H Stanke & Sons Pty Ltd v Frederick John Von Stanke (No 2)
[2007] SASC 379
•26 October 2007
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
H STANKE & SONS PTY LTD v FREDERICK JOHN VON STANKE & ORS (No 2)
[2007] SASC 379
Judgment of The Honourable Justice Sulan
26 October 2007
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS - GENERALLY
First defendant appeals from judgment of Master in which Master did not strike out certain paragraphs of the contribution notice of the second defendant - whether certain paragraphs include statements of conclusions based on unpleaded material facts - whether certain paragraphs are frivolous or vexatious - whether certain paragraphs plead evidence instead of material facts - whether certain paragraphs disclose no reasonable cause of action.
Supreme Court Rules 1987 r 46A; Trustee Act 1936 s 36(1), s 84B, referred to.
Williams v Australian Telecommunications Commission (1988) 52 SASR 215, applied.
H Stanke & Sons Pty Ltd & Anor v O'Meara [2007] SASC 246, discussed.
H Stanke & Sons Pty Ltd & Anor v Frederick John Von Stanke & Ors [2007] SASC 51; H Stanke & Sons Pty Ltd and Cape Banks Processing Company Pty Ltd v von Stanke, O'Meara and Ors (2006) 95 SASR 425; Marini v MLH Insurance Brokers Pty Ltd [2004] SASC 400, considered.
H STANKE & SONS PTY LTD v FREDERICK JOHN VON STANKE & ORS (No 2)
[2007] SASC 379Civil
SULAN J: The background to this appeal is set out in my judgment of 25 July 2007. On 8 May 2007, the first defendant lodged a notice of appeal against the orders and judgment delivered by a Master of the Supreme Court on 20 February and 19 April 2007. The appeal related to orders that had been made in relation to the Amended Contribution Notice of the second defendant. The notice of appeal disclosed five grounds of appeal.
On 17 and 18 May 2007, I heard argument from the first and second defendants in relation to one of the grounds of appeal, as well as two further applications relating to the Amended Contribution Notice. I delivered judgment on the appeal and the applications on 25 July 2007. The history of this action is also set out in those reasons. The first defendant lodged an appeal against that judgment on 15 August 2007. At a directions hearing before me held on 17 August 2007, the first defendant advised the Court that they did not seek leave to appeal, but were appealing directly to the Full Court. The Full Court has reserved judgment on that appeal.
Certain of the orders made by the Master in his judgment of 20 February 2007 related to the Amended Defence of the second defendant. The plaintiffs appealed against those parts of the judgment in a notice of appeal dated 19 March 2007. On 21 March 2007, a single Judge of this Court referred that appeal directly to the Full Court. At the time of the hearing on 17 and 18 May 2007, the Full Court had reserved judgment in that appeal. The first and second defendants, who are the parties to the appeal in respect of the Amended Contribution Notice, indicated that the judgment of the Full Court might resolve the first three grounds of appeal disclosed in the first defendant’s notice of appeal dated 8 May 2007. Consequently, the hearing before me on 17 and 18 May 2007 proceeded only on ground four, on which the parties agreed that the judgment of the Full Court would have no bearing.
At the directions hearing on 17 August 2007, the parties indicated that the ultimate position was, in essence, that the judgment of the Full Court had not disclosed any reasoning that would, prima facie, operate to render the remaining grounds of appeal redundant. I heard argument on the remaining grounds of appeal on 29 August 2007.
Appeal against orders and judgment of Master
The outstanding grounds of appeal are as follows:
1. The Learned Master:
1.1 erred in that he refused, or failed, to strike out each of paragraphs 12, 12.1, 13, 14, 21, 22, 23, 24, 26.3, 32.4-32.9, 33, 34, 35, 36, 37, 39, 40, 41, 42, 59, 66, 66.1, 67, 69, 70 and 71 of the Amended Contribution Notice on the ground that each constituted or included a statement of conclusions based on unpleaded material facts; alternatively, the Learned Master ought to have ordered the pleading of material facts; and
1.2 ought to have struck out each of these paragraphs for non-compliance with the Rules as to pleadings, and as tending to cause prejudice, embarrassment and delay in the proceedings.
2. The Learned Master:
2.1 erred in refusing, or failing, to strike out each of paragraphs 12.3, 12.4, 12.5, 15, 16, 17, 18, 19, 20, 21, 22.5, 30, 31, 32.1, 32.2, 32.3, 32.4, 32.5, 32.6, 32.7, 32.8, 42, 43, 44, 45, 46, 47, 48, 49, 50, 41, 52, 53, 54, 55, 56, 57, 58 and 66.2.1 of the Amended Contribution Notice as being frivolous or vexatious;
2.2 ought to have struck out those paragraphs for non-compliance with the Rules as to pleadings, and as amounting to an abuse of process, and tending to cause prejudice embarrassment and delay in the proceedings.
3. The Learned Master:
3.1 erred in that he refused, or failed, to strike out each of paragraphs 15, 16, 17, 18, 19, 20, 21, 30, 31, 32, 32.1, 32.2, 32.3, 32.4 and 66.1 of the Amended Contribution Notice on the ground that each constituted or included a statement of evidence rather than a pleading of material facts, thereby creating false issues and permitting a use of the Rules for the purposes inimical to the orderly administration of justice, and to the detriment of just and efficient conduct of the trial; and
3.2 ought to have struck out each of these paragraphs for non-compliance with the Rules as to pleadings, and as amounting to an abuse of process, and tending to cause prejudice embarrassment and delay in the proceedings. Alternatively the Learned Master ought to have ordered the pleading of material facts.
5. The Learned Master:
5.1 erred in refusing, or failing to strike out paragraphs 67, 68, 69, 70 and 71 of the Amended Contribution Notice; and
5.2 ought to have struck out those paragraphs as disclosing no reasonable cause of action.
The first three grounds of appeal challenge particular paragraphs of the Amended Contribution Notice as being contrary to r 46A of the Supreme Court Rules 1987. Several of the paragraphs are challenged under more than one ground. Consequently, I will consider each paragraph of the Amended Contribution Notice subject to the appeal in turn. Before doing that, however, it is necessary to consider the gravamen of the allegations contained in the Amended Contribution Notice, and to identify the principles to be applied to the pleadings.
Background to Amended Contribution Notice
The Amended Contribution Notice of the second defendant, Mrs O’Meara, is addressed in paragraph 1 to “Frederick John Von Stanke (“the executor”)”. Paragraph 1 states that Frederick John Von Stanke, whom I shall refer to as ‘John’, is a party in the main action in both his capacity as executor of the estate of Frederick William Von Stanke (as first defendant) and in his personal capacity (as third defendant). As I observed in my reasons of 25 July 2007, the Amended Contribution Notice is therefore directed to John in both his executorial and personal capacities, but refers to John compendiously as “the executor” for the remainder of the document. For this reason, paragraphs of the Amended Contribution Notice containing the words “the executor” should not be taken as necessarily referring to John in his executorial capacity exclusively.
The Amended Contribution Notice alleges, in essence, that as a consequence of being the executor of the estate of Frederick William Von Stanke, John owes particular duties arising from common law, equity and statute. The Notice also alleges that John holds particular offices and plays particular roles in the running of the Von Stanke family business as a whole, including offices and roles within the plaintiff companies.
The gravamen of Mrs O’Meara’s complaint is twofold. In the first instance, Mrs O’Meara claims that John has acted in breach of the duties he owes as a consequence of conflicts that Mrs O’Meara asserts exist between John’s role as executor and his roles in the family business. Mrs O’Meara pleads that John has put the interests of the plaintiff companies before those of the estate. In the second instance, Mrs O’Meara claims that John has acted in breach of his duties by way of his general conduct in relation to the administration of the estate.
Mrs O’Meara claims several forms of relief from John. First, she seeks an order pursuant to s 36(1) of the Trustee Act 1936 that John be removed as trustee of the estates of Fred and Gwen. Secondly, Mrs O’Meara seeks equitable compensation and/or equitable damages, to be paid to the estates and/or to herself. Thirdly, Mrs O’Meara seeks an account of profits for the benefits that she claims have been derived by John and his family. Finally, Mrs O’Meara seeks a declaration that John is unfit to act as trustee or executor of either of the estates of Fred and Gwen.
Principles to be applied
It is convenient to set out the following relevant parts of r 46A:
46A.02 All pleadings are to:
(a) be as brief as the nature of the case permits;
(b) plead only the material facts relied upon and not the evidence or arguments by which they are to be proved;
…
46A.08Where an allegation of fact in a pleading is not admitted by the opposing party it is required to be proved at trial by the party alleging it.
46A.09(1) No order is to be made that any further material facts are to be pleaded other than where the material facts pleaded do not disclose facts sufficient to give the other parties fair notice of the case which they will have to meet and the party seeking them would be significantly prejudiced in the conduct of its case by not having them. (The intent of Rule 46A is that parties should include all material facts in their pleadings as initially filed so that there is no unfairness to another party by any lack of particularity and if they have not done so the trial Judge may refuse to allow that party to present a case which is outside the terms of its pleading.)
(2)No pleading is embarrassing for want of particularity unless the missing particulars would be ordered under (1).
(3) Where an order is made under (1) the pleading is to be amended.
(4)No costs are to be allowed to the party making any amendment under (3) in respect of it unless the Court or a taxing officer for good reason allows them.
46A.10(1) At trial a party is not without leave of the Court to cross examine witnesses (other than on credit) or to adduce evidence about matters not properly raised on the pleadings where that course would be likely to prejudice or embarrass other parties in the conduct of their cases.
(2)In determining what issues are properly raised on the pleadings the trial Judge:
(a)will act without undue technicality and with regard to the substantial merits of the case so that no party suffers any injustice thereby; and
(b)in considering whether another party is likely to suffer prejudice or to be embarrassed may have regard to the contents of any Affidavit of Loss, experts’ reports or discovered documents, but they are not to be treated as if they were pleadings.
Counsel for the second defendant submitted that in determining the adequacy of the pleadings, it is necessary to consider the extent to which the party responding to the pleading will be prejudiced by insufficient particularity in the conduct of its defence. He submitted further than in the context of this appeal, it is necessary to consider in particular whether John will be prejudiced in his capacity as executor, as that is the capacity in which John challenges the Amended Contribution Notice. I pause to note that although, as observed above, the Amended Contribution Notice is directed to John in both his executorial and personal capacities, he has, to date, contested the notice solely in his capacity as executor.
Counsel noted that, should the second defendant be successful in obtaining the relief sought in the Amended Contribution Notice, the estates of Fred and Gwen will be the recipients of the relief sought against John in his personal capacity. Counsel contended in his written submissions on this appeal that the relief sought is sought from John in his personal capacity. I had made some observations on that point in my judgment of 25 July 2007. Counsel for the second defendant submitted that John in his capacity as executor requires no particulars to respond to the Amended Contribution Notice as it is open to him merely to abide the ruling of the Court.
I note that counsel for the second defendant, as an extension of these submissions, contended that it would be appropriate for me to rule that the first defendant – that is, John in his capacity as executor – was not the proper party to defend the Amended Contribution Notice. He did not, however, go so far as to contend that the first defendant did not have locus to argue the appeal before me. Rather, the gravamen of counsel’s submission was that because the executor would be a recipient of compensation in the event of Mrs O’Meara’s success, the executor could not demonstrate the prejudice required by r 46A.09.
I note that a similar issue has been raised in a Notice of Contention filed by the second defendant in the appeal to the Full Court against my judgment of 25 July 2007. It would therefore be inappropriate for me to make the ruling sought in any event.
