Kritsidimas v Dimitrakakis
[2019] VSC 704
•23 October 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S CI 2016 02257
| GEORGIA KRITSIDIMAS in her capacity as Executrix of the deceased Estate of ELIAS DIMITRAKAKIS | Plaintiff |
| v | |
| VASSILIOS DIMITRAKAKIS | Defendant |
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JUDGE: | Lansdowne As J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 29 November 2018 |
DATE OF JUDGMENT: | 23 October 2019 |
CASE MAY BE CITED AS: | Kritsidimas v Dimitrakakis |
MEDIUM NEUTRAL CITATION: | [2019] VSC 704 |
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ADMINSTRATION OF ESTATES – Application to remove plaintiff as executor - Executor in the underlying proceeding alleges that the defendant beneficiary acted unconscionably or in breach of fiduciary duty in respect of transfers by the deceased to the defendant of real estate in Greece and withdrawals by the defendant from certain bank accounts in Greece - Defendant denies all allegations – Administration of the estate largely completed except for distribution to the defendant of gifts of real estate - Executor plaintiff seeks to withhold those gifts pending determination of the proceeding – Whether plaintiff should be removed by reason of residence in Greece – Whether plaintiff should be removed as unfit by reason of various matters including her negative views of the defendant - Whether withholding the gifts to the defendant justified by the principle of Cherry v Boultbee or equitable set off – Held: not so justified – Plaintiff ordered to distribute gifts to the defendant – Administration and Probate Act 1958 (Vic) s 34(1)(a) and s 34(1)(c) – Cherry v Boultbee (1839) 4 My & Cr 442 and Re Taylor [1894] 1 Ch 671 considered – Re Akerman [1891] 3 Ch 212 and Re Savage [1918] 2 Ch 146 considered and applied – Stewart v Moden [2015] VSC 369 distinguished.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M W Seelig | G & M Lawyers |
| For the Defendant | Mr J D Catlin | Marshalls & Dent & Wilmoth |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Background......................................................................................................................................... 2
Legal framework................................................................................................................................. 8
Submissions...................................................................................................................................... 11
Discussion.......................................................................................................................................... 12
Paragraph (a): absence from Victoria....................................................................................... 12
Paragraph (c): unfit to act as executrix..................................................................................... 15
Delay. ……………………………………………………………………………………..15
Conflict between interest and duty................................................................................. 17
Abuse of process................................................................................................................ 18
Attitude to the defendant................................................................................................. 18
Cherry v Boultbee; equitable set-off............................................................................... 21
Appropriate relief and orders........................................................................................................ 28
HER HONOUR:
Introduction
The plaintiff in this proceeding is the executrix of the estate of her late father (‘the Deceased’). The defendant is her brother. The plaintiff seeks to recover from the defendant for the estate various sums and property she alleges were appropriated by the defendant from the Deceased unconscionably or in breach of fiduciary duty. The plaintiff also seeks to offset certain entitlements owed to the defendant pursuant to the will of the Deceased (‘Will’) against the moneys claimed, and be permitted not to distribute those entitlements until the determination of the proceeding.
The proceeding has had something of a tortuous procedural history, which it is not necessary to set out here in detail. The plaintiff’s claim is now pleaded in her Further Amended Statement of Claim dated 5 December 2018 (‘FASOC’). The defendant’s defence to the FASOC is dated 21 January 2019 (‘Defence’). By his Defence, the defendant denies the plaintiff’s claims and reserves his rights to allege certain of the claims are out of time. He also objects to certain allegations or particulars on the basis that they are embarrassing or vexatious. These reasons concern two summonses filed by the defendant, which were heard on 29 November 2018.
The first summons in time was filed on 13 December 2017, at which time the plaintiff had not yet filed a statement of claim, despite commencing the proceeding by writ and general endorsement on 10 June 2016. By the time I heard that summons, on 30 April 2018, the plaintiff had filed her statement of claim and the summons proceeded on the basis of an application for strike out, which was successful. An aspect of the defendant’s summons remained, being a summary judgment claim. In accordance with procedural orders I made on 11 October 2018, that outstanding summary judgment claim was listed for hearing on 29 November 2018. The orders made on 11 October 2018 also envisaged a potential application by the defendant to strike out the then amended statement of claim. No such application was filed.
At the hearing on 29 November 2018, the defendant appeared to conflate the outstanding summary judgment application and the potential, but not made, strike out application. He indicated through counsel that he did not wish to proceed on a summary judgment application, only strike out, and that only if the second summons was unsuccessful. [1]
[1]Transcript of Proceedings, Kritsidimas v Dimitrakakis (Supreme Court of Victoria, S CI 2016 02257, Lansdowne AsJ, 29 November 2018) 1-5, 9 (‘Transcript’).
The second summons filed by the defendant, filed on 18 May 2018, seeks the removal of the plaintiff as executor and her replacement by the defendant, or in the alternative an order that the plaintiff be required to distributed to the defendant the remaining gifts to him under the Will. By order made 23 August 2018, McMillan J referred the hearing and determination of that summons to me. It is that summons that was heard first on 29 November 2018. In his oral submissions, counsel for the defendant posited as an alternative to appointment of the defendant as executor that State Trustees be appointed. In his written submissions, in addition to the alternative relief sought in the summons, he seeks an accounting of income and expenses in respect of the properties.
For the reasons that I now give, I will not remove the plaintiff as executor but I will order her to implement the gifts of real estate to the defendant. I apologise for the delay in delivery of these reasons, which has been due to the press of work.
Background
The parties have filed multiple affidavits over the course of the disputes between them in this proceeding. They expressly rely on some aspects of those affidavits in these applications and I have had recourse to them generally for this background account. The parties disagree about many facts, including their father’s capacity and intentions in relation to the disputed transactions that benefited the defendant and other aspects of the financial dealings between the Deceased and the defendant. In the account which follows, I will indicate if the stated fact is disputed. In the absence of cross examination in this application, it is not possible to resolve disputes of fact.
The Deceased was born in Greece and emigrated to Australia in 1960. His wife and their young children followed the next year. During his life he and his wife accumulated significant assets, personally and through corporate entities, in both Australia and Greece. He and his wife had five children, of whom the plaintiff is the eldest and the defendant the youngest. The other three children are another son, Fotios (known as Frank), and two other daughters, Figalia (known as Freda) and Tina. The Deceased’s children are now aged between 71 (the plaintiff) and 60 or 61 (the defendant). Both the plaintiff and the defendant reside in Greece, to which the Deceased and his wife returned in their later years,[2] travelling back to Australia for periods. The Deceased’s wife died in Australia in 2008. The Deceased returned to Greece with the defendant in around June 2010[3] and died there on 22 December 2012. The other three children all reside in Victoria and support the plaintiff in this proceeding.
[2]According to the plaintiff this was in 1999 - Affidavit of Georgia Kritsidimas sworn 12 April 2018 (‘Plaintiff April Affidavit’), [41]. According to the defendant the Deceased’s return to Greece was in 1991 - Affidavit of Vassilios Dimitrakakis sworn 4 April 2018 (‘Defendant April Affidavit’), [33].
[3]Affidavit of Freda Katsouranis, sworn 10 April 2018, [28].
