Gooley v Gooley

[2020] NSWSC 798

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Gooley v Gooley [2020] NSWSC 798

Hearing dates:

17 April and 6 May 2020

Date of orders:

25 June 2020

Decision date:

25 June 2020

Jurisdiction:

Equity - Expedition List

Before:

Williams J

Decision:

One of the defendant’s proposed nominees to be appointed as administrator pendente lite of the deceased’s estate unless the plaintiffs provide certain undertakings described in [141]. The disgorgement order requiring the plaintiffs to replenish certain funds alleged to have been misappropriated from the deceased’s estate is refused.

Catchwords:

SUCCESSION – executors and administrators – special and limited grants of administration – administrators pendente lite – Probate and Administration Act 1898 (NSW), s 73 – basis of appointment – whether the assets of deceased estate are in some jeopardy – where defendant beneficiary alleges that the plaintiffs have engaged in certain misconduct in their capacity as putative executors of deceased estate – whether plaintiffs have used estate funds to pay their personal legal costs associated with contested probate proceedings – where plaintiffs’ conduct and evidence creates uncertainty about whether funds used by plaintiffs are estate funds, despite orders of the Court requiring the plaintiffs to serve an affidavit clarifying the position – estate assets in some jeopardy due to hostility and suspicion between plaintiffs and defendant – administrator pendente lite to be appointed unless plaintiffs provides certain undertakings to remove jeopardy to the estate

EQUITY – injunctions – interlocutory injunctions – mandatory interlocutory injunctions – where defendant seeks interim order requiring the plaintiffs to replenish funds allegedly misappropriated from deceased estate for the purposes of paying the plaintiffs’ legal costs of proceedings – order sought as an incident of the Court’s power to award costs pursuant to s 98 of the Civil Procedure Act 2005 (NSW) as applied in the context of probate proceedings – interlocutory injunction refused

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Employers and Employees Act 1890 (Vic)

Probate and Administration Act 1898 (NSW), ss 33, 44 and 73

Succession Act 2006 (NSW), Ch 3

Uniform Civil Procedure Rules 2005 (NSW), r 7.10

Wrongs Act 1890 (Vic)

Cases Cited:

Bellew v Bellew (1865) 4 Sw & Tr 58; 164 ER 1437

Boylan v Farthing (1999) 86 FCR 120

Byers v Overton Investments Pty Limited (2001) 109 FCR 554

Chen v New South Wales (No 2) [2016] NSWCA 292

Deigan as executrix for the estate of the late James Boyd Lockrey v Fussell (2019) 19 BPR 39,853; [2019] NSWCA 299

Donald Campbell & Co v Pollak [1927] AC 732

Flower & Hart v White Industries (Qld) Pty Ltd (2001) 109 FCR 280; [2001] FCA 370

Goodsall v Keen – Estate of Sydney Arthur Keen [2006] NSWSC 1143

Gray v Hart [2010] NSWSC 55

Greenway v McKay (1911) 12 CLR 30

Hempseed v Ward [2013] QSC 348

Henderson v Executor Trustee Australia Ltd (2005) 93 SASR 337; [2005] SASC 477

Horrell v Witts (1866) LR 1 P & D 103

Howling v Kristofferson, Supreme Court of New South Wales, Cohen J, 14 October 1992, unreported, BC9201556

Jones v Dunkel (1959) 101 CLR 298

Lou v IAG Limited t/as NRMA Insurance [2019] NSWCA 319

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Public Trustee v Smith [2008] NSWSC 397

Re Bevan (deceased); Bevan v Houldsworth [1948] 1 All ER 271

Texts Cited:

D Ong, Trusts Law in Australia (5th ed, 2018, The Federation Press)

Category:

Procedural and other rulings

Parties:

Aleta Joy Gooley (First Plaintiff)
Melinda Louise Foley (Second Plaintiff)
Brett Raymond Gooley (Defendant)

Representation:

Counsel:
Mr E G Romaniuk SC with Mr D Del Monte (Plaintiffs)
Mr J P Knackstredt (Defendant)

Solicitors:
Martin Street Lawyers (Plaintiffs)
Macpherson Kelley (Defendant)

File Number(s):

2018/63881

Publication restriction:

N/A

Judgment

INTRODUCTION

1. The deceased, Melville Gooley, died on 23 December 2017. [1]

   1. Exhibit 1 at Court Book p 181; Affidavit of Melinda Louise Foley affirmed on 6 April 2020 (Foley Affidavit) at paragraph 4.

2. The plaintiffs in this proceeding, Aleta Joy Gooley and Melinda Louise Foley, are two of the daughters of the deceased. [2] They were named as the executors of a will made by the deceased dated 18 July 2014 (the 2014 Will).

   2. Foley Affidavit, paragraph 5 at Court Book pp 300–301.

3. The defendant, Brett Raymond Gooley, is the son of the deceased. On 17 January 2018, the defendant lodged a caveat preventing a grant of probate being made in respect of the deceased’s estate without prior notice to the defendant. [3]

   3. Exhibit 7 (part of Exhibit BRG–6 to the affidavit of Brett Raymond Gooley sworn on 14 April 2020 (Gooley Affidavit)) at Court Book pp 706–08.

4. On 9 July 2018, the plaintiffs commenced this proceeding applying for a grant of probate in solemn form of the 2014 Will. [4]

   4. Court Book pp 1–8.

5. The principal issue in dispute between the plaintiffs and the defendant in the proceeding is whether the deceased had testamentary capacity to make the 2014 Will and, if not, what is the most recent will made by the deceased at a time when he still had testamentary capacity. [5]

   5. Defence, Amended Defence and Reply; Cross-Claim and Amended Defence to Cross-Claim at Court Book pp 9–34.

6. The defendant contends that the deceased suffered from dementia for many years before he died, and that the last valid will executed by the deceased was executed on 1 February 2010 (the 2010 Will) or, alternatively, 15 June 2012 (the 2012 Will). The defendant is named as the sole executor under both the 2010 Will and the 2012 Will. He seeks an order that probate be granted to him of the 2010 Will in solemn form or, alternatively, the 2012 Will in solemn form. [6]

   6. Cross-Claim at Court Book pp 18–22; Gooley Affidavit, paragraphs 11–12 at Court Book p 606; Exhibit 7 at Court Book pp 754–755.

7. The plaintiffs maintain that the 2014 Will is valid. However, if the deceased is found to have lacked testamentary capacity at the time that he made the 2014 Will, then the plaintiffs contend that he had testamentary capacity at the time he made earlier wills in March 2014, May 2013, March 2013, November 2012 or September 2012. Each of those earlier Wills revoked all previous Wills, and was made more recently than the 2012 Will and the 2010 Will in respect of which the defendant applies for a grant of probate. The plaintiffs therefore contend that, if the 2014 Will is held to be invalid, probate should be granted in respect of one of those earlier Wills, and not the 2012 Will or the 2010 Will. [7]

   7. Amended Defence to Cross-Claim at paragraphs 6–7.

8. In these reasons, it is convenient to refer to this proceeding as the Probate Proceeding. Reference to the plaintiffs and the defendant are references to the plaintiffs and the defendant in the Probate Proceeding.

9. One of the deceased’s daughters, Janine Gooley, passed away on 19 February 2018, leaving three children: Tahnee Carroll, Tyrone Gooley–Carroll and Charlton Gooley. These reasons refer to Janine Gooley’s children by their first names, without intending any disrespect. Tahnee, Tyrone and Charlton are the beneficiaries under Janine Gooley’s last will. Tyrone and Tahnee were named as the executors in that will and received a grant of probate on 20 September 2019. Tyrone and Tahnee are now aged 31 and 27 years respectively. [8]

   8. Affidavit of Tyrone Gooley-Carroll affirmed on 16 March 2020 (Tyrone Affidavit), paragraph 2 and Annexure “A” at Court Book pp 41, 49.

10. Charlton is now aged 12 years and suffers from severe non–verbal autism spectrum disorder. He has significant behavioural issues, including self–harm and episodes of distress and extremely aggressive behaviour that can be triggered by things such as loud noises or changes in his routine. Since the death of their mother, Tahnee and Tyrone have been Charlton’s carers. [9]

    9. Tyrone Affidavit, paragraphs 2, 26–30 and Annexures “A” and “K” at Court Book pp 41, 44–45, 49, 81.

11. An inventory of property owned by the deceased annexed to an affidavit of the plaintiffs sworn in the Probate Proceeding on 5 November 2018 lists property owned solely by the deceased with a total estimated value of $30,973,567.12, comprised principally of: [10]

    10. Affidavit of Christopher Stephen Frawley sworn on 16 March 2020 (Frawley Affidavit), paragraph 19 at Court Book 89; Exhibit 1 at Court Book pp 180–188, especially pp 187–188.

1. shares in two publicly listed companies;

2. shares in six private companies, including 2 ordinary class shares in Motasea Pty Ltd (Motasea) with an estimated value of $6,685,555;

3. loans owing to the deceased by four of those companies, including a loan of $3,654,356 owing by Motasea;

4. a loan of $3,112,052 owing to the deceased by “Gooley Family Trust No 4”;

5. funds in nine bank accounts, including three term deposit accounts each with a balance of slightly in excess of $820,000;

6. interests in two life insurance policies; and

7. a motor vehicle and various personal and household items.

12. There is no evidence of any liabilities owed by the deceased as at the date of his death and I assume that the estimated value of his total assets of $30,973,567.12 represents the estimated value of the Estate as at 5 November 2018. There is no evidence of the current value of the Estate. [11]

    11. Foley Affidavit, paragraph 10 at Court Book pp 302–304.

13. In addition to the six private companies referred to above, the deceased also owned one ordinary share in Jamell Technical Publications Pty Ltd (Jamell). [12] The one share owned by the deceased in Jamell represents one per cent of that company’s ordinary share capital. The remaining 99 per cent is owned by Breda Pty Ltd. The plaintiffs own 95 per cent of Breda. [13] Jamell was appointed as the trustee of Gooley Family Trust No. 4 (GFT No. 4) on or about 27 June 1986. [14] It will be necessary to return to GFT No. 4 later in these reasons.

    12. Foley Affidavit, paragraph 11 at Court Book p 303; Exhibit 4 at Court Book p 318; ASIC extract for Jamell Technical Publications Pty Ltd in Exhibit 4 at Court Book pp 416–429.

    13. Foley Affidavit, paragraph 30 at Court Book p 308.

    14. Exhibit 3.

14. The 2014 Will: [15]

    15. Exhibit 1 at Court Book pp 172–179.

1. appoints the plaintiffs as the deceased’s executors and trustees;

2. makes specific gifts of shares in certain companies to each of the plaintiffs and the defendant, including:

1. a gift of the deceased’s one share in Jamell to the plaintiffs; and

2. an assignment to the plaintiffs of any debt owing to the deceased by Jamell as at the date of his death;

3. bequeaths to Tahnee and Tyrone the deceased’s shares in Motasea and any monies in any bank account in the name of that company (subject to them attaining the age of 26 years, pending which those shares were to be held in trust by the plaintiffs on terms that no properties owned by Motasea are to be sold or mortgaged until the youngest of Tahnee and Tyrone attained that age);

4. assigns to Tahnee and Tyrone any debt owing by Motasea to the deceased as at the date of his death (as noted above, the plaintiffs’ estimated value of the debt owing by Motasea to the deceased was $3,654,356 as at 5 November 2018);

5. bequeaths to Janine Gooley any interest of the deceased or Motasea in the property 50 Dominic Street, Cronulla;

6. makes a gift of $5,000 to named grandchildren of the deceased (not including Charlton); and

7. gives the remainder of the deceased’s estate to the plaintiffs in equal shares as tenants in common.

15. It is not necessary for the purpose of these reasons to undertake a detailed comparison of the provisions of the 2014 Will with the 2010 Will or the 2012 Will. It suffices to note that: [16]

    16. Frawley Affidavit, paragraphs 17–19 at Court Book pp 88–89; Exhibit 1 at Court Book pp 125–135.

1. the defendant was appointed sole executor and trustee under the 2010 Will and also under the 2012 Will, whereas the plaintiffs are the executors and trustees appointed under the 2014 Will;

2. the 2010 Will and the 2012 Will bequeathed to the defendant certain shares that are gifted to other beneficiaries (including the plaintiffs) under the 2014 Will. [17] For example, under the 2012 Will, the deceased’s one share in Jamell was gifted to the defendant and any debt owing by Jamell to the deceased was assigned to the defendant; [18]

   17. The 2014 Will included a statutory declaration of the deceased explaining this change: Foley Affidavit, paragraphs 6–9 at Court Book pp 301–302; Exhibit 4 at Court Book p 316. The defendant’s affidavit referred to other statutory declarations made by the deceased: Court Book pp 603–604.

