In the Estate of Diane Carol Collison v Collison [No 2]
[2023] WASC 337
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: IN THE ESTATE OF DIANE CAROL COLLISON -v- COLLISON [No 2] [2023] WASC 337
CORAM: LUNDBERG J
HEARD: 19 JULY 2023
DELIVERED : 7 SEPTEMBER 2023
FILE NO/S: PRO 3146 of 2019
BETWEEN: DAVID ALAN COLLISON
Administrator
AND
MICHAEL JAMES COLLISON
Former Administrator
Catchwords:
Probate - Passing of accounts - Whether court has power to make order requiring former administrator to repay money to estate distributed otherwise than in accordance with the Administration Act 1903 (WA) - Whether claim is based on action in devastavit or waste - Whether account on the basis of wilful default is required - Turns on own facts
Legislation:
Administration Act 1903 (WA), s 8, s 14, s 43, s 44
Non-Contentious Probate Rules 1967 (WA), r 4, r 37
Supreme Court Act 1935 (WA), s 18, s 24
Result:
Relief refused
Category: B
Representation:
Counsel:
| Administrator | : | Mr M S Macdonald |
| Former Administrator | : | No appearance |
Solicitors:
| Administrator | : | Macdonald Rudder |
| Former Administrator | : | In person |
Case(s) referred to in decision(s):
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199
Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] 1 Ch 515; [1980] 2 WLR 430
Basset v Atherley [2011] WASC 117
Bird v Bird (No 4) [2012] NSWSC 648
Bovaird v Trustee of Bankrupt Estate of Frost [2010] FCA 1159
In re Brogden; Billing v Brogden (1888) 38 Ch D 546
In Re Ellis; Ellis v Ellis [2015] WASC 77
In the Estate of Diane Carol Collison v Collison [2023] WASC 32
Job v Job (1877) 6 Ch D 562
Juul v Northey [2010] NSWCA 211
McFarlane v Jeffery Crondon Smith as administrator of the estate of Dorothy Joyce McFarlane [2023] WASC 336
McLauchlan v Prince [2001] WASC 43
Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146
National Trustees Executors & Agency Co of Australasia Ltd v Dwyer (1940) 63 CLR 1
Re Collie; Ex parte Adamson (1878) 8 Ch D 807
Re Waterman's Will Trusts; Lloyd Bank Ltd v Sutton [1952] 2 All ER 1054
Stiles v Guy [1848] EngR 550; (1848) 16 Sim 230
The Estate of Erminia Agnes Rogers v Rogers [2009] WASC 358
Table of Contents
A. Introduction and overview
B. Procedural history
C. The nature of the present proceedings
D. Evidence
E. Jurisdiction and power
Preliminary
Common account
Wilful default account
F. The relief sought by the current administrator
G. Disposition
ATTACHMENT A Table of Alleged Bank Transfers from the Estate to the Trust
LUNDBERG J:
A. Introduction and overview
These proceedings concern the administration of the estate of the late Mrs Diane Carol Collison, who died intestate. The only beneficiaries of the estate are Mrs Collison's adult sons, Michael James Collison and David Alan Collison.[1] They are the only persons entitled to distributions from the estate pursuant to s 14(1) of the Administration Act 1903 (WA) (the Administration Act).
[1] Where appropriate in these reasons, I will refer to David Collison as the current administrator and to Michael Collison as the former administrator.
On 12 June 2019, letters of administration were granted to Michael Collison but, regrettably, he did not acquit himself well in his time in that role. The course of the administration can be seen in the reasons of this court published on 3 February 2023: In the Estate of Diane Carol Collison v Collison.[2] Those reasons dealt with an application brought by David Collison to revoke the grant of letters of administration, the catalyst for which was the inability of Michael Collison to take the necessary steps to have the accounts of the estate passed. In those reasons, I concluded that the grant to Michael Collison should be revoked, I ordered that David Collison be appointed as administrator in his stead, and granted liberty to apply.[3]
[2] In the Estate of Diane Carol Collison v Collison [2023] WASC 32.
[3] In the Estate of Diane Carol Collison v Collison [77].
The present reasons relate to an application made by David Collison, on 8 June 2023, in his capacity as the current administrator of the estate. Pursuant to the liberty to apply granted on 3 February 2023, David Collison seeks an order to require the former administrator to pay to the estate a sum of money which is said to have been paid out of the estate. In essence, David Collison complains that his brother distributed the sum of $550,000 from the estate to a trust known as the DCH Capital Family Trust, through multiple payments. That trust had been established by Michael Collison. He is the sole trustee and appointor of the trust, as well as being a named beneficiary (together with his brother). David Collison had forewarned his brother not to make these payments. The sum has not been returned to the estate despite demand.
When the matter came on for hearing on 19 July 2023, I indicated to counsel for David Collison that I needed little persuasion that the sum in question had been paid out of the estate. However, I harboured a concern as to the power of the court to grant such an order, within the context of the present probate proceedings. I raised this concern with counsel for the current administrator and sought further submissions on the issue.
The concern arose from my perspective because the present matter was commenced as an application for letters of administration under the Non‑Contentious Probate Rules 1967 (WA) (NCR), and has progressed as a passing of accounts in common form pursuant to NCR r 37. Ordinarily, the power of this court when exercising jurisdiction under the NCRs in this manner is confined to the consideration of non‑contentious matters. In the event a party wishes to agitate a contentious matter in relation to the administration of an estate, speaking generally, it is orthodox to require the party to first commence substantive proceedings either by way of a writ of summons or an originating summons, depending on the nature of the issue. In the event that an account on a wilful default basis is sought, it would first be necessary for an order to this effect to be sought.
The current administrator disavows any suggestion he is alleging wilful default on the part of the former administrator. In essence, the current administrator maintains he has brought this application in order to discharge his duty as the administrator to gather in the assets of the estate, including to recover specific sums which were formerly part of the estate, but which were distributed by the former administrator in an unauthorised manner.
For the reasons explained below, I am not satisfied the relief sought by the current administrator can be granted by the court within the present proceedings, and I therefore decline to grant the relief.
