IMO the Will and Estate of Peter Robert Nelson Peers, deceased
[2014] VSC 500
•8 October 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2013 6337
IN THE MATTER of the Will and Estate of PETER ROBERT NELSON PEERS, deceased
BETWEEN:
| BEVERLEY JOAN GILLARD (in her capacity as an Executor of the Will and Trustee of the Estate of PETER ROBERT NELSON PEERS, deceased) | Plaintiff |
| - and - | |
| MAHONS WITH YUNCKEN & YUNCKEN (in its capacity as solicitors for the Executors of the Will and Trustee of the Estate of PETER ROBERT NELSON PEERS, deceased) and others (according to the schedule attached) | Defendants |
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JUDGE: | DALY AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 July 2014 |
DATE OF JUDGMENT: | 8 October 2014 |
CASE MAY BE CITED AS: | IMO the Will and Estate of Peter Robert Nelson Peers, deceased |
MEDIUM NEUTRAL CITATION: | [2014] VSC 500 |
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EXECUTORS AND ADMINISTRATORS – Application by executor pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2005 – Whether a co-executor is entitled to act unilaterally – Whether expenditure on repairs a measurable benefit to the estate – Whether issuing a proceeding to review the legal costs incurred to administer the estate justifiable – Szabo v Balogh [2007] VSC 232 and Beath v Kousal [2010] VSC 232 considered – Re Challis [2010] WASC 333 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M. Kennedy | Michael I Kennedy & Associates (leave to cease to act granted on 10 September 2014) |
| For the First Defendant | Mr T. Whitehead | Mahons with Yuncken & Yuncken Lawyers |
| For the Second and Third Defendants | Mr T. Dowling | Martin Irwin & Richards Lawyers |
HER HONOUR:
This proceeding was commenced by the plaintiff, Dr Gillard, in December 2013 seeking directions and determinations from the Court in relation to two matters: first, whether Dr Gillard, in her capacity as one of the executors of the estate of her late father, Peter Peers (‘deceased’), was entitled to bring a proceeding seeking to review the costs of the estate’s solicitors (the first defendant), and secondly, whether she is entitled to be indemnified from the estate for the sum of $8,774 in respect of repairs and maintenance carried out on a property at 17 McKenzie Street, Murrayville (‘McKenzie Street property’), in which the estate held an interest of 50% as a tenant in common.
The second and third defendants, Christopher Peers and Sheryle Peers, are husband and wife, and are co-executors of the estate. Christopher Peers is a nephew of the deceased. Neither he nor his wife (‘co-executors’) are beneficiaries of the estate.
A few weeks before this proceeding came on for hearing on 17 July 2014, Dr Gillard settled her claim against the first defendant, presumably on terms which also compromised the Summons for Taxation brought by her in proceeding no 1323 of 2013 (‘Summons’). Accordingly, what remained for adjudication were two issues:
(a) whether Dr Gillard is entitled to be indemnified from the estate for the costs of repair to the McKenzie Street property (‘repair costs’);
(b) whether Dr Gillard was justified in issuing the Summons.
In his written outline of submissions, the solicitor for Dr Gillard stated that Dr Gillard sought an order that the co-executors pay her costs of this proceeding on a ‘standard indemnity’ basis. During the course of the hearing, an alternative formulation was put forward, being that Dr Gillard’s costs of this proceeding be paid from the estate, but to the extent that the assets of the estate are insufficient to meet any order for costs, the co-executors should be liable for the remainder.
However, it seems to me that the question of costs must await any further evidence and submissions of the parties following my determination of the two issues above.
The evidence is, and it is not in dispute, that the bulk of the assets of the estate have been distributed pursuant to an agreement reached between the beneficiaries (the children of the deceased) in 2011, and that the remaining asset of the estate comprises cash at bank of $28,794.86. Accordingly, while there is no evidence as to the quantum of Dr Gillard’s costs of the Summons and this proceeding, there appears to be a real prospect, if Dr Gillard is successful in respect of the matters in dispute in this proceeding, that the assets of the estate may be insufficient to meet the parties’ costs of this proceeding. This scenario needs to be contrasted with the position of the estate prior to the issue of this proceeding and the Summons: the cash assets of the estate would have been sufficient to meet both the claims of Dr Gillard for the repair costs, and the outstanding bill rendered by the first defendant of $12,159.40 in January 2013. Therefore, this dispute is yet another regrettable example in this Court where rancour and ill will within a family causes the assets of an estate to be squandered on legal fees, both in terms of the costs of the administration of the estate, and the costs of litigation arising out of the administration of the estate.
