Marinko v Patrick Bernard O'Sullivan and Ralph Adrian Wilson as executors of the will of Rose Margaret Marinko
[2023] WASC 180
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: MARINKO -v- PATRICK BERNARD O'SULLIVAN AND RALPH ADRIAN WILSON as executors of the will of ROSE MARGARET MARINKO [2023] WASC 180
CORAM: FORRESTER J
HEARD: 16 MAY 2023
DELIVERED : 30 MAY 2023
FILE NO/S: CIV 2151 of 2021
BETWEEN: DION MARINKO
Plaintiff
AND
PATRICK BERNARD O'SULLIVAN AND RALPH ADRIAN WILSON as executors of the will of ROSE MARGARET MARINKO
First Defendant
GREGORY JOHN TOBIN
Second Defendant
JONATHAN MICHELE MARCHESI
Third Defendant
RALPH ADRIAN WILSON as beneficiary of the estate of ROSE MARGARET MARINKO, deceased
Fourth Defendant
Catchwords:
Estate Law - Application for directions under Trustees Act 1962 (WA) s 92 - Whether administrator justified in actively defending claim
Legislation:
Consolidated Practice Directions
Trustees Act 1962 (WA)
Family Provision Act 1972 (WA)
Result:
Direction given
Category: B
Representation:
Counsel:
| Plaintiff | : | A Zilkens |
| First Defendant | : | M Cuerden SC & A Spencer |
| Second Defendant | : | No Appearance |
| Third Defendant | : | No Appearance |
| Fourth Defendant | : | No Appearance |
Solicitors:
| Plaintiff | : | Zilkens |
| First Defendant | : | Robertson Hayles Lawyers |
| Second Defendant | : | Summers Legal |
| Third Defendant | : | Summers Legal |
| Fourth Defendant | : | In Person |
Case(s) referred to in decision(s):
Blatchford v Laine [2018] WASC 207
In the Will of W.F. Lanfear (Deceased) (1940) 57 WN (NSW) 181
Lathwell v Lathwell [2008] WASCA 256 (S)
Plan B Trustees Ltd v Parker [No 2] [2013] WASC 216
Re Atkinson (Dec) [1971] VR 612
Re Estate of Anastasios Keriacules Challis (dec) [2010] WASC 333
Vasiljev v Public Trustee [1974] 2 NSWLR 497
Wood (As Co-Executor and Trustee of the Will of the Deceased) v Wood [No 4] [2014] WASC 393
FORRESTER J:
Introduction
This is an application by the first defendants pursuant to s 92 of the Trustees Act 1962 (WA) (the Act) for directions as to whether they are justified in 'actively defending' (including compromising) an application by the plaintiff pursuant to the Family Provision Act 1972 (WA) (FPA) in circumstances in which all other potential beneficiaries have filed Notices of Intention to Abide.
Factual background
Rose Margaret Marinko died on 27 March 2021. Her husband died before her. She left a will dated 20 October 2019 (the Will),[1] of which the first defendants are the appointed executors. Probate of the Will was granted to the first defendants on 3 May 2021.[2]
[1] Affidavit of Eric Eng Wei Tan sworn 9 January 2023 [5].
[2] Affidavit of Eric Eng Wei Tan sworn 9 January 2023 [6].
The plaintiff is the only one of Ms Marinko's three children to have survived her.[3]
[3] Affidavit of Eric Eng Wei Tan sworn 9 January 2023 [8].
Under the Will, a number of specific bequests were made. Part of the residue was to be distributed to the plaintiff by way of the transfer to him of a property and provision of a lump sum. The remainder was to be placed in a trust, of which the first defendants are the trustees, from which the plaintiff is to be paid an amount of money every year, according to a formula set out in the provisions of the Will and indexed in accordance with the Consumer Price Index.[4]
[4] Affidavit of Eric Eng Wei Tan sworn 9 January 2023, EET 1.
The trustees are also empowered to make distributions of any additional income to the plaintiff at their absolute discretion[5] and to make capital distributions to the plaintiff if, in their reasonable opinion, he is in need of further funds for certain purposes at their absolute discretion 'but only if they are satisfied that such distributions will be managed prudently having regard to [the plaintiff's] historical management of money and assets'.[6]
[5] Affidavit of Eric Eng Wei Tan sworn 9 January 2023, EET 1, cl 4.2.3(e).
