Juul v Northey - [2010] NSWCA 211

No judgment structure available for this case.

New South Wales

Court of Appeal

CITATION: Juul v Northey [2010] NSWCA 211

HEARING DATE(S): 11/11/09

JUDGMENT DATE:
26 August 2010

JUDGMENT OF: McColl JA at 1; Basten JA at 251; Campbell JA at 260

DECISION: See paragraph 250

CATCHWORDS: EQUITY – order for accounts on wilful default basis – whether evidence supported order - MONEY COUNTS – claim for money had and received – whether evidence estate had a claim – defences – whether retention of payment unjust - WILLS AND ESTATES – will – executor – removal – where allegation of wilful default personal to executor made out - PROCEDURE – pleadings – obligation to plead and particularise allegation of wilful default - PROCEDURE – effect of interlocutory orders – issue estoppel – whether open to judge to review matter decided in earlier proceedings between same parties - PROCEDURE – notice of judgment – where judgment affects rights or interest of person who is not a party – giving of notice under UCPR 46.12 to enable non-party interests to be protected - PROCEDURE – documents – cross-claim – out of time for filing cross-claim under rules of court – application for extension of time – delay caused by party's decision where on notice of potential liability – CPA 2005 (NSW) ss 56-60 – duties of parties in the conduct of litigation – just and efficient determination of proceedings - EVIDENCE – witnesses – credibility – whether basis established to challenge primary judge’s finding on credibility

LEGISLATION CITED: Civil Procedure Act 2005 (NSW)
Limitations Act 1969 (NSW)
Trustee Act 1925 (NSW)
Uniform Civil Procedure Rules 2005

CATEGORY: Principal judgment

CASES CITED: Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167
Adamson v Ede [2009] NSWCA 379
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175.
Australian Hardboards Limited v Hudson Investment Group Ltd [2007] NSWCA 104; (2007) 70 NSWLR 201
Bahin v Hughes (1886) 31 Ch D 390
Bartlett v Barclays Bank Trust Co Ltd (Nos 1 & 2) [1980] 1 Ch 515
Caldar v Public Trustee [2003] NSWCA 187
Carantinos v Magafas [2008] NSWCA 304
Commissioner of Police v Tanos [1958] HCA 6; (1958) 98 CLR 383
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353
Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472
Dowse v Gorton [1891] AC 190
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Gava v Grljusich [1999] WASC 13
Glazier Holdings Pty Ltd v Australian Men’s Health Pty Ltd (No 2) [2001] NSWSC 6
Gray v Guardian Trust Australia [2003] NSWSC 704
Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298
House v R [1936] HCA 40; (1936) 55 CLR 499
International Advisor Systems Pty Ltd v XYYX Pty Ltd (No 3) [2008] NSWSC 430
Itek Graphix Pty Ltd v Elliott [2002] NSWCA 104; (2002) 54 NSWLR 207
Job v Job (1877) 6 Ch D 562
Jones v Morrall (1852) 2 Sim (NS) 241; 61 ER 333
Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363
Letterstedt v Broers (1884) 9 App Cas 371
Levy v State of Victoria [1997] HCA 31; (1997) 189 CLR 579
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
Mavrideros v Mack (1998) 45 NSWLR 80
Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146
Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572.
Milltec Australia Pty Ltd v Burnes [2006] NSWCA 13
Moses v Macferlan (1760) 2 Burr 1005; 97 ER 676
Northey v Juul [2005] NSWSC 933
Northey v Juul [2008] NSWSC 275
Northey v Juul (Supreme Court of New South Wales, Macready AsJ, 13 June 2008, unreported)
Northey v Juul (Supreme Court of New South Wales, Macready AsJ, 23 July 2008, unreported)
Osborne v Smith [1960] HCA 89; (1960) 105 CLR 153
Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2006] VSCA 6; (2006) V Conv R 54-713
Perpetual Trustee Co v Watson (No 1) (1927) 28 SR (NSW) 39
Pit v Cholmondeley (1754) 2 Ves Sen 565; 28 ER 360
Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589
Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271
Re Beddoe [1893] 1 Ch 547
Re Brier (1884) 26 Ch D 238
Re Brogden (1888) 38 Ch D 546
Re Dallaway [1982] 1 WLR 756; [1982] 3 All ER 118
Re Stevens [1897] 1 Ch 422
Re Stevens [1898] 1 Ch 162
Re Symons (1882) 21 Ch D 757
Re Tebbs [1976] 2 All ER 858
Re Wrightson [1908] 1 Ch 789
Re Youngs (1885) 30 Ch D 421
Richards v Cornford (No 3) [2010] NSWCA 134
Richardson v Rearden [2006] NSWSC 1252
Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516
Royal Bank of Canada v The King [1913] AC 283
Seltsam Pty Ltd v Gahleb [2005] NSWCA 208; (2005) 3 DDCR 1
Sleight v Lawson (1857) 3 K & J 292; 69 ER 1119
Smith v Armitage (1883) 24 Ch D 727
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 73 ALJR 306
Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669
Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156
Young v Holloway [1895] P 87

TEXTS CITED: Australian Law Reform Commission, Evidence (Interim), Report No 26 (1985)
Bullen & Leake, Precedents of Pleadings, 3rd ed (1868) Stevens & Sons
H G Hanbury, “Forms of Account against Executors and Trustees” (1936) 108 Law Quarterly Review 365
Heydon & Leeming, Jacobs’ Law of Trusts in Australia, 7th ed (2006) LexisNexis Butterworths Australia
Martyn & Caddicks (eds), Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 19th ed (2008) Sweet & Maxwell
Meagher, Gummow & Lehane, Equity Doctrines and Remedies, 4th ed (2002) LexisNexis
GP Stuckey & CD Irwin, Parker’s Practice in Equity (New South Wales), 2nd Ed (1949) Law Book Company

PARTIES: Jennifer Frances Juul - Appellant
Henry John Northey - First Respondent
James Knight Northey - Second Respondent
John Stewart Hunter & Richard John Booker as Trustees of the Estate of the late Betty Frances Northey - Third Respondents
Henry John Northey - Cross Appellant
Jennifer Frances Juul - First Cross Respondent
James Knight Northey - Second Cross Respondent
John Stewart Hunter & Richard John Booker as Trustees of the Estate of the late Betty Frances Northey - Third Cross Respondents

FILE NUMBER(S): CA 2008/290201; 2008/290202

COUNSEL:
R Lovas for the Appellant
R Winfield for the First Respondent
J M Baxter for the Second Respondent

SOLICITORS: Murphy's Lawyers Civil - for the Appellant
Delwyn A Bishop Solicitor - for the First Respondent
Small Business Legal Services - for the Second Respondent
E H Tebutt & Sons Lawyers - for the Third Respondent (submitting appearance)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 4408/2004

LOWER COURT JUDICIAL OFFICER: Macready AsJ

LOWER COURT DATE OF DECISION: 16/09/05
01/04/08
13/06/08
23/07/08

LOWER COURT MEDIUM NEUTRAL CITATION:
[2005]NSWSC 933; [2008] NSWSC 275

- 1 -

2008/290201
2008/290202

McColl JA
Basten JA
Campbell JA
26 August 2010

Juul v Northey

Headnote

[This headnote is not to be read as part of the judgment]

Betty Frances Northey (the “deceased”) died on 7 December 2003 aged 90 years. She made her last will on 17 August 2003 pursuant to which she appointed her daughter, Jennifer Juul (the appellant), and another of her children, James Knight Northey (the second respondent), executors and trustees of her estate. The first respondent, another of the deceased’s children, commenced proceedings against the appellant and the second respondent seeking an order for the taking of accounts in common form in the deceased’s estate. On the first day of the hearing, he was given leave to amend his summons to seek the taking of accounts on a wilful default basis.

On 23 July 2008, in the course of the proceedings which give rise to the appeal, the appellant and the second respondent were removed as executors of the estate by consent. John Stewart Hunter and Richard John Booker (the third respondents) were appointed trustees of the deceased’s estate. They filed a submitting appearance in the appeal.

The deceased was widowed in 1996. She wanted to remain in the family home built by her husband. She decided to subdivide the tennis courts in order to provide, in part, the funds needed to renovate her house. The renovations were done with the help of the appellant and her husband, a former builder. Pursuant to a Deed they entered into with the deceased, Mr and Mrs Juul were to pay all the costs of the subdivision and to receive one block in the subdivision. The deceased also had conversations with the appellant and Mr Juul in which the cost of renovating the house was estimated to be $515,000 – a sum, it was agreed, could be met from the proceeds of the subdivision. Between 1997 and 2001 Mr Juul organised and supervised the subdivision and the renovations. The deceased made payments totalling $515,000 to the appellant and Mr Juul respectively in late 1998 and early 1999. Each payment was made shortly after she received the proceeds of the sale of a lot in the subdivision.

The first respondent said he first became aware of the proceeds received on the sale of the lots in the subdivision after his mother’s death. He asserted these proceeds were not reflected in the deceased’s bank accounts, and that he had commenced the proceedings to ascertain how those proceeds had been expended.

Northey v Juul

During the hearing on the question of wilful default, the first respondent advanced the case that the conversations in which the deceased agreed that the appellant and her husband would undertake the renovations, in which the $515,000 estimate was provided, did not occur. The money received by the appellant and her husband was said by the first respondent to therefore be money had and received to the use of the estate. The executors contended the monies were paid as a result of bona fide inter vivos transactions and/or pursuant to an agreement with the deceased to pay $515,000 for the renovations.
The primary judge accepted the conversations took place, but found they did not evidence any agreement that the appellant’s husband would be reimbursed for the time and effort he expended on the renovations (the “reimbursement finding”). His Honour held that only monies expended by the appellant’s husband on the renovations should have been paid out of the proceeds of the sale of the lots in the subdivision. He found the first respondent had established one instance of wilful default which concerned the failure of the executors to get in the amount which was due to be refunded by the appellant and her husband to the estate representing the difference between the actual monies the executors had established had been spent ($370,839.62) and the $515,000. Accordingly he ordered the taking of accounts on a wilful default basis.

On the taking of accounts, the trial judge ordered that the appellant and second respondent account to the estate for $165,493.72; less an amount of up to $137,348.45 representing a just allowance to the appellant and her husband for their efforts and labour. He rejected evidence the executors sought to lead from Mr Juul to the effect that the deceased had agreed to reimburse him for his time and effort in subdividing and renovating the property, holding that an issue estoppel arose out of his findings to the contrary effect in the wilful default judgment. However he held that having regard to the evidence that Mr Juul undertook a substantial amount of organising and building work himself to complete the renovations of the deceased’s house, it was appropriate there be a just allowance for that work.

Following the accounting hearing the primary judge gave the second respondent leave to file the cross-claim referred to above. That cross-claim had not been heard at the time the appeal was heard.
The appellant appealed from the first three judgments and sought leave to appeal from the cross-claim judgment. The first respondent cross-appealed from parts of the accounting and costs judgments.
The appeal raised multiple issues, including the following

In relation to the wilful default judgment

(i) Whether there was evidence to support the order that accounts should be taken on a wilful default basis.
(ii) Whether the primary judge decided the case on issues of which the executors had no notice, resulting in a denial of procedural fairness.
(iii) Whether the primary judge erred in making findings that adversely affected the interests of a non-party, Mr Juul.

