Lee v Australian Executor Trustees Limited as trustee of the Estate of the Late Ronald William Lee
[2019] WASC 96
•28 MARCH 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: LEE -v- AUSTRALIAN EXECUTOR TRUSTEES LIMITED AS TRUSTEE OF THE ESTATE OF THE LATE RONALD WILLIAM LEE [2019] WASC 96
CORAM: ACTING MASTER WHITBY
HEARD: 12 MARCH 2019
DELIVERED : 28 MARCH 2019
FILE NO/S: CIV 2856 of 2018
BETWEEN: JOHN ANTHONY CAMPBELL LEE
Plaintiff
AND
AUSTRALIAN EXECUTOR TRUSTEES LIMITED AS TRUSTEE OF THE ESTATE OF THE LATE RONALD WILLIAM LEE
First Defendant
FAY EILEEN LEE
Second Defendant
Catchwords:
Joinder of parties - Order 18 rule 6(2) Rules of the Supreme Court 1971 (WA) - Application for joinder by beneficiaries of estate - Beneficial interest in estate - Application dismissed
Application for access under Order 67B rule 9 Rules of the Supreme Court 1971 (WA) - Application for access by beneficiaries of estate - Application granted
Legislation:
Administration Act 1903 (WA), s 14
Rules of the Supreme Court 1971 (WA), O 18 r 6, O 67B r 9
Trustees Act 1962 (WA), s 94
Result:
Application for Joinder dismissed
Applicants' application for access granted.
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr M Curwood |
| First Defendant | : | Mr P Tydde |
| Second Defendant | : | Mr H M Reynoldson |
| Applicants | : | Mr M MacLennan |
Solicitors:
| Plaintiff | : | Croftbridge |
| First Defendant | : | Gilbert + Tobin |
| Second Defendant | : | Hotckin Hanley |
| Applicants | : | Bennett + Co |
Case(s) referred to in decision(s):
APT Finance Pty Ltd v Bajada [2008] WASCA 73
Currie v Currie [2019] WASCA 2
Elovalis v Elovalis [2008] WASCA 141
McNab v Graham [2017] VSCA 352; (2017) 53 VR 311
Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306
Penang Mining Co Ltd v Chong San [1969] 2 MLJ 52
Re Pevsner; ex parte Trustee in Bankruptcy (1983) 68 FLR 254
Russell v Lee Holdings Pty Ltd [2017] WASC 283
Silvia v Thomson (1989) 87 ALR 695
Wales v Vrseky [2015] VSC 223
Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 7] [2016] WASC 305
ACTING MASTER WHITBY:
This is an application by Ms Shana Francinne Russell and Ms Nerida Jayne Puangkham (Shana and Nerida respectively) to be joined to these proceedings as defendants pursuant to Order 18 r 6(2)(b) of the Rules of the Supreme Court 1971 (WA) (RSC).
As counsel have in their submissions, and with no disrespect intended, I will refer to the parties by their first names.
Issue to be determined
The issue to be determined by the court is whether Shana and Nerida are to be joined as the third and fourth defendants respectively to these proceedings (CIV 2856 of 2018).
All of the parties to CIV 2856 of 2018, save for Shana and Nerida, are parties to other proceedings in this court, being action number COR 227 of 2017 Russell & Anor v Lee Holdings Pty Ltd & Ors (COR 227 of 2017).
In the alternative, if Shana and Nerida are not joined as parties to CIV 2856 of 2018, Shana and Nerida seek non‑party access to the pleadings filed in CIV 2856 of 2018 pursuant to Order 67B r 9 RSC.
Shana and Nerida rely upon the following in support of their application for joinder:
(a)affidavit of Tracy Elizabeth Albin sworn 17 January 2019 (First Albin Affidavit);
(b)affidavit of Tracy Elizabeth Albin sworn 29 January 2019 (Second Albin Affidavit);
(c)affidavit of Tracy Elizabeth Albin sworn 7 March 2019 (Third Albin Affidavit);
(d)applicants' written submissions dated 12 February 2019;
(e)applicants' Aide Memoire dated 17 February 2019; and
(f)applicants' written submissions in reply dated 7 March 2019.
The plaintiff, Mr John Anthony Campbell Lee (John), relies upon the plaintiff's written submissions dated 15 February 2019.
