In the Estate of WAYNE ERNEST DAVID McAULLAY (Decd)
[2022] WASC 36
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: In the Estate of WAYNE ERNEST DAVID McAULLAY (Decd) [2022] WASC 36
CORAM: ALLANSON J
HEARD: 3 FEBRUARY 2022
DELIVERED : 9 FEBRUARY 2022
FILE NO/S: PRO 3637 of 1993
BETWEEN: KERRY ELLA MCAULLAY
Appellant
AND
BENJAMIN JAMES PETTERLIN
Respondent
Catchwords:
Executors and administrators - Appeal against order of a registrar that an executor pass accounts - Duties of executor
Legislation:
Administration Act 1903 (WA)
Non-Contentious Probate Rules 1967 (WA)
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
| Appellant | : | CH Thompson SC |
| Respondent | : | C Eastwood |
Solicitors:
| Appellant | : | Croftbridge |
| Respondent | : | Eastwood Law |
Cases referred to in decision:
Davis v Davis [2014] WASC 395
Hons v Hons [2010] NSWSC 247
Re Ellis; Ellis v Ellis [2015] WASC 77
Re Estate of John William Henry Nicholls (Dec) [2003] WASC 85
Skaftouros v Dimos [2002] VSC 198
The Estate of Erminia Agnes Rogers v Rogers [2009] WASC 358
ALLANSON J:
Introduction
The appellant, Kerry Ella McAullay, was appointed as an executor and trustee of the estate pursuant to the will of her brother, Wayne Earnest David McAullay.
On 21 June 2021, a registrar gave notice to the appellant that she was required to pass the accounts of the estate in accordance with Rule 37 of the Non-Contentious Probate Rules 1967 (WA).
The appellant has appealed against that order.
Both parties accepted that the appeal is an appeal de novo, where I should consider afresh all matters relevant to the decision.[1]
[1] See Davis v Davis [2014] WASC 395; Re Estate of John William Henry Nicholls (Dec) [2003] WASC 85
Background
Wayne McAullay died on 7 June 1993.
At the time of his death, Wayne McAullay had one child, Benjamin James, the respondent to this appeal. The respondent was born on 6 December 1989.
Wayne McAullay made a will dated 22 April 1993. He appointed the appellant and his brother, Mark Anthony McAullay, to be the executors and trustees under the will.
The will was comparatively simple. The deceased made gifts of $100,000 to each of his sister and brother. The balance of the estate was given to his trustees, upon trust for the respondent, to be distributed as follows:
One undivided third share thereof to him upon his attaining the age of twenty-one (21) years.
One undivided third share thereof to him upon his attaining the age of twenty-five (25) years.
One undivided third share thereof to him upon his attaining the age of thirty (30) years.[2]
[2] That is, on 6 December 2010, 2014, and 2019.
On 14 July 1993, probate of the will was granted to the appellant and Mark McAullay.
On 25 February 1994, the executors and Beryl Frederica McAullay, the mother of the appellant, and Wayne and Mark, executed a deed of retirement and appointment for Mark McAullay to retire as an executor of the estate and be replaced by Ms Beryl McAullay.
The appellant was living in New South Wales at the time of the death of Wayne McAullay, and remained there until 2000. Beryl McAullay managed the day-to-day administration of the estate.[3]
[3] Affidavit of Kerry Ella McAullay affirmed 7 December 2021 [17] - [19].
The executors did not apply for a regrant of probate. Ms Beryl McAullay, however, acted as trustee of the estate and was accepted as such. She appeared with the appellant as a trustee in proceedings in the Supreme Court of Victoria in 2001.
The request for documents
The last distribution to the respondent was due on his thirtieth birthday, in December 2019.
