Joyce v Cam

[2004] NSWSC 621

CITATION:	Joyce v Cam [2004] NSWSC 621
HEARING DATE(S):	5/7/04 - 6/7/04
JUDGMENT DATE:	28 July 2004
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
DECISION:	Beneficiary not entitled to be registered as proprietor of land. Trustees have power to subdivide. Claim for "account" barred by laches.
CATCHWORDS:	TRUSTS AND TRUSTEES - trust for sale with power to postpone sale and retain land in present state of investment - whether beneficiary entitled to transfer of legal estate when power of postponement exercised - whether trustees for sale with power to retain in same state of investment can subdivide land before selling - claim for "account" concerning administration of estate - operation of doctrine of laches - WORDS AND PHRASES - "retain in the same state of investment" - SUCCESSION - EXECUTORS AND ADMINISTRATORS - administration - whether order of application of assets under section 46C Wills, Probate and Administration Act 1898 affects duty of executors in realising assets for payment of debts and testamentary expenses - EQUITY - defences - laches - whether delay of predecessor in title relevant
LEGISLATION CITED:	Administration of Estates Act 1925 (UK) Conveyancing Act 1919 Family Provision Act 1982 Stamp Duties Act 1920 Supreme Court Rules 1970 Trustee Act 1925 Wills, Probate and Administration Act 1898
CASES CITED:	Chaworth v Beech (1799) 4 Ves Jun 555; 31 ER 285 Clarke v Earl of Ormonde (1821) Jacob 108; 37 ER 791 Commissioner of Stamp Duties (Queensland) v Hugh Duncan Livingston [1965] AC 694 Ewer v Corbett (1723) 2 P Wm 148; 24 ER 676 Lindsay Petroleum Company v Prosper Armstrong Hurd, Abram Farewell, and John Kemp (1874) 5 LR 5 PC 221 Orr v Ford and Another (1989) 167 CLR 316 The Roman Catholic Archbishop of Melbourne v Lawler (1934) 51 CLR 1 Sleeman v Wilson (1871) 13 Eq Cas 36 In re Tong; Hilton v Bradbury [1931] 1 Ch 202 In re Worthington; Nichols v Hart [1933] 1 Ch 771 Wyndham and Others v McKenzie and Others (1918) 25 CLR 172
PARTIES :	Candy Joyce - Plaintiff Gay Judith Cam - First Defendant Patricia Florence Clark - Second Defendant William Russell Deverall - Third Defendant
FILE NUMBER(S):	SC 2451/03
COUNSEL:	E Cohen - Plaintiff G A Sirtes; S Mason - Defendants
SOLICITORS:	Andrew Cohen - Plaintiff Peter R Murphy & Co - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

28 JULY 2004

2451/03 CANDY JOYCE v GAY JUDITH CAM & ORS

JUDGMENT

HIS HONOUR:

Nature of the Claim

1 This litigation involves various claims by the plaintiff that the deceased estates of her maternal grandparents have not been properly administered.

2 William Edgar Deverall (“the Grandfather”) died on 22 July 1973, leaving a Will made 16 November 1971. That Will appointed his wife and five of his children as executors and trustees. It gave a block of flats at 53 Gould Street, Bondi, and its contents to the trustees, on trust for his wife to receive the net rents. Upon her death, the block of flats was to form part of her residuary estate. The residuary estate was given to his trustees on trust for sale (with power to postpone sale), and on trust to pay debts, funeral and testamentary expenses and duties, and to hold the balance on trust for his wife and children equally between them as tenants in common. There was a substitutionary provision whereby if any child predeceased him leaving children, then the children of the deceased child would take the share which their parent would have taken, if the parent had survived the Grandfather.

3 The Grandfather had a total of eight children, one of whom (Irene, known in the family as Bonnie) had predeceased him, leaving children.

4 The Grandfather’s wife, Irene Mildred Deverall (“the Grandmother”) died on 5 January 1981. She left a Will which, after making some small specific legacies, gave her residue to her trustees on trust for payment of debts, funeral and testamentary expenses and duties, and then for such of six of her named children as were living at the time of her death. By the time of her death, it was only those six children who were alive – another of the children which she and the Grandfather had had, Robert, had died between the time of the Grandfather’s death, and the time of the Grandmother’s death.

5 One of the children of the Grandfather and the Grandmother, who survived the Grandmother, was Iris Daphne Rigby (“Iris”). She is the mother of the plaintiff. Iris died on 30 November 1990. By her last Will she appointed her two children, Candy (“the plaintiff”) and Paul, as executors and trustees of the Will, and gave her property to them equally. An order of this Court, under the Family Provision Act 1982, made on 6 February 1992, resulted in the plaintiff being entitled to the entirety of Iris’s estate.

6 The defendants in the proceedings are all children of the Grandfather and the Grandmother. They are the only surviving executors of the Grandfather’s estate. The first named defendant, Mrs Cam, is the only surviving executrix of the Grandmother’s estate.