B. Procedural history
On 8 June 2023, David Collison applied to the court by filing a minute of proposed orders seeking the following specific order:[4]
Michael James Collison do pay the sum of $550,000 to the estate of Diane Carol Collison care of Macdonald Rudder Lawyers within 21 days of the date of this order.
[4] Together with an order for costs against the former administrator.
The minute was filed with the affidavit of David Collison sworn on 8 June 2023 (David Collison Affidavit), followed by an outline of submissions dated 13 June 2023 (Written Submissions). In essence, David Collison complains that his brother distributed the sum of $550,000 from the estate to an entity called the DCH Capital Family Trust and that sum has not been returned to the estate despite demand. Further written submissions were filed on 31 July 2023 (Further Written Submissions).
The former administrator did not appear at the hearing on 19 July 2023, and has provided no indication to the court (or to the current administrator) as to his position in response to the present application. As matters stand, the last communication received from Michael Collison was the email received from him on 13 May 2022 (through his partner). No communications have been received since then. It is unclear why the former administrator has ceased his communications over the past 15 months or so.
I am however satisfied that adequate steps have been taken to ensure that Michael Collison received notice of the hearing and of the orders sought by David Collison. I refer in this regard to the email from my chambers to the former administrator sent four weeks prior to the hearing,[5] and to the affidavits of service filed by the current administrator,[6] which depose to service by email of the various documents filed by the current administrator. The documents were sent to the email address supplied to the court by the former administrator for service purposes.
C. The nature of the present proceedings
[5] Email from my chambers to the parties sent on 19 June 2023.
[6] Affidavit of service of Riccardo Mathew Martino sworn on 17 July 2023 and the affidavit of service of Riccardo Mathew Martino sworn on 15 August 2023.
In order to address the power question, it is necessary to first describe the nature of the present proceedings.
These proceedings were commenced by Michael Collison as a motion for letters of administration of the estate of Mrs Collison, brought under the NCRs.[7] Letters of administration were subsequently granted to Michael Collison on 12 June 2019.
[7] Motion dated 4 June 2019.
On 3 March 2020, the court issued to Michael Collison a formal notice to pass the accounts of the estate. That notice was issued pursuant to NCR r 37.[8]
[8] The full terms of NCR r 37 are set out in In the Estate of Diane Carol Collison v Collison [50].
From March 2020 onwards, the procedure for the passing of the accounts of the estate involved numerous directions hearings before the Registrar, and countless exchanges of correspondence between David Collison and his brother, as well as with the Registrar.
The primary grant of the jurisdiction of the Registrar in matters such as this is found in the Administration Act (and other statutes) as well as in NCR r 4. Rule 4 provides:
4.Jurisdiction of the Registrar
(1)The Registrar may exercise the powers of a Judge in Chambers in and about the granting of probate and administration, and in and about the granting to the Public Trustee of orders to administer the estates of deceased persons, and may transact all such business and exercise all such powers and authorities in respect of voluntary or non‑contentious probate jurisdiction as under the Act, the Supreme Court Act 1935, the Public Trustee Act 1941, the Rules of the Supreme Court 1971, or these rules, may be transacted or exercised by a Judge in Chambers, except in respect of the following proceedings and matters, that is to say -
(a)applications and orders under section 26(2) and (6) of the Act;
(b)subject to the provisions of rule 35(1) and (2), applications and orders under section 29 of the Act; and
(c)applications under section 64 of the Act to remove caveats.
(2)Nothing contained in these rules derogates from or limits the jurisdiction or powers conferred by the Act on a Registrar.
(3)The Registrar may require an application made to him to be brought by summons, and may require an application made to him, whether by summons or otherwise, to be brought before a Judge by summons or before the Court on motion.
(4)Without prejudice to the provisions of subrule (3), where a matter appears to the Registrar proper for the determination of a Judge, the Registrar may refer it to a Judge, and the Judge may either dispose of the matter or refer it back to the Registrar with such directions as he may think fit.
As the former administrator neglected to pass the accounts over many months the Registrar exercised the power in s 44(1) of the Administration Act to give notices to the former administrator of this neglect. These notices of failure to comply were issued by the court to Michael Collison on 2 May 2020, 14 April 2022 and 17 May 2022.
It should be noted at this point that s 44(3) of the Administration Act provides that no proceedings under s 44 shall affect the liability of the executor or administrator to be proceeded against for an account and administration, or prevent an action from being brought on any guarantee given. There are several ways in which proceedings may otherwise be pursued against an administrator in this regard, including pursuant to s 45(1) of the Administration Act.
From around April 2022, Michael Collison failed to take any active role in progressing the process of the passing of the accounts and failed to attend several directions hearings before the Registrar. The last written communication from Michael Collison was received by the court in May 2022.
On 3 June 2022, in the absence of any compliance with Michael Collison's obligations as the then administrator of the estate, the Registrar referred the proceedings to a Judge pursuant to NCR r 4(4). The Registrar did not require any summons or motion to be filed pursuant to NCR r 4(3), but rather exercised the referral power afforded to him by NCR r 4(4).
On 3 February 2023, pursuant to the Registrar's referral, orders were made to revoke the grant of letters of administration to Michael Collison, and David Collison was ordered to be appointed as administrator.[9] Michael Collison has failed to comply with several of the additional orders of the court made on 3 February 2023, namely to deliver the original grant of letters of administration to the Probate Registry and to file an affidavit describing his administration of the estate and identifying estate assets and all papers, documents, accounts, receipts, or other documents related to estate assets and liabilities.
[9] In the Estate of Diane Carol Collison v Collison.
D. Evidence
The evidence in support of the application consists of the supporting affidavit of the current administrator, together with the affidavit evidence and probate forms which were filed in the course of the passing of accounts procedure. I will summarise this evidence in brief terms.
On 23 July 2019, which was in the month following the grant of the letters of administration, Michael Collison established a trust known as the DCH Capital Family Trust.[10] It is not apparent on the evidence why he considered it necessary to establish such a trust.
