh & Ors [2017] NSWCA 234

Green & Ors v Wilden Pty Ltd [2005] WASC 83

Hancock v Reinhardt (Trust documents) [2018] NSWSC 1684

Hons v Hons [2010] NSWSC 247

Kemp v Burn (1863) 4 Giff 348; 66 ER 740

Manning v Commissioner of Taxation (1928) 40 CLR 506

Palmer v Ayres (2017) 259 CLR 478

Re Bosworth; Martin v Lamb (1889) 58 LJ (Ch) 432

Re Fairbairn [1967] VR 633

Re Otto Ruthenburg [1993] QSC 353

Re Simersall (1992) 25 FCR 584

Wang v Cai [2021] NSWSC 1162

Waterhouse v Waterhouse (1998) 46 NSWLR 449

Texts Cited:

Evans, Power and Power, Equity and Trusts, LexisNexis, Australia, fifth edition 2024

Category:

Consequential orders

Parties:

First Plaintiff: Joe Gatt
Second Plaintiff: Phillip Gatt
Defendant: Vicki Josephine Vella

Representation:

Counsel:
Plaintiffs: S. P. Brennan
Defendant: J. Michos (solicitor)

Solicitors:
Plaintiffs: AKC Legal
Defendant: JSM Lawyers

File Number(s):

2023/448073

Publication restriction:

No

JUDGMENT

1. The plaintiffs, Joseph and Phillip Gatt, are two of four siblings, who are beneficiaries under the will their late father, Charles Gatt (the deceased). Their sister, the defendant, Vicki Vella was appointed executrix of the deceased’s will. She engaged Mr James Michos, solicitor, to undertake the legal work necessary to administer the estate of the deceased. The estate has now been fully administered and its assets distributed to the beneficiaries.

2. The plaintiffs filed their Summons in these proceedings in December 2023 seeking an order that the defendant “provide reconciliation of the accounts and trust documents relating to the receipt and distribution of the real and personal property during the administration of the estate”. They later filed an Amended Summons seeking orders under Probate and Administration Act1898 s 85(1AA)(e) (“the Act”) that the defendant file verified accounts relating to the estate, and an extension of time for that application under Supreme Court Rules1970, r 85(2).

3. The defendant executrix resists the grant of relief. She acknowledges that the plaintiffs are “interested persons” within the Act, s 85 but she contends that the Court should not exercise its discretion to order accounts because, the application is late and no grounds to make an order have been established, and because nothing has been raised which calls into question the accuracy of the defendant’s calculations leading to the distribution of the estate. Moreover, the defendant says that she is prejudiced by the late application because the distribution of the estate means that she cannot now claim commission.

4. Resolution of these issues requires a greater overview of the facts.

Disputes in the Administration of the Estate of the Late Charles Gatt

5. The deceased died on 2 October 2020. His will of October 2015 named the defendant, Ms Vella, as his executrix. Clauses 3, 4 and 5 of the will gave bequests of various items of movable property to various relatives. Clause 6 of the will afforded a right to three persons, the deceased’s grandson, Andrew, the deceased’s daughter, Vicki, and the deceased’s granddaughter, Alecia, to purchase his property at Llandilo from his executor or and trustee "at a price equivalent to the known value of the property as determined by a valuer nominated by the President for the time being of the Australian Institute of Valuers such right to be given in the priority, as listed below”. The priority set out thereafter was a right of purchase to the deceased’s grandson, Andrew, his daughter, Vicki, and his granddaughter, Alecia, in that order. Various machinery clauses in the will (cll 7 and 8) gave operative effect to cl 6.

6. Clause 10 of the will then gave 20% of the residue of the deceased’s estate to Alecia and Andrew in equal shares. Finally, in clause 11, the will gave the (80%) balance of the residue of the estate to the deceased’s four children Vicki, Joe, Tony, and Phillip in equal shares.

7. Probate of the deceased’s will was granted to the defendant on 7 January 2021. The estate was valued for probate purposes at approximately $2.3 million and was comprised of the deceased’s Llandillo property which was said to be worth $1.95 million for probate purposes and an aged care accommodation bond of $350,000, together with other small amounts of cash.

8. If the estate was administered in accordance with the will and the Llandilo property sold pursuant to cl 6, a valuation should have been brought into existence in conformity with clause 6 of the will, fixing the purchase price of the property, then the sale price so fixed should, upon settlement, have been paid to the estate and distributed in accordance with cll 10 and 11 of the will.