Ultimately, what Dr Gillard seeks is validation of unilateral actions undertaken by her in her role as a co-executor of the estate: the first, being the repair works, which were undertaken at her instigation without consultation with the co-executors, and the second, to issue the Summons. The plaintiff sought the agreement of the co-executors to issue the Summons, but when the co-executors refused to consent to the proceeding being brought, issued the Summons anyway. So, two questions arise: first, was she, as an individual co-executor, entitled to act unilaterally? If so, had she acted reasonably in undertaking the repairs, and issuing the Summons, such that she is entitled to be indemnified from the estate for her costs and expenses in that regard, including her costs of invoking the jurisdiction of the Court to ratify her actions? It she is not entitled, is she entitled to be indemnified by the estate on the basis that her conduct provided a measurable benefit to the estate?
Before dealing with each of those issues, the following section provides a brief, and largely uncontroversial chronology of the relevant events:
(a) the deceased died on 17 February 2010, followed shortly thereafter by his wife, who died on 21 February 2010;
(b) in March 2010 Dr Gillard contacted the first defendant (‘Mahons’) with a view to engaging them to act in the administration of the estate. Mahons commenced to act, and on 18 June 2010 obtained a grant of probate of the will of the deceased dated 16 October 2007 (‘2007 will’);
(c) the terms of the 2007 will differed from a previous will of the deceased, in that the second defendant was no longer a beneficiary of the estate, and that Dr Gillard was appointed as a co-executor of the estate in place of another sister, Cassie Kelly;
(d) the inventory of the assets and liabilities of the estate filed with the application for the grant of probate valued the deceased’s interests in four pieces of real estate in Murrayville (including his interest in the McKenzie Street property, which was valued at $9,100) at $43,400, and the deceased’s personal estate at nearly $1.7 million;
(e) the assets of the estate were distributed not strictly in accordance with the terms of the 2007 will, but in accordance with a Deed of Appropriation drawn up by Mahons and executed by the executors and beneficiaries on or about 31 May 2011;
(f) notwithstanding the agreement of the parties pursuant to the Deed of Appropriation, it appears that there was ongoing ill will between Dr Gillard on the one hand, and her sister Cassie Kelly and the co-executors on the other hand, with communication between the parties taking place through Mahons;
(g) the subject matter of these communications is in part evidenced by the narrations contained in Mahons’ invoices, and includes, among other things, attendances regarding the usual matters concerned with the ascertainment of the assets and liabilities of the estate and an application for the grant of probate, preparation of the Deed of Appropriation, reimbursement of expenses incurred by the executors, claims for executors’ commission by the executors, taxation matters, an issue about the demolition of a building on one of the estate properties, the process of the distribution of certain assets of the estate in specie, payment of the accountant for the estate, claims in respect of the repair costs, and claims by Christopher and Sheryle Peers for reimbursement of legal costs paid by them for independent legal advice obtained by them with respect to issues which had emerged during the course of the administration of the estate;
(h) the total legal fees invoiced by Mahons to the estate in the period between March 2010 and January 2013 was $62,506.39, of which $12,159.40 remained unpaid at the date of the issue of the Summons;
(i) the Summons was issued on 18 March 2013 by the plaintiff in the absence of the consent of the co-executors;
(j) this proceeding was issued on 6 December 2013. Dr Gillard asked Cassie Kelly and Robert Peers (two of her three co-beneficiaries) to support her bringing this proceeding, but they refused to do so; and
(k) the proceeding was set down for hearing on 17 July 2014. On or about 30 June 2014, Dr Gillard resolved her differences with Mahons.
Dr Gillard relied upon two affidavits sworn by her on 5 December 2013, an affidavit sworn by her on 7 April 2014, and an affidavit sworn by her sister Valerie Peers on 6 April 2014. The co-executors relied upon affidavits sworn by each of them on 7 March 2014, and an affidavit of Philip Smith (the tradesperson who carried out the repair works) on 7 March 2014. Also before the Court was an affidavit affirmed by Timothy Whitehead of Mahons on 6 March 2014 which was substantially similar to an affidavit affirmed by him on 12 February 2014.
In the first of her affidavits sworn on 5 December 2013, Dr Gillard deposed to the following matters:
(a) discussions between her, Christopher Peers, and her sister Cassie Kelly regarding his alleged request for one of the properties of the estate to be gifted to him which appear to form the basis of her statement that:
I have encountered continuing difficulties in securing the cooperation of the co-executors etc and the cooperation of my sister Cassie (in her capacity as a beneficiary of the estate) in reaching agreement on issues related to the administration of the estate of which Christopher Nelson Peers is not a beneficiary.