   18. Clauses 5.8 and 5.9 of the 2012 Will in Exhibit 1 at Court Book p 132.

3. under the 2010 Will and each other will executed by the deceased after that time, including the 2014 Will, the deceased’s shares in Motasea were bequeathed to Janine Gooley or to Tahnee and Tyrone;

4. under a will executed by the deceased on 14 September 2012 and each will executed by the deceased subsequently, including the 2014 Will, the property 50 Dominic Street, Cronulla is bequeathed to Janine Gooley.

16. An ASIC extract for Motasea dated 10 March 2020 discloses that the two ordinary shares in the company owned by the deceased as at the date of his death and bequeathed to Tahnee and Tyrone under the 2014 Will constitute the entire share capital of the company. The ASIC extract names the directors of Motasea as the deceased and the plaintiffs. [19]

    19. See Annexure “D” to Tyrone Affidavit at Court Book p 59; Exhibit 4 at Court Book pp 370–385.

17. Motasea owns a block of apartments in Elouera Road, Cronulla. [20] It will be necessary to return later in these reasons to allegations made by the defendant about the management of that property in the period prior to and since the death of the deceased.

    20. Tyrone Affidavit, paragraphs 5–6 and Annexure “C” at Court Book pp 41 and 56.

18. On 20 December 2018, Charlton commenced proceeding 2018/391573 in this Court claiming provision from the estate of the deceased under Chapter 3 of the Succession Act 2006 (NSW) (Charlton’s Family Provision Proceeding). [21] In about December 2019, a further proceeding under Chapter 3 of that Act was commenced in respect of the deceased’s estate by Sean Damon Gooley, being proceeding 2019/329347 (Sean’s Family Provision Proceeding). [22] Where required, I will refer to these two proceedings collectively as the Family Provision Proceedings.

    21. Tyrone Affidavit, paragraph 31 at Court Book p 45.

    22. Frawley Affidavit, paragraph 36 at Court Book pp 94–95.

19. The Probate Proceeding was listed for an expedited final hearing, which commenced before Sackar J on 18 November 2019. The matter was adjourned part–heard on 18 December 2019, and listed to resume on 2 March 2020. However, an affidavit served by the defendants on 24 February 2020 seeking to vacate the further hearing commencing on 2 March 2020 caused the defendant to believe that the plaintiffs were using the funds of the Estate to pay for their legal costs of the Probate Proceeding and the Family Provision Proceedings. [23]

    23. Frawley Affidavit, paragraph 5 at Court Book p 86; Foley Affidavit, paragraph 18(c) at Court Book p 306.

RELIEF CLAIMED IN THE DEFENDANT’S NOTICE OF MOTION

20. By notice of motion dated 16 March 2020 and filed on 25 March 2020, the defendant applied for:

1. an order restraining the plaintiffs from using funds or assets of the Estate to meet the costs incurred by the plaintiffs or any other person in the Probate Proceeding, the Family Provision Proceedings and any other proceedings in which the Estate may be a party or have an interest (order 1(a) of the notice of motion);

2. an order restraining the plaintiffs from taking any steps to bind the Estate to any obligation or liability, except with the written approval of the defendant or by order of the Court (order 1(b) of the notice of motion);

3. an order requiring the plaintiffs to “disgorge to the Estate the value of all payments made from the Estate to them, or to any legal practitioner, accountant or other professional adviser appointed by them” in relation to the Probate Proceeding, the Family Provision Proceedings and the administration of the Estate (order 2 of the notice of motion);

4. an order requiring the plaintiffs to file and serve an affidavit disclosing the extent to which they have caused any funds or other assets to be withdrawn or transferred out of the Estate from 23 December 2017, and all transactions entered into by the plaintiffs as purported executors of the Estate (order 3 of the notice of motion);

5. an order under s 73 of the Probate and Administration Act 1898 (NSW) (the PA Act) granting administration to an interim administrator of the Estate, who is to be an independent legal practitioner admitted in the State of New South Wales, as agreed by the parties or appointed by the Court and appointed without security, and orders conferring certain powers on the interim administrator, including power to “control, manage and maintain the financial and non–financial assets of the Estate” (orders 4, 5 and 6 of the notice of motion); and

6. an order revoking any appointment of the plaintiffs as representatives of the Estate in the Family Provision Proceedings (order 7 of the notice of motion).

21. The defendant describes the appointment of the administrator referred to in (e) above as the principal relief sought, with the relief in (a) to (d) and (f) above being ancillary to that principal relief. [24]

    24. Defendant’s written submissions (15.4.20) at paragraphs 1–2.

22. The notice of motion refers to s 73 of the PA Act and “a grant of administration ad litem to an interim administrator”.

23. Section 73 of the PA Act provides for the appointment of an administrator of the personal estate and receiver of the real estate of any deceased person pending any suit touching the validity of the will of the deceased or during a contested right to administration. A person appointed under s 73 is referred to as an administrator pendente lite. He or she is appointed with such full or limited powers as the Court may think right and is subject to the control of the Court.

24. By contrast, an administrator ad litem is an administrator appointed by the Court in the exercise of its inherent jurisdiction for the purpose of representing the estate in legal proceedings. A similar power exists in Uniform Civil Procedure Rules 2005 (NSW) r 7.10.

25. At the hearing of the notice of motion on 17 April 2020, the defendant’s counsel clarified that the defendant seeks the appointment of an administrator pendente lite under s 73 of the PA Act, and does not seek the appointment of an administrator ad litem. However, the powers that the defendant contends should be conferred on the administrator pendente lite, if appointed, include the power to represent the Estate in the Family Provision Proceedings. In other words, the defendant contends that the scope of the powers to be conferred on any administrator pendente lite appointed in this case should include, in substance, the powers of an administrator ad litem in respect of the Family Provision Proceedings.

26. It was apparent from the plaintiffs’ submissions [25] that they misunderstood that the defendant’s application extended to the appointment of an administrator pendente lite to take over the role of the plaintiffs in the Probate Proceeding. However, the order sought would not have that effect. The plaintiffs are parties to the Probate Proceeding in their personal capacity, and not as executors of the Estate. The Probate Proceeding will resolve which Will is valid and, consequently, who are the executors of the Estate.

    25. Plaintiffs’ written submissions (16.4.20) at paragraph 23.

27. The defendant’s submissions identified that the order under s 73 of the PA Act is sought on the grounds of the following alleged misconduct of the plaintiffs: [26]

    26. Defendant’s written submissions (15.4.20) at paragraphs 1 and 23.

1. using the assets of the Estate for their own purposes, namely to fund their legal costs in the Probate Proceeding;

2. wasting Estate funds by opposing the appointment of Tahnee as her brother Charlton’s tutor in the Family Provision Proceedings;

3. opposing the defendant having access to evidence served in the Family Provision Proceedings;

4. instructing the deceased’s former accountant to perform accounting work on behalf of the Estate;

5. allowing certain properties owned by Motasea to fall into disrepair and not to be rented out to earn an income stream.

28. The injunctive relief referred to in paragraphs 20(a) and 20(b) above was granted by consent by Ward CJ in Eq on 24 March 2020 until further order, and on the defendant giving the usual undertaking as to damages. At the first day of the hearing of the notice of motion on 17 April 2020, counsel for the plaintiffs indicated that the continuation of those orders is contested. Counsel for the defendant indicated that the continuation of those orders was pressed, and that the defendant sought to vary the orders so that they restrained the plaintiffs from using any funds or assets of the Estate including any funds in Westpac bank account in the name of “Mrs Melinda Louise Foley and Ms Aleta Joy Gooley Executors of the Estate of Melville William Gooley” with the account number ending 511. I note in passing that the plaintiffs informed the defendant that, pending the determination of the defendant’s notice of motion, they would not pay legal expenses from that account and would seek the defendant’s approval to pay other expenses. [27] Having regard to the way in which that account has been styled, it is convenient to adopt the terminology used by the second plaintiff in her affidavit affirmed on 6 April 2020 and refer to it as the Estate Bank Account. However, my adoption of that terminology does not, by itself, imply any conclusion about whether the funds in that account were Estate funds.

    27. Exhibit 6, p 193.

29. The disgorgement order referred to in paragraph 20(c) above was described in the defendant’s submissions as interim relief that was ancillary to the order sought under s 73 of the PA Act. [28] The defendant’s counsel acknowledged that the disgorgement order was a mandatory injunction and submitted that it was interim relief in the sense that it should be made without prejudice to the plaintiffs’ right to claim an order at the conclusion of the Probate Proceeding that their costs of that proceeding be paid out of the Estate. The defendant’s counsel submitted that the Court had power to make the disgorgement order as an incident of its power to make costs orders at the conclusion of the Probate Proceedings under s 98 of the Civil Procedure Act 2005 (NSW) (CPA), as applied to probate proceedings (with specific reference to s 33 of the PA Act). [29]

    28. Defendant’s written submissions (15.4.20) at paragraphs 2 and 30–31.

    29. Transcript page 50 (lines 46–50) and page 51 (lines 6–9).

ALLEGED MISCONDUCT OF THE PLAINTIFFS

30. The account below of matters and events relevant to the allegations of misconduct on which the defendant relies is drawn from the following evidence adduced on the hearing of the notice of motion:

1. the affidavit of the defendant’s solicitor, Christopher Stephen Frawley, sworn on 16 March 2020 and the documents comprising exhibit CSF–2 to that affidavit; [30]

   30. Exhibit CSF–2 was tendered as Exhibit 1 on the hearing of the notice of motion.

2. the affidavit of Tyrone Gooley–Carroll affirmed on 16 March 2020;

3. the affidavit of the second plaintiff, Melinda Louise Foley, affirmed on 6 April 2020 and the documents comprising exhibit MLF–1 to that affidavit; [31]

   31. Exhibit MLF–1 was tendered as Exhibit 4 on the hearing of the notice of motion.

4. paragraphs 1–16 of the affidavit of the defendant, Brett Raymond Gooley, sworn on 14 April 2020 (the balance of that affidavit was not read at the hearing of the Notice of Motion) and the documents comprising part of exhibit BRG–6 to that affidavit; [32]

   32. Part of Exhibit BRG–6 (comprising the documents at pp 638–778 of the Court Book) was tendered as Exhibit 7 on the hearing of the notice of motion.

5. paragraphs 1–3 of the affidavit of Jessica Prats sworn on 15 April 2020 (the balance of that affidavit was not read at the hearing of the Notice of Motion); and

6. additional documentary evidence tendered on the hearing of the notice of motion to which the parties specifically referred in their written and oral submissions. [33]

   33. Exhibits 2, 3, 5 and 6.

31. None of the witnesses referred to above were cross-examined on the hearing of the notice of motion.

Alleged use of Estate funds to pay the plaintiffs’ legal costs of the Probate Proceeding

32. The defendant has funded his legal costs of the Probate Proceeding by drawing on his own personal assets, and intends to continue to do so. His legal costs to date are in the order of $715,000. [34]

    34. Frawley Affidavit, paragraphs 14–16 at Court Book p 88.

33. The plaintiffs’ legal costs of the Probate Proceeding to date are in the order of $1,000,000. [35] They have also incurred some additional costs as defendants in the Family Provision Proceedings. The plaintiffs have paid all of these costs by drawing on the Estate Bank Account. [36]

    35. Foley Affidavit, paragraphs 32–34 at Court Book p 309.

    36. Foley Affidavit, paragraph 28 at Court Book 308; the statements for the Estate Bank Account were in Exhibit 4 at Court Book pp 477–520 and Exhibit 5 pp 79–89.

34. The second plaintiff deposed that the plaintiffs first consulted Teece Hodgson Ward, solicitors (THW) “for the estate’s affairs” on 10 January 2018. [37]

    37. Foley Affidavit, paragraph 14 at Court Book pp 304–305.

35. THW filed the Notice of Intended Application for Probate that was published on 26 February 2018. [38] As noted above, a caveat had already been lodged by the defendant on 17 January 2018. [39] THW acted for the plaintiffs in commencing the Probate Proceeding in July 2018, and continued to act for them in the Probate Proceeding and in the Family Provision Proceedings when they were commenced, until the plaintiffs terminated their retainer on about 20 February 2020.

