Henderson v Executor Trustee Australia Ltd

Case [2005] SASC 477

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court: Civil)

In the Estate of PHYLLIS MARY RONDAHL

HENDERSON v EXECUTOR TRUSTEE AUSTRALIA LTD & ORS

Judgment of The Full Court

(The Honourable Justice Debelle, The Honourable Justice Sulan and The Honourable Justice Anderson)

13 December 2005

SUCCESSION - WILLS, PROBATE AND ADMINISTRATION - PROBATE AND LETTERS OF ADMINISTRATION

Administration pendente lite - dispute as to which of three wills is true will - administrator appointed to hold shares of deceased in company - company subject to takeover offer - potential beneficiaries of shares disagree whether to accept or reject takeover offer - whether administrator entitled to vote the shares at meeting of shareholders - held, administrator should not vote shares - appeal dismissed.

Corporations Act 2001 (Cth) s 9, s 257, s 438A, Part 5.3A; Supreme Court Rules 1987 (SA) R 104.13; Court of Probate Act 1857 (UK) s 70, referred to.
In the Estate of Hanna (1881) 7 VLR (IP & M) 44; Knox v MacKinnon (1888) 13 App Cas 753, applied.
Bellew v Bellew (1865) 164 ER 1437; Borlands Trustee v Steel Brothers & Co Ltd [1901] 1 Ch 279; Butt v Kelson [1952] Ch 197; Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12; Coopers Brewery Limited v Lion Nathan Australia Pty Ltd [2005] SASC 334; Coopers Brewery Limited v Lion Nathan Australia Pty Ltd [2005] SASC 400; Duffy v Super Centre Development Corporation Ltd [1967] 1 NSWR 382; Greenway v McKay (1911) 12 CLR 310; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405; Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409; Re Bevan (deceased) [1948] 1 All ER 271; Re Manchester & Milford Railway Company; Ex parte Cambrian Rail Company (1880) 14 Ch D 645; Re Mineral Securities Australia Ltd (in liq) [1973] 2 NSWLR 207; Re Newdigate Colliery Ltd [1912] 1 Ch 468; Re Newdigate Colliery Ltd [1912] 1 Ch 468; Re Oakes [1917] 1 Ch 230; Tomkinson v Hersey (1983) 34 SASR 181; Whittle v Keats (1866) 35 LJ (P&M) 54, considered.

In the Estate of PHYLLIS MARY RONDAHL
HENDERSON v EXECUTOR TRUSTEE AUSTRALIA LTD & ORS
[2005] SASC 477

Full Court:  Debelle, Sulan and Anderson JJ

  1. DEBELLE J.        This is an appeal from orders of a judge of this Court made on 25 November 2005, the effect of which is to direct an administrator pendente lite (“the administrator”) not to exercise voting rights in respect of shares held by him.

  2. The issues in this appeal required urgent consideration.  As will be seen, the appeal was in respect of orders made by Perry J on 25 November.  Those orders concerned the ability of the administrator to vote at a meeting of shareholders to be held on 7 December.  The Court heard the appeal on Friday 2 December, and on Monday 5 December it announced its decision.  By a majority (Debelle and Anderson JJ, Sulan J dissenting) the Court granted…

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AGLC
Henderson v Executor Trustee Australia Ltd [2005] SASC 477
Case
[2005] SASC 477
Decision Date

CaseChat Overview and Summary

In the case of Henderson v Executor Trustee Australia Ltd, the central dispute involved the administration of the estate of a deceased person, particularly the voting rights attached to shares in Coopers, a company subject to a takeover bid by Lion Nathan. The administrator, appointed to manage the estate, sought to exercise the voting rights attached to the shares held by the deceased, which represented a significant portion of Coopers' issued capital. The potential beneficiaries of the estate, however, had differing views on how the shares should be voted, particularly in relation to a takeover offer by Lion Nathan. The legal issues before the court were whether the administrator should be permitted to vote the shares and, if so, how those votes should be cast in the context of conflicting interests among potential beneficiaries.

The court considered the unique circumstances of the case, including the ongoing dispute over which of the deceased's three wills was the true will, and thus, who the beneficiaries of the estate were. Given that the identity of the beneficiaries remained unresolved, the court held that it would not be proper for the administrator to vote the shares in a manner that might irreversibly affect the interests of any potential beneficiaries. The court reasoned that allowing the administrator to vote could lead to a preferential treatment of one group of potential beneficiaries over another, which would not serve the impartial administration of the estate. The court also highlighted that the current impasse was partly due to the failure of the parties to expedite the resolution of the will validity issue. Ultimately, the court decided that the administrator should not vote the shares, preserving the status quo until the beneficiaries were clearly identified and the estate could be administered impartially.

