In the Estate of GLENYS ANNE HEYWARD
[2010] SASC 247
•12 August 2010
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
In the Estate of GLENYS ANNE HEYWARD
[2010] SASC 247
Reasons of The Honourable Justice Duggan
12 August 2010
SUCCESSION - EXECUTORS AND ADMINISTRATORS - PROCEEDINGS BY EXECUTORS OR ADMINISTRATORS
EQUITY - TRUSTS AND TRUSTEES - APPLICATIONS TO THE COURT FOR ADVICE AND AUTHORITY - PETITION OR SUMMONS FOR ADVICE - JURISDICTION AND IN GENERAL
Application by executor for advice and direction as to administration of estate – whether executor should continue proceedings pursuant to the De Facto Relationships Act 1996 (SA) to recover property claimed to comprise part of estate – whether executor acting within bounds of duty to continue proceedings – whether statement of claim filed in proceedings discloses an arguable case – nature of Court’s jurisdiction under s 69 of the Administration and Probate Act 1919 (SA) considered.
HELD: It is proper for executor to continue proceedings – executor acting within bounds of duty to continue the proceedings so as to enable the extent of the estate to be determined – statement of claim discloses an arguable case.
Administration and Probate Act 1919 (SA) s 69; De Facto Relationships Act 1996 (SA) s 9(4); Inheritance (Family Provision) Act 1972 (SA); Trustee Act 1925 (NSW) s 63; Matrimonial Property Act 1963 (NZ); Family Protection Act 1955 (NZ), referred to.
Macedonian Orthodox Church v His Eminence Petar (2008) 237 CLR 66; Re Atkinson [1971] VR 612; Irvine v Public Trustee [1989] 1 NZLR 67, applied.
In the Estate of GLENYS ANNE HEYWARD
[2010] SASC 247Civil: Judicial Advice
DUGGAN J: The executor of the estate of Glenys Anne Heyward has applied to the Court pursuant to s 69 of the Administration and Probate Act 1919 (SA) (“the Administration and Probate Act”) for advice as to certain matters concerned with the administration of her estate.
The principal issue for consideration is whether it is appropriate for the executor to continue District Court proceedings commenced pursuant to the De facto Relationships Act 1996 (SA) (“the De facto Relationships Act”) by the testatrix shortly before her death.
Background
Glenys was the de facto partner of Neil Wills Heyward. They commenced cohabitation in June 1982 and it seems that the relationship continued for some 23 or 24 years, ending in either 2005 or 2006. Glenys and Neil had two sons, Thomas and Matthew.
Glenys was murdered on about 12 July 2007. Neil, Thomas, Matthew and Neil’s employee, Minter, were charged with the murder. The Magistrate who presided over the committal hearing found no case to answer against Thomas. Neil committed suicide on 6 June 2009. The trial against Matthew, and Minter resulted in them being found guilty of the murder of Glenys.
Glenys executed a will on 12 December 2006. She appointed her solicitor, Mr Cusack, as her executor and left her estate to be divided equally between Thomas and Matthew. Probate was granted on 6 May 2008.
On 4 May 2009 Neil executed a will also disposing of his estate equally between Thomas and Matthew.
Before her relationship with Neil, Glenys had been married to Edward Valentine. She also had a son from this marriage, Gimili Valentine, who was born on 27 February 1977. Glenys did not make any provision in her will for Gimili and before her death she advised Mr Cusack that this was because she was afraid of the consequences if Neil found out that she had done so.
During their relationship Neil and Glenys operated a dairy farm business in partnership. Through this partnership various farming properties were purchased. Most of them were held in joint names. On 1 June 2004 the properties owned by Neil and Glenys were transferred to a family trust (“the Trust”). Neil was the appointor and trustee of the Trust. The Trust Deed provided that Thomas was to assume these roles in the event of Neil’s death. Glenys told Mr Cusack that she agreed to the formation of the Trust because of her fear of Neil.