The first defendant, Australian Executor Trustees (AET) as trustee of the estate of the late Ronald William Lee (Ron), and Fay Eileen Lee (Fay), have indicated they do not wish to be heard on the application and will abide by the decision of the court.
Background
John, Shana and Nerida are the children of Ron and Fay.
Ron died on 26 July 2016.
Ron executed a will on 5 June 2008 appointing Fay as the executor. The will made no disposition of any of Ron's assets.
By a grant of letters of administration (with the will annexed) dated 24 April 2018, AET was appointed administrator of Ron's estate.
Ron owned a number of farming properties (collectively, the Farm). AET is currently the registered proprietor of the Farm.
CIV 2856 of 2018
In CIV 2856 of 2018, John asserts that:
11.1from 1972 or 1973 until his death, Ron orally represented to him on many occasions that one day the Farm and improvements thereon would be his or would be his when Ron died;[1]
11.2he was induced by and relied on those representations to his detriment;[2] and
11.2he has an equitable interest the Farm.
[1] CIV 2856 of 2018 Writ of Summons - Indorsement of Claim dated 25 October 2018 par 9.
[2] CIV 2856 of 2018 Writ par 10.
AET is the first defendant, and Fay is the second defendant (as Fay has lodged a caveat over the Farm) in CIV 2856 of 2018.
COR 227 of 2017
In COR 227 of 2017, Shana and Nerida assert:
13.1Lee Bros Pty Ltd (Lee Bros) was a former subsidiary of the family company Lee Holdings Pty Ltd (Lee Holdings);
13.2Lee Bros issued shares in July 2016 which had the effect of diluting Lee Holdings' interest in Lee Bros from over 98% to less than 1% (New Share Issue);[3]
13.3the New Share Issue was conducted for an improper purpose, being to divert the opportunity to subscribe for the new shares in Lee Bros from Lee Holdings to John and Fay;[4]
13.4they are entitled to relief from oppression as shareholders, and a winding up of Lee Holdings.
[3] See reasons for decision in Russell v Lee Holdings Pty Ltd [2017] WASC 283 [10] ‑ [14] (K Martin J).
[4] Fay is the second defendant in CIV 2856 of 2018 and the second defendant in COR 227 of 2017.
John denies that the New Share Issue was for an improper purpose and asserts that the New Share Issue was, in fact, for several purposes including to secure his services as a director of Lee Bros for an extended period.[5]
[5] Second Albin Affidavit attachments 'TEA‑11' to 'TEA‑12'.
Shana and Nerida contend that John has previously made assertions concerning the purpose of the New Share Issue that are inconsistent with his claims in CIV 2856 of 2018. Shana and Nerida rely upon the evidence of Amy Joanne Rumble (Ms Rumble), a solicitor of Bennett + Co representing Shana and Nerida in various actions since 2015, of a telephone conversation on 23 August 2017 with John (Telephone Call).[6]
Shana and Nerida's position
[6] First Albin affidavit, 'TAE‑3', p 66 ‑ 70.
Counsel for Shana and Nerida submits that their joinder as defendants to CIV 2856 of 2018 is necessary and appropriate because there is significant overlap between factual controversies that arise for determination in CIV 2856 of 2018 and COR 227 of 2017 such that if Shana and Nerida are not joined:
(a)there is a risk of inconsistent findings in CIV 2856 of 2018 and COR 227 of 2017;
(b)Shana and Nerida will be forensically disadvantaged in prosecuting COR 227 of 2017; and
(c)Shana and Nerida will be deprived of the opportunity to be heard and in turn the court may not have before it all of the evidence required to determine the issues in CIV 2856 of 2018.
The determination of claims in CIV 2856 of 2018 will have a significant impact on the assets of Ron's Estate available for distribution to Shana and Nerida as beneficiaries.
Shana and Nerida are able to plead defences in CIV 2856 of 2018 that AET cannot or will not plead;
John's credibility is in issue in both proceedings and the joinder of Shana and Nerida as defendants in CIV 2856 of 2018 is required to ensure that findings on credibility are applied by the court consistently in both actions.
John's position
Counsel for John opposes Shana and Nerida's application for joinder because AET is a professional administrator appointed at the request of Shana and Nerida. Therefore, Ron's Estate is adequately represented in CIV 2856 of 2018 by AET.
John has no cause of action against either of the applicants.