Assets of the Grandfather’s Estate

7 In connection with obtaining probate of the Grandfather’s Will, the executors completed the Affidavit “D” required by the Stamp Duties Regulations made under the Stamp Duties Act 1920. That affidavit listed the assets as follows:

Item	Value
Land at Lawson, portion 22	$200,000
Land at Lawson, Lot 2	$20,000
Land at Lawson, Lot 3	$6,000
Cottage at Somers Street Lawson	$12,500
Semi-detached cottage at 50 Glasgow Avenue, Bondi	$28,000
Block of flats at Gould Street, Bondi	$80,000
Cash with Mayne Nickless	$4,156
Money with Commonwealth Bank	$9,442
Interest bearing deposit	$6,056
Motor cars	$1,400
Other personalty	$120
Total	$367,674

8 That affidavit valued the Lawson land in accordance with a valuation which the executors had requested for the purpose of the Affidavit “D”. The executors of the Grandfather’s estate appealed against that valuation. They were to some extent successful in that appeal, although the evidence does not establish how successful they were.

9 In addition, the Grandfather held, as joint tenant with his wife, their home at 70 Military Road, Dover Heights. His interest in that home passed to her by survivorship. His interest in the home was valued for probate purposes at $30,000.

10 The case was conducted on the basis of assuming that the cash with Mayne Nickless, the money with the Commonwealth Bank, the interest bearing deposit, the motor cars, and the other personalty, were all realised fairly soon after the Grandfather’s death.

11 The cottage at Somers Street, Lawson was sold pursuant to a transfer made on 4 July 1980, for $17,000. The cottage at 50 Glasgow Avenue, Bondi was sold, fairly soon after the Grandfather’s death, for a price not disclosed by the evidence. However, I accept that the net proceeds of sale of that cottage were all used in payment of New South Wales death duty and Commonwealth estate duty.

12 The three lots of land at Lawson are vacant lots which even now, more than 30 years after the death of the Grandfather, have still not been sold.

13 In 1973 or 1974 one of the executrixes of the Grandfather’s estate, Mrs Cam, the first defendant, saw the Assistant Commissioner of Stamp Duties. Mrs Cam requested that the Gould Street, Bondi flats not be sold for the purpose of paying the death duty, so as to enable the Grandmother to have an income during her life, as the Grandmother had very few assets apart from her home. An arrangement was arrived at whereby it was not necessary to sell the flats during the Grandmother’s lifetime, but that after her death the flats would have to be sold to pay death duties still outstanding in the Grandfather’s estate.

14 The Bondi flats were sold pursuant to a transfer dated 21 April 1986, for $175,000. The evidence does not establish why it was that the transfer of the Bondi flats did not occur until more than five years after the death of the Grandmother. The Stamp Duties Office received over half of the sale proceeds of the Bondi flats, but an amount of the order of $65,000 to $70,000 remained as an asset of the Grandfather’s estate.

Assets of the Grandmother’s Estate

15 When the Grandmother died, her estate consisted of: the Dover Heights house (then valued at $150,000); the furniture in it; a little over $6,000 in the Commonwealth Bank; nearly $6,000 worth of shares; rents of $262 due from the Bondi flats; and her interest in the residue of the Grandfather’s estate. Her dutiable estate had debts of a little over $8,900, consisting mainly of death duty.

Early Decision to Retain Lawson Land

16 Soon after the death of the Grandfather, the then executors decided that the Lawson land “which was proposed residential at the time, should be kept until it was worthwhile selling”. Dr Deverall, one of the executors of the Grandfather’s estate, gives evidence concerning the Lawson land as follows:

“Well the subdivision started right from the word go … We were talking about the subdivision at a time – at a time when it was profitable to sell and subdivide. At the time the land at Lawson was very very low ...”

17 Dr Deverall gives evidence, which I accept, that this proposal was discussed with the plaintiff’s mother:

“We often talked to Iris about subdividing the land at Lawson and she was in full agreement.”

18 At some stage after the death of the Grandfather, possibly in the late 1970s or early 1980s, the executors were able to persuade the Council to change the zoning of the Lawson land to residential.

Buying Out the Widows of Two Sons

19 Robert, one of the children of the Grandfather and the Grandmother, died before the Grandmother. Neither Robert nor his widow or children took any interest under the Grandmother’s estate. Another of their sons, John, died after the Grandmother. John was one of the residuary legatees in the Grandmother’s estate. The widows of Robert and John, Monica and Colleen, were paid money which came from the estate of the Grandfather. One witness, Father Sheehy (a son of Betty Sheehy, one of the children of the Grandfather and the Grandmother) was aware of this transaction, and says, with no great confidence, that it may have happened between 1984 and May of 1986, a time when he was away from Australia. Mrs Cam, who is an executrix of both estates and has been actively involved in their administration throughout, says that those two widows did not agree that the surplus proceeds of sale from the sale of the Bondi flats, after payment of death duty, should be retained as a fund to enable the Lawson land to be retained. She gives evidence, which I accept, that the “whole family”, including Iris, agreed to pay them out. That agreement of the “whole family” necessarily involved an agreement that the Lawson land should continue to be held by the executors. The two widows were paid out, using at least some of the money which remained after sale of the Bondi flats. John’s widow received more than Robert’s widow, because John had been a beneficiary of the Grandmother’s estate and Robert had not.

