Michelle Cooper v Ian Anthony McCormack as executor of the estate of the late Colin Windsor McCormick; Wayne McCormick v Ian Anthony McCormick as Executor of the estate of the late Colin Windsor McCormick (No. 2)
[2013] NSWSC 1588
•31 October 2013
Supreme Court
New South Wales
Medium Neutral Citation: Michelle Cooper v Ian Anthony McCormack as executor of the estate of the late Colin Windsor McCormick; Wayne McCormick v Ian Anthony McCormick as Executor of the estate of the late Colin Windsor McCormick (No. 2) [2013] NSWSC 1588 Hearing dates: 31 October 2013 Decision date: 31 October 2013 Jurisdiction: Equity Division Before: Slattery J Decision: Settlement of the proceedings approved on behalf of a person under legal incapacity pursuant to Civil Procedure Act 2006, s 76.
Catchwords: SUCCESSION - application for judicial advice by an executor under Trustee Act 1925 s 63 in relation to a settlement offer and for approval of the settlement under Civil Procedure Act 2006 s 76 - the Court previously gave judicial advice that the executor that he would not be justified in accepting a settlement offer and identified certain unacceptable elements of that offer - the parties later reached an amended settlement and asked for it to be approved -the Court had a residual concern whether as a result of the settlement to be approved a sister should be appointed as her disabled brother's financial manager despite the potential conflict of interest which would arise in the sister on that appointment - mechanisms discussed to resolve the conflict. Legislation Cited: Civil Procedure Act 2006
NSW Trustee and Guardian Act 2009Cases Cited: Michelle Cooper v Ian Anthony McCormack as executor of the estate of the late Colin Windsor McCormick; Wayne McCormick v Ian Anthony McCormick as Executor of the estate of the late Colin Windsor McCormick [2013] NSWSC 1207 Category: Consequential orders Parties: Plaintiff (2013/30300): Michelle Cooper
Plaintiff (2013/114880): Wayne McCormick
Defendant (2013/114880, 2013/30300): Ian Anthony McCormack as executor of the estate of the late Colin Windsor McCormickRepresentation: Counsel:
Plaintiff (2013/114880): S K Hill
Plaintiff (2013/30300): L Ellison SC
Defendant: D Liebhold (2013/114880, 2013/30300)
File Number(s): 2013/114880, 2013/30300 Publication restriction: No
Ex TEMPORE Judgment
This is my second judgment in these proceedings. In my first judgment, on an application for judicial advice by an executor, the Court advised that the executor would not be justified in accepting an offer of settlement of litigation, which the executor was then considering: Michelle Cooper v Ian Anthony McCormack as executor of the estate of the late Colin Windsor McCormick; Wayne McCormick v Ian Anthony McCormick as Executor of the estate of the late Colin Windsor McCormick [2013] NSWSC 1207. This judgment should be read with my first judgment. The parties are referred to in the same way here as they are in the first judgment. The full circumstances of the matter set out in the first judgment are not repeated.
Since my first judgment was given the parties have engaged in further negotiations and reached a settlement which is now satisfactory to them all. That was not the situation at the time that the executor sought the Court's judicial advice. At that stage the executor was doubtful that the offer then made and which is set out in the Court's earlier reasons should be accepted. Now the legal representatives of Michelle and Wayne and the estate have all executed terms of settlement, which the Court is asked to approve. The Court's approval under the Civil Procedure Act 2006, s 76, is required because of Wayne's disability.
The settlement is generally one which the Court should approve for the reasons stated in the Court's previous reasons. The full text of the settlement is set out at the end of this judgment.
The essential change from what was proposed before is that it is now clear that if the estate realty is to be sold, and that for any reason substituted realty is purchased for Wayne's and Michelle's residence, that certain conditions will apply that allow greater portability to Wayne's capital - a concern which was highlighted in the Court's previous reasons.