In relation to the accounting judgment
(iv) Whether the primary judge erred in concluding that he was bound by the principles of issue estoppel not to admit evidence which contradicted the reimbursement finding he had made in the wilful default judgment.
(v) Whether findings the primary judge made in the accounting judgment revealed that his Honour had erred in the wilful default judgment in overlooking evidence to the effect that the deceased did not expect Mr Juul and the appellant to repay any part of the moneys she had paid them.

In relation to the cross-claim judgment

(vi) Whether the primary judge erred in granting the second respondent leave to file the cross-claim against the appellant for contribution, particularly in the light of evidence that he deliberately allowed the time period in which that cross-claim should have been filed to expire.
The cross-appeal also raised multiple issues, including the following
(vii) Whether the primary judge erred in accepting the appellant’s husband as a credible witness.

Held, allowing the appeal, setting aside the orders made below and dismissing the summons, granting leave to appeal from the cross-claim judgment and dismissing the motion to file a cross-claim and dismissing the cross-appeal:
Per McColl JA, Basten and Campbell JJA agreeing:
As to issue (i)
1. The party seeking an order against executors for the taking of accounts on a wilful default basis must establish at the primary hearing at least one allegation of wilful default, namely the failure by the executors to get in an estate asset which, but for their wilful neglect or default might have been received: (at [190], [192]).

Sleight v Lawson (1857) 3 K & J 292; 69 ER 1119; Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146 applied

Gava v Grljusich

Glazier v Australian Men's Health (No 2)

Milltec Australia Pty Ltd v Burnes

David Securities Pty Ltd v Commonwealth Bank of Australia

Roxborough v Rothmans of Pall Mall Australia Ltd

3. The primary judge erred in finding that the conversations between the deceased, the appellant and Mr Juul did not extend to Mr Juul himself being paid for the work: (at [222] – [223]).

4. The evidence did not support the conclusion that the estate had an action for money had and received which the executors had failed to pursue: (at [224] – [226], [234]).

As to issue (ii)

Perpetual Trustee Co v Watson (No 1)

Re Wrightson

Parker’s

Practice in Equity

^nd

6. Once the first respondent apprehended that he might wish to seek an accounting on a wilful default basis it was incumbent upon him to plead such a case, in particular that the wilful default case was put on the basis that that case was advanced either as to the entire sum of $515,000 or in respect of any amount over and above the amount of $370,839.62. The failure to plead such a case led to the primary judge making adverse findings against the appellant of which she had no notice: (at [205], [209] – [210]).

As to issue (iii)

Young v Holloway

Osborne v Smith

As to issue (iv)

Meehan v Glazier Holdings Pty Ltd

Carantinos v Magafas

Ramsay v Pigram

Kuligowski v Metrobus

Carantinos v Magafas

Australian Hardboards Limited v Hudson Investment Group Ltd

As to issue (v)

10. The primary judge erred in failing to take into account in the wilful default judgment Mr Juul’s evidence to the effect that the extent there was any balance of the $515,000 when the renovations were complete, the deceased intended Mr Juul and/or the appellant to retain it. That evidence was material to the question whether the estate may have had an action for money had and received in respect of any part of that sum: (at [225]).

As to issue (vi)

Civil Procedure Act

Richards v Cornford (No 3)

Aon Risk Services Australia Ltd v Australian National University

As to issue (vii)

12. The first respondent did not establish any basis on which the Court could set aside the primary judge’s finding that Mr Juul was a credible witness: (at [228] – [233]).
Generally

13. If a court concludes that executors have been guilty of wilful default, and that the occasion of wilful default relates to matters personal to an executor, that person ought to be removed from that role to ensure independent legal personal representatives can consider whether in the light of that finding they should take proceedings to recover the funds found to be owing to the estate: (at [239] – [240]).

Letterstedt v Broers

Miller v Cameron

Jacobs’ Law of Trusts in Australia

^th

Orders

A In matter No 40327/08 (the appeal of Jennifer Francis Juul):

(1) Set aside the finding and orders made by the Court on 23 July 2008 in the plaintiff’s summons filed on 10 August 2004 and numbered 1-11 inclusive.

(2) In place thereof order that:

(i) subject to orders (ii) and (iii), the summons brought by the plaintiff (Henry John Northey) against the defendants (Jennifer Francis Juul and James Knight Northey) be dismissed;

(ii) order 1 is made without prejudice to orders 12-15 made on 23 July 2008 on the plaintiff’s motion of 7 April 2008 and the first defendant’s motion of 7 July 2008;

(iii) order 1 is made subject to the orders made in matter No 40328/08 (the summons for leave to appeal);

(iv) order that the plaintiff pay the defendants’ costs of the summons.

(3) In respect of the costs of the appeal:

(i) order that the first respondent (Henry John Northey) pay the appellant’s costs of the appeal;

(ii) order that the second respondent (James Knight Northey) bear his own costs of the appeal;

(iii) order that the third respondents (the current trustees) be entitled to payment of their costs of the appeal (if any) from the Estate of the Late Betty Francis Northey on an indemnity basis.

(4) Grant the second respondent a certificate under the Suitor’s Fund Act 1951 (NSW) in respect of his costs of the appeal.

B In respect of matter No 40328/08 (the summons seeking leave to appeal):

(1) Grant the applicant (Jennifer Francis Juul) leave to appeal.

(2) Direct that the applicant file her notice of appeal within 7 days.

(3) Allow the appeal and set aside orders 16-19 made on 23 July 2008 on the motion (as amended) of the second defendant (James Knight Northey) seeking leave to file a cross-claim against the first defendant (Jennifer Francis Juul) for contribution.

(4) In place of the orders made below:

(i) dismiss the motion (as amended);

(ii) order that the second defendant pay the costs of the first defendant of the motion.

(5) Order that the respondent (James Knight Northey) pay the applicant’s costs of the proceedings in this Court;

(6) Grant the respondent a certificate under the Suitor’s Fund Act 1951 (NSW).

C In respect of the cross-appeal in matter No 40327/08:

(1) Dismiss the cross-appeal.

(2) Order the cross-appellant (Henry John Northey) to pay the costs of the first cross-respondent (Jennifer Francis Juul) of the cross-appeal.

(3) No order as to the costs of James Knight Northey of the cross-appeal.

**********

CA No: 2008/290201,
2008/290202

McColl JA

Basten JA

Campbell JA

Thursday 26 August 2010

Juul v Northey

Judgment

Index

Headings Para

Statement of the case 8

The proceedings: wilful default hearing 13

Wilful default judgment: written submissions at trial 55

The wilful default judgment 62

Wilful default judgment: short minutes of order 78

The accounting judgment 80

(a) items said to be not relevant to the building work 89

(b) executors' claim for a just allowance for work done by Mr Juul 90

(c) cash payments for which vouchers were not held 101

(d) items not identified or not sufficiently identified with the deceased's property 102

The costs judgment 104

The cross-claim judgment 112

Accounting judgment: short minutes of order 119

Issue on appeal 121

Issues on cross-appeal 123

Appellant's submissions 126

(a) The wilful default judgment 126

(b) The accounting judgment 141

(c) The costs judgment 154

(d) The cross-claim judgment 155

First respondent's submissions 161

Submissions on the cross-appeal 166

Cross-appeal: appellant's response 175

Meaning of wilful default 180

Taking accounts on a wilful default basis: pleading and proof 185

Pleading issues 196

The problem with parties 211

The count for money had and received 216

Removal of executors and trustees 236

Procedural fairness 241

The cross-claim 247

Conclusion 248

Orders 250

: This appeal concerns the proper administration of the estate of Betty Frances Northey (the “deceased”) who died on 7 December 2003 aged 90 years. The deceased made her last will on 17 August 2003 pursuant to which she appointed her daughter, Jennifer Juul (the appellant), and another of her children, James Knight Northey (the second respondent), executors and trustees of her estate. Probate of the will in common form was granted to them on 8 January 2004. Where it is unnecessary to differentiate between them, I will refer to the appellant and the second respondent as “the executors”.

2 Henry John Northey, the first respondent is another of the deceased’s children. On 10 August 2004, within 9 months of the deceased’s death, he commenced proceedings in the Equity Division of this Court against the appellant and the second respondent seeking an order for the taking of accounts in common form in the deceased’s estate. The summons as originally framed sought, relevantly:

“1. An order that an account be taken of all moneys received and disbursed by the Defendants or any other person on his or her behalf in respect of the property comprised in the estate of [the deceased] and of the dealings and transactions of the Defendants therewith.

…

3 Associate Justice Macready heard the proceedings. They led to four judgments: Northey v Juul [2005] NSWSC 933 (the “wilful default” judgment), Northey v Juul [2008] NSWSC 275 (the “accounting judgment”), Northey v Juul (13 June 2008) (the “costs judgment”) and Northey v Juul (23 July 2008) (the “cross-claim judgment”). The effect of the cross-claim judgment was to give the second respondent leave to file a cross-claim seeking orders to the effect that the appellant and her husband, Mr Ole Juul, indemnify him for his liability to the estate as then adjudged. The cross-claim has not yet been heard.

4 The appellant challenges the first three judgments as of right and seeks leave to appeal to challenge the cross-claim judgment. The first respondent by notice of cross-appeal challenges parts of the accounting and costs judgments. It will be convenient to refer to the parties by their appeal nomenclature throughout.

5 On 23 July 2008, in the course of the proceedings which give rise to the appeal, the appellant and the second respondent were removed as executors of the deceased’s estate (the “estate”) by consent. John Stewart Hunter and Richard John Booker (the third respondents) were appointed trustees of the deceased’s estate. They have filed a submitting appearance in the appeal.

6 The appellant appeals from orders made by Associate Justice Macready that accounts be taken of the deceased’s estate on a wilful default basis, that there be judgment against the executors jointly and severally in favour of the estate in the sum of $165,493.72 plus interest of $109, 203.18, and as to costs. She also seeks leave to appeal from an order giving the second respondent leave to file a cross-claim against her.

7 The second respondent has filed an appearance submitting to the making of the orders sought in the notice of appeal, save as to costs. He resists the application for leave to appeal and, in the event that leave is granted, seeks to uphold that part of the cross-claim judgment giving him leave to file a cross-claim.

Statement of the case

8 The deceased’s husband had died in 1996 leaving her to live in a run down house on a large block of land which also contained some unused tennis courts (the “property”). The deceased wanted to stay in the house her husband had built for her and in which they had lived for 40 years. She decided to subdivide the tennis courts in order to provide, in part, the funds needed to renovate her house. The renovations were done with the help of the appellant and her husband, a former builder. Pursuant to a Deed they entered into with the deceased, Mr and Mrs Juul were to pay all the costs of the subdivision and to receive one block in the subdivision. The deceased also had conversations with the appellant and Mr Juul in which the cost of renovating the house was estimated to be $515,000 which it was agreed could be met from the proceeds of the subdivision.

9 Over the ensuing years the property was subdivided into five lots, on one of which the deceased’s house stood. Of the others, three blocks were sold and the proceeds of the sales were remitted to the deceased’s bank accounts. In accordance with the Deed, the appellant and Mr Juul received one lot.

10 The renovation work was undertaken over the period 1997 – 2001. The deceased took out an owner-builder’s licence, but Mr Juul organised and supervised all the work. In October 1998 the deceased told Mr Juul she wanted to pay him $250,000 for the work he had done to her home. She withdrew that sum from her bank account and paid it to him. In February 1999, the deceased withdrew $265,000 from her bank account in two amounts of $100,000 and $165,000 and paid it to the appellant.