Shana and Nerida's rights against, or liabilities to any party to CIV 2856 of 2018 are not directly affected by any order which may be made in the action.
The fact that Shana and Nerida are beneficiaries of Ron's estate is not a sufficient reason for them to be joined.
There is no evidence that the joinder of Shana and Nerida would enable the case to be run any differently (or efficiently) than it could be run by AET, nor that any additional evidence or submissions could be presented than would be presented by AET:
(b)factual overlap between CIV 2856 of 2018 and COR 227 of 2017 is no basis to join Shana and Nerida as defendants;
(c)Shana and Nerida do not have a proprietary interest in the Farm. In the absence of a proprietary interest, there is no basis for joinder of Shana and Nerida as defendants.
Applicable legal principles
The court is empowered to exercise its discretion to join a party to a proceeding pursuant to Order 18 r 6(2) RSC which relevantly provides:
(2)At any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application -
(a)…
(b)order that any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, be added as a party.
Order 18 r 6(2) RSC should be given a wide interpretation: it is designed to avoid unnecessary technicality so as to enable parties to litigate the real issues between them in an expeditious, effective and cost efficient way.[7]
[7] APT Finance Pty Ltd v Bajada [2008] WASCA 73 [34]; Elovalis v Elovalis [2008] WASCA 141 [6].
This court (Le Miere J) considered the application of Order 18 r 6(2) RSC in Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd[No 7][8] where his Honour quoted Lord Diplock in Penang Mining Co Ltd v Chong San [1969] 2 MLJ 52:
[8] Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 7] [2016] WASC 305 [17] – [20].
[A] better way of expressing the test is:
Will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action? (55)
His Honour went on to say:
This direct interest test was applied by the Full Federal Court in News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410.
…
The High Court authoritatively stated the law on joinder in John Alexander's Club Pty Ltd v White Tennis Club Ltd [2010] HCA 19]… The Court (French CJ, Gummow, Hayne, Heydon and Keifel JJ) said:
Walker Corporation submitted that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined. That submission is correct.
Joinder will be ordered if a non‑party's rights against or liabilities to any party to the proceedings will be directly affected by any order which is sought to be made in the proceedings.
In Wales v Vrsecky,[9] McMillan J identified that in certain cases the non‑alignment of interests as between beneficiaries will mean that joinder is appropriate:
…if it is possible that the interests of one or more beneficiaries will not be properly represented by the trustee and/or there is a real conflict between the beneficiaries, beneficiaries are entitled to be joined to a proceedings…
[9] Wales v Vrseky [2015] VSC 223 [52]
In McNab v Graham,[10] the Victorian Court of Appeal also considered the circumstances in which beneficiaries will be joined to an action. Tate JA (with whom Santamaria JA & Keough AJA agreed) said:
The interest of the Freemasons/Epworth Hospital arose because it was a beneficiary under the Will. It was a volunteer with no other claim and equity does not assist a volunteer. That being so, it could have no greater interest than that held by Mr Turner at the date of his death. As discussed, the property was impressed with a constructive trust from the time when there was reliance upon the promise which rendered it unconscionable for Mr Turner to resile from the representation. On any account, this occurred before the commencement of the proceeding, either before Mr Turner's death or at the time of his death. Any interest the Freemasons/Epworth Hospital gained under the Will is subject to the constructive trust over the property in favour of the Grahams. Given the status of the Freemasons/Epworth Hospital as a volunteer, there was no need for the judge to consider the effect of his determination upon the hospital before making the orders he did.
[10] McNab v Graham [2017] VSCA 352; (2017) 53 VR 311 [133].
Factual overlap
Shana and Nerida place significant weight on the factual overlap between CIV 2856 of 2018 and COR 227 of 2017.
Counsel for Shana and Nerida submits that the Telephone Call substantiates the factual overlap. Counsel for both parties made submissions in relation to whether evidence of the Telephone Call was admissible given the context in which the Telephone Call took place.
I accept that there may be similar factual controversies which arise in CIV 2856 of 2018 and COR 227 of 2017. Paragraph 9(b) of AET's defence filed 18 January 2019 in CIV 2856 of 2018[11] pleads:
[11] Referred to in the Plaintiff's Submissions dated 15 February 2019 at [4].