The Court has a residual concern even with these terms. Although the approval of these terms was sought in chambers, the Court has listed the matter today to express its concern. One of these concerns is clause 6(c) of the settlement.
Clause 6(c) of the settlement provides that for the joint tenancy over the existing real estate to be severed, during Wayne's lifetime, Wayne's financial manager or guardian would need to consider "it to be in Wayne's best interests for the realty or substitute realty to be sold".
The concern is the conflict of interest and duty the settlement creates for Michelle. In Clause 6g Michelle has agreed "that she will make an application to the [Guardianship] tribunal for the appointment of herself as a financial manager for Wayne". The Court's previous judgment, in particular [45], made clear that it was highly desirable that the financial manager who would make the decision about what was in Wayne's best interests in relation to the severance of the joint tenancy and the sale of the property would be a third party; that is, someone other than Michelle.
The parties have nevertheless agreed upon terms that are consistent with a possible outcome that Michelle would be the financial manager and that she would be the person who would decide what would be in Wayne's best interest for the sale of the present or the substitute realty. Of course, in the making of that decision she would have a conflict of interest.
It seems to the Court that unless other controls or mechanisms are put in place this would place Michelle in an impossibly difficult position. Of course, it is open upon Michelle's application for the Tribunal to appoint someone other than her as Guardian or financial manager. The settlement agreement is also consistent with that outcome. Who should be appointed is a matter for the Tribunal ultimately. It is hard to foresee all the relevant circumstances that would bear upon the appointment at this stage. It may be someone other than Michelle cannot be found to act readily.
In those circumstances it seems to me that the best course is that any application which Michelle makes to the Tribunal should propose a reporting structure which ensures that: (1) if at any stage Wayne seeks to have his interest in the real estate sold or; (2) if Michelle seeks to have the real estate sold, that particular part of Michelle's management of Wayne's estate will be referred to the NSW Trustee and Guardian before any final decision is made.
Without becoming any more prescriptive about it than this, there may be a number of mechanisms the Tribunal can put in place which will allow the general intent expressed in the previous paragraph to be given effect. The Court can approve this settlement, which is otherwise in the best interests of the parties for the reasons stated in my previous judgment. But I will give liberty to apply to the parties in the implementation of the orders which will be made. That liberty would encompass the possibility that once a financial manager has been appointed, and in particular if the financial manager is Michelle, Wayne is able to come back to the court to have orders made under of the NSW Trustee and Guardian Act 2009, ss64, 65 and 55 to ensure that the intent of what is stated in this judgment is given effect.
Of course, without recourse to this Court, the Tribunal may impose terms that if Michelle is appointed financial manager she must refer decisions such as those she might need to make under clause 6(c) to the NSW Trustee and Guardian.
Mr Ellison SC has undertaken on behalf of his client, Michelle that when the application which is contemplated to be made under Clause 6g of the orders is made a copy of my reasons today and of the previous occasion, will be put before the Tribunal. Those reasons should sufficiently arm the Tribunal with the Court's concerns about putting in place an appropriate mechanism to implement this settlement in everyone's, but particularly in Wayne's, best interests.
So I approve the settlement under Civil Procedure Act, s 76 and make orders in accordance with the short minutes of order initialled by me, dated today and placed with the Court papers.
Orders
By consent and with the Court's approval pursuant to Civil Procedure Act, s 76, the Court orders:
(1) An order pursuant to s 58(2) of the Succession Act extending the time for the bringing of the Plaintiff's claim in proceedings no 2013/114880 up to and including 15 April 2013.
(2) In lieu of the provision made for the Plaintiff in proceedings no 2013/30300 ("Michelle") and the Plaintiff in proceedings no 2013/114880 ("Wayne") under clauses 1.6, 1.7 and 1.8 and the provision made for the Defendant and Alan McCormick under clause 1.8 of the will of the late Colin Winsor McCormick (the "Deceased"):
(a) Michelle and Wayne receive the whole of estate realty, being the property situated at Adelaide Street, St Marys (Folio Identifier 102/788536) [address not published] as joint tenants; and
(b) Each of the Defendant and Alan McCormick to receive a legacy of $2,000, such amount to be charged over the estate realty.