20 Even though there was no express power under the Will of the Grandfather to use assets of his estate in this fashion, when all the beneficiaries agreed that it should be done, no breach of trust was involved. The transaction amounts, in substance, to a distribution to the beneficiaries under the estate of the Grandfather, of all or part of the amount which remained as an asset of the Grandfather’s estate after sale of the Bondi flats, and the six beneficiaries who agreed to the Lawson land being retained using their distribution to pay out the two widows. Mrs Cam has no documentation relating to the payment out of those two widows. The transaction was handled by Mr David Hunt, who was the solicitor for the estate at the time.

21 In consequence of those two widows being paid out, the interest of the remaining beneficiaries in the estate of the Grandfather increased. The case has been conducted on the basis that all the beneficiaries other than the plaintiff accept that Iris had (and hence the plaintiff has) a one-sixth interest in the estate of the Grandfather. It would be necessary to know more about the precise arrangement under which the two widows were bought out to know whether this concession on the part of the defendants is correct. However it is not necessary, for the purposes of this judgment, for me to decide whether it is correct.

Contributions to the Cost of Maintaining the Land at Lawson

22 From some time in the 1980’s, the various beneficiaries of the Grandfather’s estate made periodical contributions to paying the rates and land tax on the land at Lawson. Iris was one of those who contributed.

23 After Iris’s death, and after the Court had made the order giving the plaintiff the whole of Iris’s estate, the plaintiff had a conversation with Mrs Cam, in which Mrs Cam said:

“You have a sixth share in the land at Lawson, you will have to contribute to the costs of land tax and rates etc, it will cost about $80.00 per month.”

The plaintiff asked Mrs Cam, “How much land is there” , to which she replied, “Why do you want to know?” The plaintiff then instructed an accountant to write to Mrs Cam. The letter is not in evidence, so I can do nothing more than infer that it in some way sought information about the estates. There was no response to the accountant. However, Mrs Cam telephoned the plaintiff, and said:

“Why are you involving an accountant? Why do you want to know all of this? You don’t need to know all of this. I am the executor and I have sole power in deciding what happens. You don’t need to know about anything, if you do need to know, you can ask me”.

The plaintiff responded, “I did ask you” , to which Mrs Cam replied, “You should never get other people involved” .

24 The plaintiff did nothing about taking up Mrs Cam’s offer that “If you do need to know, you can ask me”. She continued to pay $80 per month, by posting a cheque to Mrs Cam, or whoever else in the family had later taken on the task of collecting and disbursing the payments connected with the Lawson land.

25 A couple of years later, the plaintiff’s payments towards expenses of keeping the Lawson land increased to $100 per month. She was also asked to pay a couple of lump sum payments for land tax, and another for spraying of blackberries. She continued to make these payments until either June or August 2002.

The Plaintiff Starts to Question the Executors’ Actions

26 In 1998 the plaintiff purchased a cottage in Somers Street, Lawson, which adjoins the estate’s land. On 14 December 1999 her solicitor wrote to the executors of the Grandfather’s estate. That letter asserted that the plaintiff was entitled to be a registered proprietor of the Lawson land, wished to be involved in decision-making concerning it, and did not wish to spend any money in relation to preparing any development application. The letter said:

“She is aware of the pros and cons, and that she may be in a minority in this regard, but will not at this time participate, effectively causing any proposals for Development Application, to be scotched.”

The letter alluded to the possibility of the plaintiff bringing litigation to become a registered proprietor of the Lawson land, and possibly to remove the existing executors. It went on to say:

“In the event that my client were to be offered a resolution, whereby her interest be severed, as a result of the sale of her interest or division of part of the parcel, to become her entitlement alone, with any necessary financial adjustment or an outright sale/purchase, I am instructed to convey to you her interest in such potential transactions.
For example, there is apparently a residential lot adjoining the road, Somers Street which interests her and she is also interested in that part of the parcel which be zoned “Light Industrial”.”

27 On 16 March 2000, the plaintiff’s solicitor wrote to various of the executors and beneficiaries of the Grandfather’s estate saying that the plaintiff was proposing to lodge a caveat against the Lawson land, to seek a mandatory injunction to require her to be made a registered proprietor, and to restrain the registered proprietors from taking any steps to spend money on the land other than for necessary statutory charges. The letter said that she did not consent to “a course of instigating studies and planning proposals”. It said “My client wishes the land to remain the same, and will not be held liable for any costs incurred towards or in the process of changing it, without her consent”.

28 On 18 July 2002 the plaintiff’s solicitor wrote to the Town Clerk and the Council of Blue Mountains City Council, saying that the plaintiff was opposed to subdivision of the land, and that she was preparing to obtain an injunction restraining the proprietors from subdividing the properties. The basis for that proposed injunction was a lack of power to subdivide, on the part of the executors.

The Claimed Relief Concerning the Lawson Land

29 The plaintiff’s Statement of Claim alleged, concerning the Lawson land, that the executors have retained that land in their own names. It sought an order pursuant to section 66E Conveyancing Act 1919 that the appropriate share as tenant in common in the Lawson land be vested in the plaintiff.