By his Will, dated 3 May 2000, the Deceased made a number of detailed dispositions of his property in Australia to relatives, including his children. The Will does not contain any specific gift to the plaintiff and does not dispose of the residue of the Deceased’s estate (‘Estate’). The plaintiff obtained a grant of probate of the Will on 9 February 2015. In the inventory accompanying her application for probate, the plaintiff deposes that the Deceased left personal interests in real estate in Victoria to the value of $3,562,500; personal property in Victoria, including the value of his share in Rodia Pty Ltd, to the net value of $994,397; real estate in Greece to the value of $1,556,952; and personal property in Greece, said at that time to be one Greek bank account, to the estimated value of $1,332,778. According to the inventory, the Deceased had no personal liabilities as at death. The specified gifts to the defendant were as follows:
1. A half share in the property known as 171 Brunswick St, Fitzroy with Frank as tenant in common as to the other half share;
2. The Deceased’s quarter share interest in the property known as 22 Bridge Road, Richmond; and
3. A one fifth share as tenant in common with his siblings in the property known as 19 Otter St, Collingwood. That property was sold in 2008, after the date of the Will but before the deceased’s death.[4] That gift accordingly lapsed.
[4]Affidavit of Fotios Dimitrakakis sworn 10 April 2018 (‘Fotios Affidavit’) [15].
In the later years of the Deceased’s life,[5] the defendant lived with him in his house in Greece. The plaintiff’s FASOC alleges that during this period the defendant utilised funds belonging to the Deceased in Greek bank accounts for his own purposes, and that certain transfers of real estate in Greece by the Deceased to the defendant were made in breach of fiduciary duties owed by the defendant to the Deceased. Further, it alleges that these acts were unconscionable having regard to what the defendant knew of the Deceased’s age, illness and other matters by reason of which he was under a special disability to the knowledge of the defendant.
[5]According to the plaintiff after 2008 - Plaintiff April Affidavit [40]; according to the defendant from 2003- Defendant April Affidavit [37].
The FASOC seeks declarations that the defendant has engaged in unconscionable conduct, breached his fiduciary duties to the Deceased and acted in conflict with those duties and an account of profits or alternatively equitable damages or equitable compensation. The FASOC pleads that the estate of the Deceased (‘the Estate’) has suffered loss and damage in the sum at least of $3,949,000. The plaintiff deposes that she seeks to ‘call in’ the Deceased’s personal estate in Greece, deriving from what she now knows to have been a number of bank accounts there, and would then distribute them as on an intestacy between herself and the other siblings.[6] The FASOC also seeks a declaration that the defendant’s remaining entitlement from the Estate be offset against ‘moneys misappropriated by the Defendant during the Deceased’s lifetime’.
[6]Plaintiff April Affidavit [12].
The defendant by his Defence dated 21 January 2019 denies the allegations. He contends that the bank accounts in question were joint accounts and that the real estate transfers were gifts made by the Deceased in full possession of his faculties.
The plaintiff deposes that administration of the Estate is not complete. She deposed in April 2018 that she has ‘chosen to delay transferring Vassilio’s share in properties to him, as I believe that he owes the estate approximately $1.3m which is well in excess of the values of the properties the Estate owes him’.[7] As noted, the plaintiff now quantifies the claim by the Estate at nearly $4m. She confirms in her most recent affidavit that it is her intention not to distribute to the defendant his remaining property gifts under the Will ‘until this case is settled’.[8]
[7]Plaintiff April Affidavit [15], [50].
[8]Affidavit of Georgia Kritsidimas sworn 26 November 2018 (‘Plaintiff November Affidavit’) [26].
The plaintiff has caused the defendant to be served with a document in Greece which states in its English translation:
in order to protect the right of my legitimate (forced share) in the estate of my father Ilias Dimitrakakis, which I will claim before a court in Greece, I WILL NOT transfer and assign the assets mentioned in the Will of Ilias Dimitrakakis and referring to you, until the end of the litigation with which I will claim the percentage of our father’s estate to which I am entitled as my legitimate (forced share) and of which no one can exclude me but the testator himself and only for certain reasons that do not apply in my case, therefore they are not mentioned in his Will.[9]
[9]Exhibit VD-7 to affidavit of Vassilios Dimitrakakis sworn 9 October 2018 (‘Defendant October Affidavit’).
The defendant contends that this amounts to the initiation of a parallel proceeding in Greece, in which the plaintiff will proceed on the basis of intestate succession as the Deceased had no Greek will.[10] As at November 2018, the plaintiff deposes that she intends to commence a proceeding in Greece, apparently under Greek intestacy law, as a child of the Deceased, but as at 26 November 2018 had not yet done so.[11]
[10]Defendant October Affidavit [12]-[15].
[11]Plaintiff November Affidavit [25].
The plaintiff deposes that another outstanding matter in the administration of the Estate in Australia is the transfer to Frank of the Deceased’s 50% share in the property known as 173 Brunswick St, Fitzroy. The defendant is the owner of the other 50% share of that property. The plaintiff and Frank depose that the defendant has prevented the transfer to Frank of Frank’s 50% gift by the Will by failing or refusing to sign a statutory declaration in relation to a missing certificate of title.[12] The defendant disputes this account.[13]
[12]Fotios Affidavit [16]; Plaintiff April Affidavit [15], [25], [51]; Plaintiff November Affidavit [29].
[13]Defendant April Affidavit [22].
The value of the assets not yet transferred to the defendant is disputed. Frank deposes to valuations of 22 Bridge Road and 171 Brunswick Street as at November 2013. As at that date, 22 Bridge Road was valued at $1.15m, of which a quarter share would be about $287,000. 171 Brunswick Street was valued at that date at $1.75 m, putting the defendant’s share at that time as $875,000. Frank estimates the values of those properties at April 2018 respectively as $1.5m, making the defendant’s share $375,000, and $2 m, making the defendant’s share $1m, a total of $1.375 m.[14] The defendant estimates the value of his interests as at April 2018 as $500,000 (one quarter share of 22 Bridge Road) and $1,500,000 (half share of 171 Brunswick Street) respectively,[15] making a total at that time of $2m. He does not set out the basis for his estimate.
[14]Fotios Affidavit [17] and Plaintiff April Affidavit [26]. See also Plaintiff November Affidavit [38] which values the defendant’s interests in these properties as approximately $1.4m.
[15]Defendant April Affidavit [12].
In November 2017 and April 2018 the defendant deposed that he has not received rental income due to him from the commercial leases of those and other properties in which he has an interest for a period of time. In November 2017 he estimated his loss in rent from the real estate devised to him as $374,762 in round terms, and rent withheld from him in respect of other properties at $492,443. [16] He gives more detail of what he claims to be withheld rent in his April affidavit. [17] Frank agreed in April 2018 that on the instructions of the plaintiff he has paid rents arising from properties to be transferred to the defendant into an Estate account or an account for the defendant rather than to the defendant directly.[18] The plaintiff deposed in April 2018 that she gave Frank these instructions ‘as the properties have not been transferred to (the defendant)’ and that her intention is that ‘any and all monies owing to Vassilios will be properly paid to him once he returns the monies he has taken from our Father’s bank accounts’.[19]
[16]Affidavit of Vassilios Dimitrakakis sworn 16 November 2017 [12].
[17]Defendant April Affidavit [12]-[15],[22].
[18]Fotios Affidavit [18], [31], [33].
[19]Plaintiff April Affidavit [26].
The plaintiff and Frank, in his capacity as manager of the properties, dispute the defendant’s entitlement to the full amount claimed by the defendant for rent, and the defendant’s estimate of rent owing, for various reasons.[20] It may be that some aspects of the rent claim may now have been resolved.[21]
[20]Fotios Affidavit [19]-[23], [28]-[29], [34]-[36]; Plaintiff April Affidavit [27]-[32], [90]-[91]; Plaintiff November Affidavit [5], [34]-[35].