9As to paragraph 9, AET:
…
(b)says that in around 2015, Ron represented to John words to the effect that:
(i)upon Ron's death, the Farm was to be split three ways between John and his sisters, Shana Russell and Nerida Puangkham;
(ii)in consideration for John assuming responsibility for running the Farm, John would be entitled to receive the sale proceeds from any heifers that were run on the Farm and receive payment of the sum of $350 per week for living expenses, (together, the Compensation Representations);
Particulars
AET relies on John's affidavit sworn on 20 December 2017 in Supreme Court Proceedings COR 227 of 2017 …
Given I am satisfied that a factual overlap exists independent of the Telephone Call, I am not required to consider whether the Telephone Call is admissible in CIV 2856 of 2018 or COR 227 of 2017. In fact, it would not be appropriate for me to express a view on its admissibility – this will be a matter for the trial judge.
The issue is whether that factual overlap, taken on its own, or in combination with the other factors that Shana and Nerida rely upon in support of a joinder, justifies their joinder as defendants to CIV 2856 of 2018.
Direct interest test
In my view the 'direct interest test', as it is referred to by Le Miere J in Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 7], is the test that is to be applied in determining whether Shana and Nerida ought be joined as defendants to CIV 1856 of 2018.
The question that falls to be determined is whether any order made in CIV 2856 of 2018 would directly affect Shana and Nerida's rights against, or liabilities to a party to the action.
When applying the direct interest test, the issue of factual overlap is not a determinative factor in deciding whether or not to permit the joinder of Shana and Nerida.
In considering whether Shana and Nerida satisfy the direct interest test, it is appropriate to consider to the following issues:
(a)can Shana and Nerida plead any defences in CIV 2856 of 2018 that AET cannot?
(b)do Shana and Nerida have a proprietary interest in the assets of Ron's Estate?
(c)are Shana and Nerida required to be joined to CIV 2856 of 2018 to ensure that further litigation against AET does not result?
Defences of Shana and Nerida
Counsel for Shana and Nerida submits that Shana and Nerida will be able to raise equitable defences to John's claim in CIV 2856 of 2018 if they are joined as defendants, defences which may not available to AET, in particular:
(a)a defence in equity of unclean hands arising from an alleged breach by John of his fiduciary duties in relation to the New Share Issue in COR 227 of 2017; and
(b)other equitable defences arising from John's delay in bringing his claim against AET.
AET is a professional administrator who was appointed as a result of action commenced by Shana and Nerida.[12] AET has obtained leave of the court to rely upon the affidavits of John and Ms Rumble filed in COR 227 of 2017 for the purpose of defending John's claim in CIV 2856 of 2018. There is no evidence before me which establishes anything other than AET is actively defending CIV 2856 of 2018.
[12] CIV 3134 of 2016 and CIV 2952 of 2017.
In the circumstances, there is not sufficient evidence before me to establish, and I do not accept, that AET is not able to actively defend CIV 2856 of 2018 and have available to it all of the defences that may be available to Shana and Nerida.
Shana and Nerida's as beneficiaries of Ron's Estate
Counsel for Shana and Nerida submits that, because Shana and Nerida are beneficiaries of the Estate,[13] they have a beneficial interest in the outcome of John's claim in CIV 2856 of 2018 and that, if John is successful in his claim in CIV 2856 of 2018, the relief granted would cause a substantial reduction in the value of the assets available for distribution to beneficiaries of the Estate.
[13] First Albin affidavit, 'TEA‑1' p 7 [1.2].
Shana and Nerida's interest in Ron's Estate arises because they are beneficiaries by virtue of the provisions of s 14 of the Administration Act 1903 (WA).
McNab v Graham[14] is authority for the proposition that a beneficiary is not entitled to be joined as a party to an action simply be virtue of being a beneficiary.
[14] McNab v Graham (in their capacity as Executors and Trustees of the will of Turner (deceased) v Graham (2017) 53 VR 311; [2017] VSCA 352.
As beneficiaries, Shana and Nerida could hold no greater interest in the property than Ron did at the date of his death. John has no cause of action against Shana and Nerida in CIV 2856 of 2018.
Shana and Nerida do have a right to require due administration of Ron's Estate, but this does not give rise to any proprietary right to any particular asset in the incompletely administered estate.[15] Shana and Nerida have a commercial interest in the outcome of CIV 2856 of 2018, but not a proprietary interest.
