McDonnell v McDonnell
[2021] VSC 536
•27 August 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2020 00218
IN THE MATTER of the estate of EAMONN ANTHONY McDONNELL, deceased
-and-
IN THE MATTER of section 28 and 34 of the Administration and Probate Act 1958
-and-
IN THE MATTER of sections 41, 45, 48 and 51 of the Trustee Act 1958
-and-
IN THE MATTER of an application under r 54.02(2)(b)(i)-(iii) and r 54.02(2)(c) of the Supreme Court (General Civil Procedure) Rules 2015
BETWEEN:
| JAMES EDWARD MCDONNELL | Plaintiff |
| v | |
| MICHAEL THOMAS MCDONNELL (in his capacity as executor and trustee of the estate of EAMONN ANTHONY MCDONNELL, deceased) | Defendant |
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JUDICIAL REGISTRAR: | Keith JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 18 September 2020 |
DATE OF JUDGMENT: | 27 August 2021 |
CASE MAY BE CITED AS: | McDonnell v McDonnell |
MEDIUM NEUTRAL CITATION: | [2021] VSC 536 |
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PRACTICE AND PROCEDURE – Noncompliance with Court orders – Defendant previously executor of estate – Executorship discharged due to failure to administer – Plaintiff seeks further orders – Should $90,912.03 in estate expenses be deducted from defendant’s share – Should minor beneficiaries’ share be held by Funds in Court – Defendant failed to provide explanation of how $90,912.03 was spent, despite considerable opportunity – Court found it in best interests of the minor beneficiaries to have their share held by Funds in Court – $90.912.03 to be paid from defendant’s share of estate per order 54 of Supreme Court (General Civil Procedure) Rules 2015 – Minor beneficiary’s share held by Funds in Court until majority, per s 69(1) of Trustee Act 1958 – Defendant pay plaintiff’s costs on indemnity basis, being personally liable for shortfall.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Rizzi | BD Legal |
| No appearances by or for the Defendant |
TABLE OF CONTENTS
Introduction................................................................................................................................... 1
Procedural history......................................................................................................................... 1
The plaintiff’s further summons................................................................................................. 2
Salient facts..................................................................................................................................... 4
Submissions................................................................................................................................... 6
Estate funds unaccounted for............................................................................................ 6
Funds in Court..................................................................................................................... 6
Costs...................................................................................................................................... 8
Conclusion...................................................................................................................................... 8
Orders............................................................................................................................................. 9
JUDICIAL REGISTRAR:
Introduction
Eamonn Anthony McDonnell (‘the deceased’) died on 7 July 2017, survived by his two children, James Edward McDonnell (‘the plaintiff’) and Michael Thomas McDonnell (‘the defendant’).
The deceased left a Will dated 28 October 2013 (‘the Will’) nominating the defendant as executor.
On 23 November 2017, probate of the Will was granted to the defendant. The Will provides for the residuary estate of the deceased to be divided into six parts, with the plaintiff and the defendant each receiving a one-sixth share and the deceased’s grandchildren sharing the remaining four one-sixth shares.[1]
[1]The net value of the estate as set out in the Inventory of Assets and Liabilities dated 10 November 2017 is $884,250.00
The plaintiff does not have any children. The four one-sixth shares under the Will are to be shared between the defendant’s four children: Seth Blaise McDonnell born 8 March 2000 (‘Seth’); Charlotte Montana McDonnell born 10 August 2006 (‘Charlotte’); Milly Rose McDonnell born 16 November 2009 (‘Milly’); and Levi Zayne McDonnell born 30 October 2012 (‘Levi’). Charlotte, Milly and Levi are minors.
The plaintiff alleges the defendant has so far failed to administer and distribute the estate of the deceased. Furthermore, on 16 January 2021, the plaintiff commenced this proceeding seeking inter alia orders for: the removal of the defendant as executor and trustee of the estate of the deceased pursuant to s 34 of the Administration and Probate Act 1958 and s 48 of the Trustee Act 1958; and the appointment of either the plaintiff or another suitable person in his place.