[21]Plaintiff November Affidavit [5]. But compare the submission by the defendant that more than $700,000 by way of rent due to him remains outstanding - Vassilios Dimitrakakis, ‘Submissions on behalf of the Defendant’, Submission in Kritsidimas v Dimitrakakis, S CI 2016 02257, 27 November 2018 [38].
Taking the claim by the plaintiff against the defendant and the amount the defendant says is owing to him each at their highest, the Estate claims $3.9m from the defendant and the defendant claims $2.4 m from the Estate, if the rent claimed due to him is confined to the gifts by the Deceased’s Will. In the event the plaintiff was entirely successful in respect of her claim for the Estate of $3.9m, then the defendant would be entitled on the intestacy to a one fifth share of those proceeds. Accepting for the moment the defendant’s outstanding entitlements at the value he gives them, success by the plaintiff would make the competing claimed entitlements as between the plaintiff, Freda, Frank and Tina on the one hand, and the defendant on the other, in each case as beneficiaries, roughly equal. Four fifths of $3.9m is $3.12m for the beneficiaries other than the defendant, and the total of one fifth of $3.9m and the $2.4 m claimed by the defendant is $3.18m.
In addition to the properties gifted to him by the Will of the Deceased, the defendant has substantial other property interests in Australia, including properties known as 34 and 40 Smith St, Richmond; 25% of the interests held by Rodia Pty Ltd (which include properties known as 49 Brunswick St, Fitzroy and 4-12 Langridge St, Collingwood) and 50% of 173 Brunswick St, Fitzroy.[22] His ownership of this real estate in Victoria does not appear to be disputed. The plaintiff estimates the value of some or all of these properties as at November 2018 as in excess of $6.5m.[23]
[22]Defendant October Affidavit [30].
[23]Plaintiff November Affidavit [39]. It is not clear to what properties exactly she ascribes this value, in particular whether or not it includes the defendant’s interests in properties owned by Rodia Pty Ltd.
It is plain from the affidavits filed by the parties in this and earlier applications that there is very considerable distrust and animosity between the defendant on the one hand and the plaintiff and other siblings on the other. The facts underlying this animosity are disputed and it is not possible to determine them in this application which has proceeded without oral evidence in chief or cross examination.
Legal framework
By his summons, the defendant seeks the removal of the plaintiff as executor and appointment of himself as executor pursuant to s 34(1)(a) and/or s 34(1)(c) of the Administration and Probate Act 1958 (Vic) (‘the Act’). In oral argument, the defendant proposed that the replacement executor could be State Trustees.
In the alternative, the defendant seeks an order that the plaintiff forthwith transfer to him his outstanding gifts of property under the Will.
Section 34 of the Act relevantly provides:
34 Discharge or removal of executor or administrator
(1)Notwithstanding anything contained in any Act where an executor or administrator to whom probate or administration has been granted whether before or after the commencement of this Act or where an administrator who has been appointed under this section or any corresponding previous enactment—
(a) remains out of Victoria for more than two years;
(b) (not relevant); or
(c)after such grant or appointment refuses or is unfit to act in such office or is incapable of acting therein—
the Court upon application in accordance with the Rules of Court may order the discharge or removal of such an executor or administrator and also if the Court thinks fit the appointment of some proper person or trustee company as administrator in place of the executor or administrator so discharged or removed upon such terms and conditions as the Court thinks fit; and may make all necessary orders for vesting the estate in the new administrator and as to accounts and such order as to costs as the Court thinks fit.
The parties agree that the Court has a discretion whether or not to remove an executor, even if a ground for removal is proved. They also agree that the powers of the Court on such an application include orders of the type here sought by the defendant as his alternative.
The Court’s power to remove an executor was summarised by McMillan J in Molnar v Butas(No 3)[24] as follows (citations omitted):
A court may remove an executor at its discretion pursuant to s 34 of the Administration and Probate Act 1958. Under s 34, the grounds for removal in a contested application are that an executor has been absent from Victoria for two years or refuses to act or is unfit to act. On any removal application, the Court should have regard to a testator’s wishes as to the identity of an executor or trustee.
Ultimately the decision to remove an executor depends on all the facts of the particular case and is a determination to be made at the discretion of the Court after consideration of the interests of the beneficiaries, the security of estate property, the efficient and satisfactory exercise of the trusts, and a faithful and sound exercise of the powers by an executor or trustee.[25]
[24][2017] VSC 711 [21]-[22]; repeated in Guirina v Guirina [2018] VSC 599.
[25]Ibid [21]-[22].
The meaning of ‘unfit to act’ was exhaustively considered by the Court of Appeal in Dimos v Skaftouros[26] (‘Dimos’). In that case, Winneke P, agreeing with the more detailed analysis of Dodds-Streeton JA, held that:
…the circumstances upon which the Court’s power to remove an executor pursuant to s.34(1)(c) rests, extend beyond [unfitness established by disqualification to act] and include breach of, or neglect of, duty in the administration of the estate including such matters as unwarranted delay and failure to communicate with beneficiaries, failure to account as well as conflict of interest and duty…
…It is unnecessary, and I think unhelpful, for this Court to seek to exhaustively state the limits of the Court’s discretionary power to remove executors. It must be steadily borne in mind, as the trial judge in this case bore in mind, that the Court will not lightly exercise its discretion to remove a person who has been chosen by the testator as the personal representative. However, it is the welfare of the beneficiaries and the protection of their interests in the estate which must be regarded by the Court as the paramount considerations in exercising the discretion.[27]
[26](2004) 9 VR 584; [2004] VSCA 141.
[27]Ibid [12] and [13] (Winneke P).
Conflict between personal interest and the duty of an executor was the subject of detailed consideration by Ashley J (as he then was) in Monty Financial Services Pty Ltd v Delmo[28] (‘Monty Financial’). At that time there was no reported decision of such conflict as a basis for removal of an executor. Ashley J concluded that:
…unfitness to act does comprehend a situation in which an executor has a conflict of duty and interest in carrying out his executorial duties…
It is not every conflict of duty and interest which should result in removal of an executor. The intention of the testator that the executor be a particular person should not lightly be set aside- whether before or after grant. Again, the will itself may show that the testator was aware that his or her executor would face a possible conflict of duty and interest. In such a case - as may arise, for example, where an executor is also one of the beneficiaries – it would not be right, without more, to remove the executor.[29]
[28][1996] 1 VR 65.
[29]Ibid 82-83.
The analysis and conclusions drawn by Ashley J in Monty Financial were adopted by the Court of Appeal in Dimos. In Molnar v Butas(No 3) McMillan J noted as follows in relation to removal on the grounds of conflict of interest (citations retained):
The authorities demonstrate that an executor or trustee will not necessarily be removed where there is a conflict between duty and interest, but in some cases it may be sufficient. Proof of actual misconduct is not required for the removal of a trustee. Examples of cases where executors or trustees have not been removed when in a position of conflict between duty and interest can be seen in McKenna v Lowe[30] and Porteous v Rinehart.[31] Examples of cases where a trustee has been removed when in a position of conflict between duty and interest are Passingham v Sherborn,[32] Hunter v Hunter,[33] Titterton v Oates,[34] Hill v Fry[35] and Hobkirk v Ritchie.[36] These examples demonstrate that each case depends on the facts and it is a matter of what is best for the welfare of the trust or estate as a whole.[37]
[30](1878) 1 SCR (NSW) Eq 10.