[10] David Collison Affidavit, Attachment DAC2, page 62 (Discretionary Trust Deed establishing the DCH Capital Family Trust, certified by a chartered accountant).
The DCH Capital Family Trust is a discretionary trust. A copy of the Discretionary Trust Deed (Trust Deed) has been provided to the court.[11] The Trust Deed was prepared by a firm of accountants, who were engaged by Michael Collison and paid using the estate's funds. By that Trust Deed, Michael Collison was appointed as the sole trustee and appointor. The settlor was Ms Tia Nurse, who I assume is a representative of the accounting firm which prepared the Trust Deed. The relevant terms of the Trust Deed are as follows:
(a)By cl 2 and the Schedule, both Michael and David Collison are identified as the named beneficiaries of the trust and a number of classes of people are identified as eligible beneficiaries, including spouses, parents and children of the named beneficiaries.
(b)By cl 3, the trustee is empowered to nominate additional classes of eligible beneficiaries, provided he has the consent of the appointor.
(c)By cl 4, the trustee, with the consent of the appointor, is empowered to delete a class of eligible beneficiaries.
(d)By cl 6, the trustee is vested with an absolute discretion to decide to distribute any part of the income of the trust fund in any proportions to any one or more of the beneficiaries, and has an absolute discretion to exclude a named beneficiary or a member of a class of beneficiaries.
(e)By cl 26 and cl 27 (together with cl 32), the trustee is given broad powers to exercise at his absolute discretion, including the power to invest the assets of the trust and to mix the trust fund with any other money, funds or property.
(f)By cl 41, the trustee is entitled to reasonable remuneration for acting as trustee.
[11] David Collison Affidavit, Attachment DAC2, page 62.
Shortly after the establishment of the trust, and for a continuing period of around eight months, it appears Michael Collison caused to be paid the total sum of $550,000 from the estate to the benefit of the DCH Capital Family Trust. This was undertaken through 19 separate transactions on 13 separate dates, between 5 August 2019 and 9 March 2020. The payments are apparent from a number of documents authored, or produced to the court, by Michael Collison, which are referred to below.
On 29 June 2020, Michael Collison swore an affidavit for the purposes of the passing of accounts, which was headed 'Amendment of Rule 9B (Statement of Assets and Liabilities) and Form 4 (Accounts of Executors & Administrators)'. Within the affidavit, Michael Collison deposed that the value of his mother's estate at the date of her death was $796,171.75. There are two annexures to the affidavit, namely:
(a)Annexure A to the affidavit is a document described as the Amended Rule 9B Statement of Assets and Liabilities which itemises the value of the estate in the foregoing amount.
(b)Annexure B is a document described as Form 4 Accounts of Executors and Administrators. Within that Form 4, under the section labelled 'Part B - Portion of Estate distributed in specie', there is a reference to the sum of $550,000 as having been distributed, described as 'Total distribution on separate Trust (investment, securities & equities)'.[12]
I note that the section of Form 4 which is labelled 'Part E - Plan of distribution' indicates that the amount available for distribution by the administrator is $559,895.19. The amount for distribution does not include the amounts transferred to the DCH Capital Family Trust.
[12] Affidavit of Michael Collison sworn 29 June 2020, Annexure B, page 31.
On 12 November 2020, Michael Collison filed a Form 4 Amended Accounts of Administrator with the court.[13] Within that Form 4, again under the section labelled 'Part B - Portion of Estate Distributed in Specie', there is a reference to the sum of $550,000 as having been distributed to 'DCH Trust', described as 'Distributions - separate Trust (investment, securities & equities)'.[14]
[13] David Collison Affidavit, Attachment DAC2, page 34.
[14] Affidavit of Michael Collison sworn 29 June 2020, Annexure B, page 31.
On 22 January 2021, Michael Collison provided to the court a document described as Amended Accounts, which includes objections and comments.[15] The document is in similar form to the Form 4 documents to which I have just referred. Within the document, under the section labelled 'Part B - Portion of Estate Distributed in Specie', there is again a reference to the sum of $550,000 as having been distributed to the DCH Capital Family Trust.[16]
[15] Email from Michael Collison to the Associate to Principal Registrar dated 22 January 2021.
[16] Amended Accounts, item 157.
On 5 February 2021, Michael Collison sent an email to the court as part of the process of the passing of accounts, which included the following statement: 'please see attached full set of estate accounts'.[17] The email attached various copies of bank statements for an account with NAB in the name of the Estate of the late D C Collison of South Hedland. Some of the statements include handwritten notes, commenting on particular transactions. There are various payments in the bank statements labelled 'Trust Account', 'Trust', 'Davemike Trust' or 'Mikedave Trust', or which on their face disclose that they were paid to the account of Michael Collison. I have extracted these payments in the table in Attachment A to these reasons. I understand the current administrator's claim for relief is based on these payments.
[17] Email from Michael Collison to the Associate of Registrar Fatharly dated 5 February 2021.
I should clarify my understanding of the payments which appear in the bank statements as having been made on 5 August 2019. In summary:
(a)On 5 August 2019, five payments appear to have been made from the estate's bank account.
(b)One of the payments from the estate's funds appears to have been to the accounting firm which assisted Michael Collison with the establishment of the DCH Capital Family Trust. The amount paid was $1,012. I have not included this sum in the table. This payment is of a different character to the payments made directly to the trust itself. In any event, the current administrator does not press for this amount to be repaid to the estate.
(c)Of the four other payments, two are labelled with the term 'Trust', and the other two bear the notation 'M', but no other label. However, I should note that all four payments appear to be marked as being paid to the account of Michael Collison. There is a handwritten notation of the words - 'trust set up' - on the bank statement adjacent to all of the payments on 5 August 2019.
On 14 January 2020, after the DCH Capital Family Trust was established, and after the initial transfers to the trust were effected, the solicitors for David Collison sent a letter to Michael Collison which included the following passages:
Our client has not been informed what is happening with his mother's estate.
Our client has advised us he has received very little information regard his mother's estate.