(b) the circumstances in which the deceased made the 2007 will, which was drawn up by a friend of Dr Gillard’s at Mahons;
(c) what occurred during her first conference with a solicitor at Mahons in March 2010 after the death of the deceased. In particular, she deposed as to what she was not told about at that meeting regarding Mahons’ charging and billing practices, the difference between the amounts charged by Mahons and the amounts prescribed by scale and her rights under the Legal Profession Act 2004 (‘LPA’); and
(d) she deposed that she was not informed:
[T]hat it is an important principle of law that co-executors should act jointly and unanimously and that the firm would and legally could act as an administrator on the basis of unanimous instructions by the three co-executors.
A substantial part of Dr Gillard’s first 5 December 2013 affidavit amounted to submissions as to why she was likely to be successful in meeting the criteria for costs review under s 3.4.44(1) of the LPA. At paragraph 20 of her affidavit; Dr Gillard stated:
I have reasonable grounds for believing, based on legal advice to me, that I can establish to the satisfaction of the Costs Court and for the benefit of the beneficiaries of the Estate that:
(a)it was unreasonable for Mahons to carry out the work to which part of the legal costs relate
(b)that part of the work by Mahons was not carried out in a reasonable manner; and
(c)that the amount of legal costs in relation to the work which was done was neither fair nor reasonable.
Finally, in her first 5 December 2013 affidavit, Dr Gillard exhibited, among other things, a complete set of the invoices rendered to the estate by Mahons, which, despite being lump sum bills, contained extensive and detailed narrations describing the work carried out by them in the administration of the estate.
In her second affidavit sworn on 5 December 2013, Dr Gillard set out the basis of her claim for the repair costs. Parts of this affidavit were ruled as inadmissible during the course of the hearing on 17 July 2014, but the substance of the remaining evidence can be summarised as follows:
(a) during the time of her parents’ funerals in February 2010 she stayed at the McKenzie Street property with her sister Valerie and other members of her family;
(b) she and those other family members present agreed that the McKenzie Street property was in need of urgent repairs;
(c) she received a recommendation regarding a tradesman, Phil Smith. As she was busy with her schedule as an anaesthetist, she asked her sister Valerie to discuss with Phil Smith whether he could undertake the repair works. She did not ask the co-executors to arrange the repair works as “our relationship was strained at the time”;
(d) at paragraph 5 of her affidavit she deposed:
At that time, we were acting in our collective responsibilities as members of the immediate family and beneficiaries of the estate. However I was subconsciously aware of my future responsibilities as an executor so I started to assert responsibility for this matter of getting urgent repairs done.
(e) the repair works were commenced by Phil Smith in May 2010, and completed in three stages over the course of subsequent months;
(f) she deposed that she believed Phil Smith had obtained a key to the McKenzie Street property from the co-executors on two occasions, and she inspected the repair works with Christopher Peers in June 2011, at which time he expressed no opposition to the quality of or the need for the works;
(g) originally she and Valerie Peers claimed to be reimbursed $8,000 from the estate for the repair costs, but the payments made by Valerie Peers (with her approval) to Phil Smith for the repair works totalled $8,774.00. She exhibited what she described as ‘informally created pro-forma invoices’ which were created by Phil Smith at her request in March 2013 and briefly described the works done;
(h) at paragraph 12 of her affidavit, Dr Gillard deposed as follows:
While the co-executors initially proposed in July 2011 that the Estate might reimburse 50% of the rounded up costs of $8,000, the co-executors subsequently refused to agree that the payments made for the urgent works should be reimbursed to me by Mahons from the residual assets of the estate. They have argued in various times in conversations with me and by email or letter communications to me that:
1.the works were not formally authorised by the co-executors before they were commissioned;
2. the works were not competitively tendered;
3.the works were performed by a person who was not a registered builder so that there was no assurance of quality of the work to be done so that the value of the Estate might have been diminished;
4.as no tax invoices were issued in the names of the co-executors, they could not be validly approved for payment; and
5.the works were undertaken by my sister Valerie and I for the sole underlying purpose of improving the value of the McKenzie Street property in the anticipation that it would be vested in us.