[31](1998) 19 WAR 495.
[32](1846) 9 Beav 424; 50 ER 407.
[33][1938] NZLR 520.
[34](1998) 143 FLR 467.
[35][2008] VSC 13 (7 February 2008).
[36](1934) 29 Tas LR 14.
[37]Molnar v Butas (No 3) (n 24) [24].
Where a ground for removal is established, the Court retains a discretion as to whether or not to order removal. In Re Greif,[38] for example, Byrne J found that grounds for removal of the executor were established, being delay in providing accounts, delay in finalising the administration of the estate and the payment to himself of unauthorised amounts. However, he declined to remove the executor in part because the administration of the estate was almost complete and the cost of a new administrator would be a burden on the estate. He was also concerned that the attitude of all the beneficiaries was not known. To meet the concern of the plaintiff beneficiaries that further irregularities may come to light, he accepted the suggestion by the defendant executor of an independent audit, to be paid for by him.[39]
[38][2005] VSC 266.
[39]Ibid [17]-[20].
Submissions
The defendant makes the following submissions in support of his application:
(i) The plaintiff is not entitled by virtue of the principle identified in Cherry v Boultbee[40] to retain the gifts devised by the Deceased to the defendant pending determination of her claim that he should be required to pay compensation to the Estate, as the principle only applies where the gift under the will is pecuniary, not a specific gift;
(ii) The ground for removal pursuant to paragraph (a) of s 34(1) of the Act, being absence of the plaintiff from Victoria for more than two years, is plainly established;
(iii) The plaintiff is unfit for the office of executor by virtue of a number of matters. These matters are her hatred of the defendant; her foreshadowed abuse of process by commencing proceedings in Greece; and delay in obtaining a grant of probate and in the administration of the Estate.
[40](1839) 4 My & Cr 442; 41 ER 171
The plaintiff agrees that the evidence shows a ‘passionate dislike’ by the plaintiff of the defendant.[41] She submits through her counsel that it is not, however, shown that this dislike has interfered with the plaintiff’s proper administration of the Estate. In response to the matters identified above, the plaintiff submits:
[41]Transcript, 31.
(i) No reported case limits the principle of Cherry v Boultbee to cases where the bequest is cash and so the issue is fund against fund. Retention of the defendant’s gifts is further justified by way of equitable set-off;
(ii) The plaintiff was appointed by her father as executrix notwithstanding her residence in Greece;
(iii) The delay in obtaining a grant of probate and subsequently has been due to the actions or inactions of the defendant. No conflict of interest is shown and the plaintiff’s appointment as executrix is supported by all the other beneficiaries of the Will.
The defendant does not identify any source in the Estate from which a third party executor such as State Trustees could be paid, and nor does the plaintiff. The plaintiff is not aware of any practical impediment to the alternative relief sought by the defendant, the transfer of the outstanding gifts of property, but foreshadows that in the event that were ordered she would seek a freezing order over the defendant’s Australian assets.[42]
[42]Transcript, 40.
Discussion
Paragraph (a): absence from Victoria
The defendant does not point to any case in which absence from Victoria has been a determinative factor in the removal of an executor, but submits that the rationale for the power to remove an executor conferred by paragraph (a) of s 34(1) of the Act is the significance of the role of executor and the ability to readily access the courts if necessary.
There is no dispute that the plaintiff resides in Greece. She herself deposes that she has lived in Greece since August 1980.[43] She contends, however, that this has not prevented her from complying with her duties as executor. In particular, she deposes that she attended Court in April 2018 on the hearing of a previous application heard before me, which was a large part of the reason for her visit. I recall being informed on that occasion that the plaintiff was in Court. She refers to previous travel to Australia in 2008 and 2009 for four weeks on each occasion.[44] She states that she has business interests in Australia.[45] She deposes that it is she, and not Frank as the defendant asserts, who instructs her legal advisors and that she does so by emails, telephone calls and teleconferencing with them and her siblings in Victoria. All documents requiring her approval are sent to her in Greece.[46] She deposes that when she has not been able to attend interlocutory hearings in this proceeding she has asked her siblings Frank, Freda and Tina to do so. Further, she contends that each of her siblings with the exception of the defendant have told her that they agree to her continuing to act as executrix and agree with her proceeding against the defendant.[47] Finally, she relies on the fact that the Deceased was well aware that she resided in Greece when he appointed her executrix by his Will, as is shown by her address in the Will being in Greece, notwithstanding that the Will was prepared and executed in Australia.[48]
[43]Plaintiff April Affidavit [13].
[44]Plaintiff November Affidavit [16].
[45]Plaintiff April Affidavit [10].
[46]Plaintiff April Affidavit [10].
[47]Plaintiff November Affidavit [18],[20] and [21].
[48]Plaintiff April Affidavit [10] and Plaintiff November Affidavit [17].
The defendant relies, for reasons not entirely clear to me, on the plaintiff’s absence from Australia for a period of nine years.[49] The ground for removal as stated in the paragraph is expressed in the present tense - ‘remains out of Victoria for more than two years’ - and so in my view the authors of the Wills, Probate and Administration Service (Vic) are likely correct in their assertion that ‘as a grant of representation must have been obtained before the power to remove arises, the two year period can only commence to run after the grant has been made’.[50] The grant of probate in this case was on 9 February 2015. Has the plaintiff remained out of Victoria for more than two years since that date? An inference from her evidence is that her attendance at Court in April 2018, more than two years after 9 February 2015, was the first occasion she returned to Victoria since the grant of probate. As against this, this proceeding was commenced by writ on 10 June 2016 through local solicitors and the plaintiff signed her Overarching Obligations Certificate on 27 June 2016. The Certificate does not, on its face, indicate whether or not she did so in Victoria.
[49]Transcript, 12.
[50]CCH, Wills Probate and Administration Service Victoria, vol 1 (at service 56) [48,155].
Even if it was indeed the case that the plaintiff was not present in Victoria for more than two years after 9 February 2015, I accept the submission of the plaintiff that the factor that should guide the Court’s discretion as to whether or not to remove her on this ground, either alone or in conjunction with the ground set out in paragraph (c), is whether the absence from Victoria has prevented her proper administration of the Estate. In my view, that is not shown for the following reasons.
First, I work on the basis that the solicitors on record for the plaintiff would not have instituted the proceeding without being satisfied that they were instructed by the executrix and arguably it would have been improper for the solicitor to file his Proper Basis Certificate on 28 June 2016, or for solicitor or counsel to proceed thereafter, without being so satisfied. Whatever the merits of the proceeding, which are hotly contested, its institution is an attempt within the two year period to administer the Estate, as the plaintiff on advice conceives is required or appropriate.
Next, an inference from the plaintiff’s evidence as to particular matters that have not been completed in the administration of the Estate (the transfer to Frank of a 50% interest in 173 Brunswick St, Fitzroy; and the transfer of the property interests to the defendant) is that other specific gifts have been distributed. The plaintiff does not expressly depose that the gift to Frank and gifts to the defendant are the only outstanding matters, in fact she says that the ‘matters outstanding’ include these matters, but nor has the defendant pointed to any other matters in the administration not completed or whose completion has been hampered by the plaintiff’s presence in Greece. Indeed, in argument counsel for the defendant conceded that the real difficulty on which he relies is not incapacity to administer the Estate by virtue of residence in Greece, but reluctance to administer it in relation to the defendant.[51] If there are other matters outstanding, affecting the other beneficiaries, then they make no complaint about them. The Deceased and the other beneficiaries were and are content for the executrix to live outside of Victoria.