    38. Foley Affidavit, paragraph 14 at Court Book p 305.

    39. Foley Affidavit, paragraph 15 at Court Book p 305.

36. As referred to earlier in these reasons, it was the plaintiffs’ evidence in support of their application to vacate the further hearing dates after appointing a new solicitor that caused the defendant to believe that the plaintiffs’ legal costs of the Probate Proceeding were being paid out of funds of the Estate.

37. The application to vacate and supporting affidavits of the first plaintiff and the plaintiffs’ new solicitor, Ms Jessica Prats, were served on the defendant on 24 February 2020. [40]

    40. Frawley Affidavit, paragraph 5 at Court Book p 86; Exhibit 1 at Court Book pp 99–115.

38. The first plaintiff’s affidavit said that THW had represented the Estate in the Probate Proceedings, complained about the “excessive fees of the Estate to date” and stated that THW were claiming a lien “over the Estate’s file” as security for payment of the unpaid portion of those fees. The first plaintiff deposed that, as a result of those excessive fees and certain other matters, the plaintiffs had withdrawn instructions from THW on 20 February 2020 “and instructed the Estate’s present lawyers, Martin Street Lawyers”. [41]

    41. Exhibit 1 at Court Book pp 100–102.

39. On 2 March 2020, Christopher Frawley of McPherson Kelly Ltd, the defendant’s solicitor in the Probate Proceeding, wrote to Ms Prats stating: [42]

    42. Frawley Affidavit, paragraph 8 at Court Book p 87; Exhibit 1 at Court Book pp 116–117; Affidavit of Jessica Prats sworn on 15 April 2020 (Prats Affidavit), paragraph 2; MSL–1 at Court Book pp 1220, 1223–1225.

“… it appears that:

1. incorrectly, you and your clients appear to regard your clients as being the executors of the estate of the late Melville William Gooley (‘the Estate’);

2. you have purportedly been appointed, and are acting, on behalf of the Estate; and

3. the legal fees incurred in these proceedings by the plaintiffs have and continue to be paid out of the Estate.

Could you please, by no later than 5pm on Wednesday, 4 March 2020, let us know:

1. whether you consider that you are acting for the Estate or for the plaintiffs in their personal capacities; and

2. whether any past, present or future legal fees or costs associated with these proceedings have or are intended to be paid out of the Estate, including by any company, trust or other entity which, in any way whatsoever, forms part of the Estate.

If we do not hear from you before 5pm on Wednesday, 4 March 2020:

1. our client will have no alternative but to proceed on the basis that your clients are acting on the understanding that they are, in fact, executors of the Estate and are, and intend to continue, using funds or assets of the Estate to pay their legal fees and costs associated with these proceedings; and

2. we will seek instructions from our client, which may include to prepare and serve on your clients an application addressing the above issues.”

   40. Ms Prats responded in the following terms by letter to Mr Frawley dated 4 March 2020 (emphasis added): [43]

       43. Frawley Affidavit, paragraphs 11–13 at Court Book pp 87–88; Exhibit 1 at Court Book pp 121–122; Prats Affidavit, paragraph 3; MSL–2 at Court Book pp 1220, 1226–1228.

3. As we presently understand, and without the benefit of our clients’ files, the last Will of the deceased was made in 18 July 2014 (‘the Will’). The Plaintiffs were appointed executors under that Will. The Plaintiffs remain executors of the Will unless and until their position as executors has been revoked by court order. We do not understand that any such order has been made?

4. Presently, the executors have no reason to believe that the testator was without capacity when he prepared the Will. They hold a bona fide belief that this is a valid will. The executors have no reason to suspect any irregularity in the testator’s capacity or the will, despite what has occurred to date.

5. An executor who proves a will is ordinarily entitled to his or her costs out of the estate: Headington v Holloway (1830) 3 Hag Ecc 280 at 282; 162 ER 1158 at 1159 per Sir John Nicoll. There need not be a court order of [sic] this. Expenses incurred in proving a will are a charge upon the testator’s estate. They are being met by from the estate accordingly.

6. If the Defendant be successful in his challenge to the present proceedings, the normal course would be that the executor’s costs are met by the estate. The Defendant presently, as we understand, has suggested various wills to be the last will prepared by the testator at a time when he had capacity. These matters will all, no doubt, bear relevantly on the issue of costs in due course.”

   41. It is clear from the letter that the plaintiffs, through their solicitor, were stating that their legal costs of the Probate Proceeding to date had been paid using funds of the Estate. The plaintiffs considered that they were entitled to use the funds of the Estate for this purpose because they held a bona fide belief that the 2014 Will was valid, and they characterised the Probate Proceeding as an exercise in proving the 2014 Will. The plaintiffs considered that they were entitled to apply the funds of the Estate to the costs of the Probate Proceeding even before they had succeeded in proving the 2014 Will in the Probate Proceeding and without any order of the Court for the payment of the plaintiffs’ costs out of the Estate.

   42. On the hearing of the defendant’s notice of motion, the plaintiffs read an affidavit of Ms Prats which exhibited her letter dated 4 March 2020. The plaintiffs did not adduce any evidence that the letter was sent without, or contrary to, their instructions. However, senior counsel for the plaintiffs informed me that the plaintiffs’ legal representatives (including senior counsel) had assumed that the plaintiffs’ legal costs of the Probate Proceeding were being paid out of Estate funds. The second plaintiff’s affidavit, discussed below, conveys the impression that this was also the assumption or understanding of the plaintiffs themselves.

   43. Pursuant to orders made by Sackar J on 20 March 2020, as varied by Ward CJ in Eq on 24 March 2020, the plaintiffs were required to serve an affidavit by 8 April 2020 “informing the defendant of the precise amounts paid in respect of the Probate Proceeding, the Family Provision Proceedings and any other proceedings in which the Estate is a party or has an interest, whether those amounts were paid from funds of the Estate and, if so, the precise assets of the Estate from which those funds were sourced”.

   44. In her affidavit affirmed on 6 April 2020, the second plaintiff deposed that, when the plaintiffs first instructed their former solicitors in mid–January 2018, they understood that THW “were acting for the estate and us as executors”. [44]

       44. Foley Affidavit, paragraphs 21–22 at Court Book p 307; Exhibit 4 at Court Book pp 465–474.

   45. On 28 January 2018, the second plaintiff sent an email to Mr Neal of THW in relation to the subject matter “Joint Bank Account” seeking guidance about how to name a joint bank account that Mr Neal had previously suggested be opened in the names of the plaintiffs “to cover the running costs of the estate etc”. [45]

       45. Exhibit 2 at Court Book p 1409.

   46. On 29 January 2018, Ms Chantelle Tabone of THW replied to the second plaintiff’s email referred to above. Ms Tabone’s email stated (emphasis added): [46]

       46. Foley Affidavit, paragraph 28 at Court Book p 308; email advice in Exhibit 4 at Court Book p 476; Exhibit 2 at Court Book p 1409; account statements in Exhibit 4 at Court Book pp 477–520.

“We suggest the bank account be named as ‘Melinda Foley and Aleta Gooley as Executors of the estate of Melville William Gooley’.

The most important thing is to ensure that the bank account created does not have withdrawal restrictions.

As long as you only use the bank account for estate purposes, the potential description is not particularly material but it should be clear that it is not an account of your personal funds.”

47. The second plaintiff deposed that (emphasis added): [47]

    47. Foley Affidavit, paragraphs 26–27 at Court Book pp 307–308.

“The first plaintiff and I were never told by THW that the legal costs and expenses of THW acting could not be paid by money out of the estate. The first plaintiff and I were also never told by THW that as the named executors, we had no lawful right to maintain the estate’s various assets and meet the estate’s various liabilities until probate was granted. The first plaintiff and I assumed that unless we were told to the contrary, our obligations as executors required that we obtain probate and look after everything in the meantime until the estate was distributed.

Until the defendant’s notice of motion was filed on 16 March 2020, we attended to all aspects of the estate’s business and affairs to ensure the preservation of the estate, ultimately with the intention of distributing the estate. On 17 July 2018, the defendant raised the question of the deceased’s capacity to make the last will. When that happened, and in the situation where the first plaintiff and I were in agreeance that the deceased did not lack capacity, THW never provided any different advice as to payment of legal costs and expenses, and THW never advised that money from the estate could not be used to pay THW for legal costs and expenses.”

48. Under the heading “Arranging the estate’s funds to pay legal costs and expenses in the probate application” (emphasis added), the second plaintiff deposed that: [48]

    48. Foley Affidavit, paragraphs 28–31 at Court Book pp 308–309.

1. the plaintiffs opened the Estate Bank Account on 29 January 2018 in the names of “Melinda Louise Foley and Aleta Joy Gooley executors of the Estate of Melville William Gooley”. They considered this to be consistent with the advice they had received from THW, and it was their intention that:

“… all costs associated with the will dispute, and then distributing the deceased’s estate, could be processed through the one account, and that would then make it easier to account to everyone once probate was granted and during the distribution process. The first plaintiff and I wanted this part of the process to be transparent.”

2. Jamell (as trustee for GFT No. 4) paid the sum of $1,437,000 into the Estate Bank Account on 29 January 2018 for the purpose of paying the legal costs and expenses, and other expenses, associated with the administration of the deceased’s estate.

49. The statements for the Estate Bank Account for the period 29 January 2018 to 31 March 2020 reveal that only two deposits were paid into that account during that period:

1. the deposit of $1,437,000 on 29 January 2018 referred to in the second plaintiff’s affidavit, with the transaction description “Deposit Cronulla NSW”; [49] and

   49. Exhibit 4 at Court Book p 477.

2. a deposit of $80,169.55 on 17 April 2018, with the transaction description “Deposit Ato Ato008000009391459”. [50]

   50. Exhibit 4 at Court Book p 483.

50. All other transactions recorded in the statements for the Estate Bank Account for the period 29 January 2018 to 31 October 2019 are debits, which appear from the transaction descriptions to be payments to utilities, THW, Thomson Geer (another law firm) and various other transactions.

51. There is no evidence before me about the source of the payment of $80,169.55 into the Estate Bank Account on 17 April 2018, but nothing material turns on this.

52. The second plaintiff deposed that, as at the date of her affidavit on 8 April 2020, amounts totalling $946,475 had been paid out of the Estate Bank Account for THW’s legal costs and disbursements of the Probate Proceeding, and further amounts of $68,905.38 and $3,512 had been paid out of the Estate Bank Account for THW’s legal costs and disbursements relating to Charlton’s Family Provision Proceeding and Sean’s Family Provision Proceeding (respectively). [51]

    51. Foley Affidavit, paragraphs 32–34 at Court Book p 309.

53. The second plaintiff then deposed that: [52]

    52. Foley Affidavit, paragraph 35 at Court Book p 309.

“At no time prior to, or after, withdrawing instructions from THW did THW, or barristers engaged by them, advise the second plaintiff and I that we would be, and should have been, personally liable and paying for their legal costs and disbursement…”

54. The second plaintiff’s affidavit does not expressly state that the funds paid by Jamell as trustee of GFT No. 4 into the Estate Bank Account were, or were not, funds of the Estate.

55. In my view, the second plaintiffs’ evidence, conveys the impression that, at the time she affirmed her affidavit, the second plaintiff understood that those funds were Estate funds. This is because:

1. the affidavit was made in purported compliance with the orders of the Court that required the plaintiffs to serve an affidavit “informing the defendant of the precise amounts paid in respect of the Probate Proceeding … , whether those amounts were paid from funds of the Estate and, if so, the precise assets of the Estate from which those funds were sourced” (my emphasis);

2. the second plaintiff’s evidence that GFT No. 4 was the source of the funds in the Estate Bank Account appears under the heading “Arranging the estate’s funds to pay legal costs and expenses in the probate application” (my emphasis);

3. having regard to that context, if the second plaintiff had been intending to convey that the funds paid into the Estate Bank Account were not Estate Funds, it is to be expected that she would have said so expressly and/or avoided the use of the heading which described the funds as “the estate’s funds”;

4. the second plaintiff’s evidence that THW did not advise that Estate funds could not be used to pay THW’s legal costs and disbursements and did not tell the plaintiffs they should be paying THW’s legal costs and disbursements personally, contributes to the impression that the funds in the Estate Bank Account were Estate funds; and

1. the second plaintiff’s evidence about the plaintiffs’ intention to “account to everyone once probate is granted” appears to reflect an understanding at the time the affidavit was sworn that the beneficiaries under the Will found to be valid in the Probate Proceeding will be entitled to an account of the costs spent in relation to the Probate Proceeding and the maintenance and distribution of the Estate, because those costs have been paid from the Estate.

