Kirsten v Miller - [2020] SASCFC 129

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Application for Leave to Appeal to the Full Court)
KIRSTEN v MILLER
[2020] SASCFC 129
Judgment of The Full Court
(The Honourable Chief Justice Kourakis, The Honourable Justice Kelly and The Honourable Justice Blue)
24 December 2020
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - PROCEDURE
SUCCESSION - CONSTRUCTION AND EFFECT OF TESTAMENTARY DISPOSITIONS - PARTICULAR TESTAMENTARY DISPOSITIONS - CONDITIONS AND GIFTS OVER - DISPUTING WILL OR BRINGING ACTION AGAINST EXECUTOR OR TRUSTEE
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - WHEN APPEAL LIES - BY LEAVE OF COURT
The appellant seeks leave to appeal against advice and directions given, and restricted access orders in relation to filed affidavits made, by a Judge on the application of the respondent as executor of an estate.
The Judge heard the application for advice and directions ex parte after the appellant had said that he sought to be heard on the application. The appellant contends that the Judge erred by hearing and determining the application without giving him the opportunity to be heard in opposition to it. The appellant also contends that he should have been given access to the affidavits filed in support of the application.
Held by the Court:
1. The application for leave to appeal is to be heard at the same time as the appeal.
Administration and Probate Act 1919 (SA) s 69; Uniform Civil Rules 2020 (SA) rr 213.1(1)(a), 213.5(8)(b), referred to.
Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89; Salmi v Sinivouri [2008] QSC 321, considered.

KIRSTEN v MILLER
[2020] SASCFC 129
Full Court: Kourakis CJ, Kelly and Blue JJ

THE COURT: This is an application by Ernst Kirsten (Ernst) for leave to appeal against advice and directions given, and restricted access orders in relation to filed affidavits made, by a Judge of this Court on the application of the respondent Cara Miller (Cara) as executor of the estate of the late Detlef Kirsten (Detlef).
Background
Detlef was the sole shareholder and director of Sound Diagnostics Pty Ltd. In 2016 he made a Will appointing his wife Cara as executor and trustee. By clause 8, he listed his assets, which included 100 per cent of the shares in Sound Diagnostics Pty Ltd trading as Sound Radiology. By clause 11, he left 40 per cent of his shares in Sound Diagnostics Pty Ltd to his father Ernst. Clause 11 provided:
I GIVE 40 percent (40%) of my shareholding in Sound Diagnostics Pty Ltd to Ernst Detlef Kirsten of [address]. This gift nullifies the oral agreement between myself and Ernst Detlef Kirsten that he shall receive 40% profit share from Sound Diagnostics Pty Ltd, as the 40% of shareholding is intended to replace this agreement. Should it be deemed that the oral 40% profit share agreement still applies, then this clause 11 of my Last Will and Testament shall no longer apply, and if needed the 40% shareholding referred to in this clause shall revert to my estate.
By clause 12, Detlef gave the residue of his estate to Cara as trustee of a Beneficiary Testamentary Trust for their two infant children.
In 2018 Detlef died. In September 2019 Cara as executor sent a letter to Ernst stating that she had “deemed that the oral 40% profit share agreement still applies”. In November 2019 Cara caused all of the shares in Sound Diagnostics to be transferred into her name, apparently as trustee of the Beneficiary Testamentary Trust. Cara did not transfer any shares to Ernst pursuant to clause 11 of the Will.
In June 2020 Ernst instituted a claim against Cara in the Supreme Court (case 817 of 2020) for breach of duty as executor by failing to transfer 40 per cent of the Sound Diagnostics shares to Ernst pursuant to clause 11 of the Will (the substantive action).
On 4 September 2020, at a directions hearing in the substantive action, senior counsel for Cara foreshadowed bringing an application for advice and directions concerning a defence to the claim and a counterclaim in the substantive action. Senior counsel for Ernst said that Ernst sought to be heard on the application for advice and directions.
On 16 September 2020 Cara lodged for filing an ex parte originating application, supported by an affidavit sworn by her, seeking advice and directions pursuant to section 69 of the Administration and Probate Act1919 (SA) amongst other things concerning a defence to the claim and bringing a counterclaim in the substantive action. The originating application (case 5460 of 2020) was accepted for filing, and filed, on 18 September (the advice action).