Prior to her death Glenys instituted proceedings against Neil in the District Court. These proceedings had not resolved at the time of her death and are the subject of the present request for advice. The orders sought in the proceedings are, inter alia, for the setting aside of the Deed of Trust pursuant to the De Facto Relationships Act. It is claimed that the creation of the Trust involved unconscionable conduct giving rise to a constructive trust in favour of Glenys. Thomas and Matthew have been joined as defendants in the District Court proceedings.
An application for the division of property under the De Facto Relationships Act may be made or continued by or against the legal representative of a deceased de facto partner (s 9(4)). In these circumstances that representative is Mr Cusack.
On 3 November 2008 Gimili Valentine instituted proceedings in the Supreme Court against the estate of Glenys seeking relief pursuant to the Inheritance (Family Provision) Act 1972 (SA) (“the Inheritance (Family Provision) Act (SA)”).
I granted permission to Thomas to intervene in the present request for advice and have considered written submissions prepared by his counsel.
The present application seeks advice on various matters, but the only issue which requires consideration at this stage is whether it is appropriate for the executor of Glenys’ estate to continue the District Court proceedings on behalf of the estate.
The Nature of the Court’s Jurisdiction
Before dealing with this issue it is appropriate to say something about the nature of the Court’s jurisdiction under s 69 of the Administration and Probate Act.
In Macedonian Orthodox Church v His Eminence Petar,[1] the High Court considered the nature of the jurisdiction conferred by s 63 of the Trustee Act 1925 (NSW). This section enables a trustee to apply to the Court for an opinion, advice or direction on any question respecting the management or administration of trust property, or respecting the interpretation of the trust instrument. A number of general observations made by the Court are equally applicable to the jurisdiction conferred by s 69 of the Administration and Probate Act.
[1] (2008) 237 CLR 66.
Referring to the purpose of s 63 Gummow A-CJ, Kirby, Hayne and Heydon JJ said:[2]
In short, provision is made for a trustee to obtain judicial advice about the prosecution or defence of litigation in recognition of both the fact that the office of trustee is ordinarily a gratuitous office and the fact that a trustee is entitled to an indemnity for all costs and expenses properly incurred in performance of the trustee’s duties. Obtaining judicial advice resolves doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. No less importantly, however, resolving those doubts means that the interests of the trust will be protected; the interests of the trust will not be subordinated to the trustee's fear of personal liability for costs.
It is, therefore, not right to see a trustee’s application for judicial advice about whether to sue or defend proceedings as directed only to the personal protection of the trustee. Proceedings for judicial advice have another and no less important purpose of protecting the interests of the trust.
(Emphasis in original)
The role of the Court was explained by their Honours in the following passage:[3]
A necessary consequence of the provisions of s 63 of the Act is that a trustee who is sued should take no step in defence of the suit without first obtaining judicial advice about whether it is proper to defend the proceedings. In deciding that question a judge must determine whether, on the material then available, it would be proper for the trustee to defend the proceedings. But deciding whether it would be proper for a trustee to defend proceedings instituted about the trust is radically different from deciding the issues that are to be agitated in the principal proceeding. The two steps are not to be elided. In particular, the judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceedings.
[2] (2008) 237 CLR 66 at [71]-[72].
[3] (2008) 237 CLR 66 at [74].