In his affidavit affirmed on 6 March 2014, Mr Whitehead on behalf of Mahons did not directly address the allegations made against Mahons in Dr Gillard’s first 5 December 2013 affidavit. He merely exhibited the Will of the deceased, which identified Cassie Kelly, among others, as a beneficiary of the estate, and three pieces of correspondence, being:
(a) an email from Cassie Kelly to Anthony Mahon of Mahons which, among other things, confirmed that she did not dispute the fees charged by Mahons for their work in administering the estate, and which criticised the conduct of Dr Gillard;
(b) a letter from Mahons to the executors dated 21 December 2011 reporting upon a telephone call in which Cassie Kelly made certain proposals regarding the accounting for interest on the proceeds of sale of estate assets, objected to executors commission being paid to Dr Gillard (but not the co‑beneficiaries) and had raised concerns regarding escalating legal fees between May 2011 and November 2011;
(c) an email from Cassie Kelly to Anthony Mahon dated 22 January 2014, enclosing a letter from Dr Gillard to her and her brother seeking to enlist their support for this proceeding, and stating “we do not support her in your actions against your legal practice”; and
(d) a copy of Mrs Kelly’s reply to Dr Gillard’s letter dated 12 February 2014, in which she stated:
Robert and I acknowledge receipt of your letter addressed to us jointly. Robert asked me sometime ago to represent him as he does not wish to be directly involved in estate issues.
We do not support you in your Court action against Mahons with Yuncken and Yuncken, the legal practice which you alone appointed to administer the estate.
You alone and without consultation or support of the co-executors appointed lawyer Michael I Kennedy to represent you and we are of the view that you are liable for his fees. You are the only executor who wishes these Court actions to proceed and the estate should not bear costs of filing any applications.
As to your statement that the beneficiaries may be asked to contribute to the future costs of the matter, we are not aware of any basis for this suggestion and certainly do not support your view.
As noted above, the co-executors swore affidavits in opposition to Dr Gillard’s claims in this proceeding. In her affidavit sworn on 7 March 2014, Sheryle Peers deposed to the following matters:
(a) the value of the deceased’s interest in the McKenzie Street property, being $9,100;
(b) while she did not know when Dr Gillard and Valerie Peers knew that the interest in the McKenzie Street property would pass to them, she noted that a draft agreement to that effect was prepared by Dr Gillard on 9 October 2010, shortly after the second stage of the repair works was carried out by Phil Smith, and just prior to the third stage of the repair works being carried out;
(c) the co-executors opposed Dr Gillard’s claim for the repair costs on the basis that the co-executors were not informed about the repair works and did not consent to and authorise them, and that for the most part, the repair works were not necessary or urgent and were undertaken for the ultimate benefit of Dr Gillard and Valerie Peers;
(d) the co-executors’ concerns about the costs of the proceeding, given the modest amount of cash left in the estate;
(e) the communications (or lack thereof) between the executors regarding the repairs at the McKenzie Street property;
(f) her belief as to the cause of the strained relationship between Dr Gillard on the one hand, and the co-executors on the other;
(g) the difficulties said to have been caused by the strained relationship between Dr Gillard and the co-executors, the alleged propensity of Dr Gillard to act unilaterally and in a “high handed manner” and her alleged reluctance to wind up the affairs of the estate;
(h) her belief that the repair works were not urgent; and
(i) her belief, and the source of that belief, that Robert Peers has paid Dr Gillard $2,109 in respect of the repair works.
In his affidavit sworn on 7 March 2014, Christopher Peers adopts what is deposed to in his wife’s affidavit, and deposes to certain additional matters, as follows:
(a) he rejected Dr Gillard’s assertions that he had previously engaged Philip Smith to carry out repair works, or that he inspected the repair works with her in June 2011 (save for the veranda and the parapet);
(b) he rejected Dr Gillard’s assertions about the cause of the blockage of the toilet at the McKenzie Street property and provided an alternative explanation;
(c) he gave evidence about an offer he made to Dr Gillard’s solicitor in May 2013 regarding the repair costs; and
(d) in paragraph 11 of his affidavit, he deposed as follows:
I say that right throughout the administration of this estate, Beverley has incurred significant legal fees for the estate, as a result of her actions in refusing to cooperate with her co-executors in the proper administration of the estate. This is the reason that I do not support Beverley in her claim against Mahons.
The co-executors also relied upon an affidavit of Phillip Smith, the handyman who carried out the repairs at the McKenzie Street property in 2010. Given the relevance of Mr Smith’s evidence to the claim for the repair works, paragraphs 5 to 10 of his affidavit are set out in full below:
At the time I was requested to carry out the repairs, I was not aware that the McKenzie Street property was an estate property as all correspondence in this matter was with Valerie Peers and payments were also made by her to me.