9. Mr James Michos of JSM Lawyers acted for the executrix in the administration of the estate. Before 14 March 2023, the plaintiffs had engaged Malcolm McDonald & Co. to represent their interests as beneficiaries. On 12 November 2021, the executrix published a notice under the Act, s92 that she intended to distribute the estate.

10. The plaintiffs had commenced prior litigation against the executrix in relation to her administration of the estate in 2021 (proceedings number 2021/354301). Those proceedings were settled in consent orders filed with the Registrar in Equity on 29 November 2022. The consent orders dismissed the plaintiffs’ claim and the parties agreed to bear their own costs of the proceedings with the defendant’s costs being borne by the estate on the indemnity basis.

11. On 14 March 2023, Ms Alyce Cooper of AKC Legal took over conduct of the legal affairs of the plaintiffs. There is only limited evidence before the Court on the present application about the prior correspondence between Malcolm McDonald & Co and the estate.

12. On 13 March 2023 at 4:04pm, Malcolm McDonald & Co wrote to JSM Lawyers, asking “would you please provide us with an update in relation to the final distribution and provision of the accounting documentation.” Regrettably, the Court does not have the earlier correspondence between Malcolm McDonald & Co and JSM Lawyers, but the tone and content of this email suggests that there had been prior information between Malcolm McDonald & Co and JSM Lawyers about final distribution and the provision of accounting documents.

13. JSM Lawyers replied the following morning, 14 March 2023 at 10:40am as follows:

“We confirm that today we made the final distribution of the estate to your trust account for Phillip and Joseph Gatt in the amount of $19,752.40. The portion of the final distribution of the estate is as follows: (1) $9876.20 – Phillip Gatt; (2) $9876.20 – Joseph Gatt. Please confirm once you have received the funds in your trust account by emailing us a trust account receipt.”

14. That was a reply to the request from Malcolm McDonald & Co about the final distribution of the estate. It was not a reply to the request for the provision of “the accounting documentation”. This deficiency led to Malcolm McDonald & Co writing once more at 11:33am to JSM Lawyers asking, “would you please provide us with a copy of the estate accounts”. There was no reply to this email. At the same time the plaintiffs, Phillip and Joseph Gatt decided to change lawyers to AKC Legal who took over the correspondence with JSM Lawyers from that point.

15. On about 14 March 2023, Joe and Phillip Gatt did each received the sum of $9,876.20, being what the defendant/executrix says was a "final distribution of estate assets”. Ms Alyce Cooper of AKC Legal took over conduct of the plaintiffs’ legal affairs, on 14 March 2023 at 8:34pm wrote to JSM Lawyers taking up the issue left unanswered in the correspondence with Malcolm McDonald & Co. Ms Cooper limited her request to something concrete; she sought "the trust account statement for the estate and provide an update as to where the matter is at". This appeared to have been a sensible approach to minimise the work to produce estate accounts by merely asking for a trust account statement, which should have been able to be readily produced.

16. Two days later, on Friday 17 March 2023, Mr James Michos of JSM Lawyers, wrote back to Ms Cooper for the estate saying:

"The matter is at an end. The estate has been fully distributed. Your clients already know that, and we are surprised by you asking for "an update as to where the matter is at".

We do not intend to incur further costs on behalf of our client in circumstances where the distributions have all been completed.

Your clients are not entitled to copies of the accounts or trust statements. If your clients desire to inspect the trust statements, they can make an appointment to do so in our office whereupon they will be supervised and charged for the costs incurred in association with that inspection.”

17. This response was partly wrong and partly right. To the extent that this statement asserted that the plaintiffs were not entitled to have any copies of the accounts or trust statements of the estate, or that they could only inspect copies at the office of JSM Lawyers, it was incorrect. But it was correct to the extent that it implied that the plaintiffs might be granted some kind of conditional access. Several months of correspondence followed intermittently through the rest of 2023 until these proceedings were commenced in mid-December 2023. But the legal principles discussed below indicate that at this point a reasonable response would have been for JSM Lawyers to make a simple offer of copies of estate accounts to be provided to the plaintiffs at their expense. But that did not happen in March 2023. That in turn led to AKC Legal trying a different tack.