[6] Affidavit of Eric Eng Wei Tan sworn 9 January 2023, EET 1, cl 4.2.3(f).
If the plaintiff were to die leaving no surviving children, the residue of the trust is to be distributed to the second, third and fourth defendants.[7] The fourth defendant is one of the executors of the Will and therefore is also one of the first defendants.
[7] Affidavit of Eric Eng Wei Tan sworn 9 January 2023, EET 1, cl 4.2.3(g) and cl 4.3.
A statement of Ms Marinko's assets and liabilities at the date of her death indicated that the value of her estate was just over $12m. Following distribution of the specific bequests in the Will, as at 29 November 2022, the estate was valued at just over $8m.[8]
[8] Affidavit of Patrick Bernard O'Sullivan sworn 29 November 2022.
On 1 November 2021, the plaintiff filed an originating summons seeking provision out of the estate pursuant to the FPA, on the basis that the Will is not such as to make adequate provision from the estate for his proper maintenance, support, education or advancement in life. An affidavit of the plaintiff, sworn 1 November 2021, has been filed in support of his claim.
Three attempts at mediation have failed.
On 9 January 2023, the first defendants filed an application pursuant to s 92 of the Act which was (as amended on 16 May 2023) in the following terms:
1.The first defendants seek judicial advice in respect of the following question - whether the first defendants, as executors of the estate of the late Rose Marinko, are justified in actively defending the plaintiff's claim (including compromising the claim).
2. The first defendants' costs of and incidental to this application be paid by the estate on an indemnity basis.
3.Such further or other orders as this Honourable Court deems appropriate.
The plaintiff opposes the application.
The second, third and fourth defendants (the latter only in his capacity as fourth defendant) have filed Notices of Intention to Abide in the proceeding.
Section 92 of the Trustees Act 1962 (WA)
Section 92 of the Act provides:
92. Directions, trustee may ask Court for
(1)Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.
(2)Every application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the Court thinks expedient.
The definitions of 'trust', 'trustee' and 'personal representative' are such as to make an executor a 'trustee' for the purposes of s 92.[9] There is no suggestion that s 92(2) has not been complied with.
[9] Trustees Act 1962 (WA) s 6.
A direction given under s 92 of the Act enables a trustee to avail themselves of the protections granted by s 95(1), subject to s 95(2).
In Re Estate of Anastasios Keriacules Challis (dec),[10] Allanson J adopted, as I do, the following observations of Gillard J in Re Atkinson deceased:[11]
Where an executor or trustee is in doubt as to the course of action it should adopt, it is always entitled to take the opinion of the court as to what it should do. If in doubt as to whether or not it should take legal proceedings, then it is entitled to apply to the court for directions on the matter … If the executor or the trustee then followed the direction of the court, it would be protected from any claim by a beneficiary or creditor arising from its action or inaction in accordance with the court's direction … In cases of real doubt, the proper course for a personal representative or trustee to adopt is to seek the court's decision as to whether or not action should be brought, otherwise the representative or trustee might find itself paying the costs of any proceedings which a court might subsequently say were not 'properly incurred' …
[10] Re Estate of Anastasios Keriacules Challis (dec) [2010] WASC 333 [18].
[11] Re Atkinson (Dec) [1971] VR 612, 615 (citations omitted).
In Blatchford v Laine,[12] Vaughan J summarised the relevant principles to be applied in the context of an application for directions as to the position a trustee should take in relation to litigation as follows:[13]
(1)There is a 'jurisdictional bar' under s 92(1). However, that is simply that the applicant must point to a question respecting the management or administration of trust property or a question respecting the interpretation of a trust instrument. The jurisdiction is enlivened when the question raised for directions is whether the trustee is justified in prosecuting or defending a particular claim.
(2)The court has a discretion as to whether to provide a direction under s 92(1). Advice does not have to be provided.
(3)The key question is to determine whether, on the material available, it would be proper for the trustee to prosecute or defend the proceedings. That in turn involves two issues. First, whether the legal issues are properly arguable. Second, whether there are sufficient prospects of success to warrant the trustee in proceeding with the litigation. These enquiries necessitate 'sufficient investigation' of the underlying issues.