Procedural history
At the first directions hearing on 18 February 2020, the Honourable Justice Moore made orders that the defendant provide a full and just accounting of the administration of the estate of the deceased and for the defendant to file affidavit material responsive to the plaintiff’s application. The matter was made returnable for further directions on 1 April 2020.
In anticipation of this next hearing date, the Court ordered an extension to the above timetable, as the defendant had not yet complied with the orders to provide an account or file affidavit material. Judicial Registrar Keith extended the date by which an account was to be provided to 10 April 2020 and for an affidavit to be filed and served to 17 April 2020. Additionally, the proceeding was adjourned to 24 April 2020.
At the hearing on 24 April 2020, the defendant had still not complied with the Court’s orders to provide an account or an affidavit in relation to the plaintiff’s application. On account of this non-compliance, the plaintiff requested the matter be set down for trial as soon as possible. The defendant did not appear at this hearing despite numerous attempts by the Court to make contact with him. Judicial Registrar Keith made orders fixing the proceeding for trial on 20 May 2020 and for the parties to file written submissions in anticipation of this hearing date.
At the hearing of the plaintiff’s application on 20 May 2020, Judicial Registrar Keith made orders by consent discharging the defendant as executor and trustee of the estate of the deceased and appointing the plaintiff in his place. The defendant was to pay the plaintiff’s costs of the application, hand up the grant of probate to the Registrar of Probates and to file an account of his administration of the estate.
The plaintiff’s further summons
On 14 August 2020, the plaintiff sought to have the matter listed again, pursuant to liberty to apply, as the defendant had not yet complied with the Court’s orders made 20 May 2020. On 28 August 2020, the plaintiff filed a summons seeking the following orders, inter alia:
(a) pursuant to order 54 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’), a direction that the plaintiff would be justified in deducting $90,912.03 from the defendant’s share of the estate;
(b) the share of the estate intended for the deceased’s minor grandchildren Charlotte, Millie and Levi be paid into Funds in Court for the benefit of these children, until they reach 18 years of age; and
(c) an order the defendant deliver up to the plaintiff the deceased’s goods, including the deceased’s gold sovereign watch.
On 11 September 2020, the Court ordered the plaintiff file submissions in respect of whether it was appropriate for the plaintiff to seek the additional relief enumerated in its recent summons, in an exhausted removal proceeding, by 15 September 2020. Moreover, the court ordered the defendant file written submissions in response to the plaintiff’s summons filed on 28 August 2020, with such submissions to include:
(a) a detailed explanation of how the $90,912.03 disbursed to the defendant from the trust account of Aughtersons Lawyers between 2 March 2018 and 3 May 2019 was spent; and
(b) any supporting documents evidencing any monies spent by the defendant in his capacity as executor.
At the next hearing of the proceeding[2], with the defendant having not complied with the earlier orders to file submissions, the Court made the following orders:
[2]The defendant did not enter an appearance at this hearing.
(a) pursuant to r 2.04 of the Rules, the Court shall dispense with the requirement for the plaintiff to amend the originating motion filed on 16 January 2020 to seek the additional relief now sought by the plaintiff’s summons filed on 28 August 2020.
(b) the Court shall consider the plaintiff’s summons filed on 28 August 2020 ‘on the papers’; and
(c) following the Court’s consideration of the plaintiff’s summons, the Court shall inform the plaintiff whether or not it requires a memorandum of advice from Counsel regarding the plaintiff’s request for directions and advice from the Court pursuant to r 54.02 of the Rules.
The plaintiff’s summons filed 28 August 2020, is the subject of these reasons.
Salient facts
In support of the summons filed 28 August 2020, the plaintiff deposes[3]:
[3]Taken from the affidavit of the plaintiff sworn 16 January 2020 and Richard Alan Bridge sworn 26 August 2020.
(a) between 19 June 2019 and 30 July 2019, the plaintiff’s solicitors wrote to the defendant’s then solicitors Aughtersons, seeking an account of the administration of the estate and the likely time for distribution;
(b) on 27 June 2019, the plaintiff’s solicitors received a trust account statement. This trust statement shows approximately $90,000.00 was paid to the defendant from the estate funds held on trust. Specifically, the following payments to the defendant were recorded in the trust ledger:
(i) 1 June 2018 – payment of estate expenses - $30,000
(ii) 1 September 2018 – payment of estate expenses - $20,000
(iii) 11 December 2018 – payment of estate expenses - $10,000
(iv) 1 February 2019 – payment of estate expenses - $12,500
(v) 3 May 2019 – payment of estate expenses - $9,475.03
(c) Aughtersons informed the plaintiff’s solicitors the defendant had records for all estate expenditure and these would be provided by ‘next week.’