18. On 18 May 2023 at 5:37pm AKC Legal emailed JSM Lawyers indicating the plaintiff had instructions to request the Supreme Court to pass accounts in the estate. Ms Cooper appeared to abandon her previous less formal and practical position seeking a copy of trust statements. Now she was asking for a formal passing of accounts under the Act, s 85. As is explained below, this is a more formal procedure somewhat like an audit, and not necessarily the most efficient way giving the plaintiffs a quick low-cost insight on the estate’s administration and the calculation of the amount distributed to them.

19. In reply at 6.01pm JSM Lawyers sought an undertaking from AKC Legal to cover – up to their percentage of the estate – the costs associated with the passing of accounts.

20. At 7.01pm the same day, Ms Cooper replied on behalf of AKC Legal. This reply was unfortunate in mixing her original informal request for a copy of the executrix’s accounts with a formal application for the passing of accounts. The letter correctly stated,

“as a result of an executor diligently undertaking its role [to keep accounts] in most estates it is not necessary for the probate accounts to be filed with the Court or for them to be passed [or approved] by the Court.”

21. After talking about the executrix’s obligation to keep accounts the email went on to take offence at the request that the executrix had made to have some of the costs of passing of accounts paid for by the plaintiffs,

“However, if your client refuses to provide the accounting of the estate and is suggesting that my clients pay the costs of same, I can only assume that they have not done their role with diligence, an application, including seeking cost of same, will be required.”

22. This was an unfortunate misstatement of the legal position by AKC Legal. As the statement of the law below shows, a beneficiary’s rights to accounts is not absolute. The beneficiary must pay the reasonable costs of the trustee of accessing the accounts. To the extent this letter implied otherwise it was wrong in law and its subsequent threat of proceedings on this basis was not appropriate. And as to the passing of accounts under the Act s 85, as the estate had been fully distributed without the need to pass accounts – which is not required in every estate – the executrix’s position in asking for a contribution from the plaintiff to the passing of accounts was reasonable.

23. This whole debate was starting to go off the rails, because the original AKC Legal request merely for access to the accounts in the simple form which should not have been difficult but had been declined, had escalated to a request a passing of accounts and then the reasonable response of the executrix for the plaintiff to contribute to the costs of that exercise was inappropriately rejected by the plaintiffs. But this had been preceded by an unreasonable refusal by the executrix to provide a simple low-cost existing record of accounting transactions involving the estate.

24. In the following morning on 19 May 2023 at 10:42am Mr Michos wrote back a lengthy letter reminding Ms Cooper of the executrix’s rights to indemnity out of the estate and the absence of funds in the estate and that the costs of any application for the passing of the accounts would inevitably have to be borne in part by the plaintiffs. This letter from JSM Lawyers correctly acknowledged the executrix’s obligation to keep accounts in relation to the estate and its administration but that was not the same as the work involved in applying to pass accounts pursuant to the Act. He said the executrix was not someone required to pass accounts pursuant to s 85 (1AA), but that if she did make the application then she would apply for costs and for commission under the Act, s 86 if the executrix was obliged to pass accounts. JSM Lawyers then said passing accounts was unnecessary and but that if they were applied for by the plaintiffs then indemnity costs and commission would be sought.

25. This was all strictly correct. But unfortunately, it was marred by a hostile opening that undoubtedly had the effect of diminishing the effectiveness of what it was trying to communicate. The letter opened with a disappointingly didactic tone:

"We do not require a lecture from you as to our client's duties and responsibilities, particularly when that has derived from copying and pasting material from the Supreme Court's website and without proper reference or citation."

26. Regrettably the executrix did not seek to discern and offer back (at the plaintiffs’ expense) what had originally been sought by the plaintiffs – a simple copy of the accounts.

27. On the same morning of 19 May 2023 at 11:40am, Ms Cooper responded seeking from Mr Michos "a proper basis as to why my clients are not entitled to a copy of the accounting". She explained that all she sought was "the provision of the accounting on hand, which was used at the time of the distribution. The request was summarised politely in the following terms:

“if it is your client’s position that they have acted appropriately, we cannot understand the blanket resistance to the provision of the accounting on hand, which was used at the time of the distribution.

I ask one more time, in circumstances where the material should be readily available, for a copy of the accounting of the Estate, and the distribution, even if only [by] Excel spreadsheet or Word document."