On 15 January 2020, the appellant sent the respondent, by email, a document marked 'Draft (Without Prejudice)' which contained some information about the estate of Wayne McAullay, including that the will left approximately $165,000 in trust for the respondent; that the appellant and Beryl McAullay had attempted to recover funds owed to the estate; and that the value of the estate subsequently became approximately $250,000. The draft included amounts paid to the respondent or on his behalf, to a total of $315,000, plus legal costs in the Family Court and the Supreme Court of Victoria. The document contained a note:
The above dates and figures are approximations and can be correctly corroborated by supporting documents which Ben is more than welcome to read.[4]
[4] Annexure BJM-1 to Affidavit of Benjamin James Petterlin sworn 14 January 2022.
On 30 January 2020, the respondent requested the documents referred to, 'and any other documentation that you possess that is linked to my inheritance'.[5]
[5] BJM-1.
On 9 February 2020, Beryl McAullay died.
On 26 February 2020, the appellant wrote by email:
I went to see the accountant and I will be compiling as many figures and documents as I can find in Mum's papers to take them to him and get him to add things up.
I will then get a solicitor to draw up a legal document for us to sign to acknowledge.
1.Wayne's Will was carried out in full and
2.Mum's financial contributions to you over the last 27 years.[6]
[6] Annexure BJM-4 to Affidavit of Benjamin James Petterlin sworn 14 January 2022.
The respondent was not sent any supporting documents.
On 3 February 2021, the respondent wrote requesting documents relating to the estates of his father and Beryl McAullay (in which he is also a beneficiary), specifying financial documents and tax returns for both estates, and a copy of all tax returns in relation to Rabanne, Royce Developments and the McAullay Family Trust. The respondent specifically asked for a copy of the supporting documents/records referred to in the 'draft' sent to him in January 2020.
On 4 February 2021, solicitors acting on behalf of the respondent wrote to the appellant formally requesting documents.[7]
[7] Annexure BJM-6 to Affidavit of Benjamin James Petterlin sworn 14 January 2022.
The appellant did not provide the documents requested.
On 21 June 2021, a registrar gave notice to the appellant, as the executor of the estate of Wayne Earnest David McAullay, that she was required to pass the accounts of the estate in accordance with Rule 37 of the Non-contentious Probate Rules.
The appeal
On 19 October 2021, Ms McAullay filed a notice of appeal from the decision of the registrar. The notice stated:
The Registrar erred in the exercise of her discretion to order the passing of accounts when:
a.probate was granted on 14 July 1993;
b.informal accounts have been provided to the residuary beneficiary, being Benjamin James McAullay;
c.the estate is small;
d.the cost of preparing accounts when the estate has been fully distributed and has no means to pay for the costs of the passing of accounts; and
e.the passing of accounts would be inutile in circumstances where if an item in the account is not allowed, the only remedy would be to commence a civil action for an account, which claim is statute barred having regard to the Limitation Act 1935 (WA) s 38(1)(c)(iii).[8]
[8] (1) Subject to the preceding sections of this Act and as hereinafter provided, actions, suits, or other proceedings as herein set out shall and may be commenced within the time herein expressed after the cause of such actions, suits, or other proceedings respectively: -By rule 5(2) of the Non Contentious Probate Rules, the appeal notice was required to be filed within 5 days, or within such further time as may be allowed by a judge or registrar. Ms McAullay has applied for an extension of time.
By s 43 of the Administration Act 1903 (WA), a person to whom probate or administration is granted shall be under a duty to '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'.
Rule 37 of the Non-Contentious Probate Rules 1967 provides, relevantly:
(1)Every executor and administrator (other than the Public Trustee) shall file in the Registry his accounts relating to the estate of the deceased in accordance with Form 4, and shall attend before the Registrar at such time as the Registrar may appoint to have the accounts passed and allowed.
(3)The accounts …shall be filed within 12 months after the grant, or within such further time as a Judge or the Registrar may allow, and shall be verified by the affidavit of the executor or administrator
The evidence in the appeal
The appellant filed an affidavit, affirmed by her on 7 December 2021, and a further responsive affidavit, affirmed 27 January 2022.
The appellant also relied on an affidavit of Beverly Ann Sorrell, affirmed 9 December 2021, in relation to the delay in bringing the appeal.