(4)The judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceedings. The process is meant to be a summary one.
(5)The court is not bound to investigate the evidence and make a finding as to whether the proposed proceedings would be successful. The question is whether the litigation is justified. The court is not finally resolving the merits of the underlying proceedings.
(6)Relevant overlapping considerations include: (a) the prospects of success; (b) the means of the other party to satisfy any judgment; (c) the potential for the litigation to deplete the trust estate; (d) the likely adverse costs if the litigation is unsuccessful and whether those costs are likely to be proportionate; (e) the likely irrecoverable costs; and (f) the nature of the case and issues raised and what will be gained if the trustee succeeds in the action.
[12] Blatchford v Laine [2018] WASC 207.
[13] Blatchford [57] (citations omitted).
Vaughan J emphasised that the court's function is limited to being satisfied that the material before it is sufficient to determine the general range of the prospects of success and determining whether it is appropriate to pursue the proceedings having regard to the prospects of success, the benefits of the litigation and the resources available. In this regard, he noted, there must be sufficient information before the court for it to be satisfied that the proposed action would be for the benefit of the beneficiaries as a whole and otherwise would be prudent to pursue.[14]
Jurisdictional threshold
[14] Blatchford [58].
The plaintiff submits that the threshold question is not met because 'FPA proceedings call for a variation, not exercise, of the powers of discretions vested in the trustee'.[15] However, when pressed on the issue as to whether deciding to defend proceedings and how to do so would be a question relating to the exercise of the power or discretion vested in the executors, the plaintiff declined to make further submissions as to the jurisdictional threshold in this case.
[15] Plaintiff's Outline of Submissions in Opposition of First Defendants' Application for Directions Under s 92 of the Trustees Act 1962 (WA) filed 7 March 2023 [10(3)].
The first defendants seek advice as to whether they are justified in actively defending the plaintiff's claim. In my view, the authorities are clear that, in such a case, the jurisdiction under s 92 of the Act is enlivened.[16]
Is a direction required?
[16] Blatchford [57(1)].
The plaintiff submitted that, following the decision in Lathwell v Lathwell,[17] there is no doubt as to the duty to be exercised by an executor in first instance litigation under the FPA, and there is therefore no need for a direction as sought by the first defendants.
[17] Lathwell v Lathwell [2008] WASCA 256 (S) [9].
In Lathwell, the Court of Appeal said, in the context of a decision as to costs following an appeal by an executor:[18]
There is no doubt that in any first instance litigation which involves an attempt to alter the provisions of the will, the duty of the executor as the defender of the will, is to participate in those proceedings. The correct statement of the duty is that the executor should participate so as to place before the court evidence which will have any bearing on issues which arise during the proceedings. This duty would involve the disclosure of evidence, positive or negative, in relation to those issues. See Dijkhuijs (Formerly Coney) v Barclay (1988) 13 NSWLR 639, 654 (Kirby P, Hope & Mahoney JJA agreeing).
[18] Lathwell [9].
It is to be observed at the outset that even if the duty of an executor in first instance litigation is clear, the manner in which it is to be carried out might not be. In such a case, as was made clear in the above extracted passage from Re Atkinson (Dec), an executor is entitled to seek direction or advice from the court. Further, a prudent executor may well do so, in order to gain the protection accorded by s 95(1) of the Act.
In this case, the first defendants submitted that, in order to progress the matter, they will need to gather the available evidence in relation to the plaintiff's claim, and at an appropriate time will need to determine what position to take if the matter is to proceed to trial.
It was also argued on behalf of the first defendants that, prior to any trial of the plaintiff's application under the FPA, the first defendants may seek again to compromise the proceedings, and it is likely to be necessary to obtain further evidence before they are able to do so.
The plaintiff disputed the entitlement of the first defendants to compromise FPA proceedings, suggesting that FPA proceedings were in a unique category in this regard. However, no authority was cited for this proposition, and the plaintiff was unable to point to any part of the relevant legislation which would warrant a departure from the usual position as set out in s 42 of the Act. In my view, the plaintiff's submission that executors are not entitled to compromise FPA proceedings cannot be sustained.
Provision of legal opinion
In Plan B Trustees v Parker [No 2],[19] Edelman J noted that, where directions are sought concerning the justification for legal action, the court will usually have before it a legal opinion on the prospects of success. However, having reflected on the historical roots of the practice, his Honour observed, in remarks fully supported by Kenneth Martin J in Wood (As Co-Executor and Trustee of the Will of the Deceased) v Wood [No 4],[20] that it might be better if that were no longer the case, having regard to issues of procedural fairness, admissibility and legal professional privilege.
[19] Plan B Trustees Ltd v Parker [No 2] [2013] WASC 216 [39] - [45].
[20] Wood (As Co-Executor and Trustee of the Will of the Deceased) v Wood [No 4] [2014] WASC 393 [123] ‑ [124], [126].
However, as Edelman J also observed:[21]
A court will usually be reluctant to exercise discretion in favour of sanctioning, as justified, a course of action by a trustee unless the trustee has taken reasonable steps necessary to form its own opinion on the subject. Where the direction sought is that legal action is justified then it will generally be necessary for the trustee to obtain a legal opinion before approaching the Court. This is because the trustee should have taken reasonable steps to form its own opinion on the subject about directions which are sought before approaching the Court for directions. Legal action should never be commenced unless the trustee is satisfied that it is properly arguable.
[21] Plan B [48] (citations omitted).
In Blatchford, Vaughan J considered the receipt of counsel's advice, on a confidential basis that maintains the client‑legal privilege, to be appropriate on that basis, while accepting that there will be cases in which counsel's opinion is not necessary.[22]
[22] Blatchford [65] - [66].
In the present case, I have been informed that counsel's opinion has been sought, but not yet provided. It was argued that the provision of a legal opinion is less significant in a case in which the decision is whether or not to defend, as opposed to whether or not to commence, legal proceedings. Further, it was submitted that it is appropriate to first seek a direction justifying the role of the first defendants in taking a more active role in the litigation, before the executors incur the expense of seeking counsel's advice on the merits.[23]
[23] First Defendants' Submissions in Support of their Application for Directions under s 92 of the Trustees Act 1962 (WA) filed 9 January 2023 [25].
It is relevant to consider the present state of the information before the court.
In support of his FPA application, the plaintiff has filed an affidavit, sworn on 1 November 2021. There is some cause to question whether that affidavit fully complies with Practice Direction 9.2.2 [10] of the Consolidated Practice Directions, as it is relatively difficult to understand the size and strength of the claim from the information provided. However, in any event, it is not disputed that a great deal more detail will ultimately be provided in the event of a trial of the matter (whether there is ultimately a contradictor or not).
In turn, in order to comply with their duty to place before the court evidence, whether positive or negative, which will have any bearing on issues which arise during the proceedings, the first defendants will need to conduct investigations and gather that evidence. No progress has been made towards that end at this stage pending the outcome of this application.
There is, therefore, limited information upon which to seek a comprehensive opinion from counsel as to the merits of the plaintiff's application at this stage, although I do not regard that as an impediment to the obtaining of an opinion.
I note that counsel's opinion was first sought prior to the second, third and fourth defendants filing Notices of Intention to Abide. It has not been sought since.
While it may have been appropriate for the opinion to have been sought again before making the application, it became apparent during the hearing of the application that the manner in which the plaintiff was approaching the proceedings was giving rise to additional caution on the part of the first defendants.
It is therefore a significant basis of the application for directions under s 92 that it will not only enable the first defendants to collect further materials which would enable more detailed counsel's advice to be obtained, but it will enable them to obtain that advice under the protection which flows from a direction under s 92 of the Act.
In those circumstances, I consider this to be an appropriate case in which to determine the application in the absence of counsel's opinion.
Should the executor be entitled to 'actively defend' the plaintiff's claim?
The advice as sought is whether the first defendants are justified in 'actively defending' the plaintiff's claim. It was made clear that this did not necessarily mean 'actively opposing' the claim; no decision to do so has been made (or reasonably could be made) at this stage. Such a decision could only be made after gathering the information which it is necessary to put before the court, considering the evidence to be relied upon by the plaintiff, and, in all likelihood, seeking counsel's opinion.
It has been said that an executor has a duty to 'defend the will' and it is the duty of the executors either to compromise the claim, or contest it and seek to uphold the provisions of the will.[24] The plaintiff argued that this statement was made many years ago, at a time when the intervention of beneficiaries in a proceeding such as this was permitted 'on special grounds' but was 'unwelcome'.[25] It was argued that, in circumstances in which beneficiaries are now required to be served with an application under the FPA, and are entitled to appear and be represented, the statement no longer accurately reflects the law, and Lathwell now states the extent of an executor's duty.
[24] Vasiljev v Public Trustee [1974] 2 NSWLR 497, 503 citing In the Will of W.F. Lanfear (Deceased) (1940) 57 WN (NSW) 181, 183.
[25] Vasiljev 503.
The first defendants did not argue that Lathwell inaccurately states the law. However, there is an issue whether the court in Lathwell purported to place a limit on the appropriate exercise of an executor's duties; that is, whether it prevents an executor, in an appropriate case, from actively defending a challenge to, or application to vary, the provisions of a will under the FPA when the beneficiaries or, as in this case, potential beneficiaries, have indicated an intention to abide.
The plaintiff argued that the obligation of a trustee to act impartially as between beneficiaries prevents the first defendants from actively defending the matter. However, as was pointed out on behalf of the first defendants, taking steps to uphold the Will is not necessarily an act of partiality as between the beneficiaries.
Further complicating the matter is that the second, third and fourth defendants will only become entitled to any part of the estate if the plaintiff dies without surviving children and the trust has not been exhausted by the time that occurs. As such, at this stage they have no legitimate expectation of receiving any benefit under the Will at all.
The plaintiff expressed concerns as to the first defendants acting as 'proxy' for the second, third and fourth defendants. However, in light of the contingent beneficial interest of the second, third and fourth defendants, and their stated intention to abide by the outcome, the plaintiff was unable to point to any realistic potential for the first defendants to act as such a proxy in the FPA proceedings.
When pressed, the first defendants acceded to the proposition that, until such time as this matter is to be entered for trial (if that occurs) there is no distinction to be made between 'actively defending' the claim and 'actively preparing' the matter in the Lathwell sense. The steps to be taken by the first defendants will be the same under either description. It would only be at the point of entry for trial that the two would potentially diverge; when issues of challenging evidence and making submissions in opposition would arise.
The plaintiff was also unable to point to any steps which it was concerned might be taken by the first defendant in 'actively defending' the matter, prior to entry for trial, which would be contrary to, or in addition to, the steps which it would be necessary for the first defendants to take in order to perform their duty as set out in Lathwell.
Conclusion
I have taken the view that, having regard to the limited material presently available to me, and the fact that the positions of the parties do not differ significantly, if at all, as to the steps which it will be necessary for the first defendants to take in order to ready the matter for entry for trial regardless of whether they consider themselves to be 'actively defending' the matter or merely performing their duties as set out in Lathwell, it is appropriate to provide a direction as sought, but limited to a point prior to entering the matter for trial. If the first defendants wish to seek further advice or direction at that point, they will be entitled to do so. Whether it will be provided is a matter to be determined at that time.
The direction I make is that the first defendants are justified in actively defending the plaintiff's claim, including compromising the matter, up to but not including entering the matter for trial.
The first defendants may well need to seek information from others, which may include the second, third and fourth defendants, in gathering information relevant to the plaintiff's claim. They are not precluded from doing so.
For the avoidance of doubt, my direction also contemplates the first defendants may seek counsel's opinion as to how properly to proceed in accordance with their duties as executors at a point when they consider they have sufficient information to make that appropriate.
Orders
The application is allowed.
Pursuant to s 92 of the Trustees Act 1962 (WA) it is directed that the first defendants, in their capacity as executors of the will of the late Rose Margaret Marinko, are justified in actively defending the plaintiff's claim, including compromising the matter, in the Supreme Court of Western Australia action CIV 2151 of 2021, up to, but not including, entering the matter for trial.
The first defendants' costs of and incidental to this application shall be paid by the estate on an indemnity basis.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AT
Associate to the Honourable Justice Forrester
30 MAY 2023
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