[51]Transcript, 14.
Finally, to the extent the defendant puts himself forward as executor the same difficulty of absence from Victoria would apply.
For these discretionary reasons, I do not consider that the ground set out in paragraph (a) of s 34(1) provides a basis for removal of the plaintiff as executrix, even if established.
Paragraph (c): unfit to act as executrix
The defendant relies on a number of matters to show that this ground is established.
Delay
It is plain that there has been considerable delay in the plaintiff first obtaining a grant of probate and then in finalising the administration of the Estate. The Deceased died in December 2012 and the plaintiff did not apply for probate until February 2015. Even allowing for a Christmas vacation period at the beginning and end of this period, the application was nearly two years after the Deceased’s death.
The plaintiff contends that the delay in obtaining a grant of probate was due to the defendant failing to comply with her requests for information. She deposes that she began asking the defendant for bank accounts details and any other documents of their father’s in January 2013 and he refused to provide them.[52] She deposes that she sought legal advice because the defendant would not discuss these matters with her and instituted some form of process or request in Greece in September 2013, which she exhibits.[53] Unfortunately, that exhibit does not appear on the Court file but the defendant does not dispute it.
[52]Plaintiff April Affidavit [16].
[53]Ibid.
Counsel for the defendant submits that the plaintiff did not need information from the defendant to apply for a grant of probate in relation to Australian property, but in contrast to this submission notes that bank accounts in Greece attract Victorian jurisdiction.[54] Previous successful applications in relation to discovery by the defendant have proceeded on the basis that the defendant was in effective control of access to information about the Deceased’s bank accounts to which he was also a signatory. For these reasons, I do not consider the delay in obtaining probate to establish unfitness to remain as executrix.
[54]Transcript, 18.
Potentially more significant is the delay in completing the administration of the Estate since the grant. To the extent it is not complete because the plaintiff seeks to call in the money originally within the Deceased’s bank accounts in Greece, she did not move with any speed or in conformity with the usual procedural rules after initiating the proceeding in June 2016. In particular, there is no explanation to which I was directed in this application for her initial delay in filing a statement of claim until prompted to do so 18 months later by the defendant’s application in December 2017.
The delay since that time is explicable by virtue of the series of interlocutory applications that followed, in which both parties have on different occasions been successful. Significantly, on two occasions the Court has made orders against the defendant for further discovery in relation to the Deceased’s bank accounts which is consistent with delay in this proceeding being due to the recalcitrance of the defendant.[55] Further, it appears accepted that the other gifts of land made by the Will have been effected, with the exception of the gift of 50% of 173 Brunswick St, Fitzroy to Frank, or, if not, there is no evidence of any complaint in that regard by any beneficiary other than the defendant.
[55]Orders made 27 August 2018 and 11 October 2018.
In respect of the delay in distributing to Frank the gift of 50% of 173 Brunswick St, Fitzroy, the plaintiff exhibits correspondence sent by her solicitors to the defendant or former solicitors on his behalf from 3 September 2015 to 18 November 2016, and to his new solicitors from 21 December 2017 seeking that he sign a statutory declaration to enable the issue of a new certificate of title to enable the transfer. The correspondence asserts that the request was not complied with until 13 April 2018 when a copy only of the statutory declaration signed by the defendant was provided by the defendant’s current solicitors. By letter dated 17 April 2018, the solicitors for the plaintiff sought the necessary original.[56] It is not made plain on the material before me when that original was then provided, but it seems that it was from the subsequent correspondence from her solicitors to the solicitors for the defendant from 29 August 2018 to 16 October 2018 requesting that the defendant complete verification of his identity in relation to the application for a new title.[57] As at 26 November 2018 the plaintiff deposes that the defendant has still failed to provide that verification.[58]
[56]Part of Exhibit GK-2 to the Plaintiff November Affidavit.
[57]Part of Exhibit GK-3 to the Plaintiff November Affidavit.
[58]Plaintiff November Affidavit [29].
The defendant does not dispute the accuracy of the contents of the exhibited correspondence, or that he had at least as at 26 November 2018 failed to comply with requests to take simple action to facilitate the transfer of the gift of 50% of 173 Brunswick St, Fitzroy to Frank. He states that ‘It has never been explained to me where or how the title was lost’[59] but I do not consider this to be sufficient explanation for failing to facilitate the request for a new title. I am satisfied that to the extent there has been unacceptable delay in the distribution of the gift of 50% of 173 Brunswick St, Fitzroy to Frank, it has been occasioned by the defendant.
[59]Defendant April Affidavit [22].
For these reasons, I am not satisfied that delay in the administration of the Estate with the exception as to how it might apply to distribution to the defendant of the gifts of land to him establishes unfitness in the plaintiff to continue as executrix.
Conflict between interest and duty
The Will did not contain any specific gift to the plaintiff and had no provision in relation to the residue of the Estate. Thus the residue, if any, would fall to be distributed by way of intestacy, which gives the plaintiff, together with each of her siblings including the defendant, an interest in recovering for the Estate monies said to have been misappropriated by the defendant.
On this analysis the plaintiff has a personal interest in pursuing this litigation. I do not consider, however, that the defendant has shown that that personal interest, viewed dispassionately, is in conflict with the plaintiff’s duty as executrix. She brings this litigation not only for her own ultimate benefit, but for that of all the children of the Deceased, including the defendant, and to give effect, so she deposes, to the previously expressed intentions of the Deceased.
Abuse of process
The defendant submits that the plaintiff in indicating an intention to bring proceedings in Greece would abuse the process of this Court, on the basis that the Greek proceeding would concern bank accounts that attract the jurisdiction of this Court.[60] I do not consider that the evidence establishes any abuse of process, or foreshadowed abuse of process by virtue of a proceeding in Greece instituted by the plaintiff for two reasons. First, it is not shown the evidence to what property of the Deceased in Greece the foreshadowed application by the plaintiff will or may relate, in particular whether that property includes personal property that is the subject of this proceeding or can be the subject of this Court’s jurisdiction. Secondly, any such application would be instituted in the plaintiff’s capacity as a daughter of the Deceased pursuant to intestacy in Greece, not as executrix in respect of the Estate in Victoria.
[60]Transcript, 18.
Attitude to the defendant
The real nub of the case for removal is the plaintiff’s attitude to the defendant. The defendant’s principal complaint is that the plaintiff has failed to give effect to the land gifts to him, despite the inference from her evidence that all other land gifts have been distributed, with the possible exception of the gift to Frank that depends on the defendant facilitating the issue of a new title. Indeed, it is not just that the plaintiff has failed to distribute these gifts to the defendant – she has refused to do so until this litigation is resolved.[61] Further, the defendant submits that the plaintiff has shown that this failure and refusal is motivated by a vendetta against the defendant, rather than by proper considerations relating to due administration of an estate.
[61]Exhibit VD-7 to the Defendant October Affidavit;
In that regard, the defendant relies on the various statements in the plaintiff’s evidence affirming that it is her intention not to distribute those gifts to him pending the determination of this litigation and showing her attitude to the defendant. The defendant submits that the plaintiff’s statements and actions amount to an improper withholding of the gifts by way of an informal freezing order.