28. It is reasonably obvious to the objective reader of this correspondence that this is what Ms Cooper really wanted, “the accounting on hand, which was used at the time of the distribution”, despite her earlier request for a formal passing of accounts. But the fact that she was asking for both the passing of accounts and something much simpler was nevertheless quite confusing. It also seems clear that she was only asking for the more formal passing of accounts, because the simpler request for access to account information was not being addressed.

29. JSM Lawyers responded to AKC Legal in a detailed email at 2:51pm on 19 May. The response challenged the right of beneficiaries to have a trustee provide copy documentation relating to the accounts to a beneficiary, asserting “there is no basis for that”. Cited an unreported decision of the Supreme Court of Queensland, In Re Otto Ruthenburg [1993] QSC 353 (Ryan J), as authority for the proposition that the beneficiaries are not entitled to copies of the accounts of the estate, but only to inspect estate documents on the premises of JSM Lawyers. This is discussed below but the contention of law is not correct. But the JSM Lawyers response also correctly pointed out the difference between the passing of accounts and providing simple account information and queried who was going to pay for the account inspections that the plaintiffs were requesting.

30. This is where the correspondence ended for a period. It resumed late in May. On 31 May, Ms Cooper indicated she had instructions to view the “relevant documentation at your office”. She wrote a follow-up email on 2 June. She wrote another follow-up email on 13 June seeking a response as to whether Mr Michos intended “to allow access to counsel and I”. Mr Michos eventually replied on 14 June at 9:17am asking for the purpose of the inspection, the identity of counsel and why counsel was being engaged. Ms Cooper replied at 9:30am identifying the counsel who had been engaged to undertake the inspection.

31. The same day, 14 June at 12:08pm, JSM Lawyers replied striking a slightly more conciliatory tone and recognising at last what Ms Cooper really wanted. Mr Michos noted that if the purpose of the beneficiaries inspecting the accounts was to "make sure that the assets of the estate had been distributed in accordance with the will", he indicated he was "happy for your clients to have a look at the trust account statement that we provided to our client, as you originally requested but not to provide a copy of it". The trust account statement was said to be a three-page PDF document showing monies coming and going out of the estate “from our firm’s trust account”. So far this is exactly what should have happened.

32. But this email then changed tack somewhat and accused the plaintiffs of “delaying the distribution of the estate on multiple occasions” and causing the estate to “unnecessarily incur costs and delays” and expressed reservations about why a barrister was needed to undertake an inspection. The email expressed the fear of JSM Lawyers that privileged information in relation to past conflicts with the plaintiffs might thereby be disclosed. The email pointed out that:

“It would take no more than 10 minutes with a calculator to go through a cheque trust account statement to ensure that the figures balance and that the distributions were in accordance with the formulas under the will. You’re welcome to attend our office to make the inspection on behalf of your clients on 28 July 2023. You can nominate the time by return email during normal business hours and we will book in, but so long as you answer the questions we’ve asked.”

33. This email concluded by reminding AKC Legal that the present application had not been made before the final distribution of the estate and therefore JSM Lawyers was merely corresponding out of professional courtesy.

34. Correspondence resumed in September, with the parties reiterating their positions and the standoff becoming worse and worse. There was no attempt on either side to try and bridge the gap between these parties. Ms Cooper appeared to offer for counsel to come and inspect the documents, but Mr Michos did not agree with that course.

35. The correspondence went dead for a period again. Then on 25 July 2023 AKC Legal wrote to JSM Lawyers expressing disagreement with Mr Michos’ "concern about spending unpaid time on these matters”. Requesting “basic information about the administration of the estate from you in accordance with your obligations as trustee”. The letter continued:

“To be clear, we agree there is no law entitling the beneficiaries to permanent records, but that is not what is being sought. They want closure and assurance that the matter was properly handled so they can move on to other things. If you were to provide the ordinary documents created during the administration [for] me to advise upon, I would undertake not to publish them or provide copies to the beneficiaries, but without prejudice to proper use of the documents if circumstances do arise was justified litigation.

A visual inspection by somebody you say you can “supervise” done actual premises is not cost-effective, convenient or sufficient for either obvious. If you have some reason not to trust me to act professionally and ethically as you should be entitled to, could you please explain exactly why.”

36. Ms Cooper resisted the idea of a supervised inspection at Mr Michos’ premises. She warned Mr Michos that if the matter could not be "sensibly resolved", that matter might have to be brought to the Supreme Court.