56. The second plaintiff did not depose to any matters that would enable an objective assessment of whether or not her understanding that the funds were Estate funds, as conveyed in her affidavit, is correct. The second plaintiff described the process of sorting out the Estate’s affairs as complex, and deposed that neither she nor the first plaintiff had been involved in a similar situation prior to the death of the deceased. [53]

    53. Foley Affidavit, paragraph 19–20 at Court Book p 306.

57. On the eve of the first day of the hearing of the notice of motion, the plaintiffs filed and served submissions settled by senior and junior counsel which stated that the moneys paid into the Estate Bank Account were the property of GFT No. 4, that the deceased had no “property rights in the property of GFT No. 4” and that the defendant’s notice of motion should be dismissed because: [54]

    54. Plaintiffs’ written submissions (16.4.20) at paragraph 21.

“… the monies used to pay the tax invoices for legal costs and expenses in these proceedings, and the related family provision proceedings, was not the money of the deceased and did not form part of the estate of the deceased”.

58. This represented a reversal of the position expressly stated in the plaintiffs’ solicitor’s letter dated 4 March 2020, and the impression created by the second plaintiff’s affidavit. The plaintiffs did not adduce any evidence at the hearing of the notice of motion in support of their changed position. On the contrary, the plaintiffs read all of the evidence summarised above.

59. At the hearing of the defendant’s notice of motion, the defendant did not submit that the second plaintiff’s affidavit should be treated as evidence that the funds paid by Jamell as trustee for GFT No. 4 into the Estate Bank Account were Estate funds. Nor did the defendant cross-examine the second plaintiff with a view to establishing this. Rather, the defendant relied on documentary evidence concerning GFT No. 4, and the original source of the funds that Jamell had paid into the Estate Bank Account, in support of the defendant’s submission that those funds were Estate funds. The plaintiffs made submissions to the opposite effect, based on the same documentary evidence.

60. As referred to above, almost all of Estate Bank Account funds were paid into that account by Jamell by a single payment of $1,437,000 made on 29 January 2018.

61. Jamell was appointed as the trustee of GFT No. 4 on or about 27 June 1986. [55] The two plaintiffs are directors of Jamell. [56]

    55. Exhibit 3.

    56. Foley Affidavit, paragraph 30 at Court Book p 308.

62. It is clear from the Deed of Settlement establishing GFT No. 4 that the trust is a discretionary trust. [57] The deceased was the Appointor. The identity of all of the beneficiaries is not clear from the description of the primary and secondary beneficiaries in the Schedule to the GFT No. 4 Deed. However, the deceased was one of the beneficiaries. [58]

    57. Exhibit 3.

    58. Exhibit 5, p 63.

63. It was common ground between the parties that the source of the $1,437,000 paid by Jamell into the Estate Bank Account was an amount of approximately $1,417,000 that Motasea had paid to Jamell in July 2014, together with some interest earned on that amount. [59] As at July 2014, the deceased was the sole director of Motasea. [60]

    59. Exhibit 5, p 65; Transcript, page 63 (lines 21–50) and page 64 (lines 1–6).

    60. See Annexure “D” to Tyrone Affidavit at Court Book pp 59–60.

64. Documents tendered by the defendant showed that Jamell invested those funds in a term deposit that matured in July 2015. The evidence does not include Jamell’s bank statements for the whole of the period from July 2015 until the payment of the $1,437,000 to the Estate Bank Account in January 2018. However, the documentary evidence does show that Jamell invested the funds in a further term deposit that matured in July 2016 at which time the balance of Jamell’s account was approximately $1,451,000. Those funds remained in Jamell’s account until September 2016, with the exception of one withdrawal of approximately $20,000. There is no evidence about transactions on Jamell’s account during the period from the end of September 2016 until the end of December 2017. As at 29 December 2017, the balance of Jamell’s account was $1,437,519. That amount was withdrawn and paid into the Estate Bank Account on 29 January 2018. The second plaintiff’s affidavit describes the funds that were withdrawn as the proceeds of a term deposit that had been “closed”. [61]

    61. Exhibit 5, pp 72–78; Foley Affidavit, paragraphs 35–36 at Court Book pp 309–310.

65. As referred to earlier in these reasons, the Estate includes all of the shares in Motasea. The defendant submitted that, the second plaintiff had misappropriated the $1,417,000 from Motasea’s account and paid it to Jamell in July 2014, and that the $1,437,000 held by Jamell and paid into the Estate Bank Account in January 2018 was therefore Estate funds. I assume that the submission is to the effect that the funds in the hands of Jamell were therefore impressed with a trust in favour of Motasea, although that was not articulated by the defendant. [62]

    62. Transcript, page 65.

66. In support of the submission that the second plaintiff had misappropriated the sum of $1,417,000, the defendant relied on handwritten notes made by the deceased on a copy of a bank statement dated 3 April 2014 for Motasea’s account in which the $1,417,000 had been held before being paid to Jamell in July 2014. The notes include the following: [63]

    63. Exhibit 5, p 65.

“MELINDA

I was looking for this money this morning; I was told a Mrs Foley has taken it. PLEASE ADVISE WHERE ABOUTS. Thank you. Your DAD.

13/8

All I asked what had happened to the deposits when they tell you advice would BE APPRECIATED.

20/8/15

Left message with Natalie.

Under Jamel name.”

67. I accept the plaintiffs’ submission that there is no evidence about when the deceased made all of the notes on that document, and that at least one of those notes bears the date 20 August 2015.

68. I do not consider that the notes support a finding on the balance of probabilities that the second plaintiff misappropriated $1,417,000 from Motasea in July 2014. First, the statement in the notes that the deceased had been told by an unidentified person that “a Mrs Foley had taken it” is hearsay. Second, the word “taken” is capable of bearing several different meanings, ranging from “transferred” to “stolen” and the evidence does not provide any basis for inferring the latter meaning here. On the contrary, if the deceased had used the word “taken” in these notes to convey some wrongdoing on the part of the second plaintiff, it is unlikely that he would have penned her a polite note asking questions about where the money was. Third, even if the deceased had used the word “taken” to convey wrongdoing by the second plaintiff, this would reflect the deceased’s state of mind at the time the note was made. That time is unclear, but it may have been as late as August 2015. The defendant contends that the deceased lacked testamentary capacity by some time between June and September 2012 at the latest. [64] No evidence was adduced on the hearing of the notice of motion that would support an inference that the deceased’s state of mind at the time the note was made was the same at the time of the transfer in July 2014. Finally, the very serious allegation that the second plaintiff had misappropriated the $1,417,000 from Motasea was not put to her in cross-examination. The unfairness to the second plaintiff of making such a finding without her having had the opportunity to answer the allegation is, by itself, a reason why the Court should not find that the $1,417,000 was paid to Jamell in July 2014 after being misappropriated from Motasea.

    64. See [6]–[7] above.

69. The defendant made an alternative submission [65] that, pursuant to clause 18 of the GFT No. 4 Deed, the legal personal representatives of the Appointor are entitled to exercise the power of appointment after the Appointor’s death. That is a power to:

    65. Transcript, pages 65–69.

1. change the identity of the trustee, who, in turn, determines how income of the trust fund is distributed between beneficiaries and has power prior to the vesting date to transfer the whole or part of the trust fund to the trustee of another trust for the benefit of all or any one or more of the beneficiaries of GFT No. 4; [66] and

   66. GFT No. 4 Deed, clauses 4 and 20: Exhibit 3.

2. approve variations of the GFT No. 4 trusts by the trustee. [67]

   67. GFT No. 4 Deed, clause 19: Exhibit 3.

70. The defendant submitted that the deceased’s executors will have to exercise the power of appointment in the interests of the beneficiaries of the Estate, and that “for all practical purposes” the assets of GFT No. 4, including the $1,437,000 paid into the Estate Bank Account, are therefore Estate funds.

71. I note, in passing, that it is implicit in this alternative submission that the defendant accepts that, if the $1,417,000 was not found to have been misappropriated from Motasea, then those funds were paid to Jamell in July 2014 in its capacity as trustee of GFT No. 4 to hold as part of the trust fund.

72. In my opinion, the defendant’s alternative submission is misconceived. The assets of GFT No. 4 are presently held by Jamell as trustee of GFT No. 4 on trust on the terms of the GFT No. 4 Deed. That will remain the position unless and until the persons who are ultimately determined to be the executors of the Estate in the Probate Proceeding exercise the power of appointment under clause 18 of the GFT No. 4 Deed by changing the trustee. If and when that occurs, the assets of GFT No. 4 will be held by that new trustee on trust on the terms of the GFT No. 4 Deed. For the reasons explained by White J (as his Honour then was) in Public Trustee v Smith [2008] NSWSC 397 at [104]–[109], a person who controls the appointment of a trustee who holds property on trust for others, does not thereby become beneficially entitled to the trust property. This is so, even if (as was the case in Smith) the appointor is also the sole director of the trustee and one of the beneficiaries of the discretionary trust. I reject the submission that, because the executor of the Estate will control the power of appointment of the trustee, the trust assets are Estate assets.

73. Although the plaintiffs are directors of Jamell, there was no direct evidence of the purpose or character of the payment of $1,417,000 received by Jamell from Motasea in July 2014, as senior counsel for the plaintiffs acknowledged. The plaintiffs invited the Court to infer that the payment was a disposition from Motasea to GFT No. 4, on the basis that there is no evidence that Jamell had any business other than as trustee of GFT No. 4. [68] It followed, in the plaintiffs’ submission, that the $1,437,000 paid by Jamell into the Estate Bank Account in January 2018 was money of GFT No. 4 and not Estate funds, because the deceased had no “property rights” in assets or funds of GFT No. 4. [69]

    68. Transcript, pages 77, 98–99.

    69. Plaintiffs’ written submissions (16.4.20) at paragraph 21; Transcript, page 77.

74. Assuming that the $1,417,000 was a settlement by Motasea on GFT No. 4 (consistently with the plaintiffs’ submission and the defendant’s alternative submission), the deceased did not have a beneficial interest in those funds whilst they were held by Jamell on the terms of the GFT No. 4 Deed. A beneficiary under a discretionary trust is entitled to enforce due administration of the trust, but does not have a proprietary interest in the assets of the trust: see Public Trustee v Smith (supra) at [107] and the authorities cited there; see also D Ong, Trusts Law in Australia (5th ed, 2018, The Federation Press) at 327–331.

75. However, it does not necessarily follow that the $1,437,000 remained funds of GFT No. 4 when paid to the plaintiffs in the Estate Bank Account in January 2018. The evidence is silent about the basis or terms on which that payment was made. Although the plaintiffs are directors of Jamell, they adduced no evidence of any resolution of Jamell as trustee to pay the funds to the Estate Bank Account or any other evidence of the reason for or character of the payment and any terms and conditions on which it was made.

76. The plaintiffs’ submissions did not present any legal analysis that supported a finding that the funds, in the hands of the plaintiffs in the Estate Bank Account, were not Estate funds. Senior counsel for the plaintiffs merely submitted that, in the absence of evidence, the payment was “capable of being characterised” as a loan made under clause 6(b) of the GFT No. 4 Deed. [70]

    70. Transcript, page 80, lines 16–19.

77. Clause 6(b) confers on the trustee the power: [71]

    71. Exhibit 3.

to advance and lend moneys to and to borrow and raise moneys from and to secure by mortgage or otherwise howsoever the payment of money to any person, firm, company, association, or governmental or municipal body and upon such terms with or without security or interest as the Trustee shall deem fit.

78. I accept that it is possible that the payment of $1,437,000 was a loan by Jamell in its capacity as trustee of GFT No. 4 to the plaintiffs and, in that case, the funds in the hands of the plaintiffs would not be funds of the Estate.

79. However, that is no more than a possibility, and there are many other possibilities disclosed by the evidence, including:

1. partial repayment of the loan of $3,112,052 owing by GFT No. 4 to the deceased, paid to the plaintiffs purporting to act as the administrators of the deceased estate; [72] or

   72. See [11] above.

2. an amount of the income of GFT No. 4 set aside by Jamell as trustee for the benefit of the deceased in accordance with clause 4(a) of the GFT No. 4 Deed but not paid to him prior to his death. Clause 4(a) provides that any funds set aside for a beneficiary in this manner are held on separate trust for the beneficiary and shall not form part of the GFT No. 4 trust fund.