The respondent filed an affidavit sworn by him on 14 January 2022.
The respondent also relied on an affidavit of Biao Hu, sworn 14 January 2022. Mr Hu included material relating to the estate of Beryl Frederica McAullay, deceased, and a notice issued by a registrar of this court on 29 July 2021 to the executors of the Estate of the late Ms McAullay to pass the accounts for that estate.
All of the affidavits were read without objection.
The appellant's evidence
In her evidence, the appellant deposed that the statement of assets and liabilities of the estate, filed pursuant to rule 9B of the Non-Contentious Probate Rules, was prepared by Beryl McAullay. Although she accepted it was signed by her, the appellant now challenged the accuracy of the statement.
In particular, in movable property, the statement listed a loan to Rabanne Investments Pty Ltd in the sum of $127,037. In her first affidavit, the appellant set out an explanation of the efforts made on behalf of the estate to recover a debt to Rabanne from a Mr Bradbury, who was declared bankrupt in 1997. In submissions, senior counsel for the appellant said there was a mistake and that the loan to Rabanne should not have been recorded as an asset of the estate. The money owed to Rabanne by Mr Bradbury was relevant to the assets of the estate only to the extent that the estate held one of two issued shares in Rabanne.
The appellant deposed that, by reason of that and other inaccuracies, the actual value of the estate was substantially less than that recorded in the statement filed in the application for probate. She deposed that the value of the residuary estate should be reduced to $85,664.94.[9] That value is completely inconsistent with the draft document the appellant provided to the respondent in January 2020.
[9] Affidavit of Kerry Ella McAullay affirmed 7 December 2021 [37]. The value may even, on the appellant's calculation, have been less as she appears to have allowed only for half of the gift to Mr Mark McAullay.
The appellant deposed that, to the best of her knowledge, the estate bank account was closed in 2009 when it had no funds remaining.
The appellant deposed that, despite the trust having no funds, on reaching his twenty-first birthday, the respondent was given $87,000, purportedly as a distribution from the estate. Of that sum, the appellant lent $55,000 to the trust. On his twenty-fifth birthday, the respondent was given another $85,000 which the appellant says came from Beryl McAullay's personal funds. And on his thirtieth birthday, again from Beryl McAullay's personal funds, the respondent was given another $50,000.
The appellant deposed that in addition, the trust paid for the respondent's education, and contributed towards holidays, medical costs, dental work and other expenses. The evidence includes an order of the Supreme Court of Victoria, made 4 June 2001, for payment from the estate of school fees and associated expenses (books, school levies, and uniforms).
In effect, in her first affidavit, the appellant deposed that the funds in the trust had been exhausted by 2009 and that she and Beryl McAullay used their personal funds from then.
The evidence shows that the assets of the estate were not confined to those in the statement filed in the application for probate. In her second affidavit, the appellant included a statement of assets and liabilities for the year 1996 which showed the estate gained income of approximately $15,000 from rent in that year, and had received an insurance payout of $64,000.
The rent was from a property at 25/240 Mil Point Road, South Perth, which, the appellant deposed, she had forgotten was purchased by the estate. The appellant deposed the property was sold in 1998.
The appellant also, in her second affidavit, gave evidence regarding transactions involving Rabanne relating to the purchase of an interest in a property in Parker Street, South Perth, with funds borrowed from a bank, and also from the estate. The appellant deposed that Rabanne's interest in the property was sold to Beryl McAullay in 2014, and she believes that any funds owed to the estate were repaid. There is no detail as to how that was done. She said that the property was then re-mortgaged in June 2014 and the funds borrowed were used to pay the instalments to the respondent on his twenty-fifth and thirtieth birthdays.[10]
[10] Affidavit of Kerry Ella McAullay affirmed 27 January 2022 [14] - [17].
The respondent's evidence
The respondent agreed that he received the three payments deposed to by the appellant on each of the three specified birthdays. At no time was he told that the estate had insufficient funds.