37. This email was asking for something different and beyond mere accounts. It seems to be asking for “ordinary documents created during the administration”, which upon a fair interpretation would perhaps include estate correspondence and advice. This was a clear expansion of the original request and one which has not been the subject of clear submissions between the parties on this application. The email stated that the writer hoped for cooperation but then said that a Summons would be filed if the issue was not resolved any other way.

38. JSM Lawyers did not reply. On 17 August, Ms Cooper sent a follow-up email seeking a reply. The same day, JSM Lawyers wrote back stating that “our original offer to inspect on the terms already outlined by us remains open”. On 10 September, AKC Legal sought dates for counsel to inspect the documents at the offices of JSM Lawyers.

39. Ms Cooper followed up on 26 September seeking a reply. JSM Lawyers responded the same day saying, “I have replied to you ad nauseam and our position is and will remain unchanged.” To which AKC Legal replied “so can we attend your office or are you now refusing that indulgence?” JSM Lawyers queried back who the “we” was in the AKC Legal email but indicated that the plaintiffs’ attendance at the offices was acceptable. AKC Legal reiterated that they wanted counsel to attend. That seemed to be the last straw – JSM Lawyers replied.

“Well commence proceedings then because we do not agree to your counsel inspecting. We never did agree to that end if you think we did then please forward me the evidence of that.”

40. This seems to have been the final breaking point in this discourteous and often unreasonable correspondence, which could mostly have been avoided by the early application of some detached objectivity by the legal professionals involved. It is mystifying why a simple low-cost arrangement to provide a copy of the trust account records for the estate (at the plaintiffs’ expense) was not made and accepted right at the beginning of these regrettable exchanges. Instead, other than a representative of the plaintiffs’ undertaking at one point some inspection of documents at the offices of JSM Lawyers, the parties’ lawyers continued to engage in the legal equivalent of trench warfare. The Court will not reward either side in this contest by allowing any party to recover costs from any other party costs for this period.

41. The breakdown in communications then led to Ms Cooper commencing these proceedings on behalf of the plaintiffs on 11 December 2023. The original orders sought in the Summons were the following:

1.   An order that the defendant provide reconciliation of the accounts and trust documents relating to the receipt and distribution of the real and personal property during the administration of the estate of the late Charles Gatt (in the will referred to as Charlie Gatt).

2.   A copy of all the valuations on any real property of the estate.

3.   The defendant pay the plaintiffs’ costs.

42. The Summons was supported by Mr Joe Gatt’s affidavit of 11 December 2023.

43. The matter came before the Probate List Judge for management in that list. During that management, the plaintiffs decided to amend the Summons. During submissions before the Court, it became evident that Mr Michos was arguing on behalf of JSM Lawyers and the executrix that seeking accounts was too late because it meant that the executrix is now deprived of the opportunity to seek commission for her efforts, because the estate was distributed. The Amended Summons changed the basis of the relief sought to overcome some of these arguments. The Amended Summons abandoned the plaintiffs’ original claim based upon an executor’s general obligation to keep accounts and to provide them to beneficiaries and instead sought relief under the Act, s 85(1AA)(e) that the defendant “verify and file [her] accounts relating to the estate of the late Charles Gatt” and an order under Supreme Court Rules 1970, r 85 (2) that the defendant executrix be given an extension of time to comply with that order.

44. Ms Cooper says in her affidavit sworn on 1 March 2024, that she fears that any arrangement that might be made under a court order for the plaintiffs to personally inspect the accounts at JSM Lawyers will be compromised by obstructive behaviour and that unless the plaintiffs have access to an actual copy of the accounts, they will be left in a state of uncertainty as to whether the accounts are satisfactory to them. Ms Cooper concludes her affidavit by saying,

“In the circumstances I seek orders that the defendant’s solicitor provide to the court the accounts he was obliged to provide to the beneficiaries upon them asking for them including through their former solicitor was on 13 March 2023, and thereafter through myself.”

45. This request overstates the defendant’s obligation. A trustee’s obligation to provide accounts is conditional, as discussed below. But like the original Amended Summons in these proceedings, this request is based on the executrix’s general obligation to keep and provide accounts, which is a sounder basis for the plaintiffs’ claim than the amended application.

46. After several appearances in March and April 2024 and the hearing of oral submissions, the Court indicated it would consider the matter on the papers and would relist the proceedings if it were necessary to seek further information from the parties before making orders. The Court has decided to give some reasons for the orders it makes today to assist the parties in the further management of these proceedings.