[15] Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306; Re Pevsner; ex parte Trustee in Bankruptcy (1983) 68 FLR 254; Silvia v Thomson (1989) 87 ALR 695.
This proposition was affirmed by the Court of Appeal in the case of Currie v Currie.[16] Erica Currie, the wife of the land owner, sought to be joined to an appeal on the basis that she had an interest in the land the subject of the dispute because of, inter alia, contributions she had made to the acquisition and maintenance of the land.[17]
[16] Currie v Currie [2019] WASCA 2.
[17] Ibid see [211].
The Court of Appeal refused Erica's application to be joined to the appeal and observed that:
Erica should have been joined to the primary proceedings if she had or claimed an interest in the relevant land …[18]
[18] Ibid see [242].
The outcome of the CIV 2856 of 2018 will affect Shana and Nerida in a commercial sense but will not affect their rights against or liability to any of the parties to CIV 2856 of 2018.
Any interest that Shana and Nerida hold in Ron's Estate will, if John's claim is successful, be subject to the constructive trust over the land in favour of John. Accordingly, a trial judge is not required to consider Shana and Nerida's interests at any trial by virtue of their status of beneficiaries of Ron's Estate.
Avoidance of future legal action
Counsel for Shana and Nerida submits that it is necessary to join Shana and Nerida as defendants to CIV 2856 of 2018 to avoid the possibility of future legal action by Shana and Nerida against AET.
Shana and Nerida, in their position as beneficiaries, have rights to seek review of the administrator's acts, omissions and decisions in respect of the Estate pursuant to s 94 of the Trustees Act 1962 (WA).
In my view, it is not a sufficient reason to order joinder of parties in order to facilitate beneficiaries to monitor the conduct of a trustee in litigation.
Case management of CIV 2856 of 2018 and COR 227 of 2017 together
COR 227 of 2017 is currently case managed in the Commercial and Managed Cases List (CMC List) by K Martin J.
Pursuant to order 6 of the Consent Orders made by K Martin J on 29 August 2018 in another action, COR 58 of 2018, a derivative action brought by Shana and Nerida in the name of Lee Holdings in CIV 2533 of 2018 is also case managed by K Martin J in his Honour's CMC List in conjunction with COR 227 of 2017.
It is ultimately a matter for K Martin J as to whether or not CIV 2856 of 2018 ought be case managed together with COR 227 of 2017 and CIV 2533 of 2018.
However, the fact that Shana and Nerida are not joined as parties to CIV 2856 of 2018 does not preclude CIV 2856 of 2018 from being case managed with COR 227 of 2017 and CIV 2533 of 2018.
Alternative order for access to pleadings
In the alternative to being joined as defendants to CIV 2856 of 2018, Shana and Nerida seek an order pursuant to Order 67B r 9(3) RSC for non‑party access to the statement of claim and defences filed in CIV 2856 of 2018.
Counsel for John submits that Order 67B r 9 RSC is not the relevant rule as the information or record being sought has not been 'considered by the court in the proceeding to which the application relates'.
In my view, it is not necessary to determine whether the pleadings have been considered by the court in CIV 2856 of 2018 (clearly the court has considered them in this application, but not otherwise in CIV 2856 of 2018) as the court has discretion to grant a non‑party access to pleadings either pursuant to:
(a)Order 67B r 4 RSC – the court may release any record to any person on any terms, and in any manner, it thinks fit;
(b)Order 67B rule 9(4) – the court may grant access to a non‑party to any record if it satisfied that, inter alia, there is a good reason to do so.
I accept that there may be overlapping factual issues and issues as to credibility of witnesses in each of CIV 2856 of 2018 and COR 227 of 2017. In my view, these constitute good reasons to grant permission to Shana and Nerida to access the pleadings in CIV 2856 of 2018.
Conclusion
In the circumstances, I do not consider it is appropriate or necessary to join Shana and Nerida as defendants to CIV 2856 of 2018. I dismiss their application for joinder.
In relation to Shana and Nerida's application for CIV 2856 of 2018 to be case managed and heard together with COR 227 of 2017, this is an issue to be referred to the trial judge.
I grant Shana and Nerida's application for access to the pleadings filed in CIV 2856 of 2018.
I will hear the parties as to final orders and costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
EP
Associate to Acting Principal Registrar Whitby28 MARCH 2019
10
3