30 Section 66E says:

“If the trustees for sale refuse to sell … any person interested may apply to the court for a vesting or other order for giving effect to the proposed transaction or for an order directing the trustees for sale to give effect thereto, and the court may make such order as it thinks fit.”

31 The Statement of Claim also sought an order under section 66G of the Conveyancing Act 1919 appointing a trustee company as trustee for sale of the land, and an order restraining the defendants from selling, disposing of, transferring, encumbering or dealing in any way with the Lawson land.

Failure to Exercise Power of Postponement Properly?

32 In argument, counsel for the plaintiff sought to argue that the power of postponement of sale contained in the Grandfather’s Will, and the statutory power of postponement of sale arising under section 27B Trustee Act 1925, had been invalidly exercised. There was, she submitted, no evidence that the power of postponement had been exercised bona fide.

33 This argument is simply not available, as the allegation of a breach of duty in exercise of the power of postponement is one which would have needed to be specifically pleaded. It was not. Further, if it had been pleaded, the onus of proving breach of duty concerning exercise of the power of postponement is one which would have fallen on the plaintiff – it would not have been sufficient for the plaintiff to submit that there was no evidence that the power had been exercised bona fide.

Plaintiff Absolutely Entitled to One-Sixth of Lawson Land?

34 The plaintiff submits, alternatively, that once the executors of the Grandfather’s estate had become trustees, the plaintiff became absolutely entitled to a one-sixth share in the Grandfather’s estate, and for that reason is entitled to become a registered proprietor.

35 I do not accept that argument. The relevant portion of the Grandfather’s Will provided:

“As to the rest and residue of my estate of whatsoever kind and wheresoever situate I GIVE DEVISE AND BEQUEATH the same unto my Trustees UPON TRUST to sell call in and convert the same into money with power in their discretion to postpone the time of such sale calling in and conversion for such time or times as they may deem fit and to retain my estate or any part of parts thereof in the same state of investment in which it may be at the time of decease and after payment thereout of all my just debts funeral and testamentary expenses and probate duty Federal Estate duty payable in respect of the whole of my estate to stand possessed of the balance thereof UPON TRUST for my wife and children equally between them as tenants in common or the survivor or survivors of them absolutely …”

This clause does not make the trustees of the Will, once executorial functions are completed, bare trustees. Rather, they are trustees who have powers of management in relation to the estate assets. Those powers of management are not particularly extensive, being only the power to exercise the various discretions incidental to a power of sale, the power to postpone sale and the power to retain the estate in the same state of investment as it was at the time of the Grandfather’s death, and other powers arising by operation of law or implication, but those powers are nonetheless real. The obligation of the Trustees to hold the estate on trust for the beneficiaries is subject to, or qualified by, their right to exercise those powers. Further, the discretion to postpone sale, and the discretion to retain assets in the state of investment which they had at the Grandfather’s death, is conferred on the Trustees, not on anyone else. If the discretion to postpone sale has been exercised, as it has, no trust in favour of the beneficiaries which entitles them to a distribution of the legal estate in the land exists.

No Power to Subdivide?

36 Even though it was not pleaded, there was a further argument which the plaintiff ran, which the defendants understood and accepted would be run. It was that the defendants had no power under the Will to subdivide the Lawson land.

37 The defendants submit that the taking of steps to obtain a development approval authorising subdivision does not involve them acting outside their power “to retain my estate or any part … thereof in the same state of investment in which it may be at the time of decease”. They submit that that expression needs to be understood in contrast to the expression to which it is a qualification, namely the trust to “sell call in and convert the same to money”. The defendants submit that the Lawson land is still in the same state of investment as it was at the Grandfather’s death. As a matter of fact, activities which the defendants have carried out concerning it have been to obtain a change of its town planning zoning, and, more recently, to make application to the Council for approval of a development application authorising the land being subdivided into lots, with appropriate provision of roads, water, drainage and other services to those lots.

38 Obtaining such a development application does not, in my view, alter the “state of investment” of the land from that which it was in prior to the obtaining of that development application. It is still land, and its physical characteristics are not changed in the slightest by obtaining the development application, even though the development application is a legal right which attaches to the land. However, the physical state of the land is not, it seems to me, the most important matter – the expression “state of investment” shows that it is the attributes of the land considered as an investment which are critical. This land is land which has always been vacant and unproductive, but with a potential for eventual realisation through subdivision. I do not regard the taking of steps to realise the potential which the land has always had, as one of its investment attributes, as changing the state of investment of the land.

39 There is a further reason why the Trustees have power to subdivide the land. The trust for sale has attributes arising under section 26 Trustee Act 1925:

“(1) A trustee for sale may:
(a) sell all or any part of the trust property,
…
(d) do anything that a mortgagee may do under subsection (1) of section 110 of the Conveyancing Act 1919 to the like extent as if the powers conferred by that subsection on a mortgagee in relation to the mortgaged property or any part thereof were in terms conferred by this subsection on the trustee in relation to the trust property or any part thereof,
…
(2) The sale may be subject to any such conditions respecting title or evidence of title or other matter as the trustee thinks fit, and may be:
…
(b) either together or in lots, in subdivision or otherwise,
…”

40 Section 110(1) Conveyancing Act 1919 provides that the power of sale conferred on a mortgagee includes:

“(c) A power to lay out and make such roads, streets, and ways, to be dedicated to the public or not, and grant such easements, profits à prendre, rights of way, or drainage over the same as the circumstances of the case may require, and the mortgagee or chargee thinks fit.”