11 The deceased had seven children to whom she left her estate in equal shares. Following her death, the first respondent to the appeal, said he first became aware of the Deed, and of the proceeds received on the sale of the lots in the subdivision, which he asserted were not reflected in the deceased’s bank accounts. He commenced these proceedings to ascertain how those proceeds had been expended.

12 There was no suggestion that the deceased was other than of sound mind during the events which gave rise to the proceedings, nor that her will had been in any way overborne by the appellant or Mr Juul. During the period in question at least one or more of her other children lived with her in her home, while the first respondent had almost daily contact with her. There was no evidence that she ever sought repayment of any of the monies she had paid to the appellant and Mr Juul in 1998 and 1999 respectively. Indeed, as I have said, in August 2003 she appointed the appellant one of the executors of her estate.

The proceedings: wilful default hearing

13 The primary judge recorded (wilful default judgment (at [17])) that:

“At the commencement of the hearing an amended form of order was handed up seeking that the account be on the basis of wilful neglect and default and seeking the removal of the defendants as Executors and trustees of the estate of the deceased. I gave leave for an amended summons to be filed which excluded the claim for removal of the defendants as Executors as this was a fresh matter and the defendants did not have time to consider the claim. If circumstances arise during the taking of any accounts which would justify the removal of the trustee that could be dealt with on further consideration of the matter after the taking of accounts.”

14 The amended form of order the first respondent was given leave to file relevantly sought:

(a) All moneys received and disbursed by the Defendants or any other person on her or his or their behalf in respect of the property comprised in the estate of Betty Frances Northey (Deceased) and of the dealings and transactions of the Defendants therewith.

(b) All the dealings and transactions of the said Defendants or either of them in relation thereto;

(c) What are the assets and liabilities of the said Estate;

(d) Whether any, and if so what, property being part of the estate of the Deceased has been lost or misappropriated and when and by whom and under what circumstances.

(e) Whether any funds or assets of the Deceased, other than those disclosed in the Inventory attached to Probate, are held on trust by the Defendants or either of them or by any other person.

2. Order that such account be upon the footing of wilful neglect and default by the First and Second Defendants or either of them.

3. In the alternative to 2, such accounts be taken in common form.

4. An order that the Defendants or either of them pay to the Estate of the Deceased the amount, if any, which shall be found to be due to it upon the taking of such account together with interest thereon.”

15 The application the primary judge deferred for possible further consideration at an appropriate stage sought the following order:

“6. In the event that [sic, of] a finding of wilful neglect or default by the Defendants or with [sic, either] of them, and [sic, an] order that the Defendants be removed as executors and trustees of the Estate of the Deceased and the Plaintiff be appointed as executor and trustee in their stead.”

16 So far as the papers reveal, the first respondent did not file an amended summons in exercise of the leave granted to do so. Nevertheless, it is apparent that the wilful default hearing was conducted on the basis that the first respondent was seeking an order for account on the basis of wilful default.

17 It is necessary to deal more closely with the procedural history.

18 The originating summons sought an order for taking accounts in common form, that is to say an order that an account be taken of all monies received and disbursed by the executors in respect of the property comprised in the deceased’s estate and of their dealings and transactions therewith and consequential orders that they pay to the beneficiaries of the estate the amount, if any, found to be due to them on the taking of such accounts together with interest thereon. The summons also sought:

“3. An order that an inquiry be held as to whether any, and if so, what, property being part of the estate of the Deceased has been lost or is appropriated [sic, misappropriated] and when and by whom and under what circumstances.”

19 As is apparent, order 3 did not identify any person into whose conduct the inquiry sought should enquire to determine the question posed.

20 The summons was supported by an affidavit of the first respondent dated 29 July 2004. He annexed to his affidavit the Deed made between the deceased, the appellant and Mr Juul on 24 February 1997. He said he was not aware of the Deed prior to January 2004.

21 The first respondent also annexed to his affidavit various documents dealing with the subdivision. Those included a copy of the transfer by the deceased of lot 52 in the subdivided property to the appellant and Mr Juul. He also attached the transfers for lots 51, 53 and 54. Insofar as lot 51 was concerned, which was transferred to the appellant’s son on 9 April 2003 for consideration stated in the transfer of $300,000, the first respondent stated that he believed that lot to have been worth $475,000 – $480,000 as at the date of transfer and $520,000 at the time he prepared his affidavit.

22 The first respondent also attached to his affidavit a copy of the Probate of the deceased’s will which included an affidavit sworn by the appellant to which was annexed an inventory of the deceased’s property. That inventory disclosed the estate’s assets as being the property with an estimated value of $1 million and monies in banks totalling $343,607.67.

23 The appellant and the second respondent filed four affidavits, one from their solicitor, Mr Marshall, two from the appellant and one from Mr Juul. The solicitor’s affidavit relevantly annexed and/or exhibited that firm’s files relating to the sales of lots 51 – 54 in the subdivision. Insofar as lots 51, 53 and 54 were concerned, the solicitor deposed that the sums received on settlement, which totalled $882,905.64, had been forwarded to the deceased.

24 Some details of the circumstances in which the settlement sums were forwarded to the deceased should be noted. By letter dated 23 October 1998 forwarded to the deceased care of the appellant at her home address, Mr Marshall’s firm confirmed that the sale of Lot 54 was completed on 21 October 1998. The letter set out the details of settlement and enclosed two cheques totalling $321,640.73.

25 On 28 October 1998 the deceased paid Mr Juul the sum of $250,000 to which I have earlier referred.

26 Settlement of the sale of Lot 53 took place on 11 February 1999. On 15 February 1999 Mr Marshall’s firm wrote to the deceased, on this occasion care of Mr Juul at his home address, confirming completion and setting out details of the settlement and enclosing a statement of account. The latter advised that the amount of $267,530.11 had been paid to the deceased’s credit in her bank account. On 24 February 1999 there was a debit of $315,000 from the deceased’s bank account which the appellant explained was disbursed on 1 March 1999 into three different accounts as follows: $50,000 into an account in the deceased’s name, $165,000 into a bank account in the appellant’s name and $100,000 into a management trust again in the appellant’s name. A further account of the circumstances in which the deceased paid the $265,000 to the appellant was given in cross-examination and is referred to later in these reasons.

27 The appellant’s first affidavit was dated 3 November 2004. Relevantly, she deposed to the fact that the deceased had granted her a Power of Attorney, but stated that she had never used that Power to operate on, or otherwise use it in connection with, the deceased’s bank accounts. She stated that the deceased did all her own banking and never sought or obtained her assistance in that respect. Next, the appellant deposed to matters concerning the transfer of lot 52 to Mr Juul and herself and their construction of a house on that lot with their own finances.

28 The appellant then deposed to the improvements made to the deceased’s house described as comprising “supply of various items and the carrying out of works by contactors”, the acquisition of which and the provision of which work she said Mr Juul organised. She then stated:

“To my knowledge, he paid for those items and contractual amounts as they fell due from time to time and subsequently was reimbursed by the deceased. Annexed and marked ‘D’ is a schedule of expenses relating to the improvements to the deceased’s house at 62 Rose Avenue Collaroy Plateau prepared by my husband. The schedule discloses a total expenditure in relation to items acquired of $238,259.62 and an amount of $132,580.00 paid to contractors. The total of the items acquired and contractual amounts paid is accordingly $370,839.62. Exhibited to me at the time of swearing this Affidavit and marked ‘JFJ 1’ is a folder containing such invoices, receipts and other documentation relating to the items and contractual work as are available to me.”

29 Finally, the appellant sought to explain how the deceased had disbursed the amounts representing the difference between the sums she had received on account of the settlement of the sale of lots 51, 53 and 54 and that amount standing to her credit in her bank accounts at the date of her death. The only explanations which were admitted were her statement that $21,000 was applied by the deceased in buying the appellant and Mr Juul new appliances for their home and in paying $12,000 to Westpac being a debt owed to that bank by her late father.

30 The first respondent then swore an affidavit dated 24 November 2004 dealing with aspects of the affidavits of Mr Marshall and the appellant’s first affidavit.

31 Insofar as Mr Marshall’s affidavit was concerned, the first respondent said he could not ascertain “the precise nature of the transactions referred to, the parties involved in those transactions, the relationship between the parties, the legal authority upon which acts were carried out, and the accounting and disbursement of monies.” Insofar as annexure D to the appellant’s first affidavit was concerned, he said he could not “ascertain from it the link between the items set out in the said summary and any work carried [sic, out] on my mother’s house.” This paragraph was admitted as submission material only.

32 The first respondent then deposed as to the construction work carried out between 1998 and 2003 by the appellant and Mr Juul on a property they owned, which appears to have been adjacent to the deceased’s property (but not lot 52), construction work carried out on the deceased’s house and construction work done on another property jointly owned by the appellant and Mr Juul. The first respondent deposed that the builder on all three properties was Mr Juul and that he “did most of the carpentry, brick work, labouring, tiling and supervision of all subcontractors…”.

33 Next, the first respondent deposed in paragraphs which were admitted as submission material only:

“8. My mother Betty Frances Northey, received an amount in the order of about $900,000.00 from 1998 to 2003. I have perused Affidavit of Jennifer Frances Juul. I cannot ascertain from that Affidavit how some $900,000.00 was disbursed.

9. I refer to paragraph 8 of the Affidavit of Jennifer Frances Juul and the Power of Attorney for my mother, Betty Frances Northey held by the Deponent. I cannot ascertain from that Affidavit what transactions on behalf of my mother and the Estate both before and after the death of my mother, Betty Frances Northey were conducted by the Deponent, Jennifer Frances Juul.

…

15. I refer to paragraph 12 of Jennifer Frances Juul and say that I cannot ascertain from that paragraph any breakdown of the amounts expended on the sub-division as opposed to the construction of the house located on Lot 52 owned by Jennifer Frances Juul and her husband.

34 The appellant’s second affidavit was sworn on 11 April 2005. In that affidavit she deposed to conversations following her father’s death between the deceased, Mr Juul and herself on the topic of where the deceased would live and what would happen to her home on the property. She set out the conversation she had with the deceased which the primary judge accepted: see wilful default judgment (at [35], [44]). Next, the appellant referred to what she called a “passbook reconstruction” of the deceased’s bank account for the period 1 July 1998 to December 2003. Relevantly, she deposed to the debit to that account of $250,000 on 28 October 1998 of which she said she first became aware in early December 2004 and said she had previously been unaware “that these monies had been paid by the deceased in part by way of a payment to my husband”.

35 Mr Juul swore an affidavit dated 11 April 2005. He deposed, relevantly, to the conversations he had with the deceased, which I set out later in these reasons (at [67]) and which the primary judge accepted were the circumstances in which an agreement was made as to the basis upon which Mr Juul would carry out the renovations to the deceased’s house: wilful default judgment (at [32], [33], [44]). It is relevant to note at this stage that Mr Juul said, in substance, that in October 1998 the deceased said she wanted to pay him $250,000 for the work done on her home and that although he protested he had not spent that amount yet, she persisted. After the conversation he took her to her bank, she withdrew the $250,000 which he then deposited into a joint account he held with his wife.