We understand you have considered placing his share of his mother's estate into a trust. He says he doesn't want that. You would be in breach of your duties as administrator to not pay our client his bequest to him direct unless there is a court order or he has consented in writing.[18]
[18] David Collison Affidavit, Attachment DAC2, page 60.
Notwithstanding that letter, it appears that another 14 payments totalling $505,000 were made thereafter by Michael Collison to the DCH Capital Family Trust.
E. Jurisdiction and power
Preliminary
It is of course clear this court has ample powers to exercise probate jurisdiction, through the grant contained in s 18 of the Supreme Court Act 1935 (WA) (Supreme Court Act). The aspect of the exercise of the court's jurisdiction which has bedevilled the administration of the estate of the late Mrs Collison has been the passing of accounts. Once he was appointed, the former administrator, as the personal representative, was obliged to account. The duty to pass accounts (and the jurisdiction of the court to conduct such an account), is provided for in s 43(1)(b) of the Administration Act.
Section 43(1) provides as follows:
(1)Every person to whom probate or administration is granted shall be under a duty to -
(a)collect and get in the real and personal estate of the deceased and administer it according to law;
(b)file an inventory of the estate of the deceased, and pass his accounts relating thereto within such time, and from time to time, and in such manner as may be prescribed by the rules or as the Court may order;
(c)when required to do so by the Court, deliver up the grant of probate or administration to the Court.
The manner in which the above jurisdiction is to be exercised is specified in NCR r 37. During the course of the present estate being administered, and the process for the passing of the accounts being progressed, albeit slowly, the proceedings were referred to a Judge pursuant to NCR r 4(4). A detailed analysis of this rule was undertaken by E M Heenan J in The Estate of Erminia Agnes Rogers v Rogers.[19] That was a matter which also dealt with a persistent failure to pass accounts, where the Registrar ultimately exercised the referral power. As to the breadth of the power of the Judge upon such a referral, his Honour observed:
Once a referral to a Judge has been made under r 4(4) the Judge becomes seized of all matters relating to the administration of the estate in the probate jurisdiction and has the full amplitude of powers conferred by s 24 of the Supreme Court Act and in the inherent jurisdiction. These powers are not limited to those additionally conferred under s 29 of the Administration Act nor under the Non-Contentious Probate Rules. It would seem that in such cases if the matter came before a Registrar, a Registrar would also have a similar plenitude of power and jurisdiction by reason of non-contentious probate rule 4(1) subject, however, to the limitation on the powers exercisable under s 29 of the Administration Act which are imposed by rule 35.[20]
[19] The Estate of Erminia Agnes Rogers v Rogers [2009] WASC 358.
[20] The Estate of Erminia Agnes Rogers v Rogers [34].
On its face, this statement might suggest that,[21] upon a referral under NCR r 4(4), the court is not limited in the exercise of its powers by matters such as the historical distinction between a common account and the taking of an account on a wilful default basis. His Honour's detailed reasons in the later decision of In Re Ellis; Ellis v Ellis[22] demonstrate this is not so, and such distinctions remain relevant and important.
[21] In particular, his Honour's reference to 'the full amplitude of powers conferred by s 24 of the Supreme Court Act and in the inherent jurisdiction'.
[22] In Re Ellis; Ellis v Ellis [2015] WASC 77.
In In Re Ellis; Ellis v Ellis, E M Heenan J explored the court's jurisdiction as to the passing of accounts and, more specifically, whether contentious claims such as allegations of fraud and wilful default were able to be dealt with by the court within the non‑contentious jurisdiction being exercised in accordance with NCRs. His Honour recognised the breadth and flexibility of procedures and remedies available to parties to ensure the due administration of any trust, including the obligations of a personal representative of a deceased estate. His Honour identified a relevant question in this regard as: whether a particular procedure, whether chosen by the parties or otherwise, is suitable or adaptable to the demands of the investigation which taking the particular account require. In addressing this question, his Honour stated:
…. There may, for example, be situations in which the passing of an executor's accounts before a registrar pursuant to NCR 37 is not an adequate procedure for taking the particular account and that some other and more versatile or flexible procedure needs to be adopted. For example, in a case where it is alleged by beneficiaries that the personal representative/trustee had systematically failed to administer the estate and misappropriated trust property by a series of serious defalcations over a lengthy period, it is unlikely that the passing of accounts would be a suitable procedure to determine such controversies. In such a case, the preferable course may well be to require the aggrieved beneficiary or beneficiaries to commence an action seeking an account, and/or compensation and other remedies against the alleged defaulting trustee in which specific allegations of fraud, misappropriation, conversion or wilful breach of trust could be pleaded and require the trustee/personal representative to defend that action and, in doing so, to disclose all records related to the impugned transactions resulting in a trial with oral evidence and cross-examination.[23]
[23] In Re Ellis; Ellis v Ellis [120].
In the case before his Honour, the objectors urged upon the court the submission that the procedure of passing accounts under NCR r 37 was sufficient and preferable because it placed the onus of proof to satisfy due administration or the legitimacy of the executor's conduct upon him without casting any burden of proof on the objector.[24]
[24] In Re Ellis; Ellis v Ellis [121].
Ultimately, several of the more serious objections in In Re Ellis; Ellis v Ellis, which amounted to allegations of wilful default, were abandoned. In the result, the court ordered a specific inquiry and an account into the ways in which money had been expended by the executor, with that inquiry and account to be conducted before completing the passing of accounts under NCR r 37.[25]
[25] In Re Ellis; Ellis v Ellis [189] ‑ [191].
The foregoing highlights the importance of recognising the difference between the account on a common basis and an account on a wilful default basis, to which I now turn.
Common account
The notice to pass the accounts given to the former administrator in the present matter was issued pursuant to NCR r 37, in the style of a common or usual account.[26] In that circumstance, the accounting party, which is the personal representative, was required to disclose all of the assets of the estate which he had received or realised and all of the expenses or distributions which he had made by payments from the estate.[27]
[26] In Re Ellis; Ellis v Ellis [171], citing the decision of Registrar C Boyle in Basset v Atherley [2011] WASC 117 [30] - [31].