80. In my opinion, the evidence does not permit any finding to made on the balance of probabilities as to whether or not the $1,437,000 in the Estate Bank Account was Estate funds. Any such finding would be no more than a speculative guess between possibilities: Jones v Dunkel (1959) 101 CLR 298 at 305 (Dixon CJ); Chen v New South Wales (No 2) [2016] NSWCA 292 at [33]–[34] (Leeming JA, McColl JA and Emmett AJA agreeing) and the authorities there cited.

81. As referred to earlier in these reasons, the plaintiffs were required by an order of the Court to prepare an affidavit informing the defendant of whether the legal costs of the Probate Proceeding had been paid from funds of the Estate and, if so, the precise assets of the Estate from which those funds were sourced. As the directors of Jamell and the account holders of the Estate Bank Account that received the $1,437,000 sum, the plaintiffs were in a position to adduce evidence about the basis on which and the terms on which that payment is made. Such evidence would have facilitated an analysis of whether or not those funds, from which the plaintiffs’ legal costs of the Probate Proceeding were paid, were Estate funds.

82. The plaintiffs have instead created great uncertainty about this question. The plaintiffs’ solicitor’s letter dated 4 March 2020 unequivocally stated that the plaintiffs’ legal costs were being paid from Estate funds. The second plaintiff’s affidavit failed to address clearly whether the funds in the Estate Bank Account sourced from GFT No. 4 were funds of the Estate, but conveyed the impression that they were Estate funds. The plaintiffs’ submissions adopted the contrary position that the funds were not Estate funds.

83. The plaintiffs submitted that the defendant bore the onus of proving that the funds were Estate funds. In my opinion, the defendant, as the applicant for an order appointing an administrator pendente lite, bore the legal onus of proving sufficient reason for the appointment. However, it lay within the ability of the plaintiffs as the operators of the Estate Bank Account and as the directors of Jamell to adduce evidence concerning the nature and terms of the $1,437,000 payment. That evidence was necessary in order to inform the defendants whether the plaintiffs’ legal costs of the Probate Proceeding had been paid from funds of the Estate, as required by the orders made by the Court. The plaintiffs did not comply with those orders by the second plaintiff deposing that the legal costs had been paid from funds obtained from GFT No. 4 without stating expressly whether the funds so obtained were Estate funds in the hands of the plaintiffs (but creating the impression that they were), and then submitting that the funds were not Estate funds without presenting any evidence or legal analysis to support that submission other than identifying the loan possibility referred to above.

84. I note that the defendant submitted that the plaintiffs had not only used Estate funds to pay for their legal costs of the Probate Proceeding, but that they had done so in the knowledge that they had no authority to use Estate funds for that purpose. This question does not arise in light of my conclusion above that the evidence does not establish on the balance of probabilities that the funds from which the legal costs were paid were Estate funds. However, in case of any appeal, I should record that, if the plaintiffs’ legal costs were paid from Estate funds, I find that the plaintiffs did not know during the period from the death of the deceased until at least 16 March 2020 when the defendant’s notice of motion was filed that they had no authority to draw on Estate funds to pay their legal costs in the Probate Proceeding.

85. The second plaintiff deposed that she and the first plaintiff assumed that their obligations as executors required that they obtain probate and that, even after the defendant put in issue the deceased’s capacity to make the 2014 Will under which the plaintiffs were appointed as executors, neither the solicitors THW nor counsel briefed by them advised the plaintiffs that their legal costs of the Probate Proceeding could not be paid out of the Estate.

86. The second plaintiff was not cross-examined.

87. The defendant relied on the letter of engagement and other correspondence from THW to the plaintiffs, including a letter of advice dated 30 January 2018, which the defendant submitted made clear to the plaintiffs that they had no authority to pay their legal costs of the Probate Proceeding out of the funds of the Estate. However, I do not consider that the correspondence would have made this clear to the plaintiffs, who had not previously been involved in a process concerning the grant of probate for a will. [73]

    73. Foley Affidavit, paragraph 20 at Court Book p 306.

88. The letter of engagement prepared by THW and signed by the plaintiffs did distinguish between acting for the plaintiffs in relation to the Estate and the Probate Proceeding on the one hand (which was described as “Stage 1”) and acting for the Estate on the other hand (which was described as “Stage 2”). [74] However, from the very beginning of the retainer, THW were corresponding with the defendant’s solicitors claiming to represent the plaintiffs as executors of the Estate. [75] In my view, this is likely to have contributed to the plaintiffs’ understanding that they were acting in their capacity as executors in commencing and prosecuting the Probate Proceeding in order to obtain a grant a probate.

    74. Exhibit 4 at Court Book pp 466 and 472.

    75. Foley Affidavit, paragraph 23 at Court Book p 307; Exhibit 4 at Court Book p 475.

80. THW’s letter of advice to the plaintiffs dated 30 January 2018: [76]

    76. Exhibit 2 at Court Book pp 1410–1418.

1. stated that a grant of probate must be obtained before the assets of the Estate can be collected and sold or given to beneficiaries; [77]

   77. Exhibit 2 at Court Book p 1412.

2. stated that if a person with a relevant interest lodged a caveat against the application for probate, it would be necessary to make an application to the Court that the caveat cease to be in force or to file a statement of claim seeking a grant of probate; [78]

   78. Exhibit 2 at Court Book p 1413.

3. noted that a caveat had in fact been lodged by the defendant; [79]

   79. Exhibit 2 at Court Book p 1414.

4. stated: [80]

   80. Exhibit 2 at Court Book pp 1415–1416; Foley Affidavit, paragraph 25 at Court Book p 307.

“The costs and expenses of obtaining Probate and administering the estate will include our legal costs and the expenses we have to pay …

As discussed in detail in our conference, I cannot guarantee that all costs as executors will be payable by the deceased’s estate. In general circumstances, the executors costs are paid by the estate, however if another party is successful in an application before the court against you, it may be held that you are liable to pay your own costs or part of them. As the matter progresses, if we believe you are at risk of becoming personally liable for costs, we will advise you appropriately and obtain your instructions.”

90. In my view, THW’s advice of 30 January 2018, unqualified by any subsequent advice specifically directed to the legal costs of the Probate Proceeding, would have left the plaintiffs under the impression that their costs of the Probate Proceeding were incurred in their capacity as executors, that there was nothing improper or irregular in paying those costs out of Estate funds, but there was a risk that they would subsequently be personally liable for those costs if they were not successful in the Probate Proceeding. As referred to above, the second plaintiff’s evidence is that the plaintiffs were not subsequently advised that their legal costs of the Probate Proceeding could not be paid out of the Estate.

91. Even if I had been of the view that the documents relied on by the defendant cast doubt on the second plaintiff’s evidence concerning her state of mind in relation to the payment of the plaintiffs’ legal costs of the Probate Proceeding out of funds that she assumed or understood when she affirmed her affidavit were Estate funds, I consider that the principle in Browne v Dunn would preclude the rejection of the second plaintiff’s evidence on the basis of aspects of those documents not put to her in cross-examination.

92. I have referred above to the plaintiffs having had no authority to pay their legal costs of the Probate Proceeding from Estate funds. That is because the validity of the 2014 Will under which the plaintiffs claim to derive authority as executors is in dispute in the Probate Proceeding. Unless and until that dispute is resolved in the plaintiffs’ favour, it is uncertain whether the plaintiffs have the status and authority of executors of the Estate and they are not entitled to spend Estate funds on the assumption that they will be found to be the rightful executors in due course: Howling v Kristofferson, Supreme Court of New South Wales, Cohen J, 14 October 1992, unreported, BC9201556 at 14.

93. If the Court determines that the 2014 Will (or an earlier will naming the plaintiffs as executors) is valid, and if probate is granted to the plaintiffs, their spending of Estate funds before the grant of probate will be authorised retrospectively by reason of the real and personal estate of the deceased vesting in the executors with effect from the death of the deceased pursuant to s 44 of the PA Act. [81] However, that retrospective authorisation will only apply to expenditure that could properly have been incurred by the executors of the Estate. In my opinion, it will not apply to the plaintiffs’ legal costs of the Probate Proceeding. The plaintiffs are prosecuting the Probate Proceeding in their personal capacities, claiming to be recognised as the executors under the 2014 Will, which they contend is valid. Their subjective view that they are prosecuting the proceeding in their capacity as executors of the Estate is misconceived. Whether or not the plaintiffs’ legal costs of the Probate Proceeding will ultimately be paid out of Estate funds depends not on whether the plaintiffs are named as executors under the will that is held to be valid, but on whether the Court in the exercise of its discretion under s 98 of the CPA makes an order that the plaintiffs’ costs of the Probate Proceeding be paid out of the Estate.

    81. On one view, the expenditure could be viewed retrospectively as having been authorised upon the validity of the 2014 Will being upheld and prior to any grant of probate. It is not necessary to resolve that question in this case: see the different views expressed by the Full Court of the Federal Court in Byers v Overton Investments Pty Ltd (2001) 109 FCR 554 at [11]–[24] and by White JA in Deigan as executrix for the estate of the late James Boyd Lockrey v Fussell (2019) 19 BPR 39,853; [2019] NSWCA 299 at [61]–[187] (Bathurst CJ and Macfarlan JA declined to express an opinion, although Bathurst CJ described the reasoning of White JA as having “great force”).

94. The plaintiffs submitted that, if the ultimate outcome of the Probate Proceeding means that they are not the rightful executors of the Estate, then they will be liable to creditors and beneficiaries as executors de son tort in respect of any intermeddling with the assets of the Estate. That is correct. However, for the reasons explained immediately above, it does not follow that (as the plaintiffs’ submissions implied) the plaintiffs are entitled to use Estate funds to pay their legal costs of the Probate Proceeding now on the basis that they will provide an account, or may be liable to creditors and beneficiaries, in due course.

Allegations concerning the plaintiffs’ conduct of the Family Provision Proceedings

95. The affidavit of Mr Frawley, the solicitor acting for the defendant in the Probate Proceeding, establishes that: [82]

    82. Frawley Affidavit, paragraphs 25–55 at Court Book pp 91–97.

1. Charlton’s Family Provision Proceeding was commenced by Summons filed on 20 December 2018 by Tahnee, acting as Charlton’s tutor;

2. Mr Frawley was informed about Chartlon’s Family Provision Proceeding from the outset; and

3. Charlton’s Family Provision Proceeding has been managed by Hallen J;

4. Hallen J has been informed about the existence and progress of the Probate Proceeding throughout the case management of Charlton’s Family Provision Proceeding;

5. the Summons filed to commence Charlton’s Family Provision Proceeding did not name a defendant, and the summons was subsequently amended to name Ms Aleta Gooley and Ms Melinda Foley (the plaintiffs in the Probate Proceeding) as the defendants in accordance with orders made by Hallen J on 5 April 2019;

6. Ms Gooley and Ms Foley made an application in Charlton’s Family Provision Proceeding for the removal of Tahnee as Charlton’s tutor, and the parties subsequently agreed to Tahnee’s removal and agreed on the identity of the new tutor to be appointed. The Court noted that agreement in orders made on 18 July 2019;

7. Hallen J made orders on 18 July 2019 for the payment out of the deceased’s estate of Charlton’s costs, and Ms Gooley’s and Ms Foley’s costs, of the application for removal of Tahnee as tutor;

8. after the appointment of the replacement tutor, Charlton was granted leave to file and serve an Amended Summons;

9. Sean’s Family Provision Proceeding was commenced in late 2019 and Mr Frawley was notified of that proceeding on 10 December 2019;

10. on 6 December 2019, Hallen J made an order appointing Ms Gooley and Ms Foley as defendants to represent the estate and notional estate of the deceased;

11. on 20 December 2019, Mr Frawley wrote to the former solicitors for Ms Gooley and Ms Foley seeking their consent to orders being made in the Probate Proceeding to the effect that:

1. pending the outcome of the Probate Proceeding, the plaintiffs (Ms Gooley and Ms Foley) would not take any steps to bind the deceased’s estate to any obligation or liability, except with the approval of the defendant or by order of the Court;

2. Ms Gooley and Ms Foley would not take any steps in relation to the two Family Provision Proceedings unless the Court specifically orders otherwise;

3. Ms Gooley and Ms Foley would provide the defendant with copies of all pleadings and evidence filed in the Family Provision Proceeding; and

4. leave be granted to the defendant to file an amended defence in the Probate Proceeding;

12. on 14 January 2020, the solicitors for Ms Gooley and Ms Foley enquired why the defendant required copies of the pleadings and evidence in the Family Provision Proceedings, and advised that they would not consent to the orders because, amongst other reasons, it was inappropriate to make orders in the Probate Proceeding relating to the Family Provision Proceedings;

13. on 6 February 2020, the defendant issued a subpoena in the Probate Proceeding to the solicitors acting for Charlton requiring production of all documents, including pleadings and evidence, filed or served in Charlton’s Family Provision Proceedings. The defendant’s solicitor subsequently agreed to limit the scope of the subpoena to evidence served in Charlton’s Family Provision Proceedings;

14. on 24 February 2020, Sackar J made orders in the Probate Proceeding granting first access to Ms Gooley and Ms Foley (who had recently changed solicitors to their current solicitors) to documents produced by Charlton’s solicitors in response to that subpoena, and listing the matter on 11 March 2020 for further directions in relation to access to those documents; and

15. on 10 March 2020, the solicitors for Ms Gooley and Ms Foley advised that the plaintiffs had no objection to the defendant having access to the subpoenaed documents, and an order granting access to the defendant was then made by Sackar J in the Probate Proceeding on 11 March 2020.