36 Mr Juul also explained that from about the middle of 1997 to April 2001 he renovated and extended the deceased’s home, enlarging it from 220 m² to 420 m². He said he paid for the renovations by drawing on part of the funds he and the appellant borrowed in September 1997 to fund the cost of subdivision and the cost of building on lot 52. Mr Juul also sought to depose to the time he himself had spent on the renovations. It is unclear from either the transcript or the index to the Blue Book whether Mr Juul’s estimate of the hours he had spent on that work was admitted. Nevertheless it appears clear that the sentence in which he explained that if those hours were charged out at a rate of $65 per hour they totalled $137,475 was admitted as “submission material”. Those figures reveal that Mr Juul said he spent 2,115 hours on the renovation work.

37 The transcript of the wilful default hearing is regrettably brief. On the first day, after stating that Ms Winfield, who appeared for the first respondent, handed to the Court a chronology and draft orders, it recorded that she then opened, but did not transcribe her opening. Insofar as the draft orders Ms Winfield handed to the court were concerned, the transcript recorded that Mr R Wilson, who appeared for the executors had not come to Court to meet a request for an order that they be removed as executors and that he sought and was granted leave to reserve his position in that regard.

38 After the affidavits to which I have referred were read, the first respondent was called. He briefly described the changes which had been made to the deceased’s house since his father died. He was not cross-examined on any issue relevant to the appeal.

39 The appellant was then called. She was cross-examined about a number of withdrawals from her mother’s bank account and, in particular, in respect of withdrawal documents on that account which she appears to have signed. The withdrawal documents do not appear in the Blue Books, although they appear to have been tendered as exhibit D. However as far as the cross-examination reveals, none of the withdrawal documents related to the $265,000 the deceased gave the appellant in 1999. Whatever the purpose of this cross-examination was, it assumed no significance to the first respondent’s written submissions, or in any of the four judgments. The appellant said that Mr Juul looked after all their “loans and … finances.”

40 As to the sum of $265,000 deposited into her accounts in 1999, the appellant said her understanding was that it was a payment “from the agreement that was made amongst my mother, my husband and myself.” The agreement to which she appears to have been referring was exposed shortly after when, in response to a question relating to the $250,000 Mr Juul received in 1998 and of which she said she was unaware until early 2004, she said:

“[I]t was a payment of part of the agreement. He had an agreement with my mother to do the building work and both of those, of December ’04, I now know that my mother paid two payments to work back with that agreement of $515,000, which I think is in my husband’s affidavit and my own.”

41 Save as to this evidence and the brief statement about the $265,000 in her second affidavit, there is no evidence as to the circumstances in which the deceased actually withdrew the $265,000 from her bank account and paid it to the appellant. There is no suggestion that any third person was present when those monies were withdrawn.

42 The appellant was cross-examined as to whether, when she applied for probate, she had asked any questions about why “there was only $340,000 there” (presumably being a reference to the balance in the deceased’s bank accounts), to which she responded that she had not. She was then asked:

“Q. Well, you knew that three blocks of lands had been sold, totalling over $900,000; didn’t you?
A. That’s correct.

Q. And you never asked one question about where the other $600,000 went?
A. No, I didn’t think it was my money to – for my business. It was my mother’s money and it was my mother’s business.

Q. What did you understand your role was as an executor?
A. As executor, it was – I have to tell you I really didn’t know and I was very much guided by the solicitors, which I appreciated.

….

So, the $265,000, you say that was consideration for work done on your mother’s house?

A. It was part of the payment of the agreement of 515

43 The appellant was challenged about the agreement as follows:

“Q. Mrs Juul, nobody ever agreed on $515,000; did they?
A. That is incorrect.

Q. Your mother never knew that renovations were going to cost $515,000?
A. I’m sorry, that is incorrect.

Q. In fact, you have reconstructed it. When you found out in December last year, you reconstructed it to say that the renovations had cost $515,000?
A. That is totally incorrect.

44 In the course of the cross-examination, Ms Winfield sought to ask the appellant questions concerning a will the deceased had made which pre-dated that which had been admitted to probate. The primary judge asked what the relevance of that line of cross-examination was to the first respondent’s case which he described as “predicated upon there being some failure to account for monies which you say were due by the first defendant to the estate… [and which] involve[d] looking at the transactions to see whether there has been a failure to account.” He asked counsel if he was wrong to “disabuse” him. She did not.

45 The appellant was also cross-examined about the funds the deceased had available when her husband died. It appears that the deceased was living on a war service pension but, according to the appellant, “was in need of money”, an observation which appeared to relate to a need for funds to deal with her house which, at the time her late husband died, “was in so much disrepair that [she] didn’t have a water system working [and] [t]he electricals had to be completed.” According to the appellant the deceased’s lack of funds was “one of the main reasons she decided to subdivide, to obtain funds for herself.”

46 The appellant denied that it was she and Mr Juul who had decided to subdivide. In response to the suggestion that the deceased had been “talked into” the subdivision, the appellant said that her late father had been “in the process of subdividing” prior to his death “because he was running out of funds.” She rejected the proposition that that statement was not correct.

47 The following exchange took place:

“Q. You didn’t keep any of those receipts in any logical order for future reference did you?
A. I say to tell you I didn’t think three years after my – the property was completed and something like seven years after – before my mother died – that we would ever have to speak about what personal business my mother had regarding the renovation of her property, that’s correct.

Q. You see it was not her personal business was it?
A. It was her personal business, it as her home, her money, her decision.

48 Mr Juul was then called. Relevantly, he said:

“Q. Mrs Northey never agreed to pay you on any hourly basis for any work done, did she?
A. We had an agreement for a fixed price but she wanted to make sure that I was paid for the work that I did for her.

…….

WINFIELD: Q. See, Mr Juul, isn’t this the case, that you had that conversation, $515,000, in which you say you put $515,000 to the deceased, that never took place, did it?
A. It did take place, yes.

Q. Mrs Northey would never have agreed to spend $515,000 on that house, would she?
A. Yes, she would.

Q. You see, in 1996 Mrs Northey did not have $515,000 in cash, did she?
A. That is correct. And what we did was we – she needed an improvement to her quality of life. She was living in an old house and it badly needed renovations. So we took her around to various places to see where she would like to live, if she wanted to sell the property, or whether she wanted to subdivide it, whether she wanted to build a new house on it or whether she wanted the house renovated.

…….

Q. Even that work did not cost $515,000 did it?
A. To my recollection it did, yes.

That is correct, because at the end, in April 2001 we agreed that our agreement was finished and all parties were perfectly happy with the arrangements

49 At the conclusion of Mr Juul’s evidence, Ms Winfield made an application to tender a report prepared by Mr Clifford Ventris, a Chartered Quantity Surveyor. The primary judge at that stage pointed out that he had not received “any explanation from [her] as to how [she] took [sic, put] this case” and expressed concern that “we are getting a whole lot of information that may not really be relevant.” At that stage his Honour suggested he ought hear from counsel for the executors. Mr R Wilson, who appeared for the appellant and the second respondent at the wilful default hearing, then said:

“WILSON: The first enquiry, one has to look at what happened to the two relevant transactions. The documentation was tendered, it was signed by the deceased. On one view that is the end of it. They were transactions made by her which on the evidence the only conclusion you could come to was there was no incapacity, she knew what she was doing and we say that is the end of it. Alternatively we say there was an agreement for payment of a certain amount but irrespective of the agreement one has to enquire what happened to the monies when they were paid.

50 The primary judge then asked Ms Winfield, again, why Mr Ventris’ report was relevant. Relevantly, she said:

“WINFIELD: To prove if the work was not worth $500,000 or anything like it then the amount the first defendant should recover from herself or her husband or put back into the estate is the difference between the value -

HIS HONOUR: What is the basis upon why they should put it back in?

51 Mr Ventris’ report was admitted with the excision of one paragraph. He was subsequently called and cross-examined.

52 The plaintiff’s case was then closed. Ms Winfield sought to commence her address but, before she did so, the primary judge asked whether there were any amendments to the summons. Her response was that the amended summons should be read in accordance with a “document” which, it appears to have been understood by Mr Wilson, was a reference to the document headed “Plaintiff’s draft order” handed up on the first day of the hearing which his Honour appears to have initialled on the third day, 1 September 2005.

53 Ms Winfield then appears to have sought to renew the application to remove the executors on the basis that the appellant had a conflict of interest because the evidence revealed she owed money to the estate, while the second respondent had done nothing in discharge of his executorial duties and had left everything to the appellant. In the course of submissions on this issue she said:

“The reason the proceedings have been taken in the way they have is because they simply have no information on which to form a view as to what happened to the money. Mr Northey did not know until he saw the probate that all the deceased had left was the block of land on which the family home stood which was one block out of the whole lot and the proceeds of sale of another block of land. He knew it had been divided up into five blocks on a rough calculation and he wrote to my friend’s instructing solicitor but it came up about $726,000 short on his calculation of what should have been there from the proceeds of sale. Of course, there is only $346,000.

So the plaintiff and the other beneficiaries had no information as to where that money had gone and they needed to make inquiries before they could form a view as to whether there were other funds owed to the estate.

It is properly the duty of an executor to inquire into whether there are any funds owing to the estate. There has been no allegation of fraud pleaded and the plaintiff was no[t] in a position at any point to plead fraud because the plaintiff and the other beneficiaries did not know what the particulars of that might be, since this inquiry there is at least substantial evidence that the monies were received by Mrs Juul and her husband and that is on the first defendant and her husband’s own evidence that that conclusion can be made.”

……………..

54 The primary judge did not accede to the renewed application. He gave leave to file the amended summons and orders in accordance with the document handed up on the first day of hearing, but deleting the order seeking the removal of the executors. The transcript then merely records that counsel then addressed.

Wilful default hearing: written submissions at trial

55 It appears that counsel for the first respondent and the executors both handed written submissions to the primary judge on the last day of the wilful default hearing. The transcript does not record their oral addresses.

56 The first respondent’s written submissions relevantly asserted that he was not aware until he saw the inventory attached to probate as to the extent of the deceased’s assets at the date of her death. They said he had sought a taking of accounts “in order to ascertain what, if anything, is owing to the Estate [and] submitted that the present inquiry has demonstrated that funds are owing to the Estate.” They submitted that a case of wilful default had been made “on both Defendants’ own affidavits”. That expression was intended to include the second respondent who, although he had sworn an affidavit had declined to attend for cross-examination upon it, so that the primary judge had ultimately rejected it. Accordingly, the first respondent’s written submissions contended that there was no evidence that he had taken any step in administering the estate or any meaningful interest in his duties as executor of the estate.