41 These provisions authorise the executors, as an incident of their power to sell, to subdivide before selling. There is nothing in the Will itself that negatives the implication of that power. The argument of the plaintiff that there is no such power, is therefore incorrect.

42 No question arises in the present litigation about what powers the trustees have to raise money to pay for holding expenses of the Lawson land, or the costs of obtaining a subdivision approval.

Section 46C Wills, Probate and Administration Act 1898

43 Another argument which the plaintiff advanced is that section 46C Wills, Probate and Administration Act 1898 required the executors, long ago, to have sold the Lawson land. Section 46C(2) provides:

“Where the estate of a deceased person is solvent the deceased person’s real and personal estate shall, subject to the provisions of any Act as to charges on property of the deceased and to the provisions, if any, contained in the deceased person’s will, be applicable towards the discharge of the funeral, testamentary, and administrative expenses, debts, and liabilities, payable thereout in the order mentioned in Part 2 of the Third Schedule.”

44 Part 2 of the Third Schedule provides:

“Order of application of assets where the estate is solvent
1 Assets undisposed of by will, subject to the retention thereout of a fund sufficient to meet any pecuniary legacies.
2 Assets not specifically disposed of by will but included (either by a specific or general description) in a residuary gift, subject to the retention out of such property of a fund sufficient to meet any pecuniary legacies, so far as not provided for as aforesaid.
3 Assets specifically appropriated or disposed of by will (either by a specific or general description) for the payment of debts.
4 Assets charged with or disposed of by will (either by a specific or general description) subject to a charge for the payment of debts.
5 The fund, if any, retained to meet pecuniary legacies.
6 Assets specifically disposed of by will, rateably according to value.”

45 The argument was, as I understand it, that the Lawson land was not specifically disposed of by will, and was included in a residuary gift, and so should have been sold by the executors for the purpose of payment of the debts of the testator, including the testamentary expenses consisting of the death duties. The executors were, it is submitted, in breach of their obligations under section 46C in not selling the Lawson land to enable the death duties to be paid.

46 There are two separate reasons why this argument is incorrect. The first is that it mis-states the correct role of section 46C in administration of deceased estates. To explain why, some factors about the background against which section 46C operates should be mentioned. New South Wales death duties are a testamentary expense (Wyndham and Others v MacKenzie and Others (1918) 25 CLR 172), and hence payment of death duties is one of the duties of administration of an executor. Section 44 Wills, Probate and Administration Act 1898 provides:

“(1) Upon the grant of probate of the will … of any person dying after the passing of this Act, all real and personal estate which any such person dies seised or possessed of or entitled to in New South Wales, shall as from the death of such person pass to and become vested in the executor to whom probate has been granted … for all the person’s estate and interest therein in the manner following, that is to say:
(a) On testacy in the executor or administrator with the will annexed
…”

And section 46 provides:

“(1) The real as well as the personal estate of every person dying as aforesaid shall be assets in the hands of the person’s executor to whom probate has been granted … for the payment of all duties and fees, and for the payment of the person’s debts in the ordinary course of administration.
(2) Such executor … for purposes of administration may sell such real estate, or mortgage the same with or without a power of sale, and convey the same to a purchaser or mortgagee in as full and effectual a manner in law as the deceased person could have done in the person’s lifetime.”

47 But section 46 does nothing more than confer on the executors a power to sell any of the deceased‘s assets, for the purpose of the payment of debts, duties and fees – it does not confer on them a duty to sell in any particular order. Part of the reason why, in Commissioner of Stamp Duties (Queensland) v Hugh Duncan Livingston [1965] AC 694 the Privy Council decided that a residuary beneficiary in an unadministered estate had no equitable right of property in any specific asset was (at 708):

“The assets as a whole were in the hands of the executor, his property; and until administration was complete no one was in a position to say what items of property would need to be realised for the purposes of that administration or of what the residue, when ascertained, would consist or what its value would be.”

48 Section 46C is not a provision which deals with the order in which an executor ought sell assets for the purpose of paying debts and other testamentary expenses. It is not a section which, in any final way, interferes with an executor’s discretion concerning what property should be sold for the purpose of paying the debts and testamentary expenses which must be discharged in the course of administration. Rather it is a section which provides a default rule (“subject to the provisions of any Act as to charges on property of the deceased and to the provisions, if any, contained in the deceased person’s will”) for how the burden of debts and testamentary expenses is to be borne amongst different types of beneficiaries. In In re Tong; Hilton v Bradbury [1931] 1 Ch 202 at 212 Romer LJ said, of the corresponding provisions of the Administration of Estates Act 1925 (UK):

“... there is nothing in this Act which prevents or is intended to prevent executors from paying expenses, debts and liabilities out of the first assets coming to their hands available for the purpose; and Part II of the First Schedule really only deals with the ultimate adjustment of the burden as between the parties becoming entitled to the testator's estate.”