96. Mr Frawley says that all of the orders in Charlton’s Family Provision Proceeding were made by the Court in the absence of any input from the defendant in the Probate Proceeding or his solicitors. [83] To the extent that this was intended to convey some complaint, it is without substance. It is clear from the evidence that Mr Frawley was notified of the proceeding from its commencement, was notified of the orders made naming Ms Gooley and Ms Foley as defendants and was notified of the date of the first directions hearing after they were joined as defendants. There is no evidence that he took any steps to appear at that directions hearing on behalf of the defendant in the Probate Proceeding, or any other steps (until now) to object to Ms Gooley and Mr Foley being joined as the defendants to Charlton’s Family Provision Proceeding.

    83. Frawley Affidavit, paragraph 27 at Court Book p 91.

97. The defendant asserts that the plaintiffs wasted estate funds by applying to remove Tahnee as Charlton’s tutor. [84] The evidence summarised above does not support any such conclusion. The application resulted in the removal of Tahnee as tutor and the appointment of a new tutor. The assertion that the application, despite its outcome, was unnecessary or wasteful, inappropriately invites me to second guess the costs order made by Hallen J. There is simply no basis for me to conclude that costs that his Honour has ordered to be paid out of the Estate ought not to have been incurred in the first place.

    84. Defendant’s written submissions (15.4.20) at paragraph 23.

98. The defendant also submits that the plaintiffs, “for no apparent reason”, opposed him having access to the material served in Charlton’s Family Provision Proceeding that was produced in response to the subpoena issued on 6 February 2020 in the Probate Proceeding. [85] As will be apparent from the summary of Mr Frawley’s evidence set out above, this opposition was taken and maintained for a short period of time that coincided with the plaintiffs changing their legal representation to their current solicitors. There is no evidence that this occasioned any court appearances other than directions hearings that were required for the purpose of managing the conduct of the Probate Proceeding generally.

    85. Defendant’s written submissions (15.4.20) at paragraph 23(c).

99. The defendant makes no complaint about the plaintiffs’ conduct in or relating to Sean’s Family Provision Proceeding, [86] yet maintains the application for an order revoking the order made by Hallen J appointing the plaintiffs (the defendants in Sean’s Family Provision Proceeding) to represent the Estate. No evidence was adduced and no submission was made that identified any basis on which the Court should revoke that order made by Hallen J as the specialist list judge who is case managing the proceeding.

    86. Transcript, page 73.

Alleged engagement of the deceased’s former accountant to perform accounting work on behalf of the Estate

100. The defendant relied on evidence given in the Probate Proceeding by Mr John Colley, the deceased’s former accountant for over 30 years, to the effect that he understood that he was to do accounting work on behalf of the Estate and that he had started to do some of that work on the basis of information provided to him by “Melinda” (which, I assume, is a reference to the second plaintiff). [87] I note that this evidence was given by Mr Colley under cross-examination on 19 November 2019. Mr Colley said that he had “started to do some work on the estate”, and referred to having obtained information about “the opening assets and liabilities of the trust” and bank statements so that he could commence work.

     87. Frawley Affidavit, paragraph 16 at Court Book p 88; Exhibit 1 at Court Book pp 123–124.

101. The second plaintiff deposes in paragraph [37(b)] of her affidavit that Mr Colley was engaged to continue preparing quarterly business activity statements for each company.

102. The defendants’ complaint about the work performed by Mr Colley appears to be based on the notion that only the executor of the Estate is authorised to instruct an accountant to prepare financial statements and tax returns for companies in which the deceased held shares and trusts of which the deceased was a settlor, appointor or beneficiary. That notion is misconceived. It is the responsibility of the directors of each company to ensure that the necessary financial records are prepared and that the company complies with its taxation obligations. The same applies to the trustee (and, where the trustee is a company, and the directors of the trustee company) of each trust. The expenditure of corporate funds or trust funds to discharge these obligations does not involve any unauthorised use of funds of the Estate. There was no evidence of the amounts that Mr Colley had charged for the work performed, or the source of funds from which his fees were paid. There is no basis to speculate that he was paid from funds of the Estate rather than from funds of each relevant company or trust. The corporate and trust entities remain intact after the death of the deceased. The funds of those entities do not, by reason of the deceased’s death, become funds of the Estate.

Alleged mismanagement of properties owned by Motasea

103. Tyrone gave evidence that he lives in one of the apartments owned by Motasea in Elouera Road, Cronulla. He says that he has observed that three of those apartments have been vacant for approximately the last five years (that is, since before the death of the deceased) despite work having been done in those units between two to four years ago, including installation of smoke alarms and fire doors. He says that the plaintiffs have not advertised the units for lease and have not responded to his correspondence asking that they be advertised for lease. If the units were leased out, this would represent rental income for Motasea. Tyrone also says that the property management agents for the building are charging fees of 5.5%, above the rates of least of one their competitors of 3.5%. [88]

     88. Tyrone Affidavit, paragraphs 5–25 at Court Book pp 41–44, 74–80.

104. The second plaintiff acknowledged that the three apartments referred to in Tyrone’s affidavit have been vacant for the last five years. She deposed that, between 2016 and 2018, this was because the apartments were in a derelict state and the building required a complete fire upgrade. [89]

     89. Foley Affidavit, paragraphs 38–45 at Court Book pp 312–313; Exhibit 4 at Court Book pp 521–565, 593–601.

105. The reports of the property management agents exhibited to the second plaintiff’s affidavit do not establish that three apartments referred to by Tyrone were in a derelict state. In those reports, the property agents advise as to the likely weekly market rental for all three apartments as at September 2016, albeit one of them is said to be in need of renovation and another requires minor repairs.

106. However, the reports exhibited to the second plaintiff’s affidavit do show that an assessment was prepared in May 2017 that identified necessary fire safety upgrade work, and quotes were obtained and the fire safety work and other work was carried out during the period from May 2017 to January 2019. A report from the managing agent for the building dated 15 April 2019 states that the apartments were advertised for lease in January 2019, but:

“We have not had much success with leasing due to the influx of new units in the area that are marketed for lease. The other units are offering brand new units with security parking, air conditioning etc. It is hard to entice tenants to rent 127 Elouera Road, when other units in the area are of a higher standard.

We will continue to market the units online and have weekly open houses …”

107. The second plaintiff deposed that one of the apartments referred to in Tyrone’s affidavit has recently been leased, and the other two continue to be advertised for lease. She attributed the length of time taken to lease the apartments to the age of the building, which makes it less desirable than more modern properties, including due to its lack of lock up garages and internal laundry facilities.

108. The second plaintiff deposed that the property agents who manage the building in fact charge only a management fee of 3.5%, which she understands to be below market average fees across the Sydney market. The 3.5% fee charged is confirmed by the management agency agreement dated 1 November 2016, a copy of which is exhibited to the affidavit.

109. The evidence does not establish that the plaintiffs have allowed the Elourera Road property to fall into disrepair, or have failed to make efforts to lease the apartments to earn an income stream for Motasea. On the contrary, the documents exhibited to the second plaintiff’s afidavit that I have referred to above establish that extensive work has been undertaken on the building and apartments at the Elourera Road property since approximately May 2017 and that the plaintiffs have been endeavouring to lease the apartments, and set out the managing agent’s assessment of the reasons why the apartments are slow to lease. The documents also establish that the management agency fee charged is much lower than Tyrone had believed and is in fact directly in line with what Tyrone says is an attractive fee.

Principles applicable to the appointment of an administrator pendente lite

110. Section 73 of the PA Act provides:

“Administration pendente lite and receiver

1. The Court may –

(a)   pending any suit touching the validity of the will of any deceased person, or for obtaining, recalling, or revoking any probate or grant of administration; or

(b)   during a contested right to administration,

appoint an administrator of the personal estate and the same or any other person to be receiver of the real estate of any deceased person, with such full or limited powers and with or without a bond or sureties as the Court may think right.

1. The Court may make such orders for the remuneration of such administrator or receiver out of the personal and real estate of the deceased as it may think right.”

   111. In England, a practice was established in 1865, and confirmed in 1948, that an administrator pendente lite would be appointed by the Probate Court (or the Probate Division of the High Court) whenever the Court of Chancery (or the Chancery Division of the High Court) would appoint a receiver. That is to say, the practice was that an administrator pendente lite would be appointed whenever there was a bona fide suit pending concerning, relevantly, the validity of the will. This practice was followed on the ground that, whilst the suit was pending, there was no one legally entitled to receive or hold the assets of the estate, or to give discharges. The practice did not depend on the condition of the estate or the identity of the person who had actual possession of the assets of the estate: Re Bevan (deceased); Bevan v Houldsworth [1948] 1 All ER 271; Bellew v Bellew (1865) 4 Sw & Tr 58; 164 ER 1437.

   112. However, Australian courts have frequently referred to the need for an applicant for the appointment of an administrator pendente lite to show not only that the circumstances referred to in s 73(1)(a) and (b) of the PA Act (or equivalent legislation in jurisdictions outside New South Wales) exist, but also that there is a “necessity” or “sufficient reason” for the appointment in all the circumstances of the case. The appointment is not made “as a matter of course” whenever a probate suit is pending.

   113. For example, in Greenway v McKay (1911) 12 CLR 30, the deceased had been killed in a workplace accident and had died intestate. The primary judge had made an order appointing an administrator ad litem to pursue a claim by the deceased’s widow for damages under the Wrongs Act 1890 (Vic) and the Employers and Employees Act 1890 (Vic). In subsequently revoking that order on the grounds that it had been for the benefit of the deceased’s widow and child, and not to protect the assets of the estate, the primary judge had said that a grant of limited administration should only be made (at 315–316):

“… under circumstances which require the interferences of the Court for the purpose of protecting the assets of the estate – that it must be shown that the estate was in jeopardy – and that it was necessary to make the order for its protection.”

114. On appeal to the High Court of Australia, Griffith CJ referred to the general jurisdiction to make limited grants of administration as arising “from the necessity of the case” (at 315). His Honour said this concerning the above passage from the primary judge’s reasons (at 316):

“Those reasons are primarily applicable to an application for administration pendente lite, which is analogous to the appointment of a receiver. But, even if those reasons be applicable to grants of this kind, the case falls within the rule suggested by the learned Judge. Although administration limited to bringing an action is not, in one sense, for the protection of the assets of the estate – that is, the physical assets – yet that limited administration is granted in order to secure for the estate what would not otherwise be available as assets, which is the same thing in principle. …”

115. Barton J agreed with Griffith CJ (at 317).

116. More recently, the Court declined to appoint an administrator in Goodsall v Keen – Estate of Sydney Arthur Keen [2006] NSWSC 1143. The deceased had been the proprietor of a private hospital. The business of the hospital was conducted through a company in which the 99 of the 100 issued shares formed part of the deceased estate, and the remaining share was owned by the deceased’s son. The other assets of the deceased estate comprised the land upon which the hospital was conducted, a motor vehicle and other smaller personal property. Following the deceased’s death, the business of the hospital was conducted by the deceased’s son and a longstanding employee of the hospital. The deceased’s son had made most of the practical decisions about the operation of the hospital for a period of some years prior to the death of the deceased.