In the earlier case of Re Atkinson,[4] Gillard J summarised the nature of the jurisdiction to give advice relating to litigation under the Victorian equivalent of s 69:[5]
Where an executor or trustee is in doubt as to the course of action it should adopt, it is always entitled to take the opinion of the court as to what it should do. If in doubt as to whether or not it should take legal proceedings, then it is entitled to apply to the court for directions on the matter: see Halsbury’s Laws of England, 3rd ed., vol. 38, pp. 946 and 1023-1024; in Re Brogden (1888), 38 Ch. D. 546, at p. 556; [1886-90] All E.R. Rep. 927; Chettiar v. Chettiar (No. 2), [1962] 2 All E.R. 238, at p. 245. If the executor or the trustee then followed the direction of the court, it would be protected from any claim by a beneficiary or creditor arising from its action or inaction in accordance with the court’s direction: see Underwood v. Hatton (1842), 5 Beav. 36; 49 E.R. 490; Smith v. Smith (1861), 1. Dr. & Sm. 384; 62 E.R. 426. In cases of real doubt, the proper course for a personal representative or trustee to adopt is to seek the court’s decision as to whether or not action should be brought, otherwise the representative or trustee might find itself paying the costs of any proceedings which a court might subsequently say were not “properly incurred”: see Re Beddoe; Downes v. Cottam, [1893] 1 Ch. 547, at pp. 558 and 562. On an originating summons seeking such direction, however, a court is not bound to investigate the evidence in order to make a finding that on the material before it the proposed proceedings will or will not be successful. It has merely to determine whether or not the proceedings should be taken: Ftizgerald v. Smith (1889), 15 V.L.R. 467, at p. 473; Re Kay’s Settlement , [1939] Ch. 329, at p. 339; [1939] 1 All E.R. 245. On the other hand the matter should be sufficiently investigated to determine whether or not the proceedings would be fruitless: cf Re Brogden (1888), 38 Ch. D. 546, at p. 556; [1886‑90] All E.R. Rep. 927.
[4] [1971] VR 612.
[5] [1971] VR 612 at 615-616.
Advice
I have pointed out that the immediate issue which requires consideration at present is whether it is proper for the executor of Glenys’ estate to continue the District Court proceedings on behalf of the estate.
In the first place this requires consideration whether the continuation of an action such as this is appropriate having regard to the role of an executor of an estate. The further question is whether the proceedings would be fruitless in the light of the circumstances of the case.
The circumstances of the present case are somewhat unusual. However, the decision of the New Zealand Court of Appeal in Irvine v Public Trustee[6] is of assistance. In that case Mrs Irvine executed a will in which she appointed the Public Trustee as her executor and trustee and left her entire estate to her husband. Prior to her death, a lottery ticket purchased by Mrs Irvine won the first prize of $500,000.
[6] [1989] 1 NZLR 67.
When Mrs Irvine died her estate consisted of $0.95. However, property to the value of $423,000, alleged to represent the proceeds of the lottery, stood in the joint names of Mr and Mrs Irvine.
Mrs Irvine had children by a previous marriage and they requested that the Public Trustee commence proceedings under the Matrimonial Property Act 1963 (NZ) (“the Matrimonial Property Act”) to recover assets including the $423,000 into their mother’s estate. They did so in anticipation of a claim they proposed to make against her estate under the Family Protection Act 1955 (NZ) (“the Family Protection Act”). The Family Protection Act serves a purpose similar to that of the Inheritance (Family Provision) Act (SA).
The Public Trustee, in the capacity of the executor of Mrs Irvine’s estate, commenced proceedings against Mr Irvine under the Matrimonial Property Act. Mr Irvine responded by applying to the Court to strike out the statement of claim and remove the Public Trustee as executor. It was claimed that the Public Trustee was acting contrary to his duty to Mr Irvine as the beneficiary of the estate. These motions were dismissed by the trial Judge and Mr Irvine appealed.
In considering whether it was proper for the Public Trustee to take action against the sole beneficiary in the estate in these circumstances, Cooke P, delivering the judgment of the Court of Appeal, said:[7]
In a note in 17 Halsbury’s Laws of England (4th ed) para 1193, the view is expressed, without citation of supporting authority, that a personal representative’s duty to be even‑handed between all the beneficiaries includes persons entitled or potentially entitled as statutory beneficiaries under the family provision legislation. We think that this must be so as to persons of whose claims the personal representative is aware. For present purposes there is no need to consider whether it is so as to persons of whose claims he ought to be aware, although in the case of a person not of full age or mental capacity this Court has recognised that there is a duty in a clear case to take action to safeguard that person’s interests (Re Magson [1983] NZLR 592, 599). At least from the time when the Public Trustee knew that the (adult) children were intended to claim and wished the extent of the estate to be determined, we accept that the Public Trustee’s duty of even‑handedness did extend to them.