In a document dated 8 June 2010 and prepared by myself, I stated I carried out the following work to the McKenzie Street property: ‘Repaired Ceiling purlins & rafters in internal verandah damaged by water leakage from roof and wall flashing. Replaced Canite Ceiling and Roofing iron to correct area. Remove debris from ceiling.’ In my opinion, these repairs that I carried out were not urgent; rather I would consider them to be necessary maintenance to the McKenzie Street property. The ceiling had not collapsed as has been stated by Beverley in paragraph 2 of her affidavit. The ceiling had a noticeable sag but the ceiling could have remained in its state over a considerable period of time before any repairs were carried out.
Whilst I was on the roof I noticed that there was a lot of debris which had accumulated over a number of years and therefore whilst I was carrying out the repairs to the roof, I decided to it would be appropriate to also remove the debris.
The damage which had been caused to the internal verandah by water leaking from the roof was the result of a leak which I would describe as more annoying than bad. To the best of my recollection when I was working on these repairs I do not recall viewing water pooling in the roof; I was only able to observe water stains which could have been present for some years.
In a document dated 8 September 2010 and prepared by myself, I stated I carried out the following work to the McKenzie Street property: ‘Verandah work. Remove eastern side facia damaged by wood & water rot. Remove gutters holed and rusted through. Refit proofing iron to suit new facias &Y guttering. Supply and fit termite resistant Facia on eastern side of verandah. Supply and fit lengths of OG Colourbond guttering & brackets both sides. Refit & connect down pipes.’ In my opinion, these repair works were not urgent. They were repairs which could be classified as maintenance but there was not any pressing need for them to be carried out immediately.
In a document dated 2 November 2010 and prepared by myself, I stated I carried out the following work to the McKenzie Street property: ‘Clear septic tank drains. Pump out and tank clean by contractor. Fit door locks to house as directed.’ In my opinion I believe the clearing of the septic tank drains could be classified as urgent works because even though the drains were working, they were not working properly and the toilet would ultimately end up blocked and not be able to drain.
Dr Gillard responded to the matters raised in the affidavits filed on behalf of Mahons and the co-executors in an affidavit sworn on 7 April 2014. Again, parts of that affidavit were struck out as inadmissible hearsay, conclusion, or submission. Dr Gillard also relied upon an affidavit sworn by her sister, Valerie Peers, on 6 April 2014.
In her affidavit sworn on 7 April 2014, Dr Gillard deposed to the following matters:
(a) one of the ceiling panels at the McKenzie Street property had collapsed;
(b) she had engaged Mr Smith to do the repair works prior to her first conference with Mahons in March 2010;
(c) she commented upon the number of communications between Mahons and various parties between May 2011 and November 2011 disclosed by the Mahons invoices, presumably in order to refute the assertions of Cassie Kelly in correspondence that the cause of increasing legal costs was Dr Gillard’s approach to the administration of the estate;
(d) she commented further regarding the circumstances in which the deceased made the 2007 will, and the events at the time of her parents’ funeral which were said to be the cause of the strained relationship between her on the one hand, and the co-executors and Cassie Kelly on the other hand;
(e) the proposal that she and Valerie Peers be given the deceased’s interest in the McKenzie Street property was her brother Robert’s proposal, not hers; and
(f) she deposed as to other matters which she considered may have caused ill‑will between her and the co-executors, such as her reporting to the Council her concerns about the risk to public safety of one of the properties co‑owned by the estate and the co-executors’ family.
In her affidavit sworn on 6 April 2014, Valerie Peers deposed as follows:
(a) the nature of the relationship between Cassie Kelly and other members of her family, and the impact she believed the animosity Cassie Kelly felt for Dr Gillard upon the costs of administering the estate;
(b) the alleged cause of the strained relationship between the co-executors and other family members, including her and Dr Gillard;
(c) she commented upon various aspects of the repairs required to the McKenzie Street property, having stayed regularly at the property since 2002, and her concerns about the state of repair of the McKenzie Street property;
(d) in January 2010 (that is, prior to the death of the deceased) she agreed with Dr Gillard that repairs needed to be carried out. Dr Gillard provided her with Phil Smith’s contact details, and he first visited the McKenzie Street property in January 2010; and
(e) she provided further details regarding Mr Smith’s engagement and the repair works he carried out.
In particular, she deposed, in summary, as follows:
(a) she confirmed Dr Gillard’s evidence that a panel in the ceiling of the McKenzie Street property had collapsed;
(b) she disputed the second defendant’s assertion as to the cause of the blocked toilet at the McKenzie Street property;
(c) during Phil Smith’s first visit to the McKenzie Street property in January 2010 he suggested that he would need to replace three ceiling panels and agreed to inspect the roof and provide a quote on the repairs and maintenance required; and
(d) that in subsequent email correspondence and meetings between her, Dr Gillard, and Phil Smith, Mr Smith did not question the need for the repair works, including the works on the roof to be done.