117. Proceedings were commenced in which the validity of the deceased’s will was put in issue. An application was made for the appointment of an administrator pendente lite. There was some evidence of some “unusual transactions”, but no evidence of money or other assets of the estate having disappeared.

118. In an ex tempore decision, Campbell J (as his Honour then was) said (at [8]):

“The appointment of an administrator pendente lite, under section 73 Wills Probate and Administration Act 1898, is made only when there is sufficient reason to do so. In Horrell v Witts and Plumley (1866) LR 1 P & D 103, Sir J P Wilde declined to appoint an administrator pendente lite when the deceased was a partner in a business, and the partnership business was being operated by the surviving partner.”

119. His Honour refused to appoint an administrator pendente lite in the particular circumstances of the case (at [9]). Those circumstances included that the need to regularise certain transactions was capable of being addressed by specific orders concerning those transactions, and it was not necessary to go so far as to appoint an administrator pendente lite. Rather than dismissing the application, his Honour stood it over to the commencement of the trial and granted liberty to restore it on seven days’ notice.

120. The facts in Goodsall v Keen (supra) were similar to the facts in Horrell v Witts (1866) LR 1 P & D 103, to which Campbell J referred. In Re Bevan (supra), Lord Greene MR explained (at 273) that, in Horrell v Witts (supra), the deceased’s entire assets consisted of his share in a partnership and the surviving partner was continuing to operate the farm that had been conducted in partnership with the deceased until his death. The preservation of the deceased estate would not be improved by appointing an administrator pendente lite to wrangle with the surviving partner in the management of the farm. The Master of the Rolls described this as a “very special case” which warranted departure from the usual practice that had been laid down in Bellew v Bellew (supra).

121. Similarly, in Goodsall v Keen (supra), the majority shareholding in the company that conducted the hospital business, and the land on which that business was conducted, comprised substantially the whole of the deceased estate. The business of the hospital continued after the death of the deceased, with operational decisions being made in substantially the same manner as they had been made for some years prior to his death. The estate was therefore not in any jeopardy that called for the exercise of the Court’s power to appoint an administrator pendente lite.

122. In Gray v Hart [2010] NSWSC 55, the plaintiff sought probate of the deceased’s most recent will. The defendants sought probate of an earlier will, claiming that the deceased lacked testamentary capacity when she had made the most recent will. Both the plaintiff and the defendant agreed that an administrator should be appointed under s 73(1)(a) of the PA Act pending the determination of the contest as to which will was valid. The only dispute between them related to the identity of the administrator to be appointed.

123. Palmer J accepted that it was “obviously necessary to have an administrator appointed pending determination of this suit” and that “the necessity for the appointment of an administrator arises, of course, from the fact that there are in contest two wills”: [2010] NSWSC 55 at [17] and [19].

124. However, his Honour declined to appoint either of the prospective administrators nominated by the parties on the basis that they had not been shown to be suitability qualified and independent of the parties. In relation to the importance of the independence of an administrator pendente lite, his Honour said (at [10], omitting citations):

“If the estate is in contest between beneficiaries under competing wills, there will often be mutual distrust and hostility in the administration of the estate if one of the contestants, or a person apparently biased towards one of them, is appointed administrator. That circumstance will often generate needless litigation to the detriment of the estate. That is why the Court generally prefers an administrator independent of both sides of the dispute.”

125. In my opinion, the cases referred to above illustrate that the search for “necessity” or “sufficient reason” for the appointment of an administrator pendente lite is directed to a need for the Court to be satisfied that, in all the circumstances of the case, the assets of the deceased estate are in some jeopardy, and the appointment of an administrator pendente lite will remove, or at least reduce, that jeopardy. As the plaintiffs’ submissions acknowledged, it is not necessary that the jeopardy arise from some misconduct on the part of a person dealing with or claiming to preserve the assets of the deceased estate. [90]

     90. Transcript, page 90, line 40.

126. The object of an appointment of administrator pendente lite is to ensure that the deceased estate is managed and preserved for the benefit of those persons who may ultimately be found in the suit to be entitled to it. The administrator is required to act impartially as between the potential beneficiaries. Section 73 of the PA Act allows the Court to mould the powers of the administrator in a manner best designed to achieve that object in the specific circumstances of the case: Henderson v Executor Trustee Australia Ltd (2005) 93 SASR 337; [2005] SASC 477 at [44]–[45], [53] (Debelle J, Anderson J agreeing); Hempseed v Ward [2013] QSC 348 at [14] (McMeekin J).

127. The plaintiffs submit that an administrator pendente lite should not be appointed in all the circumstances of this case because either: [91]

1. even before probate is granted, the plaintiffs are authorised by of their appointment as executors under the deceased’s last will to administer the deceased estate (depending on how divergence in the case law about this question is ultimately resolved: see Byers v Overton Investments Pty Limited (2001) 109 FCR 554 and Deigan as executrix for the estate of the late James Boyd Lockrey v Fussell (2019) 19 BPR 39,853; [2019] NSWCA 299 per White JA); or

2. the plaintiffs have in fact been administering the deceased estate since the death of the deceased, to the knowledge of the defendant and, until now, without complaint. The plaintiffs submit that their administration will be retrospectively validated by s 44 of the PA Act if they succeed in the Probate Proceeding. If the plaintiffs do not succeed in the Probate Proceeding, they submit that they will have become innocent intermeddlers and executors de son tort, and the interests of beneficiaries and creditors will be protected because they will be liable for “illegitimate” dealings with estate property since the date of the deceased’s death. The plaintiffs submit that the “concept of executor de son tort exists for the very reason that persons regularly administer estate informally until probate is granted”.

   91. Plaintiffs’ written submissions (16.4.20) at paragraphs 18–19.

128. For the reasons already explained in [92]–[94] above, I reject the submission that the plaintiffs’ use of Estate funds to pay their legal costs of the Probate Proceeding would involve no mischief in circumstances where the validity of the will under which the plaintiffs claim to derive authority as executors is in dispute. The evidence does not establish on the balance of probabilities that the plaintiffs have in fact used Estate funds for that purpose, but that is because the plaintiffs have failed to comply with a Court order requiring them to explain the position and have instead created great uncertainty about whether the funds from which their legal costs have been paid are funds of the Estate.

129. The question is whether the assets of the Estate referred to in [11] above are in some jeopardy which constitutes sufficient reason for the appointment of an administrator pendente lite in all the circumstances of this case.

130. There is no evidence that the shares in the publicly listed companies, or the value of those shares, are in any jeopardy that would be alleviated by the appointment of an administrator pendente lite to hold those shares for the benefit of the persons who are beneficially entitled to them under the will ultimately determined by the Court to be valid.

131. The six private companies are under the management of the directors of those companies, as they were before the death of the deceased. For the reasons explained in [103]–[109] above, the defendant has not established that the plaintiffs have allowed the Elourera Road property to fall into disrepair, or have failed to make efforts to lease the apartments to earn an income stream for Motasea. There is no evidence suggesting that the standard of management of the other private companies by the directors has declined following the death of the deceased and that the value of the shares in those companies held by the Estate is therefore in jeopardy.

132. Nor is there any evidence that the value of the loans owing to the deceased estate are in jeopardy.

133. The second plaintiff’s evidence is that funds held in the deceased’s bank accounts have been frozen, and will remain frozen pending the financial institutions being provided with contrary instructions. [92] Those institutions have been provided with evidence of the death of the deceased, and will not act on contrary instructions unless given by an executor to whom probate has been granted.

     92. Foley Affidavit, paragraph 37(d) at Court Book pp 311–312.

134. The second plaintiff deposed that the insurer under the two life insurance policies has been advised that probate is contested and that the benefits payable under the policies will be paid to the Estate once a grant of probate has been made. [93] There was no evidence that the Estate’s interest in those benefits is jeopardised as a result of their being no person currently authorised to receive those benefits as executor of the Estate.

     93. Foley Affidavit, paragraph 37 at Court Book p 312.

135. The value of the deceased’s motor vehicle and personal and household items is insignificant compared to the other assets of the Estate, but there is no evidence that those items are in jeopardy. [94]

     94. Foley Affidavit, paragraph 37(e) at Court Book p 312.

136. For the reasons explained in [95]–[99] above, the defendant has not established that the plaintiffs have conducted themselves in a manner that has wasted costs in Charlton’s Family Provision Proceeding. I do not consider that the plaintiffs’ brief opposition to the defendant having access to the evidence served in Charlton’s Family Provision Proceedings, to which he is not a party and to which he has not sought to be joined as a party, was unreasonable in all the circumstances or points to jeopardy that might arguably call for the appointment of an administrator pendente lite.

137. In his affidavit affirmed on 16 March 2020 and read by the defendant in support of the notice of motion, Tyrone gives a detailed account of Charlton’s condition, the specialist therapy that he requires and the significant challenges that Tyrone and Tahnee face in caring for Charlton. Those matters, if adduced in evidence in Charlton’s Family Provision proceedings, will be relevant to the determination of Charlton’s claim for provision out of the deceased’s estate. However, I am not satisfied that they are a reason in this case to appoint an administrator pendente lite with a view to conferring on the appointee powers to make interim distributions under s 92 of the PA Act which might alleviate the challenges.

138. Although the role of an administrator pendente lite will vary according to the circumstances of his or her appointment, the administrator’s duty is to get in the assets of the estate and to manage and preserve them. An administrator is only able to distribute or deal with assets of the estate where the potential beneficiaries agree or the Court gives directions to do so. Where potential beneficiaries do not agree, and the dealing or distribution proposed might adversely affect one or more of the beneficiaries, the Court will, as a general rule, give directions preserving the status quo: Henderson v Executor Trustee Australia Ltd (supra) at [44]–[45]. The plaintiffs and the defendant are beneficiaries under the 2014 Will, the 2012 Will, the 2010 Will and each other will in issue in this proceeding. [95] There is no evidence that they would agree to any interim distribution, and no evidence about the position of other beneficiaries under each of the wills in issue. The defendant did not present any detailed analysis demonstrating that no beneficiaries under any of those wills would be adversely affected by an interim distribution to Tahnee and Tyrone. In any event, the authorities discussed above do not support the view that the power to appoint an administrator pendente lite may be exercised with a view to facilitiating an interim distribution to alleviate difficulties faced by some beneficiaries due to their personal circumstances, as opposed to with a view to preserving assets of the Estate that are in jeopardy.

     95. See [6] above; Exhibit 1 at Court Book pp 125–179.

139. Notwithstanding the matters in [130]–[138] above, I have concluded that the assets of the Estate are in some jeopardy. It was apparent from the tone of the parties’ submissions and from some of the correspondence in evidence that the Probate Proceeding has already generated a degree of hostility and suspicion between the plaintiffs and the defendant. Regrettably, this is a common side effect of hard fought litigation between family members over a deceased estate. In my opinion, that hostility and suspicion must have been materially increased by the uncertainty that the plaintiffs have created about whether Estate funds have been used to pay $1,000,000 for the plaintiffs’ personal legal costs of the Probate Proceeding, together with the position they have taken in their submissions to the Court that their use of Estate funds for that purpose would not involve any wrongdoing. The risk that the plaintiffs may have used Estate funds to pay their personal legal costs without any Court order permitting those costs to be paid out of the Estate, and may continue to do so in the absence of some undertaking or restraint, is likely to generate needless litigation within or in connection with and after the Probate Proceeding. For example, a protracted dispute about the costs orders that should be made at the conclusion of the Probate Proceeding is likely if it remains uncertain whether the plaintiffs have already been helping themselves to Estate funds to pay their legal costs. If levels of hostility and suspicion remain elevated by that ongoing uncertainty, disputes are also more likely to emerge about the accuracy of any accounting provided by the plaintiffs to the beneficiaries (or to the rightful executor, if the plaintiffs are not held to be the executors under a valid will) of the plaintiffs’ dealings and transactions in relation to the Estate since the death of the deceased. Disputes that are unnecessary, or that are unnecessarily protracted, will be to the detriment of the Estate and to the detriment of the beneficiaries. Such disputes increase the extent to which the Estate may potentially be eroded by legal costs ordered to be paid out the Estate, and delay the ability of the rightful executor to distribute the assets of the Estate to the beneficiaries in accordance with the will.