Counsel for the plaintiff does not dispute that his client has strong feelings against the defendant. I find on the basis of her own evidence and that of her other siblings that not only do they believe that the defendant has taken financial advantage of their ailing father to their disadvantage and against the Deceased’s prior expressed intentions, but they also believe that the defendant isolated the Deceased and withheld information from their father so that he died believing that Frank had defrauded him, that the plaintiff and other family members apart from the defendant had abandoned him, and other matters to their discredit.[62] Their evidence is that that this is a matter of great distress to them.[63] In addition to these matters, the plaintiff, Frank, Tina and Freda express disapproval of the defendant’s lifestyle over a number of years, depose that their parents shared this view, and compare his lifestyle unfavourably to their own hard work for their natal family and subsequently.[64] Nevertheless the plaintiff maintains that her relations with the defendant were good until after the Deceased’s death and her discovery of the money received by the defendant from the Deceased. Freda, Frank and Tina date the deterioration in their relations with the defendant from early 2012 when they began to learn what the defendant was doing or had done to exploit and isolate their father from them. [65] The plaintiff and the siblings who support her also depose to matters to the effect that the defendant’s care for the Deceased and contribution to the family wealth was no greater, and indeed was less, than their contributions and care.[66]
[62]Plaintiff April Affidavit [35]-[37], [68]-[69], [84]; Plaintiff November Affidavit [11]. Affidavit of Tina Krontiris sworn 10 April 2018 (‘Tina Affidavit’) [13]-[15]. Frank Affidavit [39], [63]-[64], [77]
[63]Plaintiff April Affidavit [71], [86], [92]. Tina Affidavit [22], [63].
[64]Plaintiff April Affidavit [38]-[39],[42], [44], [47], [72]-[75], [101]. Tina Affidavit [18]-[21],[38]-[39], [45]-[46], [71], [75]-[77]. Affidavit of Freda Katsouranis sworn 10 April 2018 (‘Freda Affidavit’) [4],[6],[9],[31],[51]. Frank Affidavit [12]
[65]Plaintiff April Affidavit [104]. Tina Affidavit [22], [64], [70], [73]. Freda Affidavit [53]. Frank Affidavit [43], [85], [93].
[66]For example, Tina Affidavit [65]; Freda Affidavit [16]; Frank Affidavit [41], [44], [55], [68], [88].
It is clear on the affidavit evidence that the strong negative feelings of the plaintiff, supported by the other siblings, towards the defendant are at least to some extent reciprocated. The defendant denies the allegations of misappropriation made against him, deposes to a close relationship between himself and the Deceased, and that he made a ‘considerable’ contribution to the family wealth. In his account, the Deceased gifted properties to him as compensation for contributions he had made which had compromised his own life, and his siblings were resentful of these gifts and as a result unfriendly towards him.[67] He alleges that his siblings ceased talking to him well before the Deceased’s death and have acted harshly towards him thereafter, that the Deceased was angry with Frank from 2011, and that Tina stopped talking to the Deceased in 2011.[68]
[67]Defendant April Affidavit [17]-[18].
[68]Defendant April Affidavit [41]-[46].
It is not possible in this application to determine disputes of fact. However, the dislike expressed by the plaintiff and the siblings who support her towards the defendant, and his dislike of them, is plain on the face of their respective affidavits. This is not a case where the allegation of bad feeling, or sufficient bad feeling, is disputed and a full consideration of the allegation with the benefit of seeing the witnesses in person and cross examination is required.
I accept the submission of the plaintiff that it is not necessarily enough that a plaintiff executor might stand to gain personally from an action against another beneficiary, or that the executor dislikes another beneficiary, to show that the executor should be removed. It is common for an executor to be also a beneficiary or potential beneficiary and dislike as between family members is not in itself a reason for removal of one as executor, particularly where the posited replacement executor is the object of the dislike of all other beneficiaries. What is necessary to show is that the potential conflict between duty as executor and interest as potential beneficiary, and/or the dislike is hindering the due administration of the Estate.
The answer to the question as to whether that is shown in this case turns on whether the plaintiff has a plain justification in law for withholding the gifts to the defendant. This is because counsel for the plaintiff concedes that there is no practical obstacle that prevents the distribution of the gifts of land to the defendant, but relies on the plaintiff’s claim on behalf of the Estate against the defendant as justification for the withholding of the gifts. For the reasons I now set out, I am not satisfied that the principles on which the plaintiff relies apply in this case. In these circumstances, I consider that the defendant has shown that it is the plaintiff’s attitude to him that is the cause of her failing to distribute the gifts to him, and so is interfering with the proper administration of the Estate.
Cherry v Boultbee; equitable set-off
The plaintiff relies on Cherry v Boultbee[69] and the equitable principle of set-off to justify her retention in the Estate of the gifts of the two interests in real estate to the defendant pending determination of this proceeding. As applied to the administration of estates, they can each be seen as mechanisms to ensure that a beneficiary who owes money to an estate does not receive more than his or her fair share of the distribution of the estate.[70]
[69](1839) 4 My & Cr 442; 41 ER 171.
[70]Lee Aitken, ‘Recent Applications of the rule in Cherry v Boultbee (or Jeffs v Wood)’ (2010) 84 ALJ 191.
A succinct statement of the principle originating from Cherry v Boultbee can be found in Re Peruvian Railway Construction Co Ltd[71] (‘Re Peruvian Railway’) in which Sargent J summarised it in these terms (citations omitted):
The whole contest has been as to the application to the present case of the much broader principle, enunciated in Cherry v Boultbee and given effect to in Re Akerman and a series of subsequent cases, that where a person entitled to participate in a fund is also bound to make a contribution in aid of that fund, he cannot be allowed so to participate unless and until he has fulfilled his duty to contribute.[72]
[71][1915] 2 Ch 144.
[72]Ibid 150; [1914-15] All E.R.Rep 1397, 1399 (Sargant J). Decision affirmed on appeal to the Court of Appeal Re Peruvian Railway Construction Company Limited [1914-15] All E.R.Rep 1397, 1402.
If that principle were to be applied in this case to justify the plaintiff’s refusal to distribute the gifts of real estate to the defendant pending determination of the claim by the Estate against him, it would be to apply it to a disputed claim for an unliquidated amount, as yet unproven, in respect of a gift in specie, as opposed to a pecuniary amount. I now consider those aspects.
In Equity Trustees Executors & Agency Co Ltd v Nicholas (‘Equity Trustees’)[73] Harper J of this Court (as he then was) discussed the principle as an aspect of the jurisdiction to impound the interests of a beneficiary, and cited authority[74] that that did not confine it to a proven claim. Further, the discussion in Equity Trustees shows that Harper J did not consider the principle to only apply to a liquidated amount due to the estate. In Equity Trustees the executors sought to withhold distribution to a particular beneficiary, Michael Nicholas, on the basis that he was a defendant to a suit for recovery of damages and equitable compensation to the estate. The claim alleged that as a director of a company said to have acted in breach of trust in respect of estate assets he instigated or acquiesced in that breach of trust. The claim against Michael Nicholas was thus for an unliquidated sum, and was not yet proven. In the result, Harper J declined to impound Mr Nicholas’s share in the estate pending determination of the suit against him, noting that the claim against him ‘is far from being one for a liquidated amount’ and having regard to the limited state of the evidence before the Court in relation to the claim.
[73](Supreme Court of Victoria, Harper J, 22 June 1994) BC 9406219, 15-17. In this case, Harper J described the principle as impounding the interest of a beneficiary.
[74]Partridge v Rhodesia Goldfields Ltd [1910] 1 Ch 239, discussed in Equity Trustees at 15-16.