47. The Court makes orders today which should result in all issues apart from the question of costs being resolved between these parties.

Consideration

48. The applicable legal principles may be shortly stated. The trustee’s duty to keep proper accounts is “fundamental” and is a necessary incident of the control of trust property by the trustee: Waterhouse v Waterhouse (1998) 46 NSWLR 449 at 493 and Re Simersall (1992) 25 FCR 584 at 588 – 589. First as to the general rights of beneficiaries to accounts, trustees have a duty to keep proper accounts and to render accounts where required by the beneficiaries either to the beneficiaries or the persons authorised by them: Manning v Commissioner of Taxation (1928) 40 CLR 506. A failure to render accounts when requested will make the trustee personally liable to pay the cost of any proceedings brought to obtain an account: Kemp v Burn (1863) 4 Giff 348; 66 ER 740. When a beneficiary requests accounts or information from a trustee the trustee is entitled to be reimbursed by the beneficiary for the cost of supplying the accounts or the information in advance: Re Bosworth; Martin v Lamb (1889) 58 LJ (Ch) 432 at 433, and see Evans, Power and Power, Equity and Trusts, LexisNexis, Australia, fifth edition 2024 [39.21] (“Equity and Trusts”).

49. The beneficiaries’ right to request and the trustee’s obligation to provide trust documents or information is not absolute. The beneficiary may apply to inspect trust documents. They at least include documents evidencing the terms of the trust, documents relating to the trust property and the accounts of the trust, including primary receipts and vouchers: Hancock v Reinhardt(Trust documents) [2018] NSWSC 1684 and [17]; Wang v Cai [2021] NSWSC 1162 at [99]; and Equity and Trusts at [39.29 – 39.40]. The trustee is not obliged to provide the trustee’s working papers to the beneficiary: Re Fairbairn [1967] VR 633. The Court has inherent supervisory jurisdiction over the administration of trusts to hear an application by a beneficiary who is dissatisfied with the production of documents and seeks that the trustee provides documents or information in relation to the administration of the trust: Palmer v Ayres (2017) 259 CLR 478 at [84] per Gageler J (as he then was).

50. The duty of the trustee in providing accounts has been described as to “provide a full rather than a reluctant response to a request for information by the beneficiaries”: Green & Ors v Wilden Pty Ltd [2005] WASC 83 at [470] and Re Whitehouse [1982] Qd R 196 and Equity and Trusts [34.21] – [34.22].

51. The executrix has cited Re Otto Ruthenburg, in its correspondence and submissions as authority for the proposition that “a beneficiary is not entitled to a copy of the accounts at the expense of the estate, but he is entitled to expect that accounts kept by the representatives”. This is consistent with the law cited above. The beneficiary is entitled to a copy of the accounts of the estate but not at the estate’s expense. And the beneficiary is also entitled to inspect the accounts kept by the legal personal representative. But Re Otto Ruthenburg does not limit the beneficiary’s rights to a choice between physical inspection of the accounts, or the provision of a copy of the accounts. To the extend the executrix uses Re Otto Ruthenburg to seek to limit the beneficiary’s rights to such a simple choice, she is misquoting the authority. Re Otto Ruthenburg does discuss whether an inspection of the accounts has been refused as relevant to the Court’s exercise of discretion as to whether accounts would be ordered.

52. The above account of the history these proceedings gives some substance to the executrix’s written submissions dated 15 March 2024. Those submissions address the plaintiffs’ claim under the Act, s 85, and point out that making such an order is discretionary and the Court will not make such an order if the Court considers that it would be futile or premature: DJ Singh v DH Singh & Ors [2017] NSWCA 234 at [50] – [52] and Hons v Hons [2010] NSWSC 247 at [101].

53. The Court generally accepts the executrix’s submissions for not ordering the formal taking and passing of accounts under the Act, s 85. The circumstances do not presently justify the making of a s 85 order for several reasons. First, application for such an order should have been made well before the distribution of the estate and much closer to the executrix’s November 2021 Act, s 92 notice of intended distribution. Secondly, the additional burdensome work and cost that is required in creating s 85 accounts is not warranted here, when the executrix has allowed some inspection and following that inspection the plaintiffs can still on this application not point to anything of substance indicating maladministration the estate more than the need for an assurance that the estate has been properly administered. Thirdly, as the very approximate analysis of the numbers set out below shows, there does not appear to be an obvious question mark over the financial administration of the estate. Fourthly, the Court does not see why the estate and the executrix should be put to that trouble and expense without an undertaking from the plaintiff to pay reasonable commission to the executrix. Finally, a far simpler solution is at hand, as the discussion below shows.