(d) on 1 August 2019, the plaintiff contacted the Probate Office seeking the defendant be compelled to provide an administration account. The Probate Office exchanged several pieces of correspondence with the defendant’s solicitors seeking the administration account. The majority of the emails provided by the defendant’s solicitors indicated they could not obtain instructions.
(e) on 20 May 2020, the Court made orders discharging the defendant as executor and trustee of the estate of the deceased and appointing the plaintiff as administrator of the Will annexed and trustee in his place. Following these orders on 27 May 2020, Aughtersons confirmed the transfer of the funds held on trust to the plaintiff’s solicitors. Following this, the plaintiff emailed Aughtersons seeking any invoices they may have received in relation to the purported $90,912.03 of executor’s expenses. Aughtersons responded on 4 June 2020 indicating they had provided their file in relation to the estate administration and to direct any further enquiries to the defendant personally;
(f) on 3 June 2020, the plaintiff emailed the defendant in relation to the outstanding expenses, noting there was nothing on his solicitors’ file substantiating the legitimacy of the executor expenses paid from the trust account. From this date until 28 July 2020, the plaintiff made numerous attempts to contact the defendant, requesting an explanation of the estate expenses paid out to him.
(g) on 6 July 2020, the plaintiff sent a letter to the defendant’s former solicitors again requesting supporting documentation in relation to the expenses, noting the information provided to date did not include any details of those expenses. On 20 July 2020, the defendant’s former solicitors responded, informing the plaintiff they would review the documents they had retained in relation to the estate and advise if any further information could be released;
(h) on 28 July 2020, the plaintiff wrote to the defendant’s former solicitors confirming: receipt of further documents in relation to the administration of the estate of the deceased; and notwithstanding the retention of some internal communication, in substance the entirety of the estate had been provided. Review of these documents indicated at no time did the defendant provide any evidence in respect of the transfer of funds to pay for estate expenses;
(i) as no substantial response or substantiation of the outstanding expenses had been received from the defendant or his former solicitors, the plaintiff filed the summons the subject of these reasons on 28 August 2020.
Submissions
On 22 April 2021, at the request of the Court, the plaintiff filed further submissions and affidavit material relating to the relief sought in the summons filed 28 August 2020.
Estate funds unaccounted for
The plaintiff notes the defendant is entitled to one-sixth of the residuary estate. It must be determined whether the $90,912.03 paid to the defendant for ’estate expenses’ is a proper estate expense, or whether it should be deducted from the defendant’s share of the estate.
The plaintiff notes it is difficult to categorise these expenses as the defendant has provided little assistance in explaining them.
The trust account from Aughtersons suggests $90,912.03 was paid to the defendant for estate expenses, however it appears there were no documents to justify this, with Aughtersons relying on the defendant’s instructions.
The plaintiff contends he, now administrator of the estate of the deceased, is justified in deducting $90,912.03 from the defendant’s share, as the defendant has been given several opportunities to explain these deductions/expenses, but has not done so. One expects if there was an explanation readily available, it would have been provided.
Funds in Court
The plaintiff notes, per the terms of the Will, four of the one-sixth shares of the residuary estate of the deceased are to be paid to the deceased’s grandchildren.
The details of the four grandchildren are contained in the affidavit of Brayden O’Connor affirmed on 28 August 2020.
The Will of the deceased requires the shares of the deceased’s grandchildren be held on trust by the trustee of his estate until they reach the age of 18. Seth has reached 18 years, but Charlotte, Milly and Levi are still minors.
The plaintiff submits the investment of the funds due to Charlotte, Milly and Levi with Funds in Court is in the best interests of the minors. The alternatives would be for the plaintiff to:
(a) personally invest those funds until the minors reach their majority;
(b) pay those funds to the parents of the minors, being the defendant and the defendant’s former partner, under the power afforded to him by clause 8(a) of the Will; or
(c) appoint a trustee company or two or more individuals to be the trustee of those funds under s 47 of the Administration and Probate Act 1958.