The court's decision was grounded in the principle that the administrator's duty was to manage and preserve the estate for the benefit of all potential beneficiaries until the court determined which will was valid. The court's conclusion was that allowing the administrator to vote the shares could prejudice the interests of one group of potential beneficiaries over another, which would contravene the principles of impartial administration. Consequently, the appeal was dismissed, and the administrator was not permitted to vote the shares at the upcoming shareholder meetings. This decision underscored the importance of maintaining neutrality in estate administration, particularly in complex scenarios involving competing claims and significant commercial interests.

Orders

Orders of the court

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Background

Background to the litigation

On 21 November Lion Nathan increased its offer to purchase the shares in Coopers from $260 per share to $310 per share.A Summary of Relevant Facts The factual background against which the administrator applied for directions permitting him to exercise the voting rights attaching to the Coopers shares might be shortly stated.1.On 1 September 2005 Lion Nathan announced a takeover offer to acquire the shares in Coopers for a price of $260. On 30 September it sent shareholders in Coopers its Bidder Statement.2.On 15 November Coopers published its Target Statement advising shareholders not to accept the offer and announcing a proposal to amend its Articles to enable a buy‑back of 15 per cent of its shares at a price of $260 per share.3.On 21 November Lion Nathan increased its takeover offer to $310 per share.4.On 7 December 2005 two important meetings of shareholders will be held.(a)At the first meeting the motion before the shareholders is to remove all reference to Lion Nathan Australia from the Articles of Association of Coopers. That will effectively remove the third tier pre‑emptive rights of Lion Nathan Australia to purchase shares in Coopers. The practical effect of the motion, if carried, will be to preclude Lion Nathan from becoming a shareholder in Coopers. As it is a resolution to amend the Articles of Association, this resolution is a special resolution which will be carried only if at least 75 per cent of the votes cast by members entitled to vote are in favour of the resolution. The administrator’s assessment is that the voting rights attached to the shares now registered in his name will be critical to the outcome of that voting.(b)The second meeting will consider a motion which, if carried, will enable Coopers to implement its buy-back offer of 15 per cent of the shares in Coopers. This goal would be effected by carrying a special resolution to amend the Articles of Coopers to authorise the buy-back offer and a second ordinary resolution to approve the buy-back offer pursuant to s 257C(1) of the Corporation Acts 2001 (Cth).The special resolution to amend the Articles to authorise the buy-back offer will also require 75 per cent of the votes of members entitled to vote. The effect of the second resolution, if carried, is that Lion Nathan’s offer will lapse unless it is varied by Lion Nathan. That is a consequence of the fact that Lion Nathan’s offer contains conditions that there must be no change to the Articles of Coopers and that there must be no prescribed occurrences. The takeover offer defines “prescribed occurrences” to include entry by Coopers into a buy-back arrangement.5.The testatrix made three wills in 1991, 1992 and 1993. In this action, the Court will determine which of those three wills is the true will of the testatrix.6.The terms of each the 1991 will, the 1992 will and the 1993 will differ as to the disposition of shares in Coopers held by the testatrix. In the 1991 will and in the 1992 will, the shares are divided between the four named nephews and nieces and Mrs Henderson. In the 1993 will Mrs Henderson is given all of the shares.7.The testatrix held a total of 114,292 shares in Coopers which represents 8.5 per cent approximately of the issued capital of Coopers.8.In consequence of the orders of Perry J made on 22 and 27 September 2005, the administrator is registered as the holder of the shares formerly held by the testatrix but has no power to vote unless directed by this Court to do so.The Administrator’s Application