But the duty is not complied with but broken if the personal representative favours one beneficiary or potential beneficiary against another. In consequence it must be wrong for him to bring or lend his name to litigation which may reasonably be seen to indicate that he is not impartial. See 48 Halsbury’s Laws of England (4th ed) paras 821 and 934. On the affidavits we are not satisfied that the Public Trustee’s officers concerned with this case did all that ought to have been done to keep Mr Irvine informed; it is not even clear when he first learnt of the action brought by the children against the Public Trustee. It is understandable that he gained the impression that the Public Trustee was siding against him.
One way of avoiding that impression might have been for the Public Trustee to seek to join Mr Irvine in the action just mentioned and to take a neutral stance in the litigation. Or the Public Trustee could have applied to the Court for directions. But further discussion of these matters would serve no good purpose. Mr Barton accepted in the course of argument that the High Court or this Court on appeal could direct that the present action be treated as one brought by the Public Trustee as nominal plaintiff in order to have the claims of the children as to the extent of the estate assets determined. Mr Barton was concerned, however, to have the Public Trustee retained as plaintiff so that an order for costs (it was said on a solicitor-and-client basis) can be sought against the Public Trustee if the action fails and so that a counterclaim for negligence or other breach of duty could be made against the Public Trustee.
It is apparent from the statement of claim that in effect the Public Trustee is seeking, as a nominal plaintiff, simply to have the extent of the estate determined.
[7] [1989] 1 NZLR 67 at 70-1.
The Court dismissed the appeals against the decision of the trial Judge to permit the Public Trustee to continue the action under the Matrimonial Property Act.
In my view, Mr Cusack, as executor of the estate, would be acting within the bounds of his duty to continue the District Court proceedings commenced by Glenys so as to enable the extent of her estate to be determined.
It is possible that the outcome of the District Court proceedings will be prejudicial to the interests of the beneficiaries under Glenys’ will in an indirect way. This is because Thomas and Matthew are the beneficiaries under their father’s will. If their father’s estate is diminished as a result of the action, their mother’s estate will, in turn, be increased. However, Matthew may be prevented from benefiting from his mother’s estate by reason of the forfeiture rule. Further, both brothers’ interests in the estates of their parents would be reduced if an order was made in favour of Gimili Valentine pursuant to the Inheritance (Family Provision) Act.
In my view these considerations should not prevent the executor from taking action to determine the extent of the estate of Glenys. However, it is the duty of the executor to remain impartial in the conduct of the litigation.
The next question is whether the litigation would be fruitless or lacking in substance. As stated previously, Glenys and Neil commenced cohabitation in June 1982. They lived together for approximately 23 years. Glenys brought little by way of assets into the relationship. After commencing to live together they purchased various parcels of land, some of which were registered in their joint names and others which were registered in Neil’s name alone. The properties were transferred to a family trust which was formed by a Deed executed on 1 June 2004. Through the District Court proceedings Glenys sought to set aside the Trust, in part, on the basis that unconscionable conduct led to its formation.
The statement of claim filed in the proceedings alleges that Glenys did not receive independent legal advice in relation to the formation of the Trust and under its terms she lost control over the assets. It also alleges a long history of personal violence by Neil against Glenys, placing her in a position of vulnerability. This is all put forward in support of the claim of unconscionable conduct, said to have resulted in her executing the Trust.
I am not required to assess the merits of the District Court action or its likely outcome. I do no more than observe that the statement of claim discloses an arguable case and one which, on the material available, could not be described as a fruitless exercise. The proof of the allegations in the statement of claim has been rendered more difficult by reason of the death of Glenys. However, it has not been demonstrated that these difficulties would prevent the essential allegations from being established.
Accordingly in my view it would be proper for Mr Cusack to continue the District Court proceedings in pursuance of his function to have the extent of the estate determined. The potential cost of the litigation does not alter my view in this respect.
I advise accordingly.
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