In any event, I do not accept unqualified the proposition that John, as executor, could not suffer prejudice as contemplated by r 46A.09. The second defendant’s submission is founded in part on the fact that the estate will benefit in the event of Mrs O’Meara’s success. However, if Mrs O’Meara is not successful, different consequences will follow. It does not follow, therefore, that because certain consequences will flow from Mrs O’Meara’s success, the executor cannot satisfy the requirements of r 46A.09.
The approach of the Master to Rule 46A
The Master, in his reasons of 20 February 2007, identified several principles which, in his view, were to be applied in considering the applications before him pursuant to r 46A. Relevantly, the Master stated in paragraph 7B that: “Issues of pleading with insufficient particularity are primarily to be dealt with by the trial Judge, and not on an interlocutory basis.”[1] This statement was made in the context of considering the plaintiffs’ applications in relation to the second defendant’s defence. However, in his reasons of 17 April 2007 dealing with the first defendant’s application to strike out certain of the pleadings as being vague and embarrassing, the Master referred, inter alia, to paragraph 7B of his earlier reasons. Duggan and White JJ in their joint judgment of 4 July 2007, with which Kelly J agreed, rejected this approach, stating that: “On the contrary, in many cases, it will be important for such disputes to be dealt with at the interlocutory level.”[2]
[1] H Stanke & Sons Pty Ltd & Anor v Frederick John Von Stanke & Ors [2007] SASC 51, [7B].
[2] H Stanke & Sons Pty Ltd & Anor v O’Meara [2007] SASC 246, [85].
Counsel for the first defendant contended that the Master had erred by, in essence, deciding that part of the application on a preliminary point rather than proceeding to deal with the application on its merit. She submitted that I should revisit the merits of the application. Counsel for the second defendant initially did not object to that course. However, later in the course of the hearing, the second defendant submitted that, as this was an appeal, I should not approach the hearing as a rehearing, but rather should only interfere with the Master’s reasons if error was demonstrated. Counsel contended further that the Master’s reasoning was correct and the appeal should be dismissed on that basis. I consider that there is no practical difference in this case between the approaches propounded by the first and second defendants respectively. It is necessary for me to consider the merits of the first defendant’s appeal with respect to each paragraph in any event, if only for the purpose of considering whether the Master’s decision was correct. This is not a case, for instance, where the Master was exercising a discretion with which I can interfere only if error has been shown.
Both counsel before me made submissions on the effect of the Full Court judgment of 4 July 2007 to the present appeal. Shortly stated, counsel for the first defendant submitted that the gravamen of the judgment was that the reasoning of the Master had been rejected, whereas counsel for the second defendant contended that the reasoning of Duggan and White JJ was solely applicable to defences, and that the Master’s underlying approach to the interpretation of r 46A, founded as it was on the principles expounded in Williams v Australian Telecommunications Commission,[3] was not impugned by the judgment. Counsel for the second defendant submitted that the reasoning of Duggan and White JJ did not impugn the Master’s reasons with respect to individual paragraphs, as Duggan and White JJ addressed the pleadings rules as applicable to defences. As will be seen, I do not accept unqualified either counsel’s propounded interpretation.
[3] (1988) 52 SASR 215.
The purpose of pleadings was set out authoritatively by King CJ in Williams, who stated:
The fundamental purpose of pleadings is to provide a structure or framework for the litigation designed to promote a just outcome. Pleadings achieve this purpose by performing two basic functions. The first is to define the issues between the parties thereby providing the basis for the determination of questions as to discovery before trial and admissibility of evidence at trial and of questions as to what the litigation has decided for the purposes of the Rules as to res judicata and issue estoppel. The second function is to give the parties fair notice of the case to be made against them at trial thereby minimising the risk of injustice resulting from surprise.[4]
[4] Ibid 216.
Duggan and White JJ emphasised the continuing applicability of that statement. The Master in his reasons also referred to that judgment.
Duggan and White JJ considered in detail the effect of r 46A.05. As the Court noted, that is a rule that applies specifically to defences. The reasoning of the Full Court in relation to that rule is therefore of limited applicability to the present appeal. However, they did observe that the rules as to different forms of pleadings “are to be construed so that these different kinds of rules have a harmonious operation.”
Duggan and White JJ made some observations relating to r 46A.02, which applies to all pleadings. In particular, they emphasised that it is not permitted to plead evidence. Rather, it is necessary to plead only the material facts relied upon, with evidence and argument to be omitted. However, Duggan and White JJ noted that the distinction between material facts and the corresponding evidence was “not always easy to maintain”. They stated that:
There are cases in which it is difficult to plead the material facts giving rise to a claim without, in effect, pleading the evidence by which those facts will be provide. It can, for example, be difficult to plead the material facts relied upon for the existence of a particular title or interest derived from documents without pleading the very documents which will be relied upon to establish that title or interest…. There may also be cases in which the one fact may be both a material fact, and evidence of another fact.[5]
[5] H Stanke & Sons Pty Ltd & Anor v O’Meara [2007] SASC 246.
Thus, it is necessary to consider carefully the content of the particular pleading in question, in the context of the contribution notice as a whole, to determine whether it complies with the rules as to pleadings.
It is also necessary to note the authority of Besanko J in Marini v MLH Insurance Brokers Pty Ltd,[6] which indicates the appropriate course of action if a pleading is found to be insufficiently particularised. That case was cited with approval by Duggan and White JJ, who said:
In our opinion the complaint of the plaintiffs concerning paragraph 22.7 is justified. It does assert a conclusion but without pleading the material facts which support that conclusion. Neither the amounts lent, nor the dates of the lending, nor the actual recipients of the loans have been identified. However, in our opinion, the master was correct in declining to strike out paragraph 22.7. This was an occasion for the approach adopted by Besanko in Marini v MLH Insurance Brokers Pty Ltd to be applied. In Marini Besanko J held that the power contained in r 46.18(b) to strike out a pleading on the ground that it did not comply with the rules as to pleadings should ordinarily not be exercised when the real complaint is (using the language of the 1947 Rules) a failure to provide sufficient particulars. Besanko J held that in cases of that kind, the appropriate application is an application under r 46A.09 rather than an application to strike out the pleading. We respectfully agree with that view of r 46A and consider that it is the approach to be applied in relation to paragraph 22.7.[7] (citations omitted)
Grounds One to Three
[6] [2004] SASC 400.
[7] H Stanke & Sons Pty Ltd & Anor v O’Meara [2007] SASC 246 [91].
Paragraph 12
Paragraph 12 of the Amended Contribution Notice is as follows:
12.The executor has held and continues to hold other offices, and has acted and continues to act in other capacities, which conflict with his duties and obligations as executor and trustee pleaded in paragraphs 10 and 11 above and has thereby allowed conflicting duties and interests to prevail over his duties and obligations to the beneficiaries of Fred’s estate.
Particulars
The particulars of the executor’s conflicts of interest and duty are as follows:
12.1 The executor is and has at all material times also acted as a director of both plaintiff companies… (“the companies”) and is employed to manage the business operations carried on by those companies:
12.1.1By virtue of the executor’s role as director and manager of the companies, he has considerable control and influence over the way in which those businesses are operated and has authority over many of the employees and other Von Stanke family members who reside at Carpenter Rocks and/or work in the businesses carried on by the companies;
12.1.2It is contrary to the interests of the beneficiaries of Fred’s estate, but in the interest of the companies, to support the companies’ claims in this proceeding to ownership of the land registered in Fred’s name…;
12.1.3The companies assert that they would suffer serious detriment and would be destroyed if the executor asserted and/or exercised in the powers of ownership of the land registered in Fred’s name;
12.1.4The executor and the other directors of the companies intend and desire to maintain their present level of control and influence over all of the businesses, people and land at Carpenter Rocks, and consider that transmitting this land or shareholdings of property owning companies under Fred’s, Robert Charles Von Stanke’s (“Bob”) or John Hurtle Von Stanke’s (“Jack”) Wills to beneficiaries of their respective estates who are not directors, would diminish their level of control over the businesses, people and land at Carpenter Rocks.
12.2 The executor is also a director of FWV Stanke Holdings Pty Ltd (ACN 007 655 665) (“FWV Pty Ltd”).
Further Particulars
12.2.1Mrs O’Meara refers to and repeats sub-paragraphs 22.9, 22.10 and 22.11 of her amended defence.
12.3 In breach of the duties pleaded at sub-paragraphs 11.13, 11.14, 11.16, 11.19, 11.20, 11.21 and 11.22 above, the executor and the present directors of the companies acting in concert, have conferred financial benefits, directly and indirectly, upon themselves and their spouses and children, at the expense of the beneficiaries of Fred’s estate and other family members who are not shareholders of FWV Pty Ltd, RCV Stanke Estates Pty Ltd (“RCV Pty Ltd”) (ACN 007 655 709) and JHV Stanke Properties Pty Ltd) [sic] (“JHV Pty Ltd”) (ACN 007 65 5 692) (“the family companies”).
Further Particulars
The particulars of the conferral of financial benefits include:
12.3.1charging the assets of the H Stanke & Sons Pty Ltd [sic] to support the borrowings of the directors of the companies (including the executor) and their spouses and children. SCHEDULE B annexed hereto lists recent charges of this sort;
12.3.2providing financial assistance for the maintenance and repairs and providing better housing for the directors of H Stanke & Sons Pty Ltd, their spouses and their children at the expense of other Von Stanke family members who are shareholders of the family companies;
(a) The executor and his son Wade John Von Stanke are the occupants of superior houses situated on land registered in Fred’s name (Certificate of Title Register Book 5630 Volume 402, being the allotment comprising pieces of 126 and 127 in Filed Plan 216008);
12.3.3providing Southern Zone Rock Lobster Fishery licences and related crayfish pot allocations to the directors and their children as well as the opportunity to acquire increased pot allocations which have not been offered to other family members. SCHEDULE C annexed hereto lists the allocation of licences:
(a) The executor, his son Wade John Von Stanke and the other directors of the companies, are the recipients of an inequitable number of fishing licences and craypot allocations made available to them and other directors;
12.3.4utilising the companies’ banking facilities for a range of private purposes, particulars of which will be provided following the provision of full discovery and inspection of the documents by the companies.
12.4 Mrs O’Meara cannot further particularise all of these benefits identified in sub-paragraph 12.3 until the provision of full discovery and the inspection of documents by the companies and the executor.
12.5 The directors of the companies (including the executor) have never declared a dividend or conferred any other benefit upon their shareholders, and have no intention of ever declaring any dividend or conferring any other benefit upon shareholders. Instead, the directors of the companies without reference to what is in the interests of their corporators confer “benefits in kind” upon such members of their families as they might be inclined to favour from time to time.
In relation to the first ground of appeal, counsel for the first defendant submitted that there was no basis for the allegations made, drawing attention to what she said was the second defendant’s failure to state material facts relating to the allegations of “considerable control” in 12.1.1 or “intention and desire” in 12.1.4.
In relation to the second ground of appeal, counsel submitted that the allegations contained in sub-paragraphs 12.3 to 12.5 do not provide a basis for the relief sought. In particular, she submitted that any allegation relating to John’s conduct in another capacity – that is, as a director of the plaintiff companies – which are unrelated to his duties as executor or trustee cannot provide a basis for the relief sought. Counsel for the first defendant submitted that sub-paragraph 12.3 could be understood if it had been made in the context of an action for oppression by a minority shareholder. However, she contended that the assertion in the sub-paragraph could not support any of the prayers for relief. She submitted that there was no attempt to link the conduct of the plaintiff companies to any breach of duty by the executor, although John was party to decisions made by the companies in his capacity as director.