Certain of the claims against the defendant in this proceeding are for the misappropriation of specific sums from the accounts of the Deceased. However, other claims relating to the transfer of real estate from the Deceased to the defendant are not for identified sums. The monetary relief sought is equitable damages or equitable compensation, rather than a specific sum. I conclude that this may not in itself make the principle inapplicable, although it may make it inappropriate to apply it as a matter of discretion, particularly where on the evidence the Court cannot conclude that the claim will succeed.
There is a more fundamental issue, however. That issue is whether the principle is applicable to gifts in specie. The contest in Re Peruvian Railway[75] was between money said to be owed by the testator to a company, which subsequently went into liquidation, and the monies which would otherwise be due to the testator on the liquidation of the company. In other words, it did not concern the question whether a specific gift in specie could be withheld pending payment of an amount due from the beneficiary to the estate. The distribution in question in Equity Trustees was from a fund of known amount. In another recent application of the rule, in Steiner v Strang,[76] the New South Wales Court of Appeal accepted that the principle could apply, although allowing an appeal against its application on other grounds. The distribution to the defendant beneficiary to which the plaintiff executor sought to apply the principle in that case was a pecuniary legacy of fixed amount, greater in amount than the debt said to be owing from the defendant to the estate. In other words, the balance between claim and entitlement was the reverse of the situation in this case. In acknowledging that the principle could apply, the Court stated it in terms that limited it to cases of a pecuniary entitlement as follows (citations retained):
That would leave the question of whether or not Mr Steiner was entitled to be paid the legacy of $2,000,000 before he paid to the Executors the amount of the “loan”. An estate has the right to deduct from an amount owing to a residuary legatee or a pecuniary legatee the amount of a debt owing by that legatee to the estate.[77] Where a person who is entitled to participate in a fund is also bound to make a contribution in aid of that fund, that person cannot be allowed to participate in the fund unless and until the duty to contribute has been fulfilled.[78] Accordingly, the Executors will be entitled to retain from the legacy due to Mr Steiner the amount of any “loan” owing by him to the estate, if it ultimately be held that there is such a liability to the estate.[79]
[75][1915] 2 Ch 442.
[76][2015] NSWCA 2013.
[77]Re Taylor [1894] 1 Ch 671; Re Ackerman [1891] 3 Ch 212.
[78]Peruvian Railway Construction Co Ltd (n 75) 150.
[79]Steiner v Strang [2015] NSWCA 203, [62].
The view taken by leading text writers is that the principle cannot apply in respect of a specific gift of property or chattels.[80] On consideration of the cases on the basis of which that assertion is made, Re Akerman[81], Re Taylor[82] and Re Savage[83] I consider, for the purposes of this application, it to be correct.
[80]G E Dal Pont and K F Mackie, Law of Succession (LexisNexis Butterworths, 2nd ed, 2017) [14.25].
[81][1891-4] All E.R.Rep 196.
[82][1894] 1 Ch. 671.
[83][1918-19] All E.R.Rep 700.
In Re Akerman, the deceased testator made specific gifts to his sons, amongst others, and also gifts to them of part of the residue of his estate. The sons owed various amounts to the deceased. Kekewich J held that they were entitled to take the specific gifts without having to account for the amounts they owed the estate, but were obliged to account for those debts before participating in the residue. He drew the distinction as follows:
A specific legacy is a thing to be taken apart and given to the legatee; it is to be extracted from the estate before the residue can be ascertained. On the other hand, a debt is part of the residue; it has to be paid, so far as it can be recovered, in order that the residue may be constituted. The distinction is clear between pecuniary and specific legacies in reference to such a debt.[84]
[84]Re Akerman, n 81, 198.
Kekewich J expressed the view that the principle justifying retention of that part of the residue that represented a debt to the estate was not adequately described as either a right of set-off or of retainer. He described the principle in these terms (citations omitted):
The principle which is applicable will be found laid down in Cherry v Boultbee, and also in Courtenay v Williams, and it is that a person who owes an estate money-that is, who is bound to increase the general mass to be distributed by the contribution of the amount due from him-cannot claim an aliquot share of the mass without bringing in the contribution which completes it. Nothing is retained by the representatives of the testator, and nothing is strictly set-off. The contributor is paid by holding in his own hand a part of the mass, which, if the mass had been first completed, he would be able to recover back. That is a right on his own part to pay himself out of the fund in his hands rather than a set-off.[85]
[85]Ibid 198.
Re Taylor concerned a specific gift, being the testator’s profits from a business, which took the form of money. Chitty J described the principle in terms of retainer or set off, and applied it to allow the executors to withhold monies due to a beneficiary under the will who owed money to the estate, notwithstanding that the source of the monies was a specific gift. He held that:
I think there is power to retain or withhold here. The executors have money in hand and a duty to pay it to a person from whom money is due to their testator’s estate. The mass of that estate is diminished or increased by these sums to be respectively paid and received… and the one may be set off against the other.[86]
[86]Re Taylor (n 82) 188-189.
Both cases were considered in Re Savage. That case concerned a specific gift which was not money, being stock in a company, but which was easily convertible into money. Sargant J disagreed with Kekewich J in Re Akerman as to the correct characterisation of the underlying principle, agreeing with Chitty J in Re Taylor that it was one of retainer, but agreed with him in the application of the principle to a specific gift. He held that the executor was not entitled to withhold that part of a gift of stock to the beneficiary that represented the amount owing by the beneficiary to the estate, because the principle does not apply to specific gifts. He held:
To have the right of retainer there must be money in the shape of a debt on the one side and money on the other side. If what the executor holds is not money, he cannot pay himself the debt out of it by way of retainer, or if the right existed otherwise than by way of something like a lien….
You must have money against money, and the fact that the gift to the debtor is something like money, or something which may easily be turned into money, does not give the executor the right claimed.[87]
[87]Re Savage (n 83) 702.
On the basis of these cases, and on the basis of the argument in this application only, I do not consider the Cherry v Boultbee principle justifies the plaintiff withholding the gifts of real estate to the defendant.
I limit my conclusion on this point to this application because the ratio of the cases that support it depend at least in part on how the underlying rationale of the principle is described, and even in these cases that rationale was in dispute. In more modern times, the principle has been described as an illustration of the fundamental principle of equity that he who seeks equity, must do equity.[88] If that is the rationale, then there would seem little reason to confine it to cases of money owed to the estate and monetary gifts, given that a monetary value can be ascribed to or determined in respect of non-monetary gifts.
[88]Derham SR, Set-Off (3rd edn OUP) cited with approval by Young CJ in Eq in Gray v Gray [2004] NSWCA 408 [91].
In the alternative or in addition, counsel for the plaintiff relies on a recent illustration in this Court of a declaration that an executor be entitled to retain the entitlement of the defendant to a share of residue under a will for the benefit of other residuary beneficiaries, having regard to alleged misappropriation by that defendant during the deceased’s lifetime: Stewart v Moden.[89] On close analysis, that case is not an illustration of retention of an entitlement pending determination of a competing claim. It is rather the effective cancellation of an entitlement having regard to the competing claim. Further, the case does not cure the difficulty of applying the right of retainer to a non-pecuniary gift, as the gift in question in that case was from the monetary residue of the estate. In any event, as I will discuss, the issues determined and the facts are in my view materially distinguishable from those here.
[89][2015] VSC 369.