[27] Learmonth A, Ford C, Clark J, Martyn JR, Mortimer HC, Sunnucks JHG, Williams, Mortimer and Sunnucks: on Executors, Administrators and Probate (21st ed, 2018) [58‑25].
In Meehan v Glazier Holdings Pty Ltd,[28] Giles JA described the ordering of a common account as follows:
Under such an order the accounting party accounts only for what has actually been received and disposed of. The other party to the accounting can challenge the accounting party's account by asserting that more was received (in the old terminology, surcharging) or by asserting that less was disposed of (in the old terminology, falsifying).[29]
[28] Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146.
[29] Meehan v Glazier Holdings Pty Ltd [13].
A common account is narrow in nature. Under such an account, a personal representative can only be charged for actual receipt by himself, or his agent, not for a default of his co‑trustee. The personal representative is required to account only for the money they themselves have received, not for what they might have received but for their own default.[30]
[30] Williams, Mortimer and Sunnucks [58-25]. See also In Re Ellis; Ellis v Ellis [80].
It has been said that such a common account will not extend to a loss to the estate due to a breach of duty by omission.[31] For example, it will not extend to a failure to invest trust property in order to obtain a suitable return, or a failure to exercise powers to lease property which is intended to be retained in the long term.
Wilful default account
[31] In Re Ellis; Ellis v Ellis [125].
The common account procedure is to be contrasted with a wilful default account, which has been described to mean a passive breach of trust - an omission to do something that ought to have been done as distinct from an active breach of trust or waste.[32] The term 'wilful default' in this context does not require knowledge, intention or an appreciation of the breach of duty.[33] The concept focuses upon negligence or omission to do something which the personal representative ought to have done.
[32] Williams, Mortimer and Sunnucks [58-25] and Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] 1 Ch 515; [1980] 2 WLR 430, 546 (Brightman LJ). More recently, see Juul v Northey [2010] NSWCA 211 [180].
[33] In Re Ellis; Ellis v Ellis [144].
Where it is established that there has been a wilful breach of trust, a court may order that the account be undertaken on this basis. In Meehan v Glazier Holdings Pty Ltd, Giles JA described the ordering of an account on a wilful default basis as follows:
There is an alternative basis for taking accounts. An order may be made for taking accounts on the basis of wilful default (sometimes the words are wilful neglect and default). Under such an order the accounting party must account not only for what has actually been received, but also for what should have been received: that is, for what would have been received if the relevant duties of the accounting party had been properly discharged. Thus in Partington v Reynolds [1858] EngR 461; (1858) 4 Drew 253; 62 ER 98 it was said (at 255; 98) that on this basis an executor or administrator must account 'not only for what he has received, but also for what he might, without his wilful neglect or default have received, although he has not received it'.[34]
[34] Meehan v Glazier Holdings Pty Ltd [14].
Giles JA further explained the meaning of the term 'wilful default':
It is then necessary to return to what amounts to wilful default, and to ask whether the matters found by Austin J were instances of wilful default. In an accounting by a trustee, the underlying concept is that through breach of trust the trustee has failed to obtain for the trust that which would have been obtained if the trustee's duties had been discharged. There may be simple failure to get in an asset of the trust; sale of a trust asset at an undervalue has been treated as wilful default, presumably because of failure to obtain for the trust the full value of the asset (re Tebbs); failure to obtain rent for a stranger's occupation of a trust property has been treated as wilful default (Bartlett v Barclays Bank Trust Co Ltd (No 2) (1980) 1 Ch 515). The breach of duty need not be conscious wrongdoing (Bartlett v Barclays Bank Trust Co Ltd (No 2) at 546). But wilful default is not coextensive with breach of trust: there may be a breach of trust which is not wilful default (see in re Wrightson: Wrightson v Cooke (1908) 1 Ch 789 at 799-800; Russell v Russell [1891] VicLawRp 139; (1891) 17 VLR 729 at 732; In re Wood; Ebert v Union Trustee Company of Australia Ltd (1961) Qd R 375 at 378).
E M Heenan J in In Re Ellis; Ellis v Ellis held that an account on a wilful default basis is available without demonstrating conscious wrongdoing:
There need not be conscious wrongdoing by the executor or administrator as it is sufficient for the account to be based on a wilful default footing if there is any breach of trust by omission proved which has caused loss to the estate. In such a case, the accounting party will be made liable not merely for any receipts or payments actually received or made but in respect of the value of property or income which should have been derived by the estate but for the wilful breach and to make reparation, often with interest, for opportunities so incurred.[35]
[35] In Re Ellis; Ellis v Ellis [126].
As I have noted already, the taking of accounts before a Registrar pursuant to NCR r 37 typically proceeds as a common account, such as in the present case. As E M Heenan J has explained, the account 'cannot and will not be converted into an account on the basis of wilful default, even in relation to part of the administration'.[36] In order for an account on a wilful default basis to be conducted, a specific order of a Judge would need to be sought within proceedings in which allegations of wilful default are made and demonstrated. This is the case even where serious default is uncovered in the common account process.[37]
[36] In Re Ellis; Ellis v Ellis [141].
[37] Re Waterman's Will Trusts; Lloyd Bank Ltd v Sutton [1952] 2 All ER 1054, 1055C (Harman J).
No order has been made in the present proceedings for an account on this basis; nor does the current administrator seek such an order.[38] The current administrator acknowledges that he would need to commence fresh proceedings if an account on a wilful default basis was sought.[39]
[38] Further Written Submissions, par 12.
[39] Further Written Submissions, par 13.
The foregoing raises the question whether the relief presently sought by the current administrator properly required an order for an account on a wilful default basis (notwithstanding the current administrator's insistence that one is not needed to accommodate the relief presently sought), or requires fresh proceedings to be brought by the current administrator. I will turn next to consider the relief which is sought.
F. The relief sought by the current administrator
The current administrator asserts that the former administrator, having received the assets of the estate, thereafter distributed $550,000 to the DCH Capital Family Trust.