Counsel for the first defendant did not take issue with the allegation pleaded in paragraph 12, nor with sub-paragraph 12.1, but rather with sub-paragraphs 12.1.1 and 12.1.4. However, counsel contended that if paragraph 12 were to stand on its own, it would need to be struck out for lack of particularity because the remaining sub-paragraphs would not be capable of supporting the plea. She submitted that although the first defendant acted in several capacities – in particular, as a director of a company and as the executor of an estate owning shares in that same company – it did not automatically follow, without additional pleadings, that there was a conflict of duties. Counsel submitted that it was necessary to plead the manner in which the conflict was said to arise.
Counsel for the second defendant contended that the first defendant did not suggest that there had been any prejudice. Counsel submitted that the matters raised in the sub-paragraphs were not conclusions, and concerned matters within John’s knowledge. Counsel submitted that the simple point was that John in his capacity as executor has certain obligations and has chosen to act in breach of them.
Counsel drew attention in particular to the duties to avoid conflicts of interest and not to permit competing interests to prevail over those of the estate. Counsel submitted that the second defendant’s case was that the executor had breached his duties via his roles within the companies, and that consequently it was no answer to the contribution notice for John to respond by saying that he was not acting as the executor when he engaged in particular conduct.
In relation to the first ground of appeal relating to sub-paragraph 12.1, counsel for the second defendant submitted that the Master was correct in concluding that the first defendant had not demonstrated the prejudice required by r 46A.09(1). Counsel submitted that on the contrary, sub-paragraphs 12.1, and in particular 12.1.1 and 12.1.4 concerned facts within John’s knowledge. Counsel contended that the effect of these pleadings was to put John on notice of Mrs O’Meara’s allegations to facilitate proper discovery. In relation to the pleadings in sub-paragraphs 12.1.2 and 12.1.3, counsel submitted that they clearly referred to allegations contained in other pleadings in the action, and in particular the Amended Statement of Claim. Counsel submitted that sub-paragraph 12.1.3 merely stated the plaintiffs’ case, and that consequently there was no difficulty in pleading to it. Counsel contended that sub-paragraph 12.1.4 pleaded a material fact, namely the state of mind of the directors.
In relation to the second ground of appeal, counsel for the second defendant made reference in his submissions to the pleadings in action 05-1565. In response to the challenges to sub-paragraphs 12.3.1, 12.3.2 and 12.5, counsel contended that the plaintiff in action 05-1565 made similar allegations, which John has either admitted or admitted in substance in his defence. Similarly, in response to the challenge to sub-paragraph 12.3.3, he contended that John had pleaded to this conduct in his defence in action 05-1565. Counsel noted that with respect to sub-paragraph 12.4, he has already indicated that the second defendant may be in a position to provide further material facts once discovery has been made.
Counsel for the first defendant also addressed a number of the particulars. Counsel contended that the assertions that certain family members had been provided with superior houses, and that there was an inequitable distribution of fishing licences, had not been sufficiently particularised and it was not clear what was meant by either. Counsel submitted it had not been pleaded how the private use of banking facilities had disadvantaged the estate. In respect of sub-paragraph 12.5, she contended that no link to the allegation of breach had been pleaded. Counsel contended that, on its face, John’s conduct in another capacity was not a breach of his duties as executor.
Counsel for the second defendant submitted that sub-paragraph 12.3 pleaded the benefits that John had received, and that these were relevant to the administration of the trust as it demonstrated that John and others had received benefits to the detriment of the estates.
I understand the pleading to mean that John, in his capacity as a director of the plaintiff companies, has been party to decisions which have had the effect of diminishing the interests of the estate, and is, as a consequence, in breach of his duties as an executor.
I reject the submissions of the first defendant. First, it is not necessary for the first defendant to plead to the contribution notice. It is open to the first defendant to deny aspects of the contribution notice and thus put the second defendant to proof. Further, if the first defendant does not plead to the contribution notice, or to parts of it, his silence will be taken as a denial.
Secondly, it is necessary to consider the Amended Contribution Notice in its entirety. I accept the submission of counsel for the first defendant that merely to hold several offices with associated duties does not necessarily lead to the conclusion that those duties are in conflict. However, the second defendant has identified in the remaining sub-paragraphs of paragraph 12 the ways in which she says a conflict arises. Sub-paragraphs 12.3 and 12.5 in particular contain assertions which support the allegation that there has been a breach of duty. For example, in sub-paragraph 12.3 she asserts that the executor and other directors of the companies have conferred financial benefits inequitably and at the expense of the beneficiaries of the estates. The second defendant has also identified which of the duties of executor and trustee she claims have been breached by the first defendant. It is also important to note, as counsel for the first defendant accepted, that it has been pleaded that the Amended Contribution Notice will be further particularised after discovery.
Thirdly, I reject the submission that John’s conduct in another capacity is irrelevant to the claim for relief sought by Mrs O’Meara. As I have noted above, the very gravamen of Mrs O’Meara’s complaint against John is, in part, that he has allowed his duties to the companies to prevail over his duties to the estate. As counsel for the second defendant has submitted, it is no answer to these allegations to claim that certain of his conduct was carried out in a different capacity.
Counsel for the first defendant also objected to the way in which the pleading was phrased. Counsel submitted that the words ‘considerable control’ used in sub-paragraph 12.1.1 were vague and unclear. I reject that submission. The words are plain and clear.
I would dismiss the appeal in respect of paragraph 12.
Paragraphs 13 and 14
Paragraphs 13 and 14 are as follows:
B: The Executor’s Preferment of the Companies’ Interests Over Those of Fred’s Estate
13.In breach of the duties pleaded in paragraph 10, and in sub-paragraphs 11.2, 11.13, 11.14, 11.16, 11.19, 11.20, 11.21, 11.22 above, the executor has allowed the companies’ interests to prevail over those of Fred’s estate in numerous respects which are dealt with in the succeeding paragraphs of this contribution notice.
14. The persons who stand to benefit from any advancement of the companies’ interests are the current and former directors of the companies namely:
14.1 The executor;
14.2 Ian David Von Stanke;
14.3 Robert Denis Von Stanke;
14.4. Stephen Wayne Von Stanke;
14.5 Christopher Robin Von Stanke;
14.6 Martin Hercules Von Stanke
(collectively “the directors”)
and their respective immediate families.
Counsel for the first defendant submitted that no material facts are pleaded in support of the conclusions stated in paragraphs 13 and 14. Counsel submitted that although it was stated that paragraphs 13 and 14 would be further particularised later in the contribution notice, this did not in fact happen.
Counsel for the second defendant submitted that paragraph 13 stated that the allegations concerning the manner in which the executor’s duties had been breached would be “dealt with in the succeeding paragraphs of this contribution notice”, and that consequently all of the succeeding paragraphs should be considered to be further material facts in support of the allegation in paragraph 13. Counsel submitted that paragraph 13 provided a ‘sign post’, which stated the duties which have been pleaded, why it was said that these duties had been breached, and that the material facts had been pleaded in subsequent paragraphs. Counsel submitted further that even if John could not plead to paragraph 13, no detriment to John would result, as it was open to him to plead a positive case in response to the material facts which supported paragraph 13.
In relation to paragraph 14, counsel contended that the Master was correct to conclude that the first defendant had not demonstrated the prejudice required by r 46A.09(1). He submitted further that John was well aware of the issue raised by paragraph 14 as it formed part of the case alleged by the plaintiff in the action 05-1565. Counsel submitted further that it was open to the first defendant either to admit the conduct or not to plead to the paragraph at all.
Counsel for the second defendant’s submissions raised the spectre of whether, and to what extent, a court should have regard to pleadings in another action in determining an issue in the present action. This question arose in the hearing in relation to ground four of the notice of appeal. The parties at that time provided me with written submissions on the question. I did not decide the question as I determined in my judgment of 25 July 2007 that it was unnecessary to have regard to the pleadings in another action in any event. For reasons which will become apparent, I consider it unnecessary to decide that question in the context of paragraphs 13 and 14.
First, I reject the submission that the second defendant has not pleaded material facts in support of paragraph 13. Material facts are pleaded in subsequent paragraphs. I shall identify some of these in the remainder of these reasons.
Secondly, I reject the submission that paragraph 14 has not been supported by pleaded material facts. Paragraph 12, set out above, provides several instances of alleged material facts which would support paragraph 14. For example, paragraph 12 alleges, inter alia, that the directors of the companies are the recipients of superior housing and inequitable numbers of fishing licences. Read in that context, paragraph 14 merely particularises the individuals who are alleged to have benefited by John’s conduct as alleged by the second defendant.
I would dismiss the appeal in respect of paragraphs 13 and 14.
Paragraphs 15 – 21
Paragraphs 15 to 21 are in the following terms:
15.In 1997, a claim to an equitable interest in a portion of the land registered in Fred’s name was asserted by the solicitor acting for one Victor McCarthy. The executor retained Judith Choate (“Ms Choate”) to advise him whether the companies or Victor McCarthy had any equitable interest to the land registered in Fred’s name.
16.In performance of the retainer referred to in paragraph 15 above, Ms Choate investigated all available evidence which related to equitable entitlements to the land registered in Fred’s name. Following this investigation, Ms Choate advised the executor that Fred’s estate was beneficially entitled to the land and that no other person had any beneficial interest in it.
17.Ms Choate, in further performance of the retainer referred to in paragraph 15 above, advised the solicitor acting for Victor McCarthy that neither the companies nor Victor McCarthy had any interest in the land, which was owned entirely by Fred’s estate.
18.In 1998, a claim to an equitable interest in a portion of the land registered in the names of Fred, Bob and Jack was asserted by the solicitor acting for one Gary McCarthy. The executor again retained Ms Choate to advise him whether the companies or Gary McCarthy had any equitable interest to the land claimed by him.
19.In performance of the retainer referred to in paragraph 18 above, Ms Choate investigated all available evidence which related to equitable entitlements to the claimed [sic] by Gary McCarthy. Following this investigation, Ms Choate advised the executor that Fred’s, Bob’s and Jack’s estates respectively were beneficially entitled to the respective parcels of land registered in their names and that no other person had any beneficial interest in it.
20.At no time after 1998 did the executor seek or obtain any legal advice to the effect that the companies have, or asserted, any interest in the land registered in the name of Fred, Bob or Jack’s estates respectively.
21.Furthermore, the executor and the companies are aware of a wide range of conduct over many years which is inconsistent with the basis of the companies’ claim.
Particulars
21.1 Mrs O’Meara repeats and refers to paragraphs 32 and 33 of her amended defence.
21.2 In addition, at no time has any of the executor, the companies, or any other person acting on their behalf, asserted that Mrs O’Meara’s mother, Gwen was not entitled to leave her interest in the land described as s 409 Hundred of Kongorong to the executor.
I pause here to note that the Full Court struck out certain sub-paragraphs of paragraph 32 of Mrs O’Meara’s Amended Defence. I do not consider that that affects in any way the pleading in sub-paragraph 21.1 of the Amended Contribution Notice.
Counsel for the first defendant submitted that the gravamen of paragraphs 15 to 21 is that John sought and obtained advice relating to equitable interests in certain land, and that this does not provide a ground for the relief sought. In addition to this complaint against paragraphs 15 to 21, counsel submitted that paragraphs 17 and 19 plead evidence rather than material facts.