Those remarks were quoted with approval by Lord Hanworth MR in In re Worthington; Nichols v Hart [1933] 1 Ch 771 at 776, and affirmed in that case by Romer LJ at 778. They were quoted in The Roman Catholic Archbishop of Melbourne v Lawlor and Others (1934) 51 CLR 1 at 28-29 by Starke J, and at 43 by Dixon J.

49 An illustration of the way in which the law about the order of application of assets does not affect the power of an executor to sell for purposes of administration whatever asset is most convenient, arises if an executor sells or retains, for purpose of administration, property which has been the subject of a specific legacy or devise. Property subject to a specific legacy or devise is a late class of property to be encroached upon for payment of debts, under the general law concerning administration of assets, when the will did not make that property available for payment of debts. It has long been established that if an executor sold property which was the subject of a specific legacy or devise, or kept such property in case it needed to be sold for payment of debts, then the legatee is entitled, by a process of adjustment of the rights of beneficiaries between one another, to be put into the position he would have been in if the property the subject of the specific legacy had not in fact been sold, or kept in case it needed to be sold. In Ewer v Corbett (1723) 2 P Wms 148; 24 ER 676 Sir Joseph Jekyll MR said (at 149 of P Wms; 676 of ER), of a situation where an executor had sold a specifically devised leasehold term:

“... an executor, where there are debts, may sell a term, and the devisee of the term has no other remedy, but against the executor, to recover the value thereof, if there be sufficient assets for the payment of debts.”

50 In Chaworth v Beech (1799) 4 Ves Jun 555; 31 ER 285 Sir Richard Arden MR said (at 567 of Ves Jun; 291 of ER):

“It is no more than the case, that was put in the argument, of a legacy of a horse, which the executor refused to let go, least there should be a deficiency of assets, and having used and worked the horse a considerable time, afterwards offered to return him: the legatee then may insist upon the value.”

51 The statutory order of application of assets can, if the will makes no other provision, and there is no legislation which bears on the topic of where the burden of debts and duties ought fall, sometimes influence the executor in the exercise of discretion about which assets ought be sold for the purpose of administration. If there really is a choice about which assets should be sold, it would often be an appropriate exercise of discretion on the part of the executor to sell assets of a class upon which the burden of payment, as between beneficiaries, would fall (cf Clarke v Earl of Ormonde (1821) Jacob 108; 37 ER 791). Thus if, for example, an estate included furniture and jewellery which were the subject of specific gifts, it would often be an unwise exercise of discretion on the part of the executor to sell the furniture and jewellery for the purpose of paying debts, if the estate also included sufficient cash, which had not been specifically disposed of. However, there is no bright-line rule requiring an executor always to sell assets in the statutory order, and if the executor does not do so the process for making financial adjustment between beneficiaries aims to ensure that no beneficiary suffers loss in consequence.

52 Further, in the present case, if it were to be alleged that the executors had, in the particular circumstances, exercised their discretion incorrectly, by failing to sell the Lawson land earlier, the facts which show the alleged wrong exercise of discretion would have needed to have been pleaded and proved. No such facts were pleaded and proved.

53 Further support for this view comes from Woodman, Administration of Assets (The Law Book Co. of Australasia, 1964). He says, at 2-3:

“Firstly, the creditors of the testator are not affected by the problems which confront a legal personal representative.
…
In a solvent estate ... a legal personal representative is entitled to satisfy the creditors out of the first available money coming to hand. A legal personal representative, having satisfied the creditors (who are not concerned whether they receive payment from one asset or another), but before distributing or transferring any assets in the estate, is required to consider the ultimate adjustment, as between the beneficiaries, of the debts, funeral and testamentary expenses, having regard to the provisions of the will of the deceased person and to the statutory order of application of assets; the procedure by which adjustment between beneficiaries are made is known as “Marshalling of Assets”.” (footnotes omitted)

54 Woodman considers the matter further, at 204:

“The order of application of assets does not bind creditors who are entitled to be satisfied out of the real and personal estate of a deceased person, to the extent of his beneficial interest therein, and out of the real and personal estate disposed of by will in exercise of a general power of appointment. Personal representatives are entitled to satisfy creditors out of the first moneys coming to hand ( In re: Tong [1931] 1 Ch 202; Roman Catholic Archbishop of Melbourne v Lawlor (1934) 51 CLR 1), and the result is that the assets may not be applied in their proper order.
It then becomes necessary to adjust the rights of the beneficiaries by virtue of the doctrine of marshalling. If a beneficiary finds that property to which he is entitled under the will is used to pay creditors, he may be recouped, to the extent to which the particular property has been used, out of other assets which fall into earlier classes in the statutory order. For example, if a will contains a specific bequest of a bank account to A, and a gift of residue to B, it may be that the proceeds of the sale of residue are not available for some time and that the personal representative thus uses the money in the bank account to satisfy the creditors; when the proceeds of sale of the residue become available, the bank account is recouped to the extent to which it has been depleted in paying debts.”