Dr Gillard submits that she was entitled to arrange for the repair works to be carried out and to issue the Summons, notwithstanding that in respect of both matters, she acted without the consent of the co-executors. She submitted that the authorities entitle an executor (as opposed to a trustee) of an estate to act unilaterally (or severally), and that as the estate has not been finally distributed, she still holds the status of an executor. She submitted that by arranging for the repair works to be carried out, and by issuing the Summons, she was acting consistently with her fiduciary duty as an executor to preserve, protect and maintain the assets of the estate. As such, she was acting in the best interests of the beneficiaries of the estate.
There is some inconsistency in recent Victorian authorities as to the question as to whether an executor of an estate, as opposed to a trustee of trust property, is entitled to act unilaterally in carrying out their duties in administering the estate. In Szabo v Balogh,[1] Habersberger J accepted the proposition, supported by English and Australian authorities,[2] that personal representatives can act jointly or severally in administering the estate, although he did make the following observation:[3]
The legal position which I have to accept under those authorities, that a co‑executor can act severally (that is, on his or her own) does not explain how one deals with a situation such as this where you have conflict between the co‑executors. One looks again at the terms of the will.
[1][2007] VSC 232.
[2]See Attenborough v Solomon [1913] AC 76; Commissioner for Stamp Duties for Queensland v Livingston (1964) 112 CLR 12; Union Bank of Australia v Harrison Torres v Deverell (1910) 11 CLR 492.
[3]At [13].
In Beath v Kousal,[4] in a proceeding where a co-executor was seeking reimbursement of expenses incurred by her in her capacity as an executor, but not authorised by the other co-executor, Kaye J drew no distinction between the position of executors and trustees, stating, again relying upon a number of English and Australian authorities to like effect, that:[5]
…all trustees must concur in the exercise of powers conferred upon them relating to a trust estate.
[4][2010] VSC 24.
[5]At [55].
His Honour noted that:[6]
No authority was cited to me entitling one of a number of co-executors to reimbursement for expenses incurred by that executor in obtaining legal advice without the agreement of the co-executors.
[6]At [53].
His Honour, in considering the application by the co-executor for legal expenses incurred by her as the personal representative of the estate in Family Court proceedings, adopted the test propounded by Brooking J in R.W.G. Management Limited v Commissioner for Corporate Affairs and Anor,[7] that:
A trustee is, however, entitled to be indemnified in respect of a liability improperly incurred to the extent which, acting in good faith, he has benefited the trust estate.
[7][1985] VR 385, at 396.
Kaye J emphasised that the unauthorised expenditure must be demonstrated to have resulted in a measurable benefit to the estate.
It is not necessary, for the purpose of determining the issues in this proceeding to reconcile the differences in the authorities regarding the capacity of a co-executor, as compared with a co-trustee, to act unilaterally. If there is a difference, and a co-executor is entitled to act unilaterally, it may well be that, where a co-executor is seeking reimbursement of expenses, the onus of proof shifts from that posited by Kaye J in Beath v Kousal (where the co-executor has to prove that the expenditure has benefited the estate) to a position where the party opposing reimbursement must establish that the expenditure was improper or unreasonable. However, in the current case, Dr Gillard is asserting that the actions unilaterally undertaken by her, being the commissioning of repair works and issuing the Summons, have benefited the estate. In any event, given that Dr Gillard has considered it appropriate to bring this proceeding to seek the direction of the Court as to whether she is entitled to recover the repair costs, and is justified in issuing the Summons, it seems to me that a matter critical to the directions the Court might give would be the benefit or the potential benefit to the estate of the expenses incurred or the proposed course of conduct, and, as the party seeking to invoke the jurisdiction of the Court, Dr Gillard bears the onus of persuasion in that regard.
In relation to Dr Gillard’s claim for repair costs, the position of the co-executors, as evident from their affidavits and submissions, was that the repair costs should not be paid from the assets of the estate, on the basis that:
(a) they were not authorised by, or ratified by the co-executors;
(b) contrary to the position advanced by Dr Gillard and Valerie Peers, the repair works were not so urgent as to warrant unilateral action on the part of Dr Gillard; and
(c) there are some questions of whether the repair works were actually commissioned by Dr Gillard in her capacity as executor, rather than commissioned by Valerie Peers gratuitously.