Counsel for the second defendant submitted that paragraphs 15 to 21 put John on notice of the case that Mrs O’Meara intends to put at trial, and that in accordance with the reasons of the Master they are proper pleas. Counsel contended that the gravamen of the paragraphs was that John had investigated the question of equitable entitlements to the land and had determined that they did not exist.
I accept counsel for the first defendant’s submission that the content of paragraphs 15 to 21 alleges that John sought and obtained certain advice. However, I do not accept that this is irrelevant to the relief sought. As I observed in my reasons of 25 July 2007, one of the issues that will arise in the present action is whether there has been a recent invention by the plaintiff companies of the equitable interests claimed, and that issue is relevant to both the plaintiffs’ claim and the contribution notice. Paragraphs 15 to 21 are relevant to that question. In that context, I do not consider that the paragraphs plead evidence. Rather, they are material facts which are alleged to support the second defendant’s case that the equitable claim of the plaintiff companies has been a recent invention, and that in the case of John, his conduct has been in breach of his duties as an executor.
I would dismiss the appeal in relation to paragraphs 15 to 19. Paragraphs 20 and 21 are further challenged under an additional ground of appeal, to which I shall now turn.
Paragraphs 20 and 21
Paragraphs 20 and 21 are set out above.
Counsel for the first defendant submitted that the pleas relating to the failure to obtain advice and the knowledge of the first defendant are evidence that supports the allegations made in earlier paragraphs. Counsel submitted that the pleas are similar to those contained in paragraph 31 of the Amended Defence, which was struck out by the Full Court.
I pause to note that the Full Court struck out paragraph 31 of the Amended Defence because it found that the paragraph, in the guise of a positive assertion, pleaded a denial with evidence.
Counsel for the second defendant submitted that paragraphs 20 and 21 bore no similarity to paragraph 31 of the Amended Defence, and that in any event the reasoning of the Full Court was applicable only to defences and not to contribution notices. Counsel submitted that the Full Court’s decision to strike out portions of paragraph 32 of the Amended Defence did not affect the reference to the Amended Defence in sub-paragraph 21.1 of the Amended Contribution Notice.
As I have noted above, I consider paragraphs 20 and 21 relevant to the ‘recent invention’ issue. I do not consider it relevant that the Full Court struck out a paragraph of the defence which contained similar allegations of fact. That paragraph was struck out because it was contrary to a rule particular to defences. That reasoning is not applicable to a paragraph in a contribution notice.
I would dismiss the appeal in respect of paragraphs 20 and 21.
Sub-paragraph 22.5
Paragraph 22 of the Amended Contribution Notice alleges that John has aligned his interests with those of the companies. The particulars include, inter alia, the following claim in sub-paragraph 22.5:
22.5In early 2006, the executor colluded with the companies to procure the deprivation by Mrs O’Meara of her solicitors of choice based upon false allegations of breach of confidence, and unprofessional conduct.
In relation to the first ground of appeal, counsel for the first defendant submitted that no material facts have been pleaded in relation to the allegation of collusion. She contended that the sub-paragraph included allegations of conspiracy, fraud and false allegations, which were serious allegations unsupported by material facts. In relation to the second ground of appeal, counsel for the first defendant submitted that the paragraph was vexatious.
Counsel for the second defendant assumed for the purposes of his submissions that the appeal was only pursued with respect to sub-paragraph 22.5. In relation to the first ground of appeal, counsel submitted that John is aware of the nature and substance of the allegation contained in this sub-paragraph, the issue having proceeded to trial ultimately before a judge of this Court. Counsel contended that the Master was correct in concluding that prejudice of the kind required by r 46A.09(1) had not been demonstrated. In relation to the second ground of appeal, he submitted that John is well aware of the substance and nature of the allegation, and contended that no basis had been asserted for the claim that it was vexatious. Counsel submitted that the Master was correct in concluding that the paragraph gave the first defendant notice of the case to be led at trial and was consequently a proper pleading. Counsel for the second defendant submitted that if such a serious allegation were to be made, it was necessary that it be stated in the pleadings to give the first defendant fair notice of the case against him.
The adjective “false” can be used in a range of circumstances, and in The Australian Concise Oxford Dictionary has meanings as diverse as “not according with fact; wrong, incorrect” and “spurious, sham, artificial” or “deceptive”. It is thus an adjective that can be used to describe conduct ranging from innocent to culpable. In any event, the allegations of breach of confidence and unprofessional conduct have already been adjudicated on by White J in his judgment of 5 October 2006.[8] White J found that the allegations against the second defendant’s solicitors had not been proved, and the application for their removal was dismissed. However, White J did not suggest that the allegations were spurious or deceptive. In these circumstances, I do not consider that the use of the word “false”, of itself, carries with it a suggestion of improper conduct.
[8] H Stanke & Sons Pty Ltd and Cape Banks Processing Company Pty Ltd v von Stanke, O’Meara and Ors (2006) 95 SASR 425.
The verb “to collude” is defined in The Australian Concise Oxford Dictionary as to “come to an understanding or conspire together, especially for a fraudulent purpose”. I accept that the allegation that there has been a collusion is a plea of fraud, which must be pleaded with greater particularity if it is to stand.
I would therefore allow the appeal for the limited purpose of removing the suggestion of collusion, the assertion of fact to remain intact. I would order that sub-paragraph 22.5 be amended to read in terms:
22.5In early 2006, the executor and the companies applied to remove Mrs O’Meara’s solicitors as solicitors on the record based upon false allegations of breach of confidence, and unprofessional conduct.
I give leave to the second defendant to replead paragraph 22.5 to include the particulars necessary to support a plea of fraud, in the event that she wishes to pursue such a plea.
Paragraphs 23 and 24
Paragraphs 23 and 24 are in the following terms:
C: The Executor’s Unconscionable Delay in Administering Fred’s Estate
23.In breach of the duties pleaded at sub-paragraphs 11.2, 11.5, 11.6 and 11.23 above, the executor has unconscionably and unreasonably delayed in the administration of Fred’s estate.
24.Such delay has been calculated to, and has in fact materially assisted the companies to mount and prosecute their claims against Fred’s estate.
Counsel for the first defendant submitted that no material facts have been pleaded in relation to the delay and why that delay is said to be unconscionable and unreasonable. Further, she submitted that there have been no material facts pleaded in support of the allegation of calculation in paragraph 24; in particular, who was involved in such a calculation, the nature of the calculation and when it occurred.
Counsel for the second defendant submitted that paragraph 23 was introductory to the succeeding paragraphs which particularise the allegation of breach of duty. He submitted further that the material facts contained within the contribution notice are sufficient to provide the first defendant with fair notice of the case alleged against him.
Counsel for the first defendant submitted that there were no material facts pleaded to support the allegation that the executor had behaved unreasonably or unconscionably. She observed that paragraph 23 failed even to set out the delay. In my view, a delay in itself could be a material fact supporting the allegation contained in paragraph 23. Further, counsel submitted that no material facts had been pleaded to support the suggestion in paragraph 24 of a calculation, nor to indicate in what way the companies had been assisted.
If it were the case that paragraph 23 stood in isolation, there would be merit in the first defendant’s submission. However, paragraphs 23 and 24 are followed immediately by the following text:
Executor’s Delay in Administering Fred’s Estate
25.The executor became entrusted with the administration of Fred’s estate as at the time of Fred’s death on 12 November 1995.
26. At no time has the executor:
26.1 called in the assets or satisfied the liabilities of Fred’s estate;
26.2 obtained legal advice upon his obligations as executor;
26.3 obtained an understanding of the nature of or administered the trust that was created by Fred’s Will.
27.From the time of Fred’s death in November 1995 until mid 2004, the executor took no steps to inform Mrs O’Meara of:
27.1 the progress of the administration of Fred’s estate;
27.2 the value of Fred’s estate;
27.3 how he intended to realise Mrs O’Meara’s interest in Fred’s estate.
There is then an additional sub-heading: “Executor’s Delay in Preparing an Inventory of Assets and Liabilities of Fred’s Estate”, with additional paragraphs.
In essence, these paragraphs plead that John became the executor of Fred’s estate on 12 November 1995 and has failed to take particular steps in administering the estate. These are material facts that support the assertion in paragraph 23 that there has been an unreasonable delay. I do not accept the submission that paragraph 23 has not been sufficiently particularised.
I would dismiss the appeal in respect of paragraph 23.
Paragraph 24 is of more concern. There are no material facts pleaded in the Amended Contribution Notice to indicate in what way it could be said that any delay has assisted the companies, nor to indicate how or why any delay could be attributed to a calculation on John’s part.
I would therefore allow the appeal in respect of paragraph 24 and order that the second defendant plead further material facts in support of the allegation contained in that paragraph.
Sub-paragraph 26.3
Under the sub-heading “Executor’s Delay in Administering Fred’s Estate” is included the following pleading, inter alia:
26. At no time has the executor:
…
26.3 obtained an understanding of the nature of or administered the trust that was created by Fred’s Will.
Counsel for the first defendant submitted that no material facts have been pleaded in relation to the trust created by Fred’s Will. In particular, counsel submitted that the notice does not plead the creation of any particular trust by the Will, and does not assert that any particular assets are held on trust by the first defendant as a consequence of his having administered the Will. She submitted further that the reading of the Will would indicate that that was not the position, and that there was no allegation that John held a particular asset as a consequence of completing administration in respect of it.
Counsel for the second defendant submitted that it is clear on the face of the Amended Contribution Notice that the trust referred to is the trust created by clause 3 of Fred’s Will, which is set out in paragraphs 7 to 9 of the Amended Contribution Notice. He further submitted that the Master was correct to find that the plea goes to John’s understanding of his executorial duties and as such is relevant and proper. Counsel for the second defendant submitted that paragraph 26 set out various ways in which it was contended that John had failed to deal responsibly with the estates. Counsel contended that a beneficiary of a residual estate had only the right to compel the due performance of the trust created by the Will, and that sub-paragraph 26.3 assumed particular significance because clause 9 of the Will conferred discretion on the executor in the administration of the Will.
Paragraphs 7 to 9 of the Amended Contribution Notice are as follows:
7.Fred bequeathed his estate upon trust for his wife Gwendoline Mary Von Stanke (“Gwen”) and his children the executor and Mrs O’Meara. Clause 3 of Fred’s Will provides:
“I GIVE DEVISE AND BEQUEATH the whole of my estate both real and personal UPON THE FOLLOWING TRUSTS:-
(a) As to one half to my wife GWENDOLINE MARY VON STAKE [sic] provided that she shall survive me for more than one month.
(a) [sic] As to the remaining half to my children FREDERICK JOHN VON STANKE and LEONIE MARY O’MEARA in equal shares.”
8.Fred directed that if any of his beneficiaries had not attained a vested interest at the time of their death, their interest in his estate would pass to their children in equal shares. Clause 5 provides:
“should any of [his] said beneficiaries die before [him] or before attaining a vested interest under this [his] will leaving a child or children then such child or children shall upon attaining the age of majority take and if more than one equally between them the share to which his/her or their parent would have been entitled to under this… will.”
9.Under clause 6 of Fred’s Will, Fred empowered and authorised the executor as trustee in his absolute discretion:
“a. To pay [his] debts, funeral and testamentary expenses.
b.To sell, call in and convert into money the whole or any part or parts of [his] real and personal property in such a manner at such times at such price or prices and upon such terms and conditions as my trustee shall think fit.
c. From time to time if thought fit to vary the number of [his] trustees.
d.To postpone the sale, calling in and conversion of any part or parts of [his] real and/or personal estate for such a period as my trustee in his absolute discretion may deem fit.
e.To apply the whole or any part or parts of the income and/or capital of the vested contingent or presumptive share of any infant under this… will for or towards his or her maintenance, education, benefit or advancement in life.
f.To appropriate and partition any real or personal property forming part of [his] estate (and for such purposes to determine the values thereof) to or towards the share of any beneficiary or beneficiaries.”