Evidence

Evidence Before The Court

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Decision

Reasons for decision

DEBELLE J (dissent) SULAN J ANDERSON J
The duty of the administrator to manage and preserve the estate for the benefit of those found to be entrusted to it focuses attention on two aspects of the issues in this appeal. The first is that, until the Court determines which is the true will of the testatrix, it is not possible to know who will be the beneficiaries of the estate of the testatrix. The second is that views differ between the potential beneficiaries as to how the voting rights attached to the Coopers shares should be exercised. In this case, the best interests of the estate are the best interests of the potential beneficiaries. Mrs Henderson believes that the best course is to oppose the motion to amend the Articles and accept the Lion Nathan offer of $310 per share. The four nephews and nieces believe that it is better for shareholders in Coopers to vote in favour of the motion, refuse the Lion Nathan offer and retain control of the company. If the administrator were to exercise the voting rights and vote to defeat the motion to amend the Articles, it is likely that the Lion Nathan takeover bid will succeed. In that event, the administrator will be acting contrary to the wishes of the four nephews and nieces and in a way which does not preserve the benefit of the shares as they perceive that benefit. By the same token, if he were to vote in favour of the motion and the motion is carried, the takeover would be defeated and Mrs Henderson would believe that the administrator had acted in a way which does not preserve the benefit of the shares as she perceives that benefit. In short, if the administrator were to vote one way or the other he would not be acting impartially as between the potential beneficiaries. He would be preferring the interests of one group over the interests of the other. If the administrator does not vote, he does not prefer the interests of one potential beneficiary over another.Conclusion The question whether or not the administrator should be directed to vote these shares must be determined by a reference to the circumstances in which he was appointed. Those circumstances may be briefly summarised in these terms.1.There is a dispute as to which of the three wills of the testatrix is the true will of the testatrix. One consequence of that dispute is that there are competing claims as to who is beneficially entitled to the shares in Coopers held by the testatrix.2.The administrator holds the shares of the testatrix in Coopers knowing that, until the Court decides which is the true will of the testatrix, it is not possible to determine who has the beneficial interest in the shares.3.The potential beneficiaries who are litigating the issue as to which is the true will have different views as to how to vote at the first meeting of Coopers and whether the Lion Nathan offer should be accepted. In other words, they have different views as to how the administrator should manage and preserve the shares for their benefit until the Court determines who is entitled to those shares.4.As noted a little earlier, neither Mrs Henderson nor the four nephews and nieces has a beneficial interest under any of the wills until the Court decides which is the true will and until the personal representative has finalised the executorial or administrative duties under that will to the point where the asset is or can be released for the purposes of the trusts directed for it.5.Before the administrator was appointed, no person was able to exercise the voting rights attached to the shares in Coopers held by the testatrix.

Ratio Decidendi

Legal Principle Established

Established by: SULAN J, ANDERSON J

Perry J expressed his reasons for dismissing the application of the administrator in these terms:16The administrator has made a genuine attempt to set out relevant considerations to assist the Court in determining the application. He has marshalled the various considerations and materials which bear on the decision to be made. I accept that the view which he ultimately offers is a view which he genuinely holds as to how the balancing out of the interests of the respective parties should best be approached.17In his affidavit, he concedes that whichever way he might vote, there is potential for prejudice to the interested parties on one side or the other.18He offers the view, based largely on economic considerations relative to his opinion as to the likely effect on the value of the shares, that he should be permitted to vote against the resolution. This would preserve the position of Lion Nathan, if the motion was to be lost, as the holder of a third-ranking pre-emptive right to purchase shares.19The difficulty I have in accepting that view as determinative of the application, is that clearly there are other considerations involved which do not relate entirely to the question of the value of the shares or preservation of the value of the shares. In any event, it is impossible to say whether the long-term value of the shares would best be preserved by voting one way or another on the resolution in question.20It is clear from the material that has been brought into court that commercial opinion from experienced persons as to that aspect of the matter is by no means unanimous. For example, the directors of Coopers clearly take a different view.21Putting aside economic considerations, I do not think that it would be right for the Court to sanction a particular exercise of the voting rights attached to the shares when:· the ultimate beneficiaries of the shares cannot at this stage be identified;· the views between those who might possibly succeed to the shares, as to how the voting rights should be exercised, differ markedly; and· voting on the shares could irreversibly and adversely affect some of the interested parties.22I point out also, that the present situation would have been avoided if the parties to the action in which the validity of the various wills is to be resolved, had proceeded with those proceedings in a timely fashion. The plaintiffs and the defendants have each blamed the other for the delays in bringing the proceedings which were commenced in April 2003, to trial. However, it does not matter who might be said to be to blame. The fact remains that the defendant has always had the ability to seek orders to push the matter along.23In that sense, the present situation is a product of her own failure to do so.24I have carefully considered the arguments put by counsel, but I have reached the firm view that, in all the circumstances, it would not be proper to allow Mr Hart to participate in the meeting of 29 November or to vote with respect to the resolution that is to be considered by that meeting.SOME PRELIMINARY CONSIDERATIONSNo Evidence of Likely Voting