Furthermore, there appears to be an implied submission that the repair works could not be shown to have benefited the estate, as the repair costs only just fell short of the value of the estate’s interest in the McKenzie Street property.
In my view, Dr Gillard has demonstrated that the repair costs have benefited the estate, and that she is entitled to be reimbursed for the repair costs (save to the extent she has already received a partial reimbursement from her brother Robert Peers). Notwithstanding Phil Smith’s evidence that the roof and ceiling repairs were not ‘urgent’ as such, it is apparent from the evidence that the repair works were necessary to prevent the wastage of the assets of the estate. Even if I adopted the approach of Kaye J in Beath v Kousal in that any expense incurred unilaterally by a co-executor is by nature ‘improper’ and as such, must be shown to have been for the measurable benefit of the estate to warrant indemnification from the estate, in my view, the taking of reasonable steps to prevent the wastage of an asset of the estate does provide a measurable benefit to the estate. While the cost of the repairs might seem disproportionate to the value of the asset concerned, it seems to me that ensuring there was a functioning waste disposal system, an intact roof and adequate guttering would amount to necessary repairs and maintenance to a domestic building, notwithstanding the modest value of the McKenzie Street property.
Further, I accept that while it appears that Dr Gillard and Valerie Peers made investigations as to what repair works ought to be carried out prior to the death of the deceased, Phil Smith was not actually engaged to carry out the repair works until April 2010, with the repair works commencing in May 2010, after the death of the deceased.
However, Dr Gillard should only be reimbursed for the repair works to the extent she has not already been indemnified by others. I note that Dr Gillard, in her affidavit sworn on 7 April 2014, did not respond to the assertions of Sheryle Peers regarding the payment to her of $2,109 by her brother Robert in respect of the repair costs, and I can infer that if she disputed Sheryle Peers’ characterisation of this payment or the fact that it was made she would have said so in her affidavit.
Turning to the question of whether Dr Gillard was justified in issuing the Summons, I accept the statement in Re Atkinson, deceased,[8] that:
The court is not bound to investigate the evidence and make a finding as to whether the proposed proceeding would be successful.
[8][1971] VR 612, at 616.
However, the Court is required to make an assessment as to whether the proposed proceeding is justified, taking into account the prospects of success, the potential of the litigation to deplete the assets of the estate, the costs thrown away should the action be unsuccessful, and what might be gained should the action succeed.[9]
[9]Re Challis [2010] WASC 333, at [30].
The solicitor for Dr Gillard submitted that the issue of the Summons was justified, as Dr Gillard reasonably believed, on the basis of legal advice, that the fees charged to the estate by Mahons might be significantly reduced, for the financial benefit of the estate. The evidence of Dr Gillard in her first affidavit of 5 December 2013 established that there were grounds for the Mahons invoices to be taxed on the grounds of non-disclosure and failing to make proper disclosure, and that the costs agreement entered into between Mahons and the executors was voidable under the relevant principles of the LPA. Further, he submitted, an analysis of the evidence shows that the fees incurred by the estate were inflated by the repeated unilateral communications between Mahons and the co-executor and Cassie Kelly.
During the course of the hearing, the solicitor for Dr Gillard sought to tender the Terms of Settlement reached between Dr Gillard and Mahons on 30 June 2014. The other parties objected to the tender of that document, on the basis that no notice had been given of Dr Gillard’s intention to rely upon that document at the hearing, and that, in any event, accepting that document into evidence would open up a new line of inquiry, thus necessitating further affidavit evidence and discovery in respect of communications which were not disclosed to the Court prior to that time by reason of them being protected by ‘without prejudice’ privilege.
I agreed, and indicated that if Dr Gillard wished to rely upon the Terms of Settlement as evidence in support of her contention that the issue of the Summons was justified, then there would need to be an adjournment to enable there to be further discovery to take place and to provide the parties with an opportunity to prepare any further evidence and submissions, and that I would make an order that Dr Gillard pay the costs thrown away by reason of the adjournment. As a consequence of this discussion the solicitor for Dr Gillard informed the Court that he was instructed not to rely upon the Terms of Settlement and to complete his submissions in its absence.[10]
[10]T94, 11-17.
In my view, even if I had allowed the Terms of Settlement into evidence and the terms disclosed what might appear to be a favourable outcome for the estate, the evidence before the Court is insufficient to persuade me that issuing the Summons was justified.