I reject the submission of counsel for the first defendant. Paragraph 7 of the Amended Contribution Notice clearly pleads the creation of a trust. Whether the terms of the Will support that plea may be a matter of fact to be resolved at the trial. However, reading the Amended Contribution Notice as a whole, it is clear that the second defendant has pleaded the creation and existence of a trust. There is no basis for the complaint made against sub-paragraph 26.3.
I would therefore dismiss the appeal in relation to sub-paragraph 26.3.
Paragraphs 30 and 31
Under the sub-heading “Executor’s Delay in Preparing an Inventory of Assets and Liabilities of Fred’s Estate” are included the following paragraphs, inter alia:
30.Mrs O’Meara has been forced to undertake her own investigations to determine whether all of the assets and liabilities of Fred’s estate have been disclosed in the executor’s affidavit of assets and liabilities appropriately.
31.Due to a lack of information, most sources of which are under the control of the executor, Mrs O’Meara cannot determine the precise number and value of the assets or liabilities of Fred’s estate.
Counsel for the first defendant submitted that these paragraphs pleaded evidence rather than material facts.
In relation to the third ground of appeal, counsel submitted that the basis of the first defendant’s complaint was unclear. He submitted that the paragraphs did no more than indicate the allegation made, namely that Mrs O’Meara had been forced to undertake certain of her own investigations, and that as a consequence of a lack of information she could not identify precisely the assets and liabilities of Fred’s estate. Counsel submitted that these paragraphs were merely assertions of fact that John had not responded to the legitimate enquiries of Mrs O’Meara, and that they preceded the paragraphs setting out the allegations of breach of duty.
In my view, paragraph 30 is relevant, at the very least, to the question of the quantum of equitable damages to be paid in the event that the second defendant is successful in the claims sought in the contribution notice. Paragraph 31 is also relevant. Elsewhere in the Amended Contribution Notice, the second defendant pleads that further particulars will be provided upon the completion of discovery. In that context, it would in my view be unlikely that the allegation of Mrs O’Meara’s present inability to determine the number and value of the estate’s assets would still be present in the contribution notice at the trial.
I would dismiss the appeal in respect of paragraphs 30 and 31.
Paragraph 32
Paragraph 32 is in the following terms:
D: The Executor’s Breaches of Duty in Connection with the Affidavit of Assets & Liabilities of Fred’s Estate
32.The executor has not complied with his obligations to keep proper records and preserve the assets of Fred’s estate in contravention of the duties pleaded in sub-paragraphs 11.1, 11.2, 11.3, 11.4, 11.5, 11.10, 11.11, 11.12 and 11.22 above.
Particulars
The particulars of the executor’s failure properly to record and preserve the assets of Fred’s estate are as follows:
32.1 Mrs O’Meara has not been informed what the executor has done to administer Fred’s estate, nor has she been provided with any accounts of Fred’s estate maintained by the executor;
32.2 At no time since Fred’s death has the executor done anything to realise the major asset of Fred’s estate, being his interest in Stanke Brothers, despite the executor’s knowledge of that interest;
32.3 The executor has taken no responsibility for the preservation of the houses situated on the land belonging to Fred’s estate.
32.4 The totality of the documents provided to Mrs O’Meara by the executor’s second solicitor (Strachan Carr), the executor’s third solicitor (Iles Selley) and the executor’s fourth solicitor (Rosemary Craddock) indicate that the executor has not complied with his obligations to keep proper records of Fred’s estate;
32.5 Mrs O’Meara has been concerned to learn of the value of the assets of H Stanke & Sons Pty Ltd. On 29 September 2004 and 12 October 2004 Mrs O’Meara’s solicitors wrote to the executor’s second solicitor and requested details of H Stanke & Sons Pty Ltd charging its assets to secure borrowings of up to $900,000 of the executor’s son and daughter-in-law. The details of this charge are in sub-paragraph 1.8 of Schedule B below;
32.6 On 5 November 2004 the second executor’s solicitors advised that H Stanke & Sons Pty Ltd had provided the charge over its assets in accordance with longstanding family arrangements. No details were provided of what these longstanding family arrangements were;
32.7 The only evidence of such other borrowings of the type pleaded in the prior sub-paragraph are the charges referred to in sub-paragraph 12.3.1 above;
32.8 Mrs O’Meara was never advised that the companies proposed to provide financial assistance and was never offered, nor received financial assistance of the type pleaded in sub-paragraphs 32.5 and 32.7 above. Mrs O’Meara has been required to arrange her own private borrowings to purchase and maintain fishing boats, build her house and purchase the land contained in Certificate of Title Register Book Volume 5444 Folio 565 (“allotment 3”), from Jack’s estate;
Counsel for the first defendant submitted that the sub-paragraphs of paragraph 32 (with the exception of sub-paragraph 32.9, which is contested for a different reason) are evidence that would be led to prove the allegation contained in paragraph 32. Counsel contended that paragraph 32 contained an allegation that the executor had not complied with his obligation to keep proper records. She submitted that sub-paragraph 32.1 was unrelated to that allegation, and was instead merely a complaint that Mrs O’Meara had not received certain information. Counsel submitted that sub-paragraph 32.3 was a general plea in the nature of a conclusion that did not specify the houses in question. Counsel contended that sub-paragraphs 32.6, 32.7 and 32.8 related to the conduct of the companies rather than the executor.
In relation to sub-paragraphs 32.4 to 32.8, counsel for the second defendant submitted that these sub-paragraphs contain the material facts in support of the allegation in paragraph 32, and that they contain sufficient particularity to provide John with fair notice of the case. In relation to the third ground of appeal, counsel submitted that paragraph 32 (with the exception of sub-paragraph 32.9) pleads the material facts relied upon to support the allegation that John has breached his duty to keep proper records and preserve assets.
In response to the first defendant’s submission that sub-paragraphs 32.6, 32.7 and 32.8 relate to the conduct of the companies rather than the executor, it is my view that this is irrelevant to the question whether the sub-paragraphs are proper pleadings in the context of this contribution notice. As I have observed earlier in these reasons, it is the second defendant’s case that John has breached his executorial duties via his involvement in the plaintiff companies, and that he exerts considerable control over those companies. For the first defendant to submit that the complaints relate to conduct of the companies rather than to John in his capacity as executor is therefore no basis for striking out these sub-paragraphs.
I reject the submission that sub-paragraph 32.3 is a general plea in the nature of a conclusion, and that it does not describe the houses with sufficient particularity. The sub-paragraph refers to “the houses situated on the land belonging to Fred’s estate”. In my view, that adequately describes the houses in question; it is all the houses located on land which is registered in the name of Fred’s estate.
Finally, I reject the submission that the sub-paragraphs 32.2 to 32.8 disclose evidence by which Mrs O’Meara would seek to prove the allegation contained in paragraph 32. Paragraph 32 clearly pleads an allegation in the nature of a conclusion: that John has acted in breach of certain of his duties by failing to keep proper records and preserve the assets of Fred’s estate. Sub-paragraphs 32.2 to 32.8 plead material facts that support that conclusion.
Sub-paragraph 32.1 is more problematic. The issue of the executor’s failure to provide information is dealt with in great detail in paragraphs 37 to 59, which are preceded by the heading ‘Executor’s Failure and/or Refusal to Provide Information’. The allegation that Mrs O’Meara has not been informed of certain information does not, prima facie, relate to the allegation that there has been a failure to keep proper records and preserve the assets of Fred’s estate, nor does it appear to relate to any of the duties referred to in paragraph 32.
I would therefore allow the appeal against paragraph 32 on the third ground disclosed in the Notice of Appeal for the limited purpose of striking out sub-paragraph 32.1.
Sub-paragraphs 32.1 – 32.8
Sub-paragraphs 32.1 to 32.8 were also variously challenged by the first defendant under the first and second grounds of appeal disclosed in the Notice of Appeal.
In relation to the first ground of appeal, counsel for the first defendant submitted that there is no basis pleaded for the allegations contained in sub-paragraphs 32.4 to 32.8, and drew attention in particular to the allegation concerning the “totality of the documents”. Counsel submitted that the phrase “the totality of the documents” was vague and meaningless. She contended that paragraphs 32.5 to 32.8 might be the subject of a complaint by Mrs O’Meara against the plaintiff company identified, but did not relate to the executor or to the contribution notice. Counsel submitted that the pleas were not related to the complaint that the executor had failed to keep proper records, and contended that Mrs O’Meara had failed even to allege that the executor had some obligation to keep proper records in relation to the plaintiff company. She conceded that Fred’s estate was a shareholder of FWV which, in turn, was a shareholder of the plaintiff company.
In relation to the second ground of appeal, counsel for the first defendant submitted that the particulars provided in sub-paragraphs 32.1 to 32.8 do not support the plea contained in paragraph 32. She submitted that the gravamen of the allegations in sub-paragraphs 32.4 to 32.8 is that the executor has a duty to inform a beneficiary of information relating to a company where the estate is a shareholder of that company. Counsel contended that even if there were such a duty, the facts as pleaded in the sub-paragraphs show that the request was answered, and that consequently there would be no basis for providing relief.
Counsel for the second defendant submitted that the purpose of these sub-paragraphs is to put John on notice of the way in which Mrs O’Meara intends to support the allegation contained in paragraph 32, which allegation in turn supports the relief sought. Consequently, counsel submitted that they are proper pleas.
Counsel observed that the pleading referred not only to keeping records, but also to preserving assets, which gave rise to the claims for compensation. In relation to sub-paragraph 32.4, counsel submitted that on each occasion that Mrs O’Meara had communicated with the solicitors for the executor, they had confirmed that she had received all available documents. Consequently, counsel submitted that no ambiguity arose from the reference to ‘the totality of the documents’.
In relation to the second ground of appeal, counsel for the second defendant contended that the gravamen of the allegations in sub-paragraphs 32.1 to 32.8 is that John as the executor had been hostile to the interests of Mrs O’Meara, and had been unresponsive to her enquiries. Counsel submitted that the pleadings could not be said to be frivolous or vexatious as they all supported Mrs O’Meara’s prayers for relief.
I reject the submission that the phrase “the totality of the documents” is vague. There will be a finite number of documents that have been provided by the solicitors identified in sub-paragraph 32.4. For the reasons I have already expressed, I also reject the submission that certain of the sub-paragraphs relate to the conduct of the companies and are, therefore, not relevant.
I would dismiss the appeal in relation to paragraph 32 and sub-paragraphs 32.2 to 32.8.
Sub-paragraph 32.9
Sub-paragraph 32.9 is in the following terms:
32.9The executor’s 1999 Affidavit of Assets and Liabilities of Fred’s estate is false and misleading in a number of respects and is in breach of the duties pleaded in sub-paragraphs 11.7, 11.8, 11.9, 11.19, 11.20, 11.21, 11.22 above.
This sub-paragraph is then further particularised.
Counsel for the first defendant noted that the Master had incorrectly considered the attack on this sub-paragraph as arising under the first ground rather than the second ground of challenge. Given that I am considering the validity of the pleadings afresh, this error is of no consequence in the present appeal. Counsel submitted that the allegation that the affidavit of assets and liabilities was false and misleading does not demonstrate grounds to revoke probate or to remove a trustee. She contended that it would be necessary for the second defendant to allege at the very least that the executor knew that the affidavit was false and misleading, which the second defendant has not. Counsel for the first defendant also challenged the use of the word ‘false’ in the sub-paragraph. She submitted that it was a strong word and that, although the succeeding particulars made various complaints about the affidavit, the plea did not set out what was said to be the falsity.