(3) The costs of the Defendant on the indemnity basis are to be paid out of the residuary estate of the Deceased.
(4) To the extent that there is a shortfall in residuary Estate satisfying the Costs order in Order 3 above, Michelle and Wayne are to pay the balance of the Defendant's costs.
(5) No order as to the costs of the Plaintiffs, Michelle and Wayne, to the intent that each bear his or her own costs.
(6) The Court notes the agreement (made in consideration of each consenting to the orders herein of the parties):
(a) Subject to clause 6c, In the event that the Estate realty is to be sold for any reason, a substitute property will be purchased by Michelle and Wayne to be used as their residence.
(b) Any property (or further property) bought pursuant to the agreement in paragraph 6(a) is to be purchased where possible by Michelle and Wayne as joint tenants.
(c) Any joint tenancy will only be severed during the lifetime of either Michelle or Wayne whilst both are alive if Wayne needs to move into institutional care and requires the capital and/or income of his share in the Estate realty or substitute realty to be applied to payment of such institutional care or services or Wayne's financial manager or Guardian considers it to be in Wayne's best interest for the realty or substitute realty to be sold, Michelle and Wayne agree to sign and do all things necessary to effect a severance of the joint tenancy and effect a sale of the Estate realty or substitute realty.
(d) In respect of any property held as tenants in common, No application for statutory sale will be brought whilst both Michelle and Wayne are alive, unless Wayne needs to move into institutional care and requires the capital and income of his share in the Estate realty or substitute realty to be applied to payment of such institutional care or services, or Wayne's financial manager or Guardian considers it to be in Wayne's best interest for the realty or substitute realty to be sold, in which case both Michelle and Wayne agree to sign and do all things necessary to make such application.
(e) If the Estate realty (or any substitute realty) is held by way of tenancy in common, then each of Michelle and Wayne grant to the other a lifetime right of residence in that party's interest in the tenancy in common.
(f) This agreement binds not only Michelle and Wayne but their executors, administrators, heirs and assigns.
(g) Within 4 weeks of the making of the orders herein, Michelle will make an application to the NSW Guardianship Tribunal for the appointment of herself as a financial manager for Wayne. The Defendant shall hold Wayne's share of the estate realty as trustee until such time as a financial manager (be that Michelle or otherwise) has been appointed but agrees not to deal with Wayne's share as may be provided by these Orders and this agreement.
(h) Michelle consents to any financial manager of Wayne:
(i) lodging a caveat to protect Wayne's interest in the estate realty or any substitute realty purchased pursuant to paragraph 6(a) herein ("Wayne's interest"); and
(ii) lodging a caveat over Michelle's interest in the estate realty or any substitute realty such caveat intended to protect Wayne's interest under the agreement referred to in paragraph 6(i) herein.
(iii) Michelle will not encumber her interest in the Estate realty (or any substitute realty) save as for security for a loan to pay for any costs associated with these proceedings or to finance the purchase of substitute realty.
(7) The Court notes the further agreement of the parties that:
(i) The Plaintiff is an eligible person;
(ii) The Plaintiff has served a notice identifying all other eligible persons on the Defendant.
(iii) The administrator has filed the administrator's affidavit and the affidavit of service of the notice of the plaintiff's claim on any person who is, or who may be an eligible person, as well as upon any person beneficially entitled to the distributable estate, and any person holding property of the estate, as trustee or otherwise.
(iv) The Defendant has filed an Appearance.
(8) Grant liberty to apply in relation to the implementation of these Orders.
(9) In proceedings 2013/30300 the Statement of Claim be otherwise dismissed.
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Decision last updated: 31 October 2013
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