The respondent referred to documents which raise questions about the nett position of the estate in 1996. On the evidence available, I am not able to make findings about disputed questions relating to the value of the estate. Nor, in my opinion, would it be appropriate to do so in these proceedings, which are concerned only with whether there should be the taking of accounts of the estate. The respondent is not required to allege or establish a breach of trust by the appellant; the action for an account arises from the fiduciary relationship of trustee and beneficiary and represents a remedy to require the appellant, as personal representative, to discharge her obligation to account to the beneficiary.[11]
[11] Re Ellis; Ellis v Ellis [2015] WASC 77 [91].
It is sufficient to note that there is evidence that the nett position of the estate was about $190,000 in 1996. Further, and importantly, there is no evidence about how those funds were administered, if the estate was so depleted that it was necessary for the appellant to advance her own funds to make the first distribution to the respondent in 2010.
The appellant's submissions
The appellant's primary position was that the taking of accounts would be futile because of the delay and the absence of any funds in the estate. She submitted that the day-to-day administration of the estate, at least for part of the time, was carried out by Beryl McCauley and, with her death, knowledge of how the estate was administered has gone.
The appellant submitted that probate was granted nearly 30 years ago and the estate was effectively wound up nearly 10 years ago. The payments made in 2014 and 2019 were not, in fact, payments out of the trust estate, but were made by the appellant and Beryl McAullay from their own funds. In submissions on the appeal, senior counsel for the appellant submitted that the administration of the estate 'effectively came to an end' and the estate was wound up in 2012.[12]
[12] Appeal ts 3.
The appellant submitted that there are no documents beyond those that she has volunteered and included in her two affidavits in the appeal, and with the passage of time documents such as bank statements will no longer be available. She submitted that, in the circumstances, it is not convenient for the passing of accounts, and the process would be grossly disproportionate to any benefit that might be achieved.
The appellant did not deny that she had failed in the duty of a trustee to maintain proper accounts so as to be in a position to give an accounting of the administration. But, there being no further documents, the process contemplated by the passing of accounts pursuant to the order of the registrar would be futile and expensive.
Alternatively, the appellant submitted that she has provided the fullest and best information she can, and that she is unable to provide further documentation because she does not have the full records dating back to 1993 and cannot now obtain them. She submitted that the affidavits that she has filed in this appeal, inadequate though they admittedly are by way of an account, should be ordered to stand as the trustee's accounts.
Finally, the appellant submitted that any cause of action against the executor has expired and, if there was a breach, it must have happened many years ago.
The respondent's submissions
The respondent submitted that the order of the registrar was to direct the appellant to pass accounts.
The respondent referred to the importance of a trustee's duty to keep accounts, and the remedy to a beneficiary to seek a passing of accounts.
The respondent pointed to the inconsistencies in the evidence regarding the value of the estate and the properties that were in it. It is a result of these proceedings that the appellant has provided some information relating to the property at Mill Point Road, South Perth; the rent received from that property; the receipt of an insurance payout by the estate; and the purchase by Rabanne, with funds that included funds borrowed from the estate, of an interest in the property in Parker Street, South Perth.
The respondent submitted that, even if there were an issue in respect of the limitation period for the recovery of funds from the executor, that does not alter the duty of an executor to maintain accounts.
The respondent further submitted that he is not guilty of any delay. He had never been told that the estate had exhausted its funds by 2010; if that be true. He acted swiftly and requested supporting documents following the receipt of the email from the appellant in January 2020, shortly after the last distribution to him.
In summary, the respondent submitted that the appellant had not only failed to maintain proper records, where the estate could not have been properly wound up before 2019 when the last distribution was due, but that the appellant may have fundamentally misrepresented the financial position of the estate. He submits he is entitled to a full accounting.
Consideration
There can be no dispute about the importance of maintaining accounts.