Counsel for the second defendant submitted that the allegation that John has breached his duties to the estate supports the relief sought, and is therefore a proper plea.
For the reasons set out above, I do not consider that the use of the word ‘false’ in the sub-paragraph provides, of itself, reason to strike out the sub-paragraph or order further particulars. I accept the submission that there may be an argument about whether a finding that the affidavit of assets and liabilities was false and misleading provides grounds to revoke probate or to remove a trustee, if such a finding is made. However, that is a question to be determined in the trial. In any event, the allegation is that the affidavit of assets and liabilities was false and misleading, and that constitutes a breach of duty. The allegation is not necessarily linked to the prayer for relief seeking removal of a trustee; the Amended Contribution Notice seeks several forms of relief, as identified above.
I would dismiss the appeal in relation to sub-paragraph 32.9.
Paragraph 34
Paragraph 34 alleges that:
34.In breach of the duties pleaded at sub-paragraphs 11.2 and 11.18 above, the executor has failed or refused to defend Fred’s estate against the equitable entitlement asserted by the companies over the land registered in Fred’s name.
Counsel for the first defendant submitted that the Amended Contribution Notice does not plead any facts material to a failure or refusal to defend the estate, and further does not plead why such a failure or refusal is a breach of the duties pleaded.
Counsel for the first defendant submitted first that paragraph 34 assumed that the executor had an obligation without pleading that obligation. Further, counsel submitted that it was not possible to link the allegation in the paragraph to the duty described in paragraph 11.18, which was a duty not to delegate his duties or powers. Counsel conceded that paragraph 11.2 pleaded a duty to take proceedings to defend the estate where necessary. Counsel also conceded that if all that was being asserted by paragraph 34 was a mere failure to defend the action by the plaintiff companies, and that that by itself constituted a breach of duty, then the allegation could be pleaded to by the first defendant; however, she contended that the plea as it stood seemed to go beyond that simple plea.
Counsel for the second defendant submitted that paragraph 11.2 set out clearly the obligation to defend claims against estate assets, and that paragraph 11.18 set out the duty not to delegate powers, which counsel related to the assertion that John had placed the burden of the defence of the estate’s assets on Mrs O’Meara. Counsel submitted further that the material facts supporting the claim were set out in succeeding paragraphs.
If paragraph 34 stood alone, there would be some merit in the first defendant’s submissions. The mere failure to defend an action by the plaintiff companies does not, prima facie, appear to be a basis for finding that John has acted in breach of his duties. However, that paragraph must be considered in light of the remainder of the Amended Contribution Notice, and in particular the allegations relating to the ‘recent invention’ issue. There are material facts pleaded elsewhere in the Amended Contribution Notice – for example, in paragraphs 15 to 21, set out above – that relate to the allegation in paragraph 34. Read in the context of the remainder of the Amended Contribution Notice, I cannot accept the submission that the allegation contained in paragraph 34 does not go beyond the bare plea.
I would dismiss the appeal in relation to paragraph 34.
Paragraph 35
Paragraph 35 is in the following terms:
35.In breach of the terms of Fred’s Will, since 2005 the executor has sought to transfer the land registered in Fred’s name into the names of Mrs O’Meara and himself proportionately.
Counsel for the first defendant submitted that no material facts are given in relation to this allegation. Counsel submitted that this plea, as it stood, was unclear. She contended that Fred’s Will left 50% of his estate to Gwen, and 25% to each of John and Mrs O’Meara, so that the intention was for a proportionate transferral of the land into the names of John and Mrs O’Meara. Counsel submitted that she could not understand the allegation, and the breach had not been identified.
Counsel for the second defendant submitted that John is aware of the substance and nature of the allegation contained in paragraph 35. He contended that the evidence which will be led in support of the allegation includes the application made by John in action 05-645, the written and oral submissions put on his behalf at the hearings held on 19 and 20 October 2005, and the orders sought by John on 19 October 2005.
I accept counsel for the first defendant’s submission. Prima facie, the pleading does not disclose how an attempt to transfer land proportionately to the second and third defendants represents a breach of the terms of Fred’s Will, particularly given that the terms of the Will that have been pleaded in paragraphs 7 to 9 of the Amended Contribution Notice suggest that there is a proportional entitlement of each to the land.
I would allow the appeal in respect of paragraph 35 and order that the second defendant plead further material facts in respect of the allegation made.
Paragraph 36
Paragraph 36 is in the following terms:
36.The executor has adopted the position pleaded in paragraph 35 above in order to impose upon Mrs O’Meara the financial burden of defending and protecting Fred’s land from the companies’ claims. The executor seeks to insulate himself from the costs associated with the defence of the companies’ claims in the knowledge that he will receive a “windfall” upon the successful defence of the action by Mrs O’Meara.
Counsel for the first defendant submitted that the Notice does not plead any basis for the purpose of the first defendant alleged in this paragraph. Counsel contended that if paragraph 36 were to be maintained, further material facts were required. She submitted that it pleaded a conclusion about the executor’s motivation that Mrs O’Meara wished the court to make, and was not at present supported by material facts.
Counsel for the second defendant submitted that the imposition of the financial burden alleged necessarily flows from John’s position in this action. In particular, counsel submitted that John via his representatives in both his executorial and personal capacities has indicated that he will not file a defence in this action, and therefore he will not incur the consequent expense but will share in the benefit if the second defendant is to succeed.
I have allowed the appeal in respect of paragraph 35. Paragraph 36 refers back to that paragraph, and pleads the reason why the position adopted in paragraph 35 has been adopted. In my view, the pleading contained in paragraph 36 will be clarified by the further particulars I have ordered in respect of paragraph 35.
I would therefore dismiss the appeal in respect of paragraph 36.
Paragraph 37
Paragraph 37 is set out below. It is convenient also to set out paragraph 38 at this point:
Executor’s Failure and/or Refusal to Provide Information
37.Following the companies’ and the executor’s attempt to prevent Mrs O’Meara’s enjoyment of one of the assets of Fred’s estate, by way of the letter dated 7 July 2004, Mrs O’Meara sought legal advice.
38.Mrs O’Meara’s solicitors have requested on numerous occasions for the executor to explain how and when he intends to administer Fred’s estate, and what is the size and value of Fred’s estate.
Counsel for the first defendant submitted that no material facts are given to support the allegation in paragraph 37 that there has been an attempt by the companies and the executor to prevent Mrs O’Meara’s enjoyment of an asset. Counsel submitted that paragraph 37 as it stands is meaningless and is not supported by any pleaded material facts.
Counsel for the second defendant submitted that the paragraph is introductory to paragraphs 38 and 39, which set out the solicitors’ attempts to obtain information.
There is merit in counsel for the first defendant’s submission. Paragraph 37 refers to the companies and the executor depriving Mrs O’Meara of the enjoyment of an asset of Fred’s estate. There are no material facts pleaded to identify to which asset the paragraph refers, or in what way Mrs O’Meara has been said to be deprived of the enjoyment of it. It is difficult to see how the first or third defendant could respond to this plea as it currently stands.
I would therefore allow the appeal in respect of paragraph 37 and order that the second defendant provide further particulars of the allegation.
Paragraphs 39 and 40
Paragraphs 39 and 40 are set out below:
39.By letters dated 29 September 2004, 12 October 2004, 9 November 2004, 23 November 2004, 8 December 2004, 1 February 2005, 21 February 2005, 10 April 2005 and 16 December 2005, 7 February 2006, 13 April 2006, 6 October 2006, 19 October 2006, 20 November 2006, 5 December 2006, 8 December 2006, 11 December 2006, 13 December 2006, 15 December 2006, Mrs O’Meara, through her solicitors, made repeated requests that the executor provide the following information:
39.1 all steps taken by the executor to administer the trust;
39.2 the executor’s current valuation of Fred’s estate and how he derived that assessment;
39.3 what the executor intended to do in the foreseeable future to administer the trust;
39.4 detailed balance sheets, profit and loss statements for Fred’s estate and tax returns for each prior year;
39.5 copies of detailed balance sheets and profit and loss statements of FWV Pty Ltd and H Stanke & Sons Pty Ltd for the past 9 years;
39.6 full details of any money, consideration or other benefit derived directly or indirectly by the executor or members of his immediate family from the assets comprising of Fred’s estate or entities in which Fred’s estate has a financial interest;
39.7 all evidence of the executor’s consideration of the companies’ claim to an interest in the real estate belonging to Fred’s estate;
39.8 all trust documents including correspondence regarding the trust/estate and use of the trust/estate assets.
40.Over the ensuing 27 months from 29 September 2004, the executor’s solicitors on the executor’s instructions given in breach of the duties pleaded at sub-paragraphs 11.10, 11.11, 11.12, 11.13, 11.20, 11.21 and 11.23 above, have provided untimely and unhelpful responses to Mrs O’Meara’s requests by letters dated 29 September 2004, 12 October 2004, 9 November 2004, 23 November 2004, 8 December 2004, 1 February 2005, 21 February 2005, 10 April 2005 and 16 December 2005, 7 February 2006, 13 April 2006, 6 October 2006, 19 October 2006, 20 November 2006, 5 December 2006, 8 December 2006, 11 December 2006, 13 December 2006, and 15 December 2006 where those solicitors have failed to provide any substantial responses to the matters raised in these proceedings and have:
40.1 denied the fact and asked that she provide a basis for her assertion in correspondence dated 29 September 2004 that she had a significant entitlement to valuable assets of Fred’s estate and any supporting valuation, yet provided no further valuation themselves;
40.2 stated, and made no apology for the fact, or promise to make good, that the only step the executor had taken to administer the trust was to take out probate of Fred’s Will;
40.3 stated that both the executor and his second solicitor remained unsure of the value of the share in H Stanke & Sons Pty Ltd or of the status of the legal or equitable ownership of the real estate;
40.4 stated that the executor’s second solicitor had written to the companies on 5 November 2004 requiring that they provide details of the legal basis upon which they asserted the companies’ interest in the property and putting them on notice that unless they took steps to vindicate the claimed right the executor will [sic] proceed to apply for directions pursuant to section 69 of the Administration and Probate Act 1919 within 30 days. Upon the expiry of 30 days, and at all times since, the executor did not and has not instituted proceedings;
40.4.1despite writing the letter referred to in 40.4 above, during 2004 and the first 10 months of 2005, the executor and the companies had no intention of instituting any proceedings to vindicate the companies’ claim;
40.4.2the executor wrote the letter referred to in 40.4 above in order to mislead and deceive Mrs O’Meara into believing that the executor was acting independently of the companies, when in fact, the executor was supporting the companies; claim;
40.5 stated that no balance sheets, profit and loss statements or tax returns for Fred’s estate have been prepared because none have been required;
40.6 provided copies of profit and loss statements of FWV Pty Ltd but no other trust documents except in response to court proceedings instituted by Mrs O’Meara to compel production of trust documents;
40.7 stated that neither the executor nor any member of his family had derived any money, consideration or other benefit directly or indirectly from the assets comprised of Fred’s estate;
40.8 stated that the executor’s second solicitor was preparing a case for the opinion of Lindy Powell QC on the construction of Fred’s Will which would be sent to independent counsel. No opinion has ever been sought or obtained by the executor. The executor sought to mislead and deceive Mrs O’Meara into believing that independent Senior Counsel’s opinion was being sought when this was not the case.