On 7 October 2020 a Judge of the Court heard the advice action ex parte and reserved judgment.
On 12 October 2020 the Judge delivered reasons for judgment. Ernst does not have access to the Judge’s reasons for judgment.
On 13 October and 2 November 2020 the Judge made orders giving advice and directions (the advice orders). Order 1 was that Cara would be justified in defending the claim by Ernst on the basis that the clause 11 gift was ineffective because Detlef held all or most of the Sound Diagnostics shares on trust and alternatively that, on the proper construction of clause 11, Cara was entitled to deem the 40 per cent profit share agreement to continue instead of transferring the shares. Order 2 was that Cara would be justified in issuing a counterclaim seeking declarations concerning the existence of a trust on which the Sound Diagnostics shares were held and as to the ineffectiveness of the clause 11 gift. The remaining orders gave advice on related or other topics.
The Judge made orders on separate occasions in the advice action that Cara’s affidavit dated 16 September 2020 and her solicitor Mr Hayes’ affidavits dated 23 September and 29 October 2020 be sealed and only be opened on the order of a Judge.
On 9 December 2020 Ernst filed a notice of appeal (case 6142 of 2020) appealing against the advice orders and seeking leave to appeal because he was not a party to the advice action. Ernst subsequently filed an amended notice of appeal after he obtained a copy of the orders made by the Judge.
Leave to appeal criteria
Ernst cites several authorities in support of the proposition that a non-party may appeal, with leave of the Court, against an order made in an action to which they were not a party provided that they have a sufficient interest in the matter.[1]
[1] Re Markham; Markham v Markham (1880) 16 Ch D 1 at 2 per Selborne LC, Brett and Cotton LJJ; Commonwealth v Construction, Forestry, Mining and Energy Union (2000) 171 ALR 379 at [18] per Black CJ, Tamberlin and Sundberg JJ; Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89 at [31]-[35] per Emmett, Nicholas and Robertson JJ; Ashby v Slipper (2014) 219 FCR 322 at [311]- [319] per Siopis J; Letten v Templeton [2014] FCAFC 131 at [13]-[15] per Davies J; Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2015) 89 NSWLR 110 at [75]-[83] per Bathurst CJ.
In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher,[2] Emmett, Nicholas and Robertson JJ identified factors relevant to grant of leave to appeal to a non-party in the following terms:
On an application for leave to appeal by a non-party, bearing in mind the widely different circumstances in which an application by a non-party for leave to appeal may be made, several matters are likely to be relevant to the exercise of the discretion, as follows:
·    first, the nature and subject matter of the proceeding, including whether it concerns public rights or private rights and, if the latter, whether only personal remedies or proprietary remedies are involved;
·    secondly, whether at first instance the applicant could have but did not seek to be made a party or to be heard, and whether the applicant could or should have been made a party;
·    thirdly, the rights, interests, liabilities and duties of the applicant that would be affected, and the nature and extent of the effect on the applicant of the orders appealed from;
·    fourthly, whether the applicant could commence a separate proceeding for the relief claimed and, if so, whether there would or might be a procedural or substantive difficulty arising from the existence of the judgment in respect of which leave to appeal is sought; and
·    fifthly, whether the proposed grounds of appeal are at least arguable, in the sense that there is a reasonable prospect of success.[3]
[2] [2011] FCAFC 89.
[3] At [35].
Ernst concedes that the advice orders comprised an “interlocutory decision” within the meaning of rule 213.1(1)(a) of the Uniform Civil Rules 2020 (SA). We proceed on the basis of that concession even though orders made in the advice action affected substantive rights insofar as they established that Cara had a right of indemnity against the assets of the estate for costs incurred in prosecuting the proposed defence and counterclaim. It is well established that the principal criteria considered on an application for leave to appeal against an interlocutory decision are whether the decision is attended with sufficient doubt to warrant its reconsideration by the Full Court and whether substantial injustice would otherwise result if the decision is wrong. These would be factors to be taken into account in any event on an application for leave to appeal by a non-party.