140. The appointment of an administrator pendente lite to hold and preserve the assets of the Estate pending the determination of the Probate Proceeding would remove the basis for further suspicion to develop concerning what future dealings the plaintiffs may undertake with the assets of the Estate. The ancillary order sought in paragraph 3 of the notice of motion would require the plaintiffs to serve an affidavit clarifying whether the funds paid by Jamell into the Estate Bank Account were funds of the Estate, disclosing the extent to which they have caused any funds or other assets to be withdrawn from the Estate since 23 December 2017 and disclosing all transactions entered into by them purportedly as executors of the Estate since 23 December 2017. The second plaintiff’s affidavit provides information about legal costs incurred and steps taken by the plaintiffs in relation to the Estate, but does not provide the detailed information required by paragraph 3 of the notice of motion. [96] The provision of such information may go some way towards alleviating the hostility and suspicion about what has occurred in the past, and would be likely to assist the parties to conduct any costs dispute or accounting process at the conclusion of the Probate Proceeding more efficiently. The information would also be relevant for the administrator to identify the appropriate steps to be taken during the administration to preserve the assets of the Estate. However, the appointment of an administrator would also expose the Estate to costs. The administrators proposed by the defendant charge hourly rates of between $450 and $500 (plus GST).

     96. Foley Affidavit, paragraphs 32–37 at Court Book pp 309–312.

128. In my opinion, this is a case where it may be possible to alleviate the risk to the Estate without going so far as to appoint an administrator pendente lite if the plaintiffs are willing to offer undertakings to the Court and the defendant to:

1. serve an affidavit within 14 days of the date of these reasons:

1. providing a detailed explanation of the transaction pursuant to which the sum of $1,437,000 was transferred by Jamell to the Estate Bank Account on 29 January 2018, including:

1. whether the transaction was a loan from Jamell to the plaintiff and, if so, the terms of the loan;

2. if the transaction was not a loan, the nature and terms of the transaction and the clause of the GFT No.4 Deed that conferred power on Jamell to enter into the transaction; and

3. annexing or exhibiting all documents evidencing the transaction, its nature and terms, including (without limitation) documents evidencing any resolution of Jamell to enter into the transaction;

2. disclosing the extent to which the plaintiffs have caused any funds or other assets to be withdrawn from or transferred out of the Estate during the period from 23 December 2017 to the date of the affidavit (excluding transfers out of the Estate Bank Account shown in the statements for that account in evidence on the hearing of the notice of motion, if the funds in that account be funds of the Estate); and

3. disclosing all transactions entered into by the plaintiffs purportedly as executors of the Estate during the period since 23 December 2017;

2. refrain from using funds or assets of the Estate to meet any costs or expenses incurred by the plaintiffs or any other person in or in relation to the Probate Proceedings, the Family Provision Proceedings or any other proceedings in which the Estate is a party or has an interest, save to the extent that any order of the Court authorises such costs to be paid out of the Estate; and

3. pending determination of the Probate Proceeding, refrain from taking any steps to bind the Estate to any obligation or liability, except with written approval of the defendant or by an order of the Court permitting them to do so.

142. The information in the affidavit referred to in (a) above would provide a level of transparency about past transactions, without duplicating the information in the second plaintiff’s affidavit affirmed on 6 April 2020. In my view, the information to be included in that affidavit would facilitate the efficient conduct of any costs dispute or accounting process at the conclusion of the Probate Proceeding. At the same time, the undertakings in (b) and (c) above would provide the defendant and beneficiaries with the comfort that there is no risk of the Estate assets being inappropriately used or eroded by the plaintiffs in the meantime.

143. However, if the plaintiffs are not willing to give those undertakings to alleviate the jeopardy to the Estate that I have referred to in [139] above, that jeopardy is sufficient reason for the appointment of an administrator pendente lite, in my opinion. I will make an order for that appointment and an ancillary order in terms of paragraph 3 of the notice of motion if the undertakings are not given.

144. The defendant has proposed two potential appointees: Mr Stephen Lynch and Mr Brian Stinson. Both Mr Lynch and Mr Stinson are solicitors admitted to practise in New South Wales and accredited specialists in the area of wills and estates under the Specialist Accreditation Scheme operated by the Law Society of New South Wales. They have each sworn affidavits confirming their preparedness to act as an independent interim administrator of the Estate and their acceptance of the fiduciary duties that would be associated with that appointment. They have each deposed that they have not acted for or had any dealings with the parties to the Probate Proceeding or the deceased. Mr Lynch’s hourly rate is $450, and the hourly rates of solicitors may would assist him is $280 per hour. Mr Stinson’s hourly rate is $500, and the hourly rates of others who may assist him range between $120 to $500 per hour. Both Mr Lynch and Mr Stinson say that they would undertake the majority of the work personally.

145. There is little to differentiate between the two proposed appointees, but I would appoint Mr Lynch by reason of his slightly more economical fee structure.

146. The plaintiffs submitted that, if any administrator pendente lite were to be appointed, then the plaintiffs should be appointed to fulfil that role. I regard that proposal as wholly unsuited to alleviating the risk to the Estate that I have referred to in [139] above.

147. I do not consider that it would be appropriate to confer on the administrator all of the powers sought in paragraph 5 of the defendant’s notice of motion. Specifically:

1. I would not confer on the administrator the power to represent the Estate in the Family Provision Proceedings. As referred to earlier in these reasons, the defendant did not identify any proper basis for me to revoke or interfere with the orders made by Hallen J in those proceedings;

2. I would not confer on the administrator the power to be appointed as the director of companies wholly or majority owned by the Estate. Rather, the administrator would hold the shares owned by the Estate in those companies, and would need to seek directions from the Court before taking any step as shareholder to remove those directors or appoint new directors. The administrator is appointed to preserve, not change, the status quo;

3. the administrator would have the power to control the deceased bank accounts, and those bank accounts would need to be described specifically in the order;

4. the defendant would need to identify and confer with the plaintiffs in relation to any other “financial and non–financial assets of the Estate” referred to in paragraph 5(e) of the defendants notice of motion. If this includes debts owing to the deceased at the time of his death, I would need to hear from parties about whether it would be appropriate to order that the administrator not enforce repayment of certain debts that are assigned under some of wills in contest in the Probate Proceeding to the same beneficiary whom the shares in the relevant debtor company are bequeathed;

5. I would include the powers in paragraphs 5(f) and (g) of the defendant’s notice of motion; and

6. I would not include the powers in paragraph 5(h) of the defendant’s notice of motion, for the reasons referred to in [138] above.

DISGORGEMENT ORDER

148. As I have not found on the balance of probabilities that the plaintiffs used Estate funds to pay their legal costs, it is not strictly necessary to address the defendant’s application for the “disgorgement order” referred to in [29] above. However, in case of any appeal, it is appropriate that I explain here the reasons why I would not have made the order on the basis sought by the defendant, even if I had found that the plaintiffs’ legal costs of the Probate Proceeding had been paid out of Estate funds.

149. The defendant submitted that, unless specifically authorised to do so by an order of the Court, the plaintiffs were not entitled to appropriate funds from the Estate to pay the plaintiffs’ legal costs of the Probate Proceeding. I accept that submission, for the reasons in [92]–[94] above.

150. However, the defendant went further and submitted that the Court could make an interim order requiring the plaintiffs to replenish the Estate with any Estate funds found to have been used to pay the plaintiffs’ legal costs, without prejudice to the plaintiffs’ rights to seek an order at the conclusion of the Probate Proceeding that their costs be paid out of the Estate. The order sought also extended to the plaintiffs’ legal costs in the Family Provision proceedings and legal and accounting costs relating to the administration of the Estate. The terms of the order made no exception for the plaintiffs’ legal costs that the Court has already ordered in the Family Provision Proceedings be paid out of the Estate. It was not clear from the defendants’ submissions how a costs order at the conclusion of the Probate Proceedings might address costs of the Family Provision proceedings or other legal and accounting costs.

151. The defendant acknowledged that the order sought is in the nature of a mandatory interim injunction, and submitted that the Court has power to make such an order as an incident of its power to award costs pursuant to CPA s 98, as applied in the context of probate proceedings (with specific reliance on PA Act s 33). The defendant did not address precisely how the disgorgement injunction would involve the exercise of a power incidental to the discretion to make costs orders in the Probate Proceeding under CPA s 98 or PA Act s 33. The defendant did not advance any other basis on which the disgorgement injunction might be granted.

152. In my opinion, CPA s 98 does not confer power on the Court to make the disgorgement injunction sought by the defendant. Section 98(1) of the CPA is a discretionary power to award costs. The power is to be exercised judicially in accordance with established principle and factors directly connected with the litigation, and is subject to the rules of Court: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22], [35] (Gaudron and Gummow JJ), [63]–[66] (McHugh J) and [134] (Kirby J); Lou v IAG Limited t/as NRMA Insurance [2019] NSWCA 319 at [42] (Payne JA, Gleeson JA agreeing). The power does not confer on a party to litigation any right to recover their costs from the opposing party, or any right to a costs order adverse to the opposing party, prior to the exercise of that discretion: see Boylan v Farthing (1999) 86 FCR 120 at [25]; Flower & Hart v White Industries (Qld) Pty Ltd (2001) 109 FCR 280; [2001] FCA 370 at [59]; Oshlack v Richmond River Council (supra) at [134] (Kirby J), citing Donald Campbell & Co v Pollak [1927] AC 732 at 811. Accordingly, it cannot be said that CPA s 98 confers any right capable of being protected by a mandatory injunction of the kind sought by the defendant, irrespective of whether the disgorgement injunction is characterised as final or interlocutory relief.

153. I do not think that s 33 of the PA Act adds anything to the above analysis. That provision confers jurisdiction on this Court in probate and administration matters. The defendant did not articulate how this provision, either alone or together with CPA, s 98, conferred power on the Court to make the disgorgement order.

154. It goes without saying that this does not in any way fetter the discretion of the Court to determine what costs orders should be made at the conclusion of the Probate Proceedings, including whether or not the whole or any part of plaintiffs’ costs should be paid out of the Estate. Nor does it preclude the defendant or any other beneficiaries of the Estate, or the rightful executor (if a grant of probate is ultimately made in favour of a person other than the plaintiffs), from claiming such relief as they may be advised to claim against the plaintiffs in respect of any expenditure of Estate funds during the period between the death of the deceased and determination of the Probate Proceeding.

CONCLUSION AND ORDERS

155. As to the principal relief sought in the defendant’s notice of motion (paragraphs 4, 5 and 6), an order will be made pursuant to s 73 of the PA Act appointing Mr Stephen Lynch, solicitor, as administrator pendente lite of the Estate pending final determination of the Probate Proceeding, unless the plaintiffs give the undertakings referred to in [141] above. The appointment will be made without security, and otherwise on terms to the effect referred to in [147] above, subject to hearing from the parties in relation to the matters referred to in [147(d)] above. An ancillary order in terms of paragraph 3 of the notice of motion will also be made.

156. Interim orders were made by Ward CJ in Eq on 24 March 2020 in terms of paragraphs 1(a) and 1(b) of the defendant’s notice of motion. The undertakings, if given by the plaintiffs, will cover the field of those interim orders and also cover additional matters. If the undertakings are not given, the interim orders will operate ancillary to the appointment of the administrator pendente lite to preserve the assets of the Estate and it is appropriate in my view that the interim orders continue pending determination of the Probate Proceeding.

157. Irrespective of whether the plaintiffs give the undertakings or the order is made appointing Mr Lynch as administrator pendente lite, paragraph 2 (the disgorgement order) and paragraph 7 (revocation of the appointment of the plaintiffs to represent the Estate in the Family Provision Proceedings) of the defendant’s notice of motion will be dismissed.

158. The plaintiffs are to notify the defendant and my Associate in writing within 5 days whether the plaintiffs will give the undertakings referred to in [141] above.

159. The parties are then to confer for the purpose of agreeing on the terms of orders to give effect to these reasons for judgment and send the agreed orders (or, if agreement cannot be reached, the orders for which each party contends) to my Associate within a further 5 days.

160. The matter will be listed at 9:00am on 10 July 2020 for the purpose of making the orders disposing of the notice of motion. On that occasion, I propose to make an order that the costs of the defendant’s notice of motion be reserved for determination by Sackar J at the conclusion of the Probate Proceedings, subject to hearing from any party who seeks a different order as to costs.

161. The parties are granted liberty to apply for an earlier listing in the event that they are able to agree on orders prior to 10 July 2020.

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Endnotes

Amendments

05 August 2020 - [74] - replaced the word "defendant" with the word "deceased" in the third line.

Decision last updated: 05 August 2020