Counsel for the first defendant submitted that these two paragraphs purport to comply with r 46A.02 in a “rolled-up” fashion. The gravamen of counsel’s complaint in respect of these two paragraphs is that they do not identify which letters made the relevant requests, and that they do not identify which letters made the corresponding responses. Counsel complained that the plea contained in these paragraphs cannot be properly answered and is prejudicial to the first defendant.
Counsel for the first defendant submitted that paragraph 39 and 40 collectively allege that a series of letters made the same request, and the same responses were received, but that no material facts are pleaded to identify the letters making particular requests and those making particular responses. Counsel submitted that because of the generality of the plea, it could not be properly answered and was therefore prejudicial to the first defendant. Counsel contended that the second defendant had failed to identify even one response of the first defendant that was complained of. Thus, the second defendant had not given particulars of any untimely, unhelpful or insubstantial responses.
In relation to paragraph 39, counsel for the second defendant submitted that all of the letters identified are relied upon to support the allegation, and that the sub-paragraphs contain the material facts supporting the allegation. Counsel submitted that no conclusion was pleaded, and that the paragraph identified both the correspondence relied upon and the nature of the requests made. In relation to paragraph 40, counsel submitted that the material facts are sufficiently particularised in the sub-paragraphs to provide John with fair notice of the allegations against him. Counsel contended that it would be easy for John to plead to the paragraph, either by admitting it, or by particularising the responses that he considered to be helpful and timely.
Counsel for the first defendant also drew attention to some of the sub-paragraphs. She submitted that her client could not plead to sub-paragraphs 40.4.1 and 40.4.2 as there were no material facts asserted to support the allegation as to the intention of the first defendant. She made a similar complaint in respect of paragraph 41. Counsel submitted that the reasoning of the Full Court made clear that the second defendant was not entitled to plead conclusions without pleading the material facts supporting those conclusions. Counsel contended that to give fair notice of the case, it was necessary to plead not merely the allegations and conclusions, but also the supporting facts. Counsel conceded that if the deficiency in the pleading was a failure to provide sufficient particulars, then it would be appropriate to give leave to the second defendant to amend further the Amended Contribution Notice in order to include those particulars.
In my view, there is no basis for the complaint against paragraph 39. The paragraph identifies by date the correspondence sent by the solicitor for the second defendant and, in the sub-paragraphs, pleads the pertinent requests.
In relation to the complaint against paragraph 40, it is true that the second defendant has not identified the particular letters by which John’s solicitors have provided the responses in question. However, the second defendant has, in the sub-paragraphs of paragraph 40, identified the content of the responses. In any event, the pleas contained in paragraphs 39 and 40 may be easily pleaded to by John. If the allegation that the executor has made untimely or unhelpful responses is denied by John, he can deny the allegation and if necessary plead material facts relating to any responses that he did make.
I would dismiss the appeal in respect of paragraphs 39 and 40.
Paragraph 41
Paragraph 41 makes the following allegation:
41.The tenor of much of the correspondence sent by the executor’s solicitors to Mrs O’Meara’s solicitors has been hostile, adversarial and defensive.
Counsel for the first defendant’s submission in relation to this paragraph is similar to that for paragraphs 39 and 40. In her written submissions, counsel suggested that in order to consider the allegation of hostility, it would be necessary for John to review all correspondence between himself and the second defendant. Counsel for the first defendant submitted that paragraph 41 was a clear example of pleading a conclusion rather than material facts. In any event, counsel contended that the paragraph was unnecessary and should therefore be struck out.
Counsel for the second defendant submitted that the paragraph puts John on notice that Mrs O’Meara intends to rely upon the tenor of the correspondence from John, and is particularised sufficiently to give fair notice of the case alleged against him.
I agree with the first defendant’s contention that paragraph 41 pleads a conclusion, that being that the inference to be drawn from the correspondence is that much of it has been hostile, adversarial and defensive. The plea must be supported by the material facts from which it is alleged that the conclusion follows.
I would allow the appeal in respect of paragraph 41. I would not strike out the paragraph but, rather, order that the second defendant give particulars upon which she relies.
Paragraph 42
Paragraph 42 makes the following allegation:
42.The substance of the correspondence sent by the executor’s solicitors to Mrs O’Meara indicates that the executor’s solicitors has [sic] been communicating with the solicitors of the companies in connection with the matters concerning Fred’s estate raised by Mrs O’Meara. Mrs O’Meara has not been privy to these private conversations.
In relation to the first ground of appeal, counsel for the first defendant submitted that this is a serious allegation in respect of which no material facts have been pleaded. In relation to the second ground of appeal, counsel submitted that the paragraph is vexatious. She submitted that the plea in paragraph 42, if it was to stand, required further material facts to be pleaded: for example, items of correspondence that supported the allegation made.
Counsel for the second defendant submitted that the gravamen of the allegation in paragraph 42 was that the executor had aligned his interests with those of the companies. In relation to the first ground of appeal, counsel submitted that this paragraph, when read in the context of the preceding paragraphs, is sufficiently particularised to put John on notice of the allegations against him. In relation to the second ground of appeal, he submitted that the first defendant has not identified the basis of the complaint that the paragraph is vexatious, and has failed to identify the prejudice that arises. Further, counsel submitted that the plea is adequately supported by the material facts pleaded in the Amended Contribution Notice and is therefore a proper plea.
In my view, paragraph 42 must be considered in light of the fact that discovery has not yet occurred. It is true that Mrs O’Meara has not identified items of correspondence; however, she also pleads that she has not been privy to the communications in question. In my view, it is to be expected that this allegation will be further particularised following discovery.
I would dismiss the appeal in respect of paragraph 42.
Paragraphs 43 – 59
Paragraphs 43 – 59 are set out below:
43.On 23 March 2005 Mrs O’Meara instituted proceedings in the Supreme Court of South Australia, numbered 304 of 2005, seeking orders that the executor provide all documents pertaining to Fred and Gwen’s estate to which Mrs O’Meara was entitled as a beneficiary, under s 84B of the Trustee Act 1936 (SA).
44.In early April 2005 the executor’s second solicitor telephoned Mrs O’Meara’s solicitor and it was agreed that he would provide all of his files.
45.On 8 April 2005 the executor’s second solicitor provided his files to Mrs O’Meara’s solicitor.
46.Mrs O’Meara’s solicitors reviewed and numbered the documents in the files provided by the executor’s solicitors on 8 April 2005. The documents were:
46.1 in no coherent order;
46.2 did not disclose that the companies had made claims of beneficial entitlement to the land over a number of years as originally asserted by the executor’s second solicitors in their letter to Mrs O’Meara’s solicitors of 5 November 2004;
46.3 inadequate insofar as they did not explain what the executor had done to administer Fred and Gwen’s estates and did not fully disclose the assets of the estates.
47On 11 April 2005 in accordance with the executor’s request Mrs O’Meara’s solicitors returned the files to the executor’s second solicitors so that they could be re-ordered and then returned to Mrs O’Meara’s solicitors.
48.The files originally provided to the executor’s second solicitors were never returned to Mrs O’Meara. The executor had no intention of returning the files to Mrs O’Meara’s solicitors.
49.On 18 April 2005 new solicitors representing the executor (“the executor’s third solicitors”) wrote to Mrs O’Meara’s solicitors and stated that:
49.1 they were filing that day a notice of appearance in the Supreme Court proceedings numbered 304 of 2005;
49.2 the executor wanted to comply with his obligations under the legislation to provide trust records and requested additional time to provide the documents;
49.3 Mrs O’Meara should return to them any copies she took of the material provided to her by the executor’s former second solicitors as some of that material was confidential, privileged, of little relevant [sic] or outside the scope of s 84B of the Trustee Act 1936 (SA).
50.On 26 April 2005 Mrs O’Meara’s solicitors wrote to the executor’s third solicitors and stated that:
50.1 they would allow the executor to have a further four weeks in which to comply with their request for trust records;
50.2 they looked forward to receiving notification of their advice to the executor of the claims made by the companies;
50.3 Mrs O’Meara had taken copies of the documents originally provided to her by the executor’s second solicitors.
51.On 19 May 2005 the executor’s third solicitors wrote to Mrs O’Meara and said that she should return to them all of the photo copies she had taken of the documents provided by the executor’s second solicitor apart from those included in the subsequent bundle of documents provided by them.
52.On 2 June 2005 the executor’s third solicitors wrote again to Mrs O’Meara’s solicitors and sought the return of any copies of documents retained by her that had been provided to her by the executor contrary to s 84B of the Trustee Act 1936 (SA).
53.On 7 June 2005 Mrs O’Meara’s solicitors sought confirmation that they had been provided with all documents to which Mrs O’Meara was entitled under s 84B of the Trustee Act 1936 (SA).
54.On 9 June 2005 the executor’s third solicitors wrote to Mrs O’Meara’s solicitors and confirmed that she had now been provided with all of the documents in the executor’s possession referable to Regulation 6 of the Trustee Regulations 1996 (SA) and s 84B of the Trustee Act 1936 (SA) and requested that Mrs O’Meara return all copies that she had taken of the documents provided by the executor’s second solicitors on the first occasion.
55.On 14 June 2005 Mrs O’Meara’s solicitors wrote to the executor’s third solicitors and offered to return all of copies [sic] they had taken of the documents provided by the executor’s second solicitors under protest on the basis, among other things, that many of the documents they would return clearly did fall within the scope of the Trustee Act 1936 (SA) and regulation 6 of the Trustee Regulations 1996 (SA).
56.The executor’s third solicitors wrote a further letter to Mrs O’Meara’s solicitors on 14 June 2005 again requesting that they return documents. The documents were returned to the executor’s third solicitors at the time of the institution of this contribution notice.
57.On 15 June 2005 Judge Withers made orders in the Supreme Court of South Australia proceedings numbered 304 of 2005 that Mrs O’Meara was to have the cost of proceedings paid by the executor and noted that since the institution of the proceedings the defendant has [has] delivered two lever arch folders containing documents which the defendant asserted were constituted in full compliance with the executor’s obligations pursuant to s 84B of the Trustee Act.
58.In mid December 2005, the executor terminated his instructions to the executor’s third solicitor and retained the executor’s fourth solicitor.
59.On 16 December 2005, Mrs O’Meara sought from the executor a candid response to the matters which had been raised in her correspondence with him since September 2004. As at the date of this contribution notice, no response has been received by Mrs O’Meara from the executor’s fourth solicitor.
Counsel for the first defendant submitted that these paragraphs are frivolous or vexatious. She conceded that the mere fact that a beneficiary has commenced an action pursuant to s 84B of the Trustee Act 1936 may be relevant, but submitted that the degree of detail provided does not establish the relevance of the pleading and merely prejudices the first defendant in his response. Counsel submitted that paragraphs 43 to 59 did not make any relevant allegations and could only serve a purpose that was vexatious and harassing. She contended that the paragraphs did not go beyond pleading a request for the executor to comply with s 84B. Counsel conceded that that may be relevant, but that there was no possible relevance to the succeeding paragraphs dealing with the conduct of the solicitor. Counsel submitted the paragraphs should be struck out in their entirety.
Counsel for the second defendant noted that while the written submissions of the first defendant in relation to the second ground of appeal purport to include paragraph 59, that paragraph is not identified in the notice of appeal as being challenged under the second ground. Counsel submitted that paragraphs 43 to 58 pleaded the steps that Mrs O’Meara had been required to take to obtain documents to which she was entitled. He submitted that the facts pleaded in paragraphs 43 to 58 demonstrate that John has consistently refused to provide information to a beneficiary of the estates, and complied with this obligation only when he was, in effect, forced to do so. He submitted that these were proper pleas supporting Mrs O’Meara’s prayers for relief.