See also, as to marshalling between beneficiaries, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (4th ed, 2002), para [11-210].

55 A second reason why the executors were not in breach of their obligations in failing to sell the Lawson at an earlier date, to enable death duties to be paid, arises from the terms of the trust created by the will of the Grandfather. It specifically creates a regime saying where the burden of payment of debts funeral and testamentary expenses will, as between the beneficiaries, fall. The Bondi Flats are clearly, from the structure of the will, intended to be preserved in specie during the widow's lifetime, or an alternative block of flats bought with their proceeds of sale, so as to provide an income for the widow. The gift of the residuary estate was one which gave the executors power to postpone conversion of the assets in the residuary estate, before it created the obligation to pay testamentary expenses and duties. When the executors have exercised their power to postpone conversion, this qualifies their obligation to use estate assets to pay debts and duties.

56 The plaintiff is entitled to none of the relief she seeks concerning the Lawson land.

The Pleaded Case Concerning the Estate Assets Other than the Lawson Land

57 The Statement of Claim sets out facts about the death, assets and Wills of each of the Grandfather and the Grandmother. It then, in relation to three of the items of real estate which have been sold from the estates (50 Glasgow Avenue, Bondi, the Bondi flats, and 70 Military Road, Dover Heights) alleges that in breach of trust the defendants have failed to distribute the proceeds of sale to the beneficiaries of the appropriate Will, and have failed to account to the beneficiaries of the appropriate Will for the proceeds of sale. It alleges that there has been a failure to account to the plaintiff’s mother for the rents of the Bondi flats and the Dover Heights property between the date of death of the Grandmother and the date of sale of those properties, and failure to account to both the plaintiff and the plaintiff’s mother for the proceeds of sale of the Bondi flats and the Dover Heights property. It alleges that during Iris’s lifetime she received no benefits from the estate of either the Grandfather or the Grandmother, other than a ring and a television set.

Was there a Distribution to Iris?

58 The plaintiff bases her allegation that Iris received nothing from the estates, apart from the two items of personal property, upon her contact with her mother, and observation of her mother’s financial circumstances. The plaintiff was aged about 14 or 15 when her Grandfather died in 1973. At that time, she was living with Iris. The plaintiff ceased living with Iris in 1980, just prior to the death of her Grandmother. However, the plaintiff lived near Iris, and continued to visit her almost every second day. She says that Iris lived in a frugal manner up to the time of her death, that the house in which she lived was in disrepair, the carpets were threadbare, and the paintwork was discoloured and flaking. Her mother ate skimpily, and had a very limited wardrobe.

59 Mrs Cam gives evidence that Iris’s living conditions were not as bleak as the plaintiff paints them. It is not necessary to resolve this difference in the evidence. While I accept that the plaintiff believed that Iris had received nothing from the estates of her parents, Iris, along with her siblings who were then beneficiaries, had received a distribution from the Grandmother’s estate once the Dover Heights house was sold. She received a distribution equal in amount to that received by her siblings who were beneficiaries in that estate. The amount was of the order of $25,000. There is some difference in the evidence of various witnesses about when that distribution occurred. Father Sheehy and his sister, Ms Souter, thought they remembered their mother receiving a distribution prior to Father Sheehy’s departure for overseas in August of 1984, while Dr Deverall and Mrs Cam put the distribution as having occurred later than that. The fact that the Dover Heights home was not transferred to the purchaser until 1 November 1985 suggests that Father Sheehy and Ms Souter may have misremembered the time of the distribution. Notwithstanding this difference in the evidence as to time of payment, I am satisfied that the payment was made. Mrs Cam recalls dealing with the estate solicitor about making the payment. I accept evidence from Dr Deverall, and Mrs Cam, that they each had a conversation with Iris, in which Iris acknowledged receiving her payment. That acknowledgment by Iris, being an admission by a predecessor in title to the plaintiff, can be used as evidence of the truth of the acknowledgement made, notwithstanding the rule against hearsay.

60 There has never been a distribution to beneficiaries in the Grandfather’s estate (other than in the notional sense I have referred to, connected with buying out the two widows), as the Lawson land has been retained, and other assets have been expended. A significant part of the expenditure from the Grandfather’s estate has been in payment of death duty. Possibly some estate assets have also been spent in pursuing the appeals against the valuation of the Lawson land. The evidence in the case is such that it is not possible to make precise findings on these topics, however.

The Claim for an “Account”

61 The Statement of Claim has prayers for relief more extensive than could be supported by the facts pleaded. It claims orders that, pursuant to Part 68 Rule 2 of the Supreme Court Rules 1970, the defendants “account” to the plaintiff for the appropriate fraction due to her of the proceeds of sale of each piece of estate realty which has been sold, together with interest from the date of sale of that real estate, after deduction of any costs of sale and death duty. The prayers for relief also seek that the defendants “account” to the plaintiff for her appropriate share of each and every item of personalty in the estates, together with interest from the date of death of the Grandparent who owned it to the date of payment, but after deducting expenses of sale and death duty. They also seek an “account” of the appropriate share of rentals of the Bondi flats from the date of death of the Grandmother until sale, and of rentals of the Lawson land.