Consideration
Ernst cites several authorities in support of the proposition that in England applications for advice and directions are served on the beneficiaries and the beneficiaries have a right to be heard.[4]
[4] Re Moritz [1960] Ch 251 at 255 per Wynn-Parry J; Re Eaton [1964] 3 All ER 229 at 230 per Wilberforce J; Smith v Croft [1986] 2 All ER 551 at 558 per Walton J; Alsop Wilkinson v Neary [1996] 1 WLR 1220 at 1226 per Lightman J; Craig v Humberclyde IndustrialFinance Group Ltd [1999] 1 WLR 129 at 136 per Morritt LJ.
In Salmi v Sinivouri[5] Lyons J said:
The practice in Australia follows the English procedure which is that whilst the beneficiaries are served with a claim, neither the beneficiary against whom the trustees propose to litigate, nor those representing him, would normally be allowed to be present when the merits of the main action are discussed between the trustee’s counsel and the judge because they might hear something that they should not, given that it is about the strength or weakness of the trustee’s case. Whilst the beneficiary and his counsel are allowed into the hearing to address any arguments they may wish, they must then withdraw while the matter is discussed between the trustee’s counsel and the judge. The beneficiary’s counsel are then readmitted to be informed of the court’s decision. The basic principles of natural justice mean that material placed before the judge should be kept to a minimum. In this regard, the respondents to the current application had the opportunity to put affidavit material before the court.[6]
[5] [2008] QSC 321.
[6] At [15]. (Footnote omitted).
Ernst contends that the Judge erred in hearing and determining the advice action on an ex parte basis when Ernst had stated that he sought to be heard on the application for advice. Ernst accepts that his right to be heard may have been qualified or limited in the manner identified by Lyons J but contends that he was denied a right to be heard at all. Ernst has not been able to locate any authority of this Court, or of another intermediate appellate court in Australia, on the question of a right of a beneficiary of an estate or trust to be heard on an application by the executor or trustee for advice and directions.
It is sufficiently arguable that Ernst was entitled to be heard on the application for advice and directions to warrant consideration by the Full Court. If Ernst was entitled to be heard, it would follow that he has a sufficient interest in the question to justify grant of leave to appeal to a non-party. Subject to the two issues addressed at [21] and [22] below, Ernst will suffer substantial prejudice if he had a right to be heard but was not afforded that right. Subject to those two issues, this is a case in which leave to appeal against the advice given should be granted.
Ernst also seeks leave to appeal against the decisions by the Judge to seal the three affidavits filed in the advice action. If this were the only subject of the application for leave to appeal, it would not be appropriate to grant leave to appeal but rather Ernst should apply to the Judge, or a Judge, for leave to inspect the affidavits pursuant to the terms of the sealing orders themselves. However, the question whether Ernst should have access to some or all of the affidavits is inextricably intertwined with the question whether Ernst had a right to be heard on the application for advice. The extent to which Ernst should be permitted to inspect the affidavits will depend on what is required in order to afford him procedural fairness. If the question of Ernst’s right to be heard is to be considered by the Full Court, it is more efficient that both matters be heard and determined at the same time.
It is not possible at this stage to assess whether the advice given might have been different if Ernst had been heard. If leave to appeal is granted or the question of leave is referred to be heard at the same time as the appeal, Ernst may apply to adduce further evidence and make submissions on why the advice orders should not have been made. Cara will be entitled to contend that the giving of the advice was inevitable regardless of any participation by Ernst at the hearing. The most efficient course is to order, pursuant to rule 213.5(8)(b) of the Uniform Civil Rules 2020 (SA), that the application for leave to appeal be heard at the same time as the appeal.
The Judge gave advice and directions on a number of topics in addition to defending and filing a counterclaim in the substantive proceeding. Ernst contends that some of these orders are subsidiary to or interrelated with the advice on defending and filing a counterclaim in the substantive proceeding and seeks leave to appeal against all of the advice orders. It is more efficient for the relationship between the various advice orders, and the question whether leave to appeal should be granted in respect of some or all of the advice orders, to be considered by the Full Court at the same time as hearing the appeal on the merits.
Disposition
It is ordered that the application for leave to appeal against the various orders made by the Judge be heard at the same time as the appeal.