In my view, and as counsel for the first defendant conceded, the fact of a request for the executor to comply with s 84B may be of relevance. If the first defendant is correct, and the paragraphs do not go beyond pleading such a request, I do not consider that the paragraphs could be said to be vexatious or harassing. The paragraphs contain statements of fact. If the first defendant denies these, it will be a simple task for him to plead a denial. Equally, if the first defendant admits the pleaded facts, it will be a simple task to plead accordingly.
I would dismiss the appeal pursuant to ground two in relation to paragraphs 43 to 59.
Paragraph 59
Paragraph 59 is also contested under the first ground of appeal. In relation to the challenge pursuant to the first ground, counsel for the first defendant repeated the submissions relating to paragraphs 39 and 40. Counsel submitted that if paragraph 59 merely asserted that that a request had been made, and no response had been received, then the plea would be unobjectionable, albeit unnecessary in her contention. However, counsel contended that the use of the phrase ‘a candid response’ added a gloss to the plea, implying that if a response had been made, it was not truthful. Counsel submitted it was not clear, for example, whether no response had been received, or whether responses had been received in relation to only some of the matters, or whether a response had been received which was not candid.
Counsel for the second defendant submitted that paragraph 59 is sufficiently particularised to give John notice of the allegations against him. He noted that the plea contains express references to the dates and time periods during which the parties corresponded. Counsel submitted that this pleading would be simple for John to plead to, as it would require only an admission, or a pleading of the correspondence that responded to Mrs O’Meara’s requests.
I do not consider that there is merit in the first defendant’s submission. The paragraph pleads that no response has been received. There is no ambiguity of the type suggested by counsel for the first defendant. The paragraph could not be interpreted as meaning that a response has been received that is not candid.
I would dismiss the appeal pursuant to the first ground in relation to paragraph 59.
Sub-paragraph 66.1
Paragraph 66 commences in the following terms:
F: The Executor’s Failure Properly to Record and Preserve the Assets of Gwen’s Estate
66.The executor has not complied with his obligations to keep proper records and preserve the assets of Gwen’s estate in contravention of the duties pleaded in sub-paragraphs 11.1, 11.2, 11.3, 11.4, 11.5, 11.10, 11.11, 11.12 and 11.22 above.
Particulars
The particulars of the executor’s failure properly to record and preserve the assets of Gwen’s estate are as follows:
66.1 Mrs O’Meara does not know what the executor has done to administer Gwen’s estate, nor has she been provided with any accounts of Gwen’s estate maintained by the executor;
Counsel for the first defendant submitted that the second defendant’s lack of knowledge pleaded in sub-paragraph 66.1 is evidence and is not a material fact.
Counsel for the second defendant in his written submissions assumed that paragraphs 66, 66.1, 67, 69, 70 and 71 were no longer challenged under ground one. In relation to the third ground of appeal, he submitted that it was a matter of fact that Mrs O’Meara did not know what the first defendant had done to administer Gwen’s estate as a consequence of John’s breaches of duty.
Sub-paragraph 66.1 is in equivalent terms to sub-paragraph 32.1, which made the same complaint in respect of Fred’s estate. For the reasons that I struck out sub-paragraph 32.1, I would allow the appeal in respect of sub‑paragraph 66.1 and order that sub-paragraph 66.1 be struck out.
Paragraph 66.2.1
Sub-paragraph 66.2.1 makes the following allegation:
66.2 The executor’s 2001 Affidavit of Assets and Liabilities of Gwen’s estate is false and misleading in a number of respects and is in breach of the duties pleaded in sub-paragraphs 11.7, 11.8 and 11.9, 11.19, 11.20, 11.21, 11.22 above.
66.2.1In the executor’s affidavit deposing to the assets of Gwen’s estate as known by him at the time of making his application pleaded at sub-paragraph 66.2 above, the executor did not identify Gwen’s estate as having any interest in the assets of Fred’s estate. This was because at that date, the executor did not believe that Gwen’s estate had any interest in Fred’s estate;
Counsel for the first defendant submitted that sub-paragraph was frivolous or vexatious.
Counsel for the second defendant submitted that the first defendant had not particularised the complaint that the pleading was frivolous or vexatious, and had not identified any consequent prejudice. Counsel submitted that the plea was included for the purpose of putting John on notice of the case intended to be run at trial. In particular, counsel for the second defendant submitted that it was significant in that it alleges that the reasons why Gwen’s interest in Fred’s estate was not included in the statement of assets of Gwen’s estate was because John did not believe that that interest had vested. Counsel submitted that this pleading should be read in context of the pleading of the correspondence sent by Mrs O’Meara to the executor.
I do not consider that sub-paragraph 66.2.1 is frivolous or vexatious. Sub-paragraph 66.2 alleges that an affidavit is false and misleading in a number of respects. Sub-paragraph 66.2.1 particularises one of the respects in which the affidavit is said to be false and misleading, and makes an allegation as to the reason for that. In my view, there is no basis for the first defendant’s complaint against this plea.
I would dismiss the appeal in respect of sub-paragraph 66.2.1.
Ground Five
Counsel for the first defendant contended that the learned Master erred in failing to strike out paragraphs 67 to 71 of the Amended Contribution Notice as disclosing no reasonable cause of action. Those paragraphs are pleaded as follows:
G: Executor’s Unconscionable Conduct
67.Following Fred’s death, the executor had no intention of administering Fred’s estate promptly and Gwen had no income, realisable assets, or other substantial cash resources available for her living expenses.
68.The executor agreed with Gwen to pay her $1000 per fortnight (tax free) for the rest of her life and to treat such sums as gifts by Fred’s estate to Gwen. Mrs O’Meara refers to and repeats sub-paragraph 32.9.4(b) above.
69.The executor also arranged for Gwen’s Will to be changed so that he received the benefit of Gwen’s interest in s 409 Hundred of Kongorong to the exclusion of Mrs O’Meara and that he received two thirds of Gwen’s residuary estate while Mrs O’Meara only received one third.
70.In securing preferential treatment under Gwen’s Will, the executor unconscientiously took advantage of Gwen’s disadvantaged position to secure his unjust enrichment under Gwen’s Will.
71.As a result of the totality of the executor’s conduct pleaded herein, it would be unconscionable for the executor to receive or retain any benefit from Gwen’s estate over and above that received by Mrs O’Meara, and the executor should be made accountable accordingly for any such unconscionable receipt.
The Master considered that although the paragraphs were ‘novel’, he would not strike them out as disclosing no reasonable cause of action.
Counsel for the first defendant submitted that there was no cause of action that could give rise to a claim for an account of profits or equitable compensation on these pleaded facts. She submitted further that the claim was contrary to the doctrines of unconscionable conduct. She contended that even in the event that a testator has been influenced in making their will, a disappointed beneficiary has no claim for damages. Rather, counsel contended that the appropriate cause of action would be to make an allegation of undue influence, which is a probate claim.
Counsel for the second defendant conceded that if findings were made which validated the allegations in these paragraphs, the Court would not be able to alter the terms of Gwen’s will. However, he submitted that such findings would amount to unconscionable conduct which would justify the relief sought, namely an account of profits or equitable compensation.
Counsel for the first defendant submitted that the second defendant was, in essence, in these paragraphs, raising an argument that there had been undue influence exerted upon Gwen in making her will. Counsel contended that, as such, it was an argument that could have been raised at the time the first defendant applied for probate, but it was not. Counsel submitted that the paragraphs should be struck out as disclosing no reasonable cause of action.
The use of the term “unconscionable conduct” makes the position less clear. The equitable doctrines of undue influence and unconscionable conduct are distinct, although having some features in common.
The gravamen of the second defendant’s claim in paragraphs 67 to 71 is that John was in a position of advantage with respect to Gwen, and that he unconscionably used that position to influence Gwen to alter her Will in his favour. Paragraph 70 illustrates clearly the substance of the claim. Mrs O’Meara claims that notwithstanding the terms of Gwen’s Will, John should not be entitled to certain of the testamentary gifts made to him by Gwen. In substance, the second defendant’s claim is one of undue influence of Gwen as a testator. That is a probate claim.
Meagher, Heydon and Leeming in the text Equity: Doctrines and Remedies identify some of the corollaries of the principle that undue influence in equity is concerned only with gifts inter vivos, and that claims of undue influence relating to testamentary capacity are properly dealt with by the probate court. For example, in the probate jurisdiction, there is no presumption of a relationship of undue influence as there is in the equitable jurisdiction. Further, the state of mind of a testator is “not so delicately considered” as that of a party claiming undue influence in equity.
In his reasons of 26 February 2007, the Master doubted that a probate claim could be made in a contribution notice. It is unnecessary for me to consider that question. The second defendant has sought relief in equity, common law and statute. She has not purported to seek relief in the probate jurisdiction.
This is not a case where the purported cause of action and the relief sought are merely novel. Nor is it a case where the claimant seeks the extension of an existing cause of action to novel circumstances. Rather, the second defendant purports in paragraphs 67 to 71 to disclose a cause of action which is quite antithetical to the established body of doctrine on the respective extents of the jurisdictions of the courts of equity and probate. The principles relating to the exertion of undue influence over a testator have been developed by the probate court and, as I have observed briefly above, are different to those that have been developed by the court of equity in relation to the exertion of undue influence by disponors inter vivos. In purporting to seek equitable relief for undue influence of a testator, the second defendant has disclosed no reasonable cause of action.
Finally, I emphasise that this is not a case where striking out paragraphs for disclosing no reasonable cause of action leaves the claimant unable to seek relief. The second defendant has a cause of action in probate.
I would allow the appeal in respect of ground five, and I would order that paragraphs 67 to 71 of the Amended Contribution Notice be struck out.
Summary
In summary, I would make the following orders in respect of the Amended Contribution Notice of the second defendant:
1.The appeal in relation to sub-paragraph 22.5 is allowed for the limited purpose of removing the suggestion of collusion, the assertion of fact to remain intact. I would order that sub-paragraph 22.5 be amended to read:
22.5In early 2006, the executor and the companies applied to remove Mrs O’Meara’s solicitors as solicitors on the record based upon false allegations of breach of confidence, and unprofessional conduct.
I give leave to the second defendant to replead sub-paragraph 22.5 to include the particulars necessary to support a plea of fraud.
2.The appeal in relation to paragraph 24 is allowed. I would order that the second defendant plead further material facts in support of the allegation in paragraph 24.
3.The appeal in relation to paragraph 32 is allowed only in respect of sub-paragraph 32.1. I would order that sub-paragraph 32.1 be struck out.
4.The appeal in relation to paragraph 35 is allowed. I would order that the second defendant plead further material facts in support of the allegation in paragraph 35.
5.The appeal in relation to paragraph 37 is allowed. I would order that the second defendant plead further material facts in support of the allegation in paragraph 37.
6.The appeal in relation to paragraph 41 is allowed. I would order that the second defendant plead further material facts in support of the allegation in paragraph 41.
7.The appeal in relation to sub-paragraph 66.1 is allowed. I would order that sub-paragraph 66.1 be struck out.
8.The appeal in relation to paragraphs 67 to 71 is allowed. I would order that paragraphs 67 to 71 be struck out.
9.The appeal in relation to all other paragraphs and sub-paragraphs is dismissed.
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