57 The first respondent’s written submissions referred to Giles JA’s statement in Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146 (at [65]) concerning an accounting by a trustee:

“[T]he underlying concept is that through breach of trust the trustee has failed to obtain for the trust that which would have been obtained if the trustee’s duties had been discharged. There may be simple failure to get in an asset of the trust; sale of a trust asset at an undervalue has been treated as wilful default…”

58 The written submissions then contended that the appellant’s affidavit revealed “many instances of wilful default” falling into Giles JA’s categories. The first was “simple failure to get in an asset of the trust” represented by:

(a) the appellant’s admission that she was unaware that Mr Juul had obtained $250,000 from the deceased notwithstanding it was deposited into their joint account. The written submissions contended that “an accounting will demonstrate that these are funds of the Estate and are held on trust for it or alternatively are had and received by [the appellant] and [Mr Juul]”; I note that no details were given of the nature of the claim which it was alleged it was open to the estate to bring against those persons;

(b) that the sale of lot 51 on 9 April 2003 to the appellant’s son was at an undervalue and was “a transaction which should be considered as a deficiency in the Estate” [and that the appellant] has a clear conflict of duty and interest in having obtained benefit for her son to the detriment of her siblings”;

(c) it was further contended that the transfer of lot 52 to the appellant and Mr Juul in 1998 was at an undervalue; a similar contention appears to have been made in relation to the other lots in the subdivision;

(d) that the deceased’s house being left empty from the date of her death to the date of trial was an example of wilful default;

(e) that the appellant’s inability to produce adequate records of the work done on the deceased’s property amounted to wilful neglect;

59 The executors’ outline of submissions recognised that the first respondent’s case was that they had committed a wilful default in that they had “failed to get in an estate asset in the form of monies paid to [them]” being all or part of the three tranches of money paid, first, as to the $250,000 to Mr Juul on 28 October 1998 and secondly the two amounts totalling $265,000 paid to the appellant on 24 February 1999. They identified the real issues for consideration in determining whether there had been wilful default in this respect as:

“…whether there was anything concerning the payments…made by the deceased which would suggest that [they] were not bona fide inter vivos transactions, and second, whether the payments were made by the deceased pursuant to an agreement or an informal arrangement by which the first defendant and her husband would renovate or supervise the restoration of the property…for the sum of $515,000.”

60 The executors’ written submissions then drew attention to the bank documents signed by the deceased pursuant to which the three tranches of monies were paid. They submitted that there was nothing in the circumstances of those payments which would suggest that “the monies are in truth estate assets which the defendants ought to have got in in the performance of their executorial duties.”

61 Next, the written submissions contended that even if the Court was not persuaded there was a binding agreement between the deceased and the appellant and Mr Juul for the renovation of the property for $515,000, the payments “continue to retain the status of bona fide inter vivos transactions” as reflected in the conversation at the time the deceased paid the $250,000 to Mr Juul. Finally, relevantly, the written submissions contended that if the two payments were made by the deceased voluntarily in return for the appellant and Mr Juul arranging for the renovation of her home, it could not be said that all or some of the monies constituted estate assets which were liable to be accounted for by the executors. The executors contended the summons should be dismissed with costs.

The wilful default judgment

62 The primary judge gave a short history of the events leading up to the proceedings in the wilful default judgment (at [6] - [14]):

“6 In late 1996 Mrs Juul and her husband said that they had a conversation with Betty Northey about the subdivision of the large property which she then owned and a renovation of her house. After looking at alternative accommodation Betty Northey decided that she would prefer to continue living in the house where she had lived with her husband. According to Mrs Juul and her husband there was an estimate for the cost of renovating the house at $515,000.

7 On 24 February 1997 Betty Northey and Mr and Mrs Juul entered into a Deed which provided that Mr and Mrs Juul would do all the work necessary at their expense to enable a subdivision of the property into five allotments. In return they were to receive one of the lots in the sub-division. The Deed itself provided that deceased appoint Mr and Mrs Juul as her Attorneys to sign any documents and, in addition, Betty Northey gave a separate power of Attorney to Mrs Juul. Between mid 1997 and August 2001 substantial renovations took place to the deceased’s property at 62 Rose Avenue, Collaroy, which was situated on Lot 55 in the new subdivision. The amount that was spent on the renovation was the subject of some dispute.

8 Mr and Mrs Juul borrowed $460,000 secured on other properties they owned to commence the subdivision and the renovation work on 62 Rose Avenue, Collaroy.

9 On 2 February 1998 Lot 52 in the subdivision was transferred to Mr and Mrs Juul in accordance with the arrangement set out in the Deed. The transfer was stamped on the basis of a value of $175,000 being the consideration for the transfer. The deceased personally signed the transfer.

10 It seems that the subdivision was finally approved in September 1998. In October 1998 Lot 54 was sold to a Mr and Mrs Webster for $320,000 which amount was paid to the deceased. Mrs Juul, as Attorney for the deceased, signed the transfer to the Websters. On 28 October 1998, in what Mr Juul said was a discussion between him and the deceased, the deceased indicated that she wished to pay him $250,000 for the work he had done. The deceased went to the Commonwealth Bank and withdrew $250,000 and paid it to him. According to Mrs Juul her husband did not tell her about this withdrawal until December 2004.

11 Between late 1998 and October 1999 Mr and Mrs Juul constructed two townhouses on Lot 52 which became known as 62B Rose Avenue, Collaroy.

12 In January 1999 Lot 53 was transferred to Mr and Mrs Briggs for $305,000 which was paid to the deceased. Mrs Juul, as Attorney for the deceased, signed the transfer to the Briggs. A few days later, on 24 February 1999, the deceased withdrew amounts of $165,000 and $100,000 and paid them into Mrs Juul’s accounts.

13 On 9 April 2003 Lot 51 in the subdivision was transferred to Gaetan Juul, the son of Mr and Mrs Juul for $300,000. The duty paid indicates a value of the property at that time for stamp duty purposes of $475,000. The purchase price of $300,000 was paid into the deceased’s account on 28 April 2003. The deceased personally signed the transfer.

63 As I have said, the first respondent sought to establish the appellant and the second respondent had been guilty of wilful default in four respects. The primary judge rejected the first three matters relied upon: see wilful default judgment (at [20] – [29]). However he found the first respondent had established one instance of wilful default which concerned the failure of the executors to get in the amount which was due to be refunded by the appellant and her husband to the estate in respect of the appellant’s involvement in the renovation of the deceased’s property with the proceeds of the sale of two of the blocks in the subdivision: see wilful default judgment (at [30] – [51]).

64 It is relevant to note the basis upon which the primary judge rejected the first respondent’s allegation of wilful default in respect of the alleged sale of trust assets at an undervalue, being two of the lots in the subdivision, one bought by the appellant’s son and the other which was transferred to the appellant and Mr Juul: wilful default judgment (at [20]).

65 Insofar as the sale to the appellant’s son was concerned, his Honour noted (wilful default judgment (at [22])) that the transaction was “not a sale of a trust asset [but] ... an inter vivos disposition made by the deceased.” The deceased had “signed the transfer and … there [was] no evidence that Mrs Juul used any authority under the Power of Attorney to deal with the property of the deceased in respect of this sale” (at [23]). His Honour concluded (at [24]) “[i]n these circumstances it is not a matter which can be a wilful default in respect of the defendants’ position as Executors and trustees because they did not deal with the property.”

66 Insofar as the transfer of lot 52 to the appellant and Mr Juul was concerned, the primary judge concluded that on the evidence there was not a sale at an undervalue, nor evidence of any dealing with the property by the appellant pursuant to the Power of Attorney. In addition “plainly the sale was not a sale of any estate asset”. Accordingly his Honour concluded it was not a wilful default: see wilful default judgment (at [25] – [27]).

67 The primary judge accepted (wilful default judgment (at [44])) the following evidence from the appellant and Mr Juul concerning their conversations with the deceased about the renovations:

I: ‘Of course I will Betty.’

Deceased: ‘Have you any idea how much it will cost?’

I: ‘The cost of the new building work will be approximately $1,500 per m² and $750 for per m² for renovations. Additional costs will also be incurred for outside work such as retaining walls, driveway, fencing, lawn, paving and other things. As you are looking to nearly double the size of the home you should count on a total cost of around $515,000 for the work.’

Deceased: ‘Will we be able to cover the costs of this from the subdivision of the land?’

My wife: ‘Yes, we should.’”

Husband: ‘You can count on it costing roughly $1,500 per square metre for new building work and $750 per square metre for the existing building. You can also count on spending $50,000 for work to the outside of the house.’

Deceased: ‘Will we get enough money from the land to pay for the work?’

I: ‘Yes.’

Husband: ‘The best way to calculate it is to work on the total figure of about $515,000 which is the best part of the sale of two blocks of land in the subdivision.’

Deceased: ‘Ole, will you do the work?’

Husband: ‘Yes, I will do the work.’
Deceased: ‘I hope there will be enough for you to be paid for the work.’”

I: ‘You don’t have to pay me that much as this stage. I haven’t spent $250,000.’

Deceased: ‘I want to give it to you anyway.’” (emphasis added)

68 Following the October 1998 conversation $250,000 was withdrawn from the deceased’s bank account, and deposited in a joint account of Mr and Mrs Juul: wilful default judgment (at [34]). The primary judge found (at [37]) that, between them, Mr and Mrs Juul had been paid $515,000 for the work involved in renovating the deceased’s house. The amount of $515,000 was made up of the $250,000 Mr Juul received in October 1998 and the $265,000 which the deceased withdrew from her bank account in two tranches of $165,000 and $100,000 on 24 February 1999 and paid into the appellant’s bank account: wilful default judgment (at [12]).

69 The primary judge held (wilful default judgment (at [46])) that the conversations between the deceased and Mr and Mrs Juul did not disclose any agreement that Mr and Mrs Juul would do the work for a fixed price. Rather:

“What in fact was happening was that Mr Juul was agreeing to assist with the work and that his best estimate of what it would cost the deceased was around $515,000 and that this would be covered by the sale of the two blocks of land.”

70 His Honour also found (wilful default judgment (at [47])):

“47 There is nothing in the conversation with Mr Juul to indicate that he was to be reimbursed for his time and effort. In the conversation with Mrs Juul there is a reference to him being paid for the work although that is expressed more as a hope. Certainly there was no agreement on the basis of that conversation with the deceased that she would reimburse Mr Juul for the time he spent organising and supervising the work.”

71 Insofar as the payment of $250,000 in October 2008 is concerned, the primary judge found (wilful default judgment (at [48])):

It was the defendants’ submission that the payment of $250,000 and $265,000 were payments which the deceased voluntarily made in return for Mrs Juul and Mr Juul arranging the renovation of her home.

Certainly the first payment which was made by the deceased to Mr Juul of $250,000 in the conversation which I accept occurred at the time has elements of making a gift.

72 Insofar as the payment of $265,000 in January 1999 is concerned, the primary judge found (wilful default judgment (at [49])):

In absence of any such evidence I would not conclude that the arrangements were as characterised by Mr and Mrs Juul. In substance the payment of the further $265,000 was nothing more than a further payment on account probably without any real discussion having taken place. Mrs Juul stated that she believed the payment was for work done on the house. In these circumstances I would not characterise the payments that have been made as gifts in a family setting rather than payments received on account for the renovation.”

73 The primary judge held (wilful default judgment (at [50])) that “prima facie the upper amount expended by Mr and Mrs Juul [on the renovation] was $370,839.62.” He found:

In these circumstances Mr and Mrs Juul are obliged to account to the estate for the difference between $515,000 and the amount spent and this amount will be at least $144,160.38.

51 In these circumstances one instance of wilful default has been demonstrated, namely, the failure of the executors to get in the amount which was due to be refunded by one of the Executors and her husband to the estate.” (emphasis added)

74 The primary judge then considered whether he should order the taking of accounts on the basis of wilful default in circumstances where only one such default had been demonstrated. In holding that he should (at [55]), his Honour applied Re Tebbs [1976] 2 All ER 858, a case where there was also one clear area of wilful default and no grounds for assuming that other improper transactions occurred. The Court there decided (at 864), summarised by the primary judge (at [55]), that “an account be taken on the basis of wilful default in respect of the one clear area and that an account be taken of the rest of the testator’s real and personal estate in common form with liberty to apply in the event of further wilful default being produced.”