The application in Stewart v Moden was for a declaration entitling the executor plaintiff to retain for the benefit of the other residuary beneficiaries the defendant’s share of the residue having regard to the alleged misappropriation. It was not in terms a claim for repayment of the misappropriated funds, but in the course of determining the declaration application McMillan J heard evidence about the alleged misappropriation, and made findings in that regard. The defendant conceded that he had sole use of moneys obtained by loans secured over the deceased’s home, which had substantially depleted the estate, and other monies given him by the deceased. He contended that his use of these monies was with her full concurrence, notwithstanding considerable evidence before the Court of her mental decline. McMillan J found against him on that issue, and granted the declaration sought that his share of the estate be retained for the benefit of other residuary beneficiaries. She did not in terms make a finding of misappropriation against him, and the judgment does not contain any quantification of the amount by which the defendant had utilised the deceased’s funds for his own purposes, but it does appear from the discussion that it would substantially exceed his entitlements.[90]
[90]The defendant was entitled to a third of the residue, which as at the trial was valued at $212,980.58, making his share less than $80,000. By contrast, the monies utilised for his sole use before the deceased’s death totalled at least $628,500 – see Ibid [2], [15], [16]-[18].
McMillan J referred to the rule in Cherry v Boultbee in the following passage (citations omitted):
Finally, the plaintiff contends that the rule in Cherry v Boultbee would not apply to the defendant. This rule established that where a person entitled to participate in a fund is also bound to make a contribution in aid of that fund, that person cannot be allowed to participate in the fund unless and until that person’s duty to contribute has been fulfilled.
No evidence was given by the defendant of his current financial state and even his address has been difficult to ascertain by the plaintiff. It does not appear that the defendant has any significant assets. He is unlikely to be able to meet any judgment debt that he may be ordered to pay if the plaintiff pursued that course of action against the defendant. He is not employed and is unlikely that he will obtain employment in the future given his age, his previous employment history and his health.
In these circumstances, the defendant would never be in a position to repay the money taken by him from the deceased during her lifetime and, therefore, he cannot be allowed to participate in the estate of the deceased.[91]
[91]Ibid [51]-[53].
It is not clear to me what submission was encompassed by the opening sentence above. It is possible that it refers to the fact that the principle, although it was enunciated in Cherry v Boultbee and continues to bear that name, was not on the facts of that case there applied. Be that as it may, it appears from her Honour’s following comments that the plaintiff in that case had not commenced a recovery proceeding against the defendant. It appears that her Honour proceeded on the basis that if such action was taken the plaintiff would succeed, given her findings in the matter before her. She then found that the defendant would be unable to repay the estate. As noted, the evidence showed the amount he may be ordered to pay would well exceed his entitlements.
In this case, of course, the plaintiff has commenced a proceeding against the defendant to recover what she contends he owes the Estate. However, that proceeding is hotly disputed and unlike Stewart v Moden there has been no assessment in this application of the case against the defendant. Further, the defendant in this proceeding has assets in Australia against which a judgment debt could be enforced. On the plaintiff’s own estimate, the value of those assets appears to exceed her claim against the defendant. Thus, it cannot be said, on the evidence currently before me, that the Estate could not recoup from the defendant what the plaintiff may ultimately recover. Finally, the case is not authority in relation to a gift in specie as the amount due to the defendant in Stewart v Moden from the estate there in question was a portion of monetary residue.
In summary, there is authority specifically against the proposition that the principle in Cherry v Boultbee permits the withholding of a gift in specie as against a disputed claim for compensation to the estate. There is no authority to which I have been referred that this may be justified on the basis of a wider principle of equitable set-off. Further, the conclusion cannot be reached on the evidence before me that if the distribution is made the defendant will be unable to pay any amount found due from him. In these circumstances the defendant has shown that that the plaintiff’s refusal to distribute the gifts of real estate to the deceased, which is conceded to be accompanied by anger at his actions, is not saved by being defensible in law. I consider the defendant has shown the plaintiff’s refusal to distribute these gifts is a basis for her removal as executor.
Appropriate relief and orders
The question then becomes whether replacement of the plaintiff as executor by the defendant is the appropriate form of relief. In my view, it is not.
First, the defendant suffers from the same disadvantages of residence outside Australia as the plaintiff. Next, on the evidence before me it is unclear if the only outstanding matter in the administration of the Estate is the transfer of the gifts of real estate to the defendant. For example, it is not clear whether the transfer of the gifted share of 173 Brunswick St, Fitzroy to Frank has now taken place. It also seems that there may be outstanding issues relating to the payment of rent from Estate properties to the defendant, and payment of outgoings on those properties by him. Those issues are less clear cut than the transfer of the real estate in specie and may touch on the entitlements of other beneficiaries. Those issues would seem to require in any event an accounting to be taken. There may be other outstanding matters. Finally, the other beneficiaries support the plaintiff remaining as executrix and she and they have a profound mistrust of the defendant.
In this application I am satisfied that the plaintiff’s failure to transfer the gifts in specie to the defendant would justify her removal. The defendant is not, however, a suitable replacement. The defendant has not shown himself to be readily compliant with his obligations in relation to discovery in this proceeding, which may suggest a disinclination to comply with formal obligations. Whatever the reasons for the defendant’s slowness in making proper discovery and whether or not the distrust of him by the other beneficiaries is well founded, I am not satisfied having regard to those matters, coupled with his absence from Victoria, that he would be able or willing to properly administer the Estate except in relation to the transfer of the in specie gifts of real estate to him.
Finally, the defendant would be in a completely untenable position if appointed replacement executor in respect of the proceeding commenced against him. This is not the occasion to determine if that proceeding is well founded in law, or to assess its prospects of success on the facts. However, it is plain that four of the five beneficiaries believe that they have a claim against the defendant. That alone is sufficient reason why, if the plaintiff should be replaced, it should not be the defendant, and preferably none of the other siblings.
In the alternative, the defendant seeks the appointment of a professional executor. However, neither counsel for the defendant nor the plaintiff could identify how such a third party executor would be funded, and discussion before me suggested that the Estate has no liquid funds. In the absence of a source of funds within the Estate, or other identified source which could be reimbursed from the Estate, I do not consider an appointment of professional executor to be appropriate, although it would have the undoubted advantage of allowing the balance of the Estate to be administered, including the continuation of this proceeding, without the personal rancour between the plaintiff as executor and the defendant as beneficiary.
For these reasons, I will not on this application remove the plaintiff as executor. The nub of the defendant’s grievance is the plaintiff’s refusal to transfer the real estate to him. I consider the appropriate relief on this summons to be the alternative relief sought, that the plaintiff be ordered to transfer the gifts of real estate to the defendant. I will ask counsel to draw appropriate orders to that effect. Those orders may include an order for an account in respect of outstanding rent and outgoings if both counsel agree. If there is dispute as to whether that is necessary, I will hear the parties further given that the order was not sought in the summons and was not the subject of oral argument.
Orders to this effect will not address any other outstanding issues relating to the administration of the estate. If relief is sought in that regard, it should be the subject of fresh application.
The defendant has indicated that in the event he is successful on his summons for removal of the plaintiff, as he is, he will not press what he regarded as an outstanding application in his earlier summons for strike out. As noted earlier, I consider this a misreading of what was left outstanding. In hindsight allowing the summary judgment application from that summons to remain outstanding introduced unnecessary complication into this hearing, and encouraged the parties to rely on the voluminous evidence filed for that application without much benefit for the removal application. After making appropriate orders for the transfer of the real property gifts to the defendant I will dismiss the balance of both summonses. Any further application should be on fresh summons with fresh evidence in support confined to that application alone.
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