54. The plaintiffs say that they want, “closure and assurance that the matter was properly handled”. But even on the limited materials presently available some ready inferences can be drawn about the administration of the estate and the appropriateness of the distribution to them. The plaintiffs combined between them are entitled to 40% (being 50% of 80%) of the residuary estate. The residuary estate largely consisted of the proceeds of sale of the Llandilo property, which was worn for probate purposes at a valuation of $1.95 million together the accommodation deposit of $350,000 after the bequests of jewellery and chattels of relatively minor value.

55. Looking at the numbers in very general terms, before accounting for and deducting any costs and disbursements that have been incurred by the estate, the plaintiffs would be entitled to $920,000 (being 40% of $2.3 million). Joe Gatt’s principal affidavit annexes a trust account printout of Malcolm McDonald & Co showing that the plaintiffs have together received the following distributions from the estate, namely $780,963.56 in January 2023 and $19,772.40 in March 2023, totalling $800,735.96. If 40% of the estate bears combined administration costs of about $120,000 (the difference between $920,000 and $800,000) then 100% of estate expenses may be inferred to be $300,000. This may be a high figure but there has been litigation and other disputation within the estate which could justify such a figure for expenses. But presumably more detailed trust accounts should account for this expenditure.

56. So, what is to be done? If the Court merely dismisses this application now made under the Act, s 85, the underlying simple request that the plaintiffs originally made for “ordinary [accounting] documents created during the administration” will go unanswered potentially leading to another application for access to the general accounts that were created by the executrix in the ordinary course of her estate administration.

57. The Court should quell this dispute once and for all. It is therefore desirable to anticipate such a future dispute and deal with it now. Despite the confusion and misstatement of the law which has reigned in the correspondence on both sides, the following matters are clear and should govern what happens now. Notwithstanding that the defendant says that some measure of inspection has taken place, the inspection and the people authorised to conduct the inspection seem to have been supervised or controlled at the premises of JSM Lawyers in a manner that was unacceptable to the plaintiffs. There is no reason why the Court cannot clarify for the parties the existing accounting documents to which the plaintiffs can have access, so there are not future disputes about that.

58. First, the law gives the plaintiffs a right to obtain a basic copy of the estate accounts, which should show clearly how the amount that was distributed to the plaintiffs was calculated by the executrix, provided they pay for that copy of the accounts.

59. Secondly, the plaintiffs must pay the reasonable costs of the executrix to produce their copy of the estate accounts and any other documents produced and this should be paid in advance to the executrix. There is no money in the estate. The executrix does not have to pay for this herself and JSM Lawyers should not go unpaid. This can be achieved by JSM Lawyers providing a reasonable estimate of the fees for production of what is requested.

60. Thirdly, there is no warrant for limiting the plaintiffs’ access to the accounts of the estate to identified persons approved by the trustee going in physically to inspect the accounts at the offices of the solicitor for the trustee and under supervision at those offices.

61. Fourthly, the trustees are entitled to protect information to which client privilege attaches or other confidential information particularly in circumstances where there has been hostile litigation between beneficiaries and the trustee, so here the executrix is entitled on for example to redact such privileged or confidential information that may appear in the accounts before they are produced or copied.

62. Fifthly, documents relating to the estate property are some of the items of information or documents that a beneficiary is entitled to request from a trustee. Here the valuation of the Llandillo property that would justify the sale of it pursuant to clause 6 of the will at $1.95 million, if that is what occurred, should be produced. Clause 6 of the will requires the sale to take place at a price “as determined by valuer”, so such a document should be able readily to be produced.

63. Sixthly, at a practical level trust account statement, as AKC Legal originally requested, or something like it but redacted to remove legal advice or other privileged information should presumably be able to be prepared without much further expense and provided to the plaintiffs.

64. Seventhly because the law is clear this must be done wholly at the plaintiffs’ own expense, if further disputes arise between these parties which require the matter to come back to Court, provided the executrix acts properly and reasonably and can legally justify the stance that she is taken, the plaintiffs/beneficiaries will have to pay not only their own costs of this re-agitation of the dispute but the future costs of the executrix.