75 Accordingly his Honour said (at [56]) that he proposed to make a similar order and reserve further consideration after the taking of the account. He directed the parties to bring in short minutes of order (at [57]).

76 Before leaving the wilful default judgment, two other matters should be noted. First, the primary judge noted (at [53]) that Mr Juul was not a party to the proceedings and:

“… the account is technically given by the defendants who are the two Executors. The fact that Mr Juul was not a party to the proceedings may, of course, be a complete answer to any claim for a just allowance on his part.”

77 Secondly, his Honour noted (at [54]) that although an affidavit by the second respondent was read he had refused to be cross-examined and accordingly he had rejected the affidavit. His Honour added that in the circumstances which have transpired the second respondent was “likely to have a joint liability to account and he may now wish to play an active role in any further hearing.”

Wilful default judgment: short minutes of order

78 A document entitled “Short minutes of order and direction” apparently intended to give effect to the wilful default judgment were filed in court on 27 September 2005. Relevantly it provided:

“1 Direct that the Defendants or either of them on or before 28 November 2005 file and serve on the Plaintiff his, her or their detailed account verified by his, her or their affidavit of:

(b) and all moneys received and disbursed by any other person on his, her or their behalf in respect of:

(ii) of all dealings and transactions of the Defendant/s therewith.

3 Direct that on a wilful default basis the Defendants or either of them on or before 28 November 2005 file and serve upon the Plaintiff his, her or their detailed statement verified by his affidavit specifying:

(b) All the dealings and transactions of the said Ole Juul and Jennifer Frances Juul or either of them in relation thereto;

(c) What amount, if any, is owed to the Estate of the late Betty Frances Northey.
…

(a) fixing a date for the hearing of the inquiry into the said account and statement;

(b) for the further hearing of the Plaintiff’s summons;

(c) for further conduct of the proceedings in the event of further wilful default being produced;

210 The imprecision which, in my view flowed from the failure properly to plead the wilful default case, did, as Mr Lovas submitted, lead to the primary judge making findings of which the executors had no notice – and, more particularly which were adverse to a non-party, Mr Juul – a subject to which I now turn.

The problem with parties

211 Mr Juul has never been made a party to the proceedings. However findings have been made which have directly and indirectly affected his interests. In the wilful default judgment (at [47]), a finding was made that there was no agreement between the deceased and Mr Juul as to him being reimbursed for his time and effort in undertaking the renovations. There is nothing which suggests he (or indeed the executors) was on notice that such a finding might be made. That finding then flowed though to the accounting hearing where it was held to constitute an issue estoppel when consideration was being given to whether there should be a just allowance (albeit to the executors) for the work he undertook.

212 Further, the wilful default judgment short minutes of order contemplated that following the taking of accounts, an order for payment might be made against Mr Juul. Although that did not ultimately happen, it made clear the extent to which the order for the taking of accounts affected his interests. In those circumstances he should have been given notice in accordance with the following rules so as to have the opportunity to intervene in the proceedings.

213 UCPR 46.12 relevantly provides:

46.12 Notice of judgment

(1) This rule applies to a judgment in proceedings for:

(a) the administration of the estate of a deceased person, or

(b) the execution of a trust,…

(2) If the Supreme Court gives a judgment:

(b) for the taking of an account or the making of an inquiry,

(c) give directions for service of notice of the judgment on any person interested…

(b) the Court may, on application by him or her on notice of motion filed within the time limited by subrule (5), discharge or vary the judgment or order,

(c) he or she may attend the accounts, inquiries or other matters under the judgment….”

214 The purpose of these rules is to allow a non-party whose interests would be affected directly by a decision in the proceedings to seek to intervene to protect the interest liable to be affected: see Young v Holloway [1895] P 87 (at 89-90); Osborne v Smith [1960] HCA 89; (1960) 105 CLR 153 (at 158-9) referred to with approval: Levy v State of Victoria [1997] HCA 31; (1997) 189 CLR 579 (at 601) per Brennan CJ.

215 There is no suggestion that Mr Juul was ever served with a notice of the orders referring the matter for the taking of accounts. Had these rules been complied with, and had Mr Juul sought to intervene, he would have been entitled to argue, for example, that the wilful default judgment should be discharged to the extent that it was based on the finding that there was no agreement with the deceased as to him being reimbursed for his time and effort in undertaking the renovations.

The count for money had and received

216 The cause of action for money had and received is the “most comprehensive of all the common counts [and is] applicable wherever the defendant has received money which in justice and equity belongs to the plaintiff, under circumstances which render the receipt of it a receipt by the defendant to the use of the plaintiff”: Bullen & Leake, Precedents of Pleadings, 3rd ed (1868) Stevens & Sons (at 44) (“Bullen & Leake”); referred to with approval by Gummow J in Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 (at [88]) as echoing what Lord Mansfield said of the action for money had and received in Moses v Macferlan (1760) 2 Burr 1005; 97 ER 676; see also Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2006] VSCA 6; (2006) V Conv R ¶54-713 (at [9]) per Chernov JA; also Nettle JA (at [47]). As Chernov JA explained, (Ovidio, at endnote 9), the description of the action for money had and received in the third edition of Bullen & Leake was substantially repeated in subsequent editions up to the 13th edition (1990) (at 654-665) whereas in the 14th edition of the work published in (2001) (at 1543-1559), there is no reference to that cause of action by that name and the topic is dealt with the heading of "Restitution" and in the context of unjust enrichment. In Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (at 683), Lord Goff of Chieveley referred to the “old action for money had and received – what we nowadays call a personal claim in restitution at common law.”

217 The principle extends to cases where the money has been paid for a consideration that has failed: Royal Bank of Canada v The King [1913] AC 283 (at 296) per Viscount Haldane LC; referred to with apparent approval by Gummow J in his extensive consideration of the cause of action for money had and received in Roxborough (at [62]). The failure of consideration must be complete in order to entitle the plaintiff to recover the money paid for it, unless the consideration is severable: Roxborough (at [14]) per Gleeson CJ, Gaudron and Hayne JJ approving the passage to that effect in the third edition of Bullen & Leake; (at [105] – [107]) per Gummow J; cf (at [198]) per Callinan J. Failure of consideration may include, but is not limited to, non-performance of a contractual obligation: Roxborough (at [16]) per Gleeson CJ, Gaudron and Hayne JJ; (at [95]) per Gummow J. In a case where it is apparent only some part of the consideration had failed, the court must determine whether there has been a failure of a severable part of the consideration and whether, in the absence of restitution, the payee will retain money at the expense of the payer: Roxborough (at [20]). Failure of consideration can have several meanings, including failure to perform the promise: Roxborough (at [101] – [103]) per Gummow J; (at [196]) per Callinan J.

218 In defending an action for money had and received, the defendant is “entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust”: David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 (at 379); Roxborough (at [91]).

219 Although not clearly articulated, one way the first respondent appeared to put the hypothetical case the estate might have brought against the appellant and Mr Juul was that the deceased paid over the $515,000 labouring under the mistaken belief that that sum represented the presumably approximate cost of the renovations and that, if it did not, the balance ought be returned.

220 A payer is prima facie entitled to recover on an action for money had and received if it appears that monies were paid by the payer in the mistaken belief that he or she was under a legal obligation to pay the monies or that the payee was legally entitled to payment of the monies. However the claim may fail if the payer intends that the payee should have the money at all events, whether the fact be true or false, or is deemed in law so to intend: David Securities (at 378, 380) per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ.

221 With those principles in mind, I return to the wilful default judgment. The primary judge did not identify a jurisprudential basis upon which he held (wilful default judgment (at [50] – [51])) that Mr and Mrs Juul were “obliged to account to the estate for the difference between $515,000 and the amount spent” and that one instance of wilful default had been demonstrated in the executors’ failure to get in the amount due to be refunded. However, the first respondent submitted at trial and, as I have said, Ms Winfield submitted in this court, that the basis for recovery was an action for money had and received.

222 It is notable that his Honour made the primary finding as to the Juuls’ liability to account to the estate at the same time as recording that there had been no discussion before him as to “whether on the taking of the accounts there should be a just allowance for the work involved in assisting with the renovation”: wilful default judgment (at [50]). It is clear that his Honour was conscious of the fact Mr Juul had expended considerable effort in effecting the renovations, the value of which might reduce the amount he had held should be refunded to the estate. The question as to whether a just allowance might be made only arose, in my view, because the primary judge had interpreted the conversations with the deceased as not extending to Mr Juul himself being paid for the work. In my view, in so finding, his Honour misapprehended the conversations.

223 The conversations (see [67] above) went to two matters: first, to the actual cost of the building work and secondly, to Mr Juul being reimbursed for the cost to him of doing, that is to say, managing and supervising the work. The deceased was happy for that work to be undertaken as long as it could be paid for from the sale of two lots in the subdivision. A total figure of $515,000 was agreed to cover both aspects of the renovations.

224 While, as events transpired (and assuming the primary judge had admitted at the accounting hearing Mr Juul’s account of the hours he had expended on the renovation work and the hourly rate the deceased had agreed) that represented the total cost of both limbs of the agreement, it is also apparent, in my view, that the deceased was not concerned that there be a dollar-for-dollar accounting of the extent to which the $515,000 was expended. This can be seen from the following matters.

225 One is the conversation to which Mr Juul deposed in the wilful default hearing that “in April 2001 we agreed that our agreement was finished and all parties were perfectly happy with the arrangements and, therefore, it was finished.” The primary judge does not appear to have given that evidence any weight in the wilful default judgment. Yet it was evidence which, in my view, indicated that to the extent there was any balance of the $515,000 when the renovations were complete, the deceased intended Mr Juul and/or the appellant to retain it. His Honour appears to have accepted as much in the accounting judgment when he said (at [75]) when holding that there should be a just allowance for the work undertaken by Mr Juul, “[t]he deceased did not expect Mr Juul and his wife to repay any part of the sums paid.” That finding can only have been based on the evidence given at the wilful default hearing. It was a conclusion which, with respect, should have been made in that hearing. If it had, it would have been apparent, as, in my view is the case, that it could not be said that the appellant and Mr Juul had received money which in justice and equity belonged to the deceased (and hence was recoverable by her estate).

226 It is also relevant to observe that the objective evidence supports the arrangement for which the appellant and Mr Juul contended, including the conclusion that the deceased was happy for the work to be carried out without requiring a detailed accounting or any refund. Each component of the $515,000 was paid to Mr Juul ($250,000 in October 1998) and the appellant ($265,000 in March 1999) immediately after the sale of a lot in the subdivision. On both occasions the renovation work had only been underway for a comparatively short period. Indeed when the first payment was made, Mr Juul protested that it did not represent the value of the work done to that time – but the deceased insisted on paying. Although unstated, it is possible her anxiety to do so stemmed from knowing the Juuls had borrowed $460,000 to commence the subdivision and the renovation work (wilful default judgment (at [8])), monies on which they presumably incurred borrowing and interest costs. The deceased lived for a further four and a half years or so, yet not once does it appear she ever sought repayment of any of the monies or expressed any dissatisfaction with the absence of an accounting to any one of her other six children, one or more of whom as I have said, lived with her in the home during the period in question.