The current administrator initially submitted that the former administrator had 'no right to make the payment' and it was 'beyond power and therefore a breach of his duty to administer the estate, or devastavit, and he is personally liable to the estate for the fund' (underlining added).[40] The current administrator also made the general submission that:
A breach of duty of an executor, or devastavit, is defined as mismanagement of the estate and effects of the deceased, in squandering and misapplying the assets contrary to the duty imposed on them, for which executors or administrators must answer out of their own pockets, as far as they had, or might have had, assets of the deceased.[41]
[40] Written Submissions, par 8.
[41] Written Submissions, par 7 citing Williams, Mortimer and Sunnucks.
This is an accurate description of devastavit which, in simple terms, means 'he has laid waste'. Devastavit, or waste, can include the wrongful distribution of assets of the estate, which deprives the estate of funds to meet the needs of other beneficiaries, as well as a failure to get in assets, debts or liabilities.[42]
[42] Bird v Bird (No 4) [2012] NSWSC 648 (partly reversed on appeal but not on this point).
In his later submissions, the current administrator contended that the jurisdiction of the court exercised in accordance with NCR r 37, upon a referral under NCR r 4(4), 'includes the power to order payment of money found to be due by the accounting party', relying upon Re Collie; Ex parte Adamson.[43] The obligation of an accounting party to replenish the fund was there described as an equitable debt or liability in the nature of a debt, in the context of a bankruptcy scenario where fraud had been perpetrated by two brothers (the Collies) to extract funds from Mr Adamson.
[43] Re Collie; Ex parte Adamson (1878) 8 Ch D 807, 819 (James and Baggallay LJJ), cited in In Re Ellis; Ellis v Ellis.
The current administrator submitted that this was precisely the relief he now seeks, being encapsulated in the definition of devastavit.[44] He also submits that an account on a wilful default basis is not being sought and, presumably therefore, it is submitted this is not required to sustain the relief he seeks. The current administrator further submits that all he is presently seeking is 'payment of a sum admitted by Michael to have been taken by him in breach of trust' (underlining added).[45]
[44] Further Written Submissions, par 10 - 11.
[45] Further Written Submissions, par 12.
There is a degree of tension, if not inconsistency, between the current administrator's reliance on devastavit to ground the relief and his disavowal that he is seeking an account on a wilful default basis. I say this for two reasons. First, an administrator who fails to call in a debt (which is the stated basis for the current administrator's claim for relief) is liable in devastavit. Second, the modern position is that an executor can be liable for a devastavit in an administration suit only where an order for account on a wilful default basis is sought.
The first of these propositions was addressed by Latham CJ in National Trustees Executors & Agency Co of Australasia Ltd v Dwyer.[46] The plaintiffs in that case complained that the executors had been negligent in failing to enforce a contract against a third party, and the trial judge agreed, going so far as to find negligence on the part of the executors (although strictly speaking such a finding was unnecessary given the burden on the executors to show why they had not recovered the debt). The appeal to the High Court focused on the operation of the protective statutory provisions and limitation periods.
[46] National Trustees Executors & Agency Co of Australasia Ltd v Dwyer (1940) 63 CLR 1.
In describing the nature of the plaintiffs' case, Latham CJ stated:
The plaintiff's case, therefore, is entirely founded upon alleged breach of duty by the executors in getting in money owing. Such a breach of duty is a devastavit (Williams on Executors, 12th ed. (1930), vol. ii., pp. 1184, 1185). The plaintiffs rely and must necessarily rely upon a devastavit in order to obtain judgment de bonis propriis. If no claim were made based upon a devastavit, there would be no dispute between the parties. The executors do not deny that the plaintiffs are residuary legatees or that, when they have assets, they are bound to distribute them among the class of residuary legatees of which the plaintiffs are members. The only dispute is a dispute as to whether the executors have been guilty of negligence in their administration of the estate. Accordingly the action is necessarily and essentially an action based upon a devastavit.[47]
[47] National Trustees Executors & Agency Co of Australasia Ltd v Dwyer (17).
As to the second proposition referred to in [57] above, I respectfully adopt the observations of Perram J in Bovaird v Trustee of Bankrupt Estate of Frost[48] and his Honour's subsequent and comprehensive extra‑judicial analysis.[49] In Bovaird v Trustee of Bankrupt Estate of Frost, his Honour concluded a review of the historical origins of the action of devastavit as follows:
The modern position then is that an executor can be liable for a devastavit in an administration suit where an order for account on a wilful default basis is sought. Such an executor will also be liable at law in an action on the case provided wilful default is shown.[50]
[48] Bovaird v Trustee of Bankrupt Estate of Frost [2010] FCA 1159.
[49] Justice Nye Perram 'The operations and present operation of the action in devastavit' [2012] FedJScol 23.
[50] Bovairdv Trustee of Bankrupt Estate of Frost [20].
G. Disposition
The facts of this case are unfortunate. The prospect of additional legal costs being incurred to the potential detriment of the estate if the current administrator is required to commence fresh proceedings to secure his relief is far from palatable. That the current administrator may need to pursue enforcement mechanisms in due course to restore the funds is a matter of reality, but less than satisfactory. And the fact the current administrator is required to pursue his brother at all in respect of their late mother's estate is a disheartening glimpse into the world of probate litigation. But here we are.
I have not had the benefit of hearing from Michael Collison in response to the present application, nor did I have that benefit before I made orders in February 2023 to revoke the letters of administration granted to him. I am however satisfied that he has had proper notice of the proceedings. It is unfortunate he has not participated, but that would not prevent this court moving to exercise its powers, where it was otherwise appropriate to do so.
As to the exercise of powers, one is instinctively drawn to the desirability of making the order sought in order to restore the funds to the estate under administration. That desirability, however, must give way to the necessity to ensure the relief sought is within jurisdiction and power, and that the relief can be granted within the proceedings as they are presently constituted.
