Mole v Mole
[2021] VSC 752
•16 November 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS EQUITY AND PROBATE LIST
S ECI 2021 04141
IN THE MATTER of the Will and Estate of COLIN GRAEME MOLE, deceased
| COLIN CHARLES MOLE | First Plaintiff |
| ANDREW JAMES MOLE | Second Plaintiff |
| NATHAN CHARLES MOLE | Third Plaintiff |
| v | |
| STEVEN JAMES MOLE (in his capacity as Executor and Trustee of the Estate of COLIN GRAEME MOLE, deceased) | Defendant |
---
JUDGE: | MOORE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 November 2021 |
DATE OF JUDGMENT: | 16 November 2021 |
CASE MAY BE CITED AS: | Mole v Mole |
MEDIUM NEUTRAL CITATION: | [2021] VSC 752 |
---
INTERLOCUTORY INJUNCTION – Application for judicial advice – Sale of land to beneficiary under will – Capital Gains Tax implications – Power of appropriation – Equitable setoff – Interlocutory injunctive relief refused – Supreme Court (General Civil Procedure) Rules2015, Order 54.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr T B D Gorton | Davies Watson Pty Ltd |
| For the Defendant | Mr J Smith | Earl & Associates |
HIS HONOUR:
On 11 November 2021, I dismissed an application by the plaintiffs for an interlocutory injunction restraining the defendant from treating as being terminated or rescinded certain contracts of sale of land. These are my reasons for judgment for dismissing the plaintiffs’ application for interlocutory relief.
Factual context
The factual background to the application was largely uncontroversial.
The first plaintiff (Colin)[1] and the defendant (Steven) are sons of the late Colin Mole who died on 15 November 2019. Colin has two children, Andrew and Nathan, who are his business partners and co-plaintiffs. Steven has two children, David and Jayde.
[1]For convenience and to avoid confusion, without any disrespect to the parties, I will refer to the parties by their first names.
The deceased’s last will was made on 5 January 2018 (the will) and appointed Steven as executor and gifted his residuary estate to Steven, David, Jayde, Andrew and Nathan. Unlike the terms of the deceased’s penultimate will, Colin was excluded as a beneficiary under the will. The will records that the deceased made no provision for Colin ‘having regard to the lack of care and feeling shown to me by my said son and having regard to his spendthrift ways’.[2]
[2]Clause 8 of the will.
Steven obtained a grant of probate on 15 June 2020. The inventory of assets and liabilities prepared by Steven in support of the grant recorded total gross assets of $936,043.66. The principal assets of the estate included two parcels of land which collectively comprised the deceased’s farm (the farm properties), as well as a property in the town of Ouyen.
Colin commenced a claim for further provision from the estate pursuant to Part IV of the Administration and Probate Act on 3 September 2020 (the Part IV proceeding). He also lodged caveats on the farm properties asserting that the deceased held them on a constructive trust for his benefit (the caveats).
Colin’s claims on the deceased’s estate were settled pursuant to written terms of settlement entered into following mediation on 18 May 2021 (the terms of settlement). The parties were represented by counsel at the mediation. It was not controversial that the terms of settlement detailed a scheme of administration which included the following components:
(a) All of the real property of the estate was to be sold forthwith by public auction, or otherwise as advised by the selling agent.
(b) Colin was given the right to purchase any of the real properties, whether by auction or private treaty.
(c) The net proceeds of sale of the properties were to be added to the residue of the estate.
(d) The defendant was also to sell the balance of the estate with the proceeds to be added to the residue of the estate.
(e) The parties’ litigation costs were to be paid from the residue, with the balance to be distributed between Colin, Steven and their children in the following proportions: 19% to Steven, 15% to Colin, 16.5% to David, 16.5% to Jayde, 16.5% to Nathan and 16.5% to Andrew. In the result, Colin and his sons collectively were entitled to 48% of the residue; with Steven and his children’s entitlement being 52%.
(f) These distributions were to be made within 14 days of the settlement of the sale of the last of the properties.
Under the terms of settlement, Colin also agreed to withdraw the caveats and acknowledged that he accepted the benefit of the settlement in full satisfaction of all relevant claims, including any which he may have in the future against the deceased’s estate, and that he released the estate from any such actions, claims or demands.
The terms of settlement were subject to the consent of the beneficiaries under the estate, which consent was subsequently provided. On 10 June 2021, the County Court dismissed the Part IV proceeding with no order as to costs.
There was some delay in the removal of the caveats which did not occur until 4 June 2021. There is some disagreement between the parties about the reasons for this delay which it is unnecessary to resolve.
The plaintiffs purchased the farm properties at public auction on 28 August 2021. Their successful bid was $2,100,000; the underbidder’s bid was $2,000,000.
The purchase of the farm properties was effected by two contracts in relevantly identical terms, one for each property (the contracts). The contracts were in standard form and included, in relation to each, that the price was $1,050,000 payable by deposit of $105,000 and a balance of $945,000, with settlement to occur 60 days after exchange of contracts, being on 28 October 2021. The payment of the balance was due upon settlement. The contracts also included usual terms to the effect that time was of the essence; that, in the event of a default, notice could be served; and that, in the event of non-compliance with a default notice notice, the contract would end.
On 31 August 2021, Steven’s solicitor requested payment of the deposits payable under the contracts. On 1 September 2021, the plaintiffs’ solicitor requested that the deposits ‘be allocated or charged against the purchasers’ 48% interest under the terms of settlement’. The following day, the defendant’s solicitor responded that this was ‘plainly unacceptable for the Estate’ and that, unless the deposits were paid forthwith, default notices would be served. Such notices were then served on or about 3 September 2021.
The deposits under the contracts were eventually paid on or about 17 September 2021. Settlement was arranged to occur on 28 October 2021.
On 30 September 2021, the plaintiffs’ solicitor emailed the defendant’s solicitor in relation to the settlement of the contracts asking whether it was ‘your client’s expectation that the balance of the price will be paid in the usual manner, or will there be allowance for the value of the purchaser’s interest in the estate so as to reduce the amount of money required to be paid?’ The defendant’s solicitor responded the same day stating that the defendant ‘requires the Purchasers to comply with their obligations under the Contracts of Sale’.
On or about 5 October 2021, Colin obtained unconditional approval from a bank for a secured loan of $1,200,000 to purchase the farm. On 7 October 2021, the solicitor for the plaintiffs notified the defendant’s solicitor that this finance had been arranged and continued as follows (emphasis in the original):
The purchaser does not presently have the ability to pay the balance of the purchase price without employing a set off against the value of their entitlements from the Estate under the Terms of Settlement. The value of their entitlements is not presently known because that depends on the amount of the Estate’s debts and expenses. In this regard, I expect that the Estate will incur a CGT liability on the sale of the farm. Notwithstanding those issues, the purchaser considers that it has an effective set off in equity.
I understand that where a CGT asset is transferred in specie to a beneficiary pursuant to the terms of a Will, the CGT event is postponed until such time as that beneficiary disposes of the asset. Practically speaking, this would imply that that [sic] the overall CGT liability in the hands of the Estate would be reduced by 40%, being the value of Nathan and Andrew’s entitlement under the Will, so long as the properties are sold to the purchaser. In fact, I understand that the Estate’s liability for CGT on the sale of the farm land could be reduced by 48%, being the value of the purchaser’s total entitlement under the Terms of Settlement.
I consