Matthews v Matthews
[2009] VSC 308
•22 July 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 6346 of 2009
IN THE MATTER of Section 34 of the Administration and Probate ct 1958 and Section 48 of the Trustee Act 1958
-and-
IN THE MATTER of the Will and Estate of CHARLES JOSEPH MATTHEWS
deceased
BETWEEN
| JILLIAN RITA MATTHEWS | Plaintiff |
| V | |
| NEIL ALLAN MATTHEWS (as the Executor of the Estate of CHARLES JOSEPH MATTHEWS deceased) | Defendant |
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JUDGE: | OSBORN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 July 2009 | |
DATE OF JUDGMENT: | 22 July 2009 | |
CASE MAY BE CITED AS: | Matthews v Matthews | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 308 | |
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CIVIL LAW – Probate of will – Application to have defendant removed as executor – Defendant and Plaintiff both beneficiaries of will – Application for adjournment refused – Serious misconduct – Direct personal interest – Defendant removed as executor – Plaintiff appointed as executor – Plaintiff awarded costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms S. Gaden | Cinque Oakley Senior Lawyers |
| For the Defendant | Ms L. Englefield | Slater Gordon Limited |
HIS HONOUR:
Charles Joseph Matthews died on 15 August 2007 leaving three surviving children. They are the defendant, who is the deceased's son, the plaintiff, who is the deceased's daughter and a further daughter. By a will dated 19 April 2002, the deceased left his estate in equal shares to his three children.
Probate of the will was granted to the defendant on 16 February 2009. The plaintiff now seeks to have the defendant removed as executor pursuant to section 34 (1)(c) of the Administration of Probate Act (1958) (“the Act”) which provides as follows:
(1) Notwithstanding anything contained in any act where an executor or administrator to whom probate has been granted whether before or after the commencement of this act or where an administrator has been appointed under this section or any corresponding previous enactment-
(a) remains out of Victoria for more than two years;
(b) desires to be discharged from his office of executor or administrator, 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 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.
In Dimos v Skaftouros & Ors[1], the Court of Appeal held that the Court's discretionary power pursuant to section 34(1)(c) would not be lightly exercised to remove a person chosen by the testator as the personal representative.
[1](2004) 9 VR 584
If further held that the plain meaning of the term "unfit to act", which served the legislative goal of promoting the welfare of beneficiaries in protecting their interest in the estate, was such that the power, extended to circumstances including breach and neglect of duty in the administration of the estate, involving matters such as unwarranted delay, failure to communicate with beneficiaries and failure to account as well as conflict of interest and duty.
The defendant is presently in Vietnam and has, it appears, resided in that country for some considerable time. His counsel has indicated to the Court that he joins issue with various factual allegations made in the material upon which the plaintiff relies but does not oppose his removal as executor, it is said, "for pragmatic reasons".
The defendant does however oppose his replacement by the plaintiff as executor and seeks the appointment of an independent third party as executor. He also opposes any order for costs against him.
The defendant further seeks an adjournment of the plaintiff's application until late August in order that he can return to this country and have the opportunity make further investigations and potentially file and serve relevant material.
The application for adjournment is opposed. In essence it is submitted on behalf of the plaintiff that there is an urgent need to remove the defendant and that should occur today. I accept this submission for the following reasons.
One, the removal of the defendant is not opposed and in my view this is a very significant concession despite the terms in which it has been phrased.
Two, the defendant is not in the jurisdiction. His solicitor deposes that the defendant is required to attend court in Vietnam on 29 July 2009 for the purpose of civil appeal proceedings. The solicitor further states that the defendant expects a successful conclusion from that case:
“After which he anticipates transferring money from Vietnam to the estate in Australia.”
Three, the defendant has failed to get in the estate assets referred to in the inventory deposed by him when he obtained probate. The most significant of these assets, in monetary terms, is a loan in the sum of $278,939 repayable to the estate by the defendant himself.
Four, the accountant who formerly acted for the deceased and to whom the plaintiff was directed by the defendant's former solicitors, as holding relevant information as to the assets of the estate, has deposed that the defendant in fact owes a total of $374,901 to the estate. The defendant has borrowed further moneys from the estate for his own benefit since his father's death. The accountant's evidence is that his office sold shares held by the estate and deposited the proceeds directly into the defendant's bank account at the defendant’s direction, see paragraph 4 of the affidavit of Robert John Evans. This evidence is not challenged.
Five, the defendant has failed to distribute any of the estate assets to either of the other two beneficiaries whilst applying funds from the estate for his own purposes.
Six, the above matters have occurred in the context of ongoing delay by the defendant. He did not seek or obtain probate until the plaintiff took proceedings compelling him to do so. He has not provided information to the plaintiff when requested to do so on a series of occasions. He has also not responded personally to the affidavit material relied on by the plaintiff in this proceeding and in particular has not filed material within an expeditious timeframe work contemplated by previous orders for directions.
When all these matters are considered together, I am satisfied the defendant should be removed as executor today. I am satisfied he is unfit to continue acting in that office.
I turn then to the more difficult question as I see it, namely whether, if the defendant is to be removed as executor, he should be replaced by the plaintiff or by an independent third party.
The affidavit material filed on behalf of the parties suggests that the probable ambit of any dispute as to the nature and extent of the estate is limited.
As I understand it, the defendant now disputes that the full amounts of the loans to himself deposed to by him at the time of grant of probate was in fact received for his own benefit. One must however view this position with considerable scepticism. At present the only affidavit material before the Court bearing directly on the point is in agreement, namely the affidavit of the defendant himself filed in support of the application for probate and the affidavit of the accountant filed on behalf of the plaintiff in this proceeding.
There is also, as I understand it, dispute as to the quantum of moneys subsequently borrowed by the defendant. It appears, however, that both sides currently expect that this will be able to be resolved by reference to financial records and it is of course on precisely this basis that the accountant has expressed the opinion which he has as to the balance owing.
This suggests to my mind a relatively limited area of potential dispute directed to a limited quantum. The accountant has, after all, not only acted for the deceased for many years, but thereafter acted on behalf of the defendant both prior to and, it appears, after the grant of probate.
In these circumstances there are, in my view, very strong considerations favouring the limiting of costs if that can be achieved. These considerations militate against the appointment of a third party executor.
Counsel for the defendant submitted an independent third party executor was appropriate essentially for two reasons. First, the plaintiff has deposed as to monetary claims which the defendant disputes, and secondly, there is a history of dispute between the parties. I do not accept these matters make the plaintiff unsuitable to act as executor.
It is apparent that the plaintiff’s evidence as to the assets of the estate is evidence as to her belief based on information obtained principally from the accountant to whom she was directed by the defendant. Further, the actions taken by her in this Court are properly characterised as ones directed simply to getting the estate finalised and not as ones which, in my view, signify some disqualifying characteristic on her part or fundamental antipathy towards the defendant.
Paragraph 9 of the defendant's solicitor's affidavit filed yesterday suggests that the plaintiff may be unsuitable to act as an executor due to "certain conduct of hers", but this totally unparticularised allegation was not pursued before me and I give it no weight.
If the defendant were to rely on hearsay affidavit evidence of this kind, then the source of the hearsay, the nature of the complaint and other relevant details should have been spelt out.
In all the circumstances, the most just and convenient course is to appoint the plaintiff as executor.
For completeness I should add that I do not accept this matter should be further adjourned. Such an adjournment would exacerbate the circumstances which justify the removal of the defendant. Further, whilst I accept the return of the defendant to this jurisdiction, if it occurs, may enable the financial history of the administration of the estate to be better clarified, this possibility does not warrant further delay.
I will hear counsel as to the appropriate form of orders and as to the question of costs.
(Submissions re costs and orders to be made)
In this case the plaintiff seeks costs on the basis that costs should follow the event, and that in the circumstances which I have found neither the plaintiff nor the estate should be out‑of‑pocket.
It is submitted on behalf of the defendant that delay on the part of the defendant since probate was granted has not been unreasonably extended, nor has he engaged in serious and consistent misconduct and that he should be entitled to indemnity from the estate as its trustee.
In my view, the plaintiff should get her costs. The matters which have caused me to order that the defendant be removed do, in my view, objectively amount to serious misconduct involving circumstances of direct conflict of interest. This said, however, I am not prepared to order that those costs be paid on an indemnity basis.
First, the actual period of delay and failure to respond to the plaintiff's legal advisors since the grant of probate is not greatly excessive in absolute terms.
Secondly, there has not been what I will call direct misconduct in this latter period, rather it appears to me the defendant has simply not faced up to his obligations and has failed and neglected to honour them.
Thirdly, I accept as Ms Engelfield submitted to me that the Defendant has always conceded that he is indebted to the estate and insofar as there is dispute between the parties as to the underlying rights and entitlements of the beneficiaries, that dispute is essentially limited to clarification of matters of quantum.
Fourthly, I am not persuaded that the defendant has acted in a consciously wrongful manner either since the grant of probate or indeed prior to it. This is so despite the observations I have made in the course of discussion with counsel as to the manner in which it appears clear he borrowed moneys from the estate for his own purposes prior to obtaining a grant of probate.
When the matter is looked at in the broad, it seems to me that the circumstances are not such as to warrant the grant of an award of costs on a solicitor/client or indemnity basis. The conduct of the defendant has not been so grossly unreasonable overall and in particular has not been so grossly unreasonable since the grant of probate as to warrant such an award. On the other hand, the failure and more particularly the continuing failure to get the estate in and to distribute it in circumstances where he has obtained continuing direct personal advantage from that situation, seem to me to be such as to not only justify his removal but also to justify the incidental costs of the application for his removal.
I will order that the defendant pay the plaintiff's costs of this application.
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