This last point prompts the question as to whether there is not a more appropriate process, consistent with established principle and the procedures of this court, which should be invoked by the current administrator in order to pursue this relief. For example, commencing fresh proceedings by originating summons or by writ of summons seeking this relief against the former administrator. This is not a matter of mere stubborn insistence on historical formality. There is a fundamental element of fairness in ensuring that allegations of a serious nature are specifically pleaded, ensuring that a personal representative (in this case, a former personal representative) has an adequate opportunity to respond to those allegations, through a proper process (which might include discovery and a trial at which viva voce evidence and cross-examination are permitted).
The analysis of this matter should commence with a reminder as to the role and function of the personal representative. Upon letters of administration being granted in favour of Michael Collison, he became vested with all the estate and interest of his late mother in her real and personal estate in Western Australia.[51] At that point, in his capacity as the administrator, Michael Collison did not hold this property as trustee in the strict sense of that term, although he was in a position of a fiduciary.[52] He was obliged to administer the estate according to law, and to attend to the matters required by s 43(1) of the Administration Act, including passing the accounts. He was thus bound by general law duties and statutory duties. At least at that stage, it may not be strictly accurate to assert that his conduct, if proven, amounted to a breach of trust.
[51] Administration Act, s 8.
[52] McFarlane v Jeffery Crondon Smith as administrator of the estate of Dorothy Joyce McFarlane [2023] WASC 336 [40] - [54] and the cases cited therein.
Upon the referral of the matter to a Judge under NCR r 4(4), the court as presently constituted became seized of all matters relating to the administration of the estate in the probate jurisdiction, with the benefit of the powers conferred by s 24 of the Supreme Court Act and the inherent jurisdiction, as explained by E M Heenan J in The Estate of Erminia Agnes Rogers v Rogers. As I understand that decision, and the subsequent reasons of his Honour in In Re Ellis; Ellis v Ellis, the broad grant of powers effected by a referral under NCR r 4(4) does not render irrelevant the historical distinctions between a common account and the taking of an account on a wilful default basis, or the necessity for an administrator (or an aggrieved person with a claim against the estate), where appropriate, to pursue remedies through separate proceedings. Such steps may well be required, and serve to ensure that the competing interests and demands of the parties are balanced and disputes concerning estates are resolved in a fair manner, and consistently with the interests of justice.
In order to grapple with the issues which emerge in the present matter, it is next necessary to understand and clarify the nature of the relief which is sought, and the juridical basis for that relief. Relief is not sought from this court in a vacuum, or based on idiosyncratic notions of fairness and justice. There must be some underlying legal or equitable right that is sought to be vindicated.[53]
[53] Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199.
The present circumstances might suggest that the current administrator's claim is based on devastavit or waste. The current administrator has referred to a claim of this nature in his submissions. This somewhat ancient species of misconduct remains a common contemporary form of relief in estate litigation. It extends to mismanagement of the estate and the squandering and misapplication of the assets of the estate contrary to the duties of the personal representative. A representative who breaches his duties in this way is personally liable to make good the loss. It extends to and includes deliberate abuse by the personal representative, such as spending or converting the assets of the deceased to his own use.[54]
[54] Williams, Mortimer and Sunnucks [52-02] - [52-04] and [52-10].
An example of the application of devastavit is a failure by a personal representative to recover a debt due to the estate. There is no doubt that an administrator is under a positive duty to call in and collect the assets of the deceased and once it is established that there is a debt owed to the estate, it is incumbent on the administrator to 'show why he did not get it in'.[55] Further, both executors and administrators alike, in relation to a debt due to the estate, are required to demand payment and, if payment is not made, to take proceedings to recover the debt, even if that involves taking action against relatives of the deceased (and the executor).[56] An executor who fails to call in a debt is liable in devastavit.[57]
[55] Stiles v Guy [1848] EngR 550; (1848) 16 Sim 230 and In re Brogden; Billing v Brogden (1888) 38 Ch D 546, 568.
[56] In re Brogden; Billing v Brogden (546) (Cotton LJ), (570) (Fry LJ), and (574) (Lopes LJ).
[57] National Trustees Executors & Agency Co of Australasia Ltd v Dwyer (17 ‑ 18).
As I have already observed, the modern position is that an executor can be liable for a devastavit in an administration suit only where an order for account on a wilful default basis is sought.[58] This proposition presents something of a difficulty for the analysis of the current matter given the current administrator disavows any suggestion that he is seeking an account on a wilful default basis.[59]
[58] Bovaird v Trustee of Bankrupt Estate of Frost [20].
[59] Further Written Submissions, par 12.
To be clear, an order for an account has in effect already been made by the Registrar through the issuing of the notice pursuant to NCR r 37, albeit in common form. There is no doubt the former administrator has a liability to account in that capacity. The process contemplated by r 37 has been partially undertaken and is not yet complete, but it has unearthed the existence of the disputed distributions to the DCH Capital Family Trust during the period in which the former administrator occupied that role. The material produced by the accounting party (i.e. by the former administrator) during the passing of the accounts is now before me pursuant to the referral made under NCR r 4(4), supplemented by the David Collison Affidavit.
The foregoing process has not been conducted on a wilful default basis, however.
It has therefore been necessary for me to consider whether, in truth, the current administrator is obliged to seek an account on a wilful default basis in order to sustain the relief he is seeking, given the discussion at [57] to [60] above, and whether his disavowal precludes the relief now sought.
There are features of the present matter which provide some support for the conclusion that an account on a wilful default basis is not required. I have given these matters earnest consideration.
First, an important feature of the present case is that the former administrator, when acting as the personal representative of the estate and during the process of the passing of accounts, admitted that funds in the order of $550,000 were in his hands, or for which he was accountable, when acting as the administrator. This is apparent from the Form 4 documents he prepared and the extracts from the NAB bank statements which he supplied to the court. The significance of the foregoing is twofold, as to fact and principle.
As a matter of fact, the current administrator's claim is based on admitted facts which do not appear to be contentious, and so it can be concluded that the claim is more readily capable of being addressed within the proceedings which are presently on foot. It might reasonably be thought that there is little to be gained by requiring the current administrator to embark on a fresh action, in circumstances where the claim appears susceptible to summary judgment in any event.[60]
[60] As to the availability of summary judgment procedures in the context of a proceeding seeking an account pursuant to O 45 r 1 RSC, I refer to the decision of Sanderson M in McLauchlan v Prince [2001] WASC 43 [7] and [15].