227 I should note that, on the cross-appeal Ms Winfield argued that the primary judge should not have accepted Mr Juul was a credible witness. It is relevant to consider this aspect of the cross-appeal which clearly could have an effect on the agreement with the deceased.

228 To make good that submission on appeal, the first respondent had to establish that in assessing Mr Juul’s credibility the primary judge failed to use, or palpably misused, his advantage, or acted on evidence which was inconsistent with facts incontrovertibly established by the evidence, or which was glaringly improbable, or was contrary to compelling inferences: Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167; Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472; State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 73 ALJR 306; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118.

229 Two bases were advanced to support the proposition that the primary judge should have rejected Mr Juul as a credible witness. The principal matter relied upon was the fact he had not declared amounts received from the deceased in his tax returns and because he declined to answer some questions about including amounts earned in Singapore in his tax returns on the basis those answers might incriminate him. As to the first point the evidence did not establish, in my view, that any amount Mr Juul personally received should be included in his tax return. The only part of the $515,000 he personally received was $250,000. It is open on the evidence to conclude that that amount was spent on the actual costs of materials and labour, rather than representing any income he actually earned.

230 As to the second point, the transcript at the stage of the wilful default hearing when this evidence was given does not reveal that Mr Juul declined to answer a question on that basis, however that that was the basis of his refusal to answer is tolerably apparent from a passage in the transcript of the accounting hearing. However the short answer to the first respondent’s submission in this respect is that no adverse inference is drawn where a person claims a privilege: see Australian Law Reform Commission, Evidence (Interim), Report No 26 (1985) (at [862]). Further, even if such an inference could be drawn, the primary judge did not consider any such inference detracted from his conclusion that Mr Juul was a credible witness on both occasions he gave evidence.

231 Ms Winfield also contended the primary judge ought to have rejected Mr Juul because he gave evasive answers. The characterisation of these answers and any effect they might have on Mr Juul’s credit (assuming them to have been evasive, which is not a matter I would determine) was, in my view, peculiarly within the judge’s province of decision-making.

232 Finally, I would note that Mr Juul’s conversations with the deceased were substantially corroborated by the appellant’s conversation with her: wilful default judgment (at [35]). No attack was made on the appellant’s credibility.

233 The first respondent did not demonstrate any reason why his Honour’s conclusion that Mr Juul was a credible witness should be disturbed.

234 This means that the conversations to which Mr Juul (and the appellant deposed) concerning the circumstances in which the deceased paid them the $515,000 stand. However, in my view, for the foregoing reasons, the primary judge erred in concluding that there were any monies owing to the estate and that the first respondent had established an occasion of wilful default. The finding of wilful default cannot stand. His Honour ought to have dismissed the summons.

235 In my view these reasons are sufficient to dispose of the appeal and the cross-appeal, without considering the numerous other challenges raised by both appellant and first respondent to the two principal judgments.

Removal of executors and trustees

236 It is appropriate to make some observations about some other aspects of the proceedings.

237 The amended orders sought to remove the appellant and the second respondent as executors and trustees of the deceased’s estate. It is not apparent whether the executors were still performing executorial duties as at 29 August 2005 when leave was given to file the amended summons (albeit excluding the prayer for this relief from immediate consideration) or had assumed their duties as trustees. There was no evidence of a declaration such as that contemplated by s 11 of the Trustee Act 1925 (NSW). Mr Lovas informed the Court on the appeal, without challenge, that although there was no evidence to this effect, the executors had become trustees by the time of the accounting hearing when the only assets, being the bank accounts and the house, were by then in their names. I observe, though, that the first respondent’s contention that the executors had not got in all the estate assets would entail that they were still executors, if that contention were correct.

238 It should be noted that the procedure contemplated by the proposed amended summons seeking orders for the removal of the appellant and the first respondent as executors and trustees was inappropriate. The procedure for the removal of executors differs from that for the removal of trustees. The former step is achieved by the court, in its probate jurisdiction, revoking the grant of probate upon a proper case being established: Caldar v Public Trustee [2003] NSWCA 187 (at [5]). Although the “sorts of situation that can count as a ‘proper case’ are not rigidly confined” (Richardson v Rearden [2006] NSWSC 1252 (at [16] per Campbell J as his Honour then was), it has been said that the court will exercise its discretion to revoke a grant of probate if the due and proper administration of an estate has either been put in jeopardy or prevented either by reasons of acts or omissions on the part of the executor or by virtue of matters personal to the executor, for example, mental infirmity, ill health, or by virtue of the proof of other matters which established that the executor was not a fit and proper person to carry out the duties he or she had sworn to perform: Mavrideros v Mack (1998) 45 NSWLR 80 (at 108) per Sheller JA, Priestley and Beazley JJA agreeing.

239 The court has an inherent jurisdiction to remove a trustee where the welfare of the beneficiaries and of the trust estate requires such a remedy, a condition which is said to be satisfied where the court considers that the continuance of the trustee in the trust would prevent its proper execution: Heydon and Leeming, Jacobs’ Law of Trusts in Australia, 7^th ed (2006) LexisNexis Butterworths Australia (at [1585](4)); see also Letterstedt v Broers (1884) 9 App Cas 371; Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572.

240 In this case, assuming for present purposes that an occasion of wilful default had been properly demonstrated as found in the wilful default judgment, the primary judge ought at that stage to have removed at least the appellant as executor to ensure independent legal personal representatives could have considered whether in the light of that finding they should take proceedings to recover the funds his Honour had found to be owing to the estate. Any such newly appointed independent legal personal representatives would (because estate assets had not been got in) be administrators de bonis non administravit, rather than executors. However, as I have found that no moneys were owing to the estate, the order actually made, appointing the third respondents as trustees, was correct.

Procedural fairness

241 It is also appropriate to observe that I would accept the appellant’s submission that findings were made in the wilful default hearing of which the executors were not on notice.

242 The rules of natural justice apply to court proceedings: Commissioner of Police v Tanos [1958] HCA 6; (1958) 98 CLR 383 (at 396) per Dixon CJ and Webb J (with whom Taylor J agreed); see also Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 (at 186) per Handley JA; Adamson v Ede [2009] NSWCA 379 (at [53] – [63]) per Campbell JA (Giles and Hodgson JJA agreeing).

243 If a judge contemplates determining a case on a different basis to the basis on which the parties conduct the trial the parties must be informed so that they have an opportunity to address any new or changed issues that may arise. Failure so to inform the parties will ordinarily result in a denial of procedural fairness leading to a new trial order if a properly conducted trial might possibly have produced a different result. It will not ordinarily be necessary to lead evidence to prove that the denial of procedural fairness had the potential to affect the outcome; in most cases the facts will speak for themselves: Seltsam Pty Ltd v Gahleb [2005] NSWCA 208; (2005) 3 DDCR 1 (at [78]-[79]) per Ipp JA (Mason P agreeing).

244 In this case it is apparent that a different outcome would have eventuated if the executors had been on notice of the reimbursement point. They would have put on the evidence they put on for the accounting hearing concerning the conversation Mr Juul said he had had with the deceased set out in the accounting judgment (at [54]). The primary judge regarded that evidence as consistent with “the case presented by Mr and Mrs Juul at the [wilful default] hearing which was that they had an agreement with the deceased that they would receive $515,000 for the work which had been discussed ” – regarding it as “a further explanation for how a particular figure was determined, namely, the per metre rates upon which Mr Juul based his calculations”: accounting judgment (at [63]-[64]). He “would have been prepared to accept that the conversation with the deceased occurred [although] … [w]hat effect the conversation has is another matter”: accounting judgment (at [65]).

245 Thus, in my view, the appellant is correct to submit that the finding that there was no agreement with the deceased for Mr Juul to be reimbursed for his time and effort was made in the absence of procedural fairness. It was that finding which led to the primary judge concluding (wilful default judgment (at [50] – [51])) that “Mr and Mrs Juul are obliged to account to the estate for the difference between $515,000 and the amount spent …at least $144,160.38” (although, of course, for the reasons already given, Mr Juul could never be an accounting party). It was, accordingly, a dispositive finding.

246 However, because I have already concluded the primary finding of wilful default should not have been made, it is unnecessary to take this aspect of the claim further.

The cross-claim

247 In my view the primary judge erred in giving the second respondent leave to file the cross-claim. The second respondent had been given clear notice in the wilful default judgment (at [54]) that he was at risk of being held liable to account personally. He could not, in my view, stand by and let the proceedings continue then seek to file a cross-claim at the end of the day. To allow the cross-claim to be filed was inconsistent with the principles set out in the Civil Procedure Act 2005 (NSW) (ss 56-60) dealing with the just and efficient determination of proceedings: see Richards v Cornford (No 3) [2010] NSWCA 134; Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175.

Conclusion

248 As I said (at [5]), on 23 July 2008 the appellant and the second respondent were removed as executors of the estate by consent and the third respondents were appointed trustees of the deceased’s estate. Those orders were sought by the first respondent by notice of motion dated 7 April 2008 and by the appellant by notice of motion dated 7 July 2008 The formal orders effecting that change were Orders 12 –15 set out above (at [119]).

249 No party has sought to disturb those orders on appeal. Accordingly, the orders appointing the current trustees should not be disturbed.

Orders

250 I would propose the following orders:

A In matter No 40327/08 (the appeal of Jennifer Francis Juul):

(1) Set aside the finding and orders made by the Court on 23 July 2008 in the plaintiff’s summons filed on 10 August 2004 and numbered 1-11 inclusive.

(i) subject to orders (ii) and (iii), the summons brought by the plaintiff (Henry John Northey) against the defendants (Jennifer Francis Juul and James Knight Northey) be dismissed;

(ii) order 1 is made without prejudice to orders 12-15 made on 23 July 2008 on the plaintiff’s motion of 7 April 2008 and the first defendant’s motion of 7 July 2008;

(iii) order 1 is made subject to the orders made in matter No 40328/08 (the summons for leave to appeal);

(iv) order that the plaintiff pay the defendants’ costs of the summons.

(i) order that the first respondent (Henry John Northey) pay the appellant’s costs of the appeal;

(ii) order that the second respondent (James Knight Northey) bear his own costs of the appeal;

(iii) order that the third respondents (the current trustees) be entitled to payment of their costs of the appeal (if any) from the Estate of the Late Betty Francis Northey on an indemnity basis.

(4) Grant the second respondent a certificate under the Suitor’s Fund Act 1951 (NSW) in respect of his costs of the appeal.

B In respect of matter No 40328/08 (the summons seeking leave to appeal):

(1) Grant the applicant (Jennifer Francis Juul) leave to appeal.

(2) Direct that the applicant file her notice of appeal within 7 days.

(4) In place of the orders made below:

(i) dismiss the motion (as amended);

(ii) order that the second defendant pay the costs of the first defendant of the motion.

(5) Order that the respondent (James Knight Northey) pay the applicant’s costs of the proceedings in this Court;

Suitor’s Fund Act

C In respect of the cross-appeal in matter No 40327/08:

(1) Dismiss the cross-appeal.

(2) Order the cross-appellant (Henry John Northey) to pay the costs of the first cross-respondent (Jennifer Francis Juul) of the cross-appeal.

(3) No order as to the costs of James Knight Northey of the cross-appeal.