62 I leave to one side whether orders of this type are ones properly made under Part 68 Rule 2. There is a lack of clarity about whether the plaintiff’s claim for “account” is truly a claim for an account, or a claim for breach of trust and its associated remedies. However, both actions are equitable. In response to the claim for an account, the defendants plead the equitable defence of laches. Nothing in that defence disputes that an executor has a duty to keep accounts, and in certain circumstances to provide information to beneficiaries. Nor does it dispute that trustees of the trusts under a Will can be liable for breach of trust. What that defence disputes is whether this plaintiff is entitled to a remedy in relation to any breach of duty there might have been.

63 In Lindsay Petroleum Company v Prosper Armstrong Hurd, Abram Farewell, and John Kemp (1874) 5 LR 5 PC 221 at 239 the Lord Chancellor (Lord Selborne) said, at 239-40:

“Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material … Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.”

See also Orr v Ford and Another (1989) 167 CLR 316 at 340-341.

64 The plaintiff has herself been in a situation where, since the time of Iris’s death, she has been of the view that Iris received nothing, apart from a ring and a television set, from her parents’ estates. The plaintiff did nothing, until a few years before these proceedings were brought, to question that state of affairs. When the plaintiff first consulted a solicitor concerning the estates, in 1999, the complaints which the solicitor raised on her behalf related to the Lawson land, not to how it came about that no distribution had been made of other estate assets. Her solicitor requested, in March 2000, a copy of the Grandmother’s Will. He requested, in July 2000, the filing of executors accounts in the Court. Though that was far from an assertion of all the rights the plaintiff now claims, I will treat it (perhaps too harshly on the defendants) as giving notice of the possibility of such claims.

65 In deciding whether a defence of laches applies, it is not only the delay of the plaintiff personally in raising a claim which can be looked to. The plaintiff is a successor in title to Iris’s rights under the Will. Iris’s rights under the Will were always equitable rights (as a beneficiary of the trusts created by the Will), and when the plaintiff received, partly under Iris’s Will, and partly under the 1992 Court order, Iris’s interest in her Grandparents estates, that interest was subject to equities which then attached to it. There is no reason to believe that Iris at any time complained to the executors of either estate that they had given her insufficient information, or had failed to distribute to her assets to which she was entitled. She would necessarily have known what distributions she had received from the estates.

66 Throughout the whole time from the death of the Grandfather and the Grandmother, Iris was aware that she was a beneficiary under their estates. Apart from the activities involved in keeping the Lawson land and preparing it for development, the last activity in administration of the estates which can be dated with any precision is the sale of the Bondi flats, which took place in April 1986. I would infer that it was somewhat after that date that the last of the death duty was paid, and the two widows were paid out, but it is not possible to fix that date with any precision. The time for a beneficiary who wanted more detail about what had happened in administration of the estate to ask for it began running, at the latest, when the widows were paid out.

67 It is also relevant that first Iris, and then the plaintiff, had been making regular payments in connection with the maintenance of the Lawson land, from some time in the 1980s up to 2002, and without complaint prior to 2000 as to any aspect of the administration of the estate.

68 This is a case where the combined failure of the plaintiff and Iris, over the years from 1973 to 2000 (so far as the Grandfather’s estate is concerned), and over the years from 1981 to 2000 (so far as the Grandmother’s estate is concerned), to call for an account of what was done in administration of the estates has prejudiced the defendants. Administration of the estate of the Grandfather was handled first by Mr Magney, solicitor, then by Mr David Hunt, solicitor. Mr Hunt was retained fairly early in the administration of the estate, although it is not possible to say when. Mr Hunt is no longer in practice. The estate of the Grandmother was handled by Mr Hugh Hourigan, solicitor, who died about 16 years ago. None of the executors is legally trained, and they relied to a significant extent on their solicitors in carrying out the administration. None of the executors hold any papers concerning administration of the estates. Robert Deverall was, until his death, active in carrying out tasks of administration concerning the Grandfather’s estate, and his evidence is necessarily not available. Betty Sheehy, who was an executrix of both estates, is also now dead.

69 As well as having no documents, the surviving executors’ memories have inevitably faded. In the course of cross-examination, Dr Deverall was not even sure whether he had been an executor of his mother’s estate or not. Concerning that, he said – perfectly understandably – “Well you know when the thing was finalised I completely put it out of my mind to be quite honest.” The oral evidence of Mrs Cam, while I accept that she was doing the best she could, was an ongoing demonstration of how much she had forgotten. The delay in bringing the claim has, in significant ways, deprived the defendants of the means of defending it. cf Sleeman v Wilson (1871) 13 Eq Cas 36 at 43.

70 In all the circumstances, the lapse of time, and prejudice to the defendants which would be involved in allowing such an action to now succeed, are such that the present claim to an account (whether it be regarded as a claim to an account properly so called, or an allegation of breach of trust) fails.

(1) Action dismissed.

(2) Plaintiff to pay costs of defendants.

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Last Modified: 08/03/2004