As a matter of principle, there is an analogous proposition of some relevance: where a claimant's claim is uncontested or proved, and the personal representative admits assets, the claimant is entitled to an immediate order for payment without taking the accounts.[61] The same doctrine applies if the executor denies assets in hand at the time the order is sought but discloses that he had at one time sufficient assets, but that he has since misapplied them.[62] Tailoring these propositions to the present case, it is apparent the current administrator's claim is, at the least, uncontested, and the former administrator has by his own documents admitted that the assets were held by him and were subsequently disbursed by him to the discretionary trust he established. These analogous propositions lend some weight to the making of the order presently sought.
[61] Williams, Mortimer and Sunnucks [58-30].
[62] Williams, Mortimer and Sunnucks [58-30].
Second, the relief as sought deals with funds which the former administrator actually received and then disposed of. That is, the relief falls within the usual boundaries of a common account, as described in Meehan v Glazier Holdings Pty Ltd. The relief is not directed at losses to the estate due to a breach of duty by omission on the part of the former administrator. For example, the current administrator is not seeking additional orders arising from the loss of the use of the funds. That is, there is no allegation made that the funds ought to have been applied to some other purpose over the past three years which has caused the estate to suffer a loss. The focus of the current administrator's complaint is not on amounts the former administrator might have received but for his own default. Those are all matters which would have required an account on a wilful default basis.[63]
[63] Williams, Mortimer and Sunnucks [58-25].
Third, and allied to the foregoing point, it should be noted that this is an application brought by the current administrator seeking orders to have funds, which previously formed part of the estate, returned to the estate for further administration. It is not a claim brought by a third party against the personal representative of the estate seeking orders to diminish the value of the estate. Rather, the current administrator seeks to restore the value of the estate.
Notwithstanding these features of the matter, the answer to the question I have posed for myself at [73] above is in the affirmative. That is, I am of the opinion that it is necessary for the current administrator to seek an order that the account be conducted on a wilful default basis in order to secure the relief he now seeks. The primary, and in my view, compelling reason for this conclusion is that the claim for relief which is advanced by the current administrator to ground the order is necessarily based on devastavit. The relief which is sought cannot be sustained by reliance on any notion that the amount sought is an equitable debt or liability in the nature of a debt because, even then, the claim that is mounted as against the former administrator is in substance one of devastavit.
Further, it is not simply sufficient to find that the former administrator made the distribution of funds held by the estate to an entity other than a beneficiary, and did so in breach of the statutory duty imposed on the personal representative.[64] Such a finding would constitute mismanagement of the estate and a misapplication of assets, which is classically a claim in devastavit. The authorities which I have earlier cited, which are of long‑standing, establish this proposition.
[64] Administration Act, s 43(1).
In National Trustees Executors & Agency Co of Australasia Ltd v Dwyer, Latham CJ's statements which I have extracted above conclude with the emphatic indication that the claim for breach of duty against the executors in that case was 'necessarily and essentially an action based upon a devastavit'.[65] Further, Sir George Jessel MR in Job v Job,[66] observed that both an executor and an administrator are in the position of a gratuitous bailee, who cannot be charged with loss of the testator's assets without wilful default. These statements, of rather high authority, admit of limited, if any, exceptions.
[65] National Trustees Executors & Agency Co of Australasia Ltd v Dwyer (17).
[66] Job v Job (1877) 6 Ch D 562, 564.
On my assessment, the present case requires that I be satisfied there has been devastavit on the part of the former administrator and such a claim necessarily requires an account to be ordered on a wilful default basis. Should the current administrator wish to pursue this relief, an account on this basis will therefore need to be sought. Further, the present proceeding cannot be adapted or converted to a wilful default account proceeding. While that will, I regret to say, require fresh proceedings to be initiated by the current administrator, the evidence which has been adduced on this application provides a sound basis for the relief in those proceedings to be sought on a summary basis.[67] It should be apparent from my analysis of the complex issues in this matter, I hope, that while I consider I must reject the present application, I nonetheless consider the application was reasonably brought.
[67] I refer again in this regard to McLauchlan v Prince.
I will hear from counsel as to the appropriate orders which should now be made.
ATTACHMENT A
Table of Alleged Bank Transfers from the Estate to the Trust
| No. | Date | Description in NAB Statement | Amount |
| 1 | 5 August 2019 | Michael Collison - M | $500 |
| 2 | 5 August 2019 | Michael Collison - Trust | $1,000 |
| 3 | 5 August 2019 | Michael Collison - Trust | $1,500 |
| 4 | 5 August 2019 | Michael Collison - M | $2,000 |
| 5 | 30 October 2019 | Trust Account | $40,000 |
| 6 | 31 January 2020 | Trust Account | $10,000 |
| 7 | 5 February 2020 | Davemike Trust | $40,000 |
| 8 | 6 February 2020 | Davemike Trust | $40,000 |
| 9 | 7 February 2020 | Davemike Trust | $40,000 |
| 10 | 10 February 2020 | Davemike Trust | $40,000 |
| 11 | 10 February 2020 | Davemike Trust | $40,000 |
| 12 | 10 February 2020 | Davemike Trust | $40,000 |
| 13 | 12 February 2020 | Davemike Trust | $40,000 |
| 14 | 13 February 2020 | Davemike Trust | $40,000 |
| 15 | 14 February 2020 | Davemike Trust | $40,000 |
| 16 | 17 February 2020 | Mikedave Trust | $40,000 |
| 17 | 17 February 2020 | Davemike Trust | $40,000 |
| 18 | 26 February 2020 | Davemike Trust | $40,000 |
| 19 | 9 March 2020 | Davemike Trust | $15,000 |
| $550,000.00 |
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SAO
Associate to the Honourable Justice Lundberg
7 SEPTEMBER 2023
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