65. Eighthly, other than the satisfaction of understanding what the estate’s expenditure was that led to a final distribution, this dispute must now come to an end. So far as the Court can see on the available evidence, the plaintiffs did not respond to the November 2021 Act, s 92 notice by notifying a claim within six months. It may be difficult for them to bring any other claim now, subject to argument about the executrix withholding information. But the Court will continue to case manage this matter for a limited period to bring it to an early conclusion once any additional information supplied by the executrix is available.

66. Finally, the Court has fashioned orders in this matter to give effect to these considerations and accelerate the case management of the proceedings. This leaves the question of costs, which is dealt with in the next section of these reasons.

Costs

67. It is clear from these reasons that at various times in the correspondence both sides have taken positions which are not correct in law. Moreover, the executrix’s conduct of correspondence did not offer that openness and dispassionate objectivity that the case law encourages. On the other hand, the plaintiffs’ position was put inconsistently, changeability and at times on the basis that was not justified in law, so a degree of frustration on the part of the executrix is understandable.

68. The Court will not decide question of costs but raises here a possible costs order for consideration and brief oral submissions. A fair and judicial exercise of the Court’s broad cost discretion here could justify the following outcome. First each party would bear his and her own costs of the correspondence up to the filing of the plaintiffs’ motion on 11 December 2023. Given the legal errors that executrix made, despite the provocations of plaintiffs who also misstated the law, it is difficult to justify any expenses she incurred with her legal advisers as being properly and reasonably incurred.

67. But after 11 December 2023, because the plaintiffs were asking for untenable and unobtainable relief by way of passing of accounts from early March and because they had not clearly offered to pay the executrix’s costs of production of accounts before that it was reasonable and proper for the executrix to defend the Summons and the Amended Summons and the plaintiff should indemnify the executrix for her costs of the proceedings incurred since 11 December 2023.

68. The matter has not decided the question of costs but is indicating that this would arguably be a fair costs outcome. The Court assesses the defendant’s defence of the present litigation as reasonable and proper in the circumstances. As executrix she really had no option but to contest the claim. There were no funds in the estate, so she did not have the funds to seek judicial advice as to whether she should defend the proceedings. She had no security in respect of her future costs until the Court ordered monies to be paid into Court by the plaintiffs. If she did not defend the proceedings, she risked having an order made against her that was more onerous than the order that has been made. Provided she conducted a defence in a reasonable and proper manner, she is entitled to an indemnity out of the estate. The Court presently sees no basis to deprive her of that since mid-December 2023. Otherwise, she would have been required to expend her own funds to indemnify the estate, potentially indefinitely, to meet the plaintiffs’ claims after distribution. This situation has been in part caused by the plaintiffs’ failure to move for the production and inspection of estate accounts in a timely way before distribution of the estate.

69. The Court does not want to generate further costs in these proceedings and will only allow short oral submissions on the questions of costs on the adjourned date after judgment. These parties should not generate any more written submissions. To focus the parties’ submissions on what further orders might be made in relation to costs a form of the orders that the Court might make is set out below to give effect to the above considerations but is wholly stayed and may be varied after argument.

Conclusions and Orders

72. For these reasons Court makes the following orders:

1. ORDER that the plaintiffs pay the costs of these proceedings on the indemnity basis incurred after 11 December 2023, but each party shall bear his and her own costs of all correspondence between the parties incurred prior to 11 December 2023;

2. ORDER subject to order (3) that the defendant shall at the plaintiffs’ expense provide to the plaintiffs within 28 days copies for inspection by the plaintiffs of the accounts of the estate of the late Charles Gatt kept by the defendant in the ordinary course of the execution of her duties as executrix of the said estate;

3. ORDER that the defendant is not required to comply with order (2) until the plaintiffs have paid the defendant the defendant’s costs of these proceedings on the indemnity basis and paid or secured in advance, the defendant’s estimated reasonable costs of complying with order (2); and

4. GRANT liberty to the parties that if any dispute arises about (a) the defendant’s costs of these proceedings or (b) the defendant’s obligations in and costs of complying with order (2), that dispute may be resolved by listing this matter on application to the Associate to Slattery J on or before 13 October 2024; and

5. STAY orders (1) to (4) for no more than 7 days, that is until 20 August 2024, to permit the parties to apply to relist the proceedings to argue that different order should be made but if no application to relist the proceedings to make different order is made within seven days then, the stay will be removed in chambers.

Decision last updated: 13 August 2024