In relation to the maintenance and provision of accounts, it has been rightly stated that it is fundamental to the good management of a deceased estate that proper records and accounts be maintained. Indeed, it is a duty of an executor to keep proper accounts and to be ready to render such accounts when called upon to do so.[13]
[13] Skaftouros v Dimos [2002] VSC 198 [11].
The Probate Registrar's direction under rule 37(1) for the appellant to attend for the passing of accounts at the appointed time is authorised by s 43 of the Administration Act 1903 which states that every person to whom probate or administration is granted shall be under a duty to:
(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.
Although rule 37(3) provides for the filing of accounts within 12 months of the grant of probate, that obligation is not always insisted upon. My power, on this appeal, to make an order that the appellant file accounts is discretionary.[14] But, as Heenan J said in The Estate of Erminia Agnes Rogers v Rogers[15], the court's power to require an executor to file and pass accounts is an important part of the court's armoury of powers to enforce the due administration of estates which may be exercised whenever and as often as the requirements of due administration dictate.
[14] Davis v Davis [47],[50]. Hons v Hons [2010] NSWSC 247 [88] - [89].
[15] The Estate of Erminia Agnes Rogers v Rogers [2009] WASC 358 [33] - [40].
I accept that, in the circumstances of this case, the provision of full accounts, supported by documents to enable the court to assess the adequacy of the evidence relating to individual transactions, may not be possible. To the extent that relevant documents can be provided, obtaining those documents may be burdensome.
I have regard to the following matters:
(1)Probate was granted in 1993, over 28 years ago.
(2)The appellant has clearly failed in her obligation to maintain accounts.
(3)The appellant has provided some information to the respondent, and to the court, although that information is incomplete and hopelessly inadequate in terms of verification.
(4)The appellant says she does not have, and cannot obtain, the documents required for verification.
(5)The estate was, on the appellant's evidence, wound up in 2009, with the closing of the estate account, or by 2012.
(6)The appellant's submission that the estate was wound up by 2012 is inconsistent with the terms of the trust which required payment to the respondent in three distributions, the last of which was only due in 2019.
(7)The passing of accounts may not provide the respondent with any remedy. It does not provide a remedy directly, and there may be limitation defences to some, at least, of any remedies the respondent might pursue.
(8)In January 2020, when the appellant did not provide the documents requested by the respondent, she told him she had supporting documents, and apparently intended to seek some form of release from the respondent on the basis that the trusts under the will had been carried out in full.
(9)The evidence discloses matters for concern regarding transactions (such as the Parker Road property, where the executors apparently borrowed from the estate), and receipts which were not previously disclosed (the rent and insurance).
There are too many apparent discrepancies in the administration of the estate to rely on the documents already filed by the appellant in these proceedings as a sufficient accounting. In particular, it is not satisfactory for the appellant to say that the estate was wound up 10 years ago. Subject to any earlier vesting once the respondent (who was the sole residuary beneficiary) reached maturity, the trust fund was to be maintained until the respondent's thirtieth birthday in 2019.
I am not satisfied that an order for the appellant to file and pass accounts would be without utility. To the extent that it is burdensome, and an expense to be borne by the appellant personally, that is the result of her own conduct in the administration.
The appeal will be dismissed. The matter should be returned to the registrar to fix a date for the passing of accounts.
Security for costs
As an alternative submission, having regard to the expense likely to be incurred in the passing of accounts, the appellant asked for an order that the respondent give security for costs of the proceedings for passing accounts.
The appellant refers to an order of that kind being made by Jenkins J in Davis v Davis. That order was made in circumstances where the party seeking an account had brought an earlier action which had been dismissed with costs, and there was evidence that he had no assets to satisfy those costs.
I do not doubt that the court has power to make such an order. But in the present case, there is no evidentiary foundation for an order for security. The appellant's statements that the estate is exhausted and that the process would be personally expensive for her, in the circumstances, are not sufficient.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TB
Associate to the Honourable Justice Allanson
9 FEBRUARY 2022
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(c) (iii) Actions of account other than such accounts as concern the trade of merchandise between merchant and merchant, their factors or servants.
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