The plaintiff submits the first and third alternatives would come at a financial cost to the minors which would take up part of their bequest, whilst the second alternative appears undesirable considering the conduct of the defendant in this proceeding and the plaintiff’s lack of knowledge of the appropriateness of the defendant’s former partner to look after the funds for the minors.
The plaintiff’s preferred position is to pay funds due to Charlotte, Milly and Levi to Funds in Court pursuant to s 69(1) of the Trustee Act 1958. That section allows a trustee having in their hands, or under their control, money subject to a trust to pay the same into Court. This provision also states those funds shall, subject to rules of Court, be dealt with according to the orders of the Court.
Pursuant to s 113 of the Supreme Court Act1986, all money paid into Court under an order of the Court is to be held by the Senior Master.
Considering the above matters, the plaintiff submits it is appropriate for the Court to order the funds due to Charlotte, Milly and Levi to be paid to Funds in Court.
Costs
The matters raised in the summons filed on 28 August 2020 are mostly matters raised in the administration of the estate of the deceased.
It is submitted in those circumstances, the costs of and incidental to the summons filed on 28 August 2020 be paid from the estate of the deceased on an indemnity basis, so the plaintiff (in his capacity as administrator) is not out of pocket.
Conclusion
The Court considers it appropriate for the plaintiff to deduct from the defendant’s share in the estate the unexplained payments made to the defendant as executor. As the plaintiff points out, the defendant has been given multiple opportunities to file an account and to substantiate these expenses. Numerous Court orders have been made, in respect of which there has been no compliance by the defendant.
The deduction of over $90,000 is not an insignificant amount of money, given the size of the estate. If these were legitimate expenses, presumably the defendant or his former solicitors would be able to provide evidence substantiating them. In circumstances where no such material has been provided over a long period of time, it is appropriate for the Court to deduct those expenses from the defendant’s share.
The Court will order the shares of the estate to be paid to Charlotte, Milly and Levi be paid into Funds in Court pursuant to s 69(1) of the Trustee Act 1997. Given the conduct of the defendant in relation to the estate and in this proceeding, resulting in his discharge as executor, the Court is not prepared to allow him, as their parent, to hold the funds. Moreover, as investment of these shares by the plaintiff, or by a trustee company, may incur expense, the Court considers it appropriate for these funds to be paid into Court.
The plaintiff seeks a further order that the defendant deliver up to him the deceased’s goods, including the deceased’s gold sovereign watch. The Court has already made orders for the defendant to deliver up to the plaintiff the assets of the deceased. If the plaintiff seeks enforcement of that order, he should do so in accordance with the rules of Court. The Court is not prepared to make a further order in similar terms merely because the defendant has not complied with the earlier order.
The Court will order the plaintiff’s costs of and incidental of the summons filed 28 August 2020 be paid from the defendant’s share of the estate of the deceased on an indemnity basis. This order for costs on the basis of an indemnity is appropriate given the defendant’s conduct, particularly his failure to substantiate the amounts deducted from the estate. The conduct of the defendant has necessitated the costs of the plaintiff’s application to the Court and should not be paid from the share of the estate to which other beneficiaries are entitled. The costs of this proceeding were a necessary and proper cost for the administration of the estate as a result of the conduct of the defendant. Moreover, it is proper the defendant should pay the costs, which should be paid from his share of the estate and in the event of any shortfall, he should be personally liable to reimburse the plaintiff.
Orders
Pursuant to order 54 of the Rules, the plaintiff is justified in deducting $90,912.03 from the defendant’s share of the estate of the deceased.
The share of the estate intended for the deceased’s minor grandchildren Charlotte Montana McDonnell, Millie Rose McDonnell and Levi Zayne McDonnell be paid into Funds in Court, for the benefit of these children, until they reach 18 years of age.
The plaintiff’s costs of and incidental to the summons filed 28 August 2020 be paid from the defendant’s share of the estate of the deceased on an indemnity basis.
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