251 BASTEN JA: The background to this appeal has been fully set out by McColl JA, with whose reasons I agree. The issue which the primary judge permitted to be agitated was whether Mr and Mrs Juul owed money to the deceased, at the date of her death, which Mrs Juul and her co-executor (Mr James Northey) had failed to recover for the benefit of the estate. If a prima facie case had been made out that one of the executors owed (but denied owing) money to the estate, the proper outcome should have been an order replacing the executors (or at least of Mrs Juul as executor) so that independent executors, not having a conflict of interest and duty, could consider whether there was indeed a debt owing to the estate which they should take steps to recover.

252 That relief was unfortunately sought only at the commencement of the hearing: Northey v Juul [2005] NSWSC 933 at [17]. Macready AsJ refused leave to file an amended summons which included this claim for relief. He then proceeded to consider whether there was a debt owing to the estate. This was inappropriate in proceedings between a beneficiary and the executors, where one of the alleged co-debtors (Mr Juul) was not a party to the proceedings.

253 His Honour’s conclusion, which grounded the ensuing three years of litigation, was that there had been wilful default on the part of the executors as a result of their failure “to get in the amount which was due to be refunded by one of the executors and her husband to the estate”: at [51].

254 As appeared from the previous paragraph in the judgment, no specific amount had been held to be payable. His Honour had held that the amount owing to the estate was the difference between the amount expended by Mr and Mrs Juul and the amount paid to them by the deceased. However, he said that this amount could not be quantified without determining whether “there should be a just allowance for the work involved in assisting with the renovation”, and if so the amount of that just allowance: at [50].

255 That approach should have alerted the parties to the difficulty; it is doubtful in the light of that conclusion whether the plaintiff was entitled to an account at all: see judgment of 1 April 2008 at [58]. Further, it should have been apparent that the proceedings were constituted inappropriately to determine the entitlement of Mr Juul to payment for his work on the property. That could only be determined in proceedings between the estate and Mr Juul. However, the claim against Mr Juul was presumably not equitable and it is unclear on what basis a “just allowance” would arise, unless there was a fiduciary duty owed by Mr Juul to the deceased, as to which there was no finding. The confusion became explicit with the finding that the Court was “determining whether the executors [were] entitled to a just allowance for work which by their own efforts they procured for the benefit of the deceased and her estate”: at [79] (emphasis added).

256 In so far as his Honour was entitled to deal with the question of whether there was a debt (or at least a prima facie claim for a debt) which was not being recovered his Honour made inconsistent findings. There were two payments, totalling $515,000, made by the deceased to Mr and Mrs Juul. In his first judgment he concluded at [49]:

“In these circumstances I would not characterise the payments that have been made as gifts in a family setting rather than payments received on account for the renovation.”

257 Payments made “on account” may envisage the possible return of any excess or that further payments may be required. These payments in fact totalled precisely the cost estimate made by Mr Juul and conveyed to the deceased. His Honour also found (second judgment) at [75]:

“The deceased did not expect Mr Juul and his wife to repay any part of the sums paid.”

258 The nature of such a negative expectation is unclear, but is not necessarily inconsistent with the existence of a debt. However, it must cast doubt on the conclusion of “wilful default” on the part of the executors. That conclusion cannot stand. The proceedings not having been properly constituted, the further findings in the subsequent judgments must also be set aside. The cross-appeal should be dismissed. It also follows that the cross-claim should have been dismissed.

259 For these reasons and those given by McColl JA with which I agree, orders should be made as her Honour has proposed.

260 CAMPBELL JA: I agree with McColl JA.

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Citations

Juul v Northey [2010] NSWCA 211

Most Recent Citation

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CITATION:	Juul v Northey [2010] NSWCA 211
HEARING DATE(S):	11/11/09
JUDGMENT DATE:	26 August 2010
JUDGMENT OF:	McColl JA at 1; Basten JA at 251; Campbell JA at 260
DECISION:	See paragraph 250
CATCHWORDS:	EQUITY – order for accounts on wilful default basis – whether evidence supported order - MONEY COUNTS – claim for money had and received – whether evidence estate had a claim – defences – whether retention of payment unjust - WILLS AND ESTATES – will – executor – removal – where allegation of wilful default personal to executor made out - PROCEDURE – pleadings – obligation to plead and particularise allegation of wilful default - PROCEDURE – effect of interlocutory orders – issue estoppel – whether open to judge to review matter decided in earlier proceedings between same parties - PROCEDURE – notice of judgment – where judgment affects rights or interest of person who is not a party – giving of notice under UCPR 46.12 to enable non-party interests to be protected - PROCEDURE – documents – cross-claim – out of time for filing cross-claim under rules of court – application for extension of time – delay caused by party's decision where on notice of potential liability – CPA 2005 (NSW) ss 56-60 – duties of parties in the conduct of litigation – just and efficient determination of proceedings - EVIDENCE – witnesses – credibility – whether basis established to challenge primary judge’s finding on credibility
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW) Limitations Act 1969 (NSW) Trustee Act 1925 (NSW) Uniform Civil Procedure Rules 2005
CATEGORY:	Principal judgment
CASES CITED:	Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167 Adamson v Ede [2009] NSWCA 379 Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. Australian Hardboards Limited v Hudson Investment Group Ltd [2007] NSWCA 104; (2007) 70 NSWLR 201 Bahin v Hughes (1886) 31 Ch D 390 Bartlett v Barclays Bank Trust Co Ltd (Nos 1 & 2) [1980] 1 Ch 515 Caldar v Public Trustee [2003] NSWCA 187 Carantinos v Magafas [2008] NSWCA 304 Commissioner of Police v Tanos [1958] HCA 6; (1958) 98 CLR 383 David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 Dowse v Gorton [1891] AC 190 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Gava v Grljusich [1999] WASC 13 Glazier Holdings Pty Ltd v Australian Men’s Health Pty Ltd (No 2) [2001] NSWSC 6 Gray v Guardian Trust Australia [2003] NSWSC 704 Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298 House v R [1936] HCA 40; (1936) 55 CLR 499 International Advisor Systems Pty Ltd v XYYX Pty Ltd (No 3) [2008] NSWSC 430 Itek Graphix Pty Ltd v Elliott [2002] NSWCA 104; (2002) 54 NSWLR 207 Job v Job (1877) 6 Ch D 562 Jones v Morrall (1852) 2 Sim (NS) 241; 61 ER 333 Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363 Letterstedt v Broers (1884) 9 App Cas 371 Levy v State of Victoria [1997] HCA 31; (1997) 189 CLR 579 Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 Mavrideros v Mack (1998) 45 NSWLR 80 Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146 Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572. Milltec Australia Pty Ltd v Burnes [2006] NSWCA 13 Moses v Macferlan (1760) 2 Burr 1005; 97 ER 676 Northey v Juul [2005] NSWSC 933 Northey v Juul [2008] NSWSC 275 Northey v Juul (Supreme Court of New South Wales, Macready AsJ, 13 June 2008, unreported) Northey v Juul (Supreme Court of New South Wales, Macready AsJ, 23 July 2008, unreported) Osborne v Smith [1960] HCA 89; (1960) 105 CLR 153 Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2006] VSCA 6; (2006) V Conv R 54-713 Perpetual Trustee Co v Watson (No 1) (1927) 28 SR (NSW) 39 Pit v Cholmondeley (1754) 2 Ves Sen 565; 28 ER 360 Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271 Re Beddoe [1893] 1 Ch 547 Re Brier (1884) 26 Ch D 238 Re Brogden (1888) 38 Ch D 546 Re Dallaway [1982] 1 WLR 756; [1982] 3 All ER 118 Re Stevens [1897] 1 Ch 422 Re Stevens [1898] 1 Ch 162 Re Symons (1882) 21 Ch D 757 Re Tebbs [1976] 2 All ER 858 Re Wrightson [1908] 1 Ch 789 Re Youngs (1885) 30 Ch D 421 Richards v Cornford (No 3) [2010] NSWCA 134 Richardson v Rearden [2006] NSWSC 1252 Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 Royal Bank of Canada v The King [1913] AC 283 Seltsam Pty Ltd v Gahleb [2005] NSWCA 208; (2005) 3 DDCR 1 Sleight v Lawson (1857) 3 K & J 292; 69 ER 1119 Smith v Armitage (1883) 24 Ch D 727 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 73 ALJR 306 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 Young v Holloway [1895] P 87
TEXTS CITED:	Australian Law Reform Commission, Evidence (Interim), Report No 26 (1985) Bullen & Leake, Precedents of Pleadings, 3rd ed (1868) Stevens & Sons H G Hanbury, “Forms of Account against Executors and Trustees” (1936) 108 Law Quarterly Review 365 Heydon & Leeming, Jacobs’ Law of Trusts in Australia, 7th ed (2006) LexisNexis Butterworths Australia Martyn & Caddicks (eds), Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 19th ed (2008) Sweet & Maxwell Meagher, Gummow & Lehane, Equity Doctrines and Remedies, 4th ed (2002) LexisNexis GP Stuckey & CD Irwin, Parker’s Practice in Equity (New South Wales), 2nd Ed (1949) Law Book Company
PARTIES:	Jennifer Frances Juul - Appellant Henry John Northey - First Respondent James Knight Northey - Second Respondent John Stewart Hunter & Richard John Booker as Trustees of the Estate of the late Betty Frances Northey - Third Respondents Henry John Northey - Cross Appellant Jennifer Frances Juul - First Cross Respondent James Knight Northey - Second Cross Respondent John Stewart Hunter & Richard John Booker as Trustees of the Estate of the late Betty Frances Northey - Third Cross Respondents
FILE NUMBER(S):	CA 2008/290201; 2008/290202
COUNSEL:	R Lovas for the Appellant R Winfield for the First Respondent J M Baxter for the Second Respondent
SOLICITORS:	Murphy's Lawyers Civil - for the Appellant Delwyn A Bishop Solicitor - for the First Respondent Small Business Legal Services - for the Second Respondent E H Tebutt & Sons Lawyers - for the Third Respondent (submitting appearance)

LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 4408/2004
LOWER COURT JUDICIAL OFFICER:	Macready AsJ
LOWER COURT DATE OF DECISION:	16/09/05 01/04/08 13/06/08 23/07/08
LOWER COURT MEDIUM NEUTRAL CITATION:	[2005]NSWSC 933; [2008] NSWSC 275

Headings	Para
Statement of the case	8
The proceedings: wilful default hearing	13
Wilful default judgment: written submissions at trial	55
The wilful default judgment	62
Wilful default judgment: short minutes of order	78
The accounting judgment	80
(a) items said to be not relevant to the building work	89
(b) executors' claim for a just allowance for work done by Mr Juul	90
(c) cash payments for which vouchers were not held	101
(d) items not identified or not sufficiently identified with the deceased's property	102
The costs judgment	104
The cross-claim judgment	112
Accounting judgment: short minutes of order	119
Issue on appeal	121
Issues on cross-appeal	123
Appellant's submissions	126
(a) The wilful default judgment	126
(b) The accounting judgment	141
(c) The costs judgment	154
(d) The cross-claim judgment	155
First respondent's submissions	161
Submissions on the cross-appeal	166
Cross-appeal: appellant's response	175
Meaning of wilful default	180
Taking accounts on a wilful default basis: pleading and proof	185
Pleading issues	196
The problem with parties	211
The count for money had and received	216
Removal of executors and trustees	236
Procedural fairness	241
The cross-claim	247
Conclusion	248
Orders	250