It is insufficient for Dr Gillard to assert that, on the basis of undisclosed legal advice, she would have met the criteria for review under s 3.4.44(1) of the LPA. Even if I were to accept her evidence and assertions regarding Mahons’ alleged non-disclosure and the voidability of the costs agreement (which remain unanswered by Mahons), the evidence, in my view, needs to go further to enable me to go further and accept that there is a reasonable likelihood that undertaking a taxation would result in a net financial benefit to the estate. Such evidence ought include evidence of legal advice regarding the prospects of Dr Gillard satisfying the criteria for review, and an opinion from a cost consultant to the effect that, upon review it is likely that there would be a significant reduction in the fees chargeable to the estate by Mahons. That there would be such a reduction is not immediately apparent from the face of the Mahons invoices themselves: the extensive narrations show that a lot of work was done, and that on occasion, the invoices were discounted by Mahons.[11]
[11]See the invoices dated 24 September 2010 and 2 May 2011 at exhibit ‘BJG-1’ to the affidavit of Dr Gillard sworn 5 December 2013.
Indeed, when one compares the itemised bill provided by Mahons at the request of Dr Gillard for the period 16 March 2012 to 11 January 2013 with the invoice rendered by Mahons on 24 January 2013 with respect to that period,[12] the amount actually invoiced by Mahons, being $12,159.40, fell short of the sum representing the fees arguably chargeable by Mahons pursuant to the itemised bill, being $17,760. That example tells against the likelihood that even if Mahons’ invoices were amenable to review, there would be a substantial reduction in the fees chargeable by Mahons.
[12]See exhibit ‘BJG-1’ to the first affidavit of 5 December 2013.
Also, I am not satisfied that the assertion by Dr Gillard that a substantial cause of the fees charged by Mahons was the conduct of the co-executors and Cassie Kelly in making unilateral communications with Mahons, is (a) correct, and (b) would, upon a taxation, result in a substantial reduction in fees payable to Mahons for the administration of the estate. First, it is apparent from the affidavit evidence in this proceeding that there is a great deal of acrimony and ill will within this family. While it is not necessary for me to make positive findings in that regard, I doubt that the blame for that rests entirely with one ‘camp’. In any event, while these matters have not been the subject of full argument, given the settlement between Dr Gillard and Mahons, it is unclear how else Mahons could have undertaken the administration of the estate any differently or any more economically, given the degree of disputation between Dr Gillard and the co-executors.
There was also no evidence before the Court as to the costs incurred or likely to be incurred in establishing the right to review and actually undertaking any review, or the cost liability that might be incurred by the estate if there was an unsuccessful outcome. There was simply insufficient material before the Court to enable me to make a positive finding that the issue of the Summons was justified.
The contents of the Terms of Settlement may have had some relevance to determining whether the issue of the Summons in March 2013 was justified. However, the Terms of Settlement was executed some 15 months after the issue of the Summons, and some seven months after the issue of this proceeding. The Terms of Settlement may or may not include an admission of liability on the part of Mahons, but in any event, parties compromise litigation for many reasons, not all of which are directly related to the strengths and weaknesses of the parties’ respective positions. Further, an assessment of whether the entry into the Terms of Settlement caused a direct financial benefit to accrue to the estate could not take place in the absence of other relevant material, not currently before the Court, including the timing and content of antecedent negotiations, and the costs incurred in achieving the outcome reached by entry into the Terms of Settlement.
Accordingly, I am not satisfied that Dr Gillard’s issue of the Summons was justified, and I will make declarations to that effect.
That brings me to the question of costs. While I have heard some submissions with respect to the costs of this proceeding, unfortunately, given the costs already incurred in this proceeding compared with the amounts at stake, I will need to hear further from the parties with respect to the costs of this proceeding, and there may be further evidence relevant to that question. Accordingly, I have circulated these reasons in advance of a further hearing on that matter to take place not before 5 November 2014, when I will hear from the parties on the appropriate form of orders and the question of costs.
SCHEDULE OF PARTIES
S CI 2013 06337
BETWEEN:
| BEVERLEY JOAN GILLARD (in her capacity as an Executor of the Will and Trustee of the Estate of PETER ROBERT NELSON PEERS, deceased) | Plaintiff |
| - and - | |
| MAHONS WITH YUNCKEN & YUNCKEN (in its capacity as solicitors for the Executors of the Will and Trustee of the Estate of PETER ROBERT NELSON PEERS, deceased) | Firstnamed Defendant |
| CHRISTOPHER NELSON PEERS (in his capacity as an Executor of the Will and Trustee of the Estate of PETER ROBERT NELSON PEERS, deceased) | Secondnamed Defendant |
| SHERYLE ANN PEERS (in her capacity as an Executor of the Will and Trustee of the Estate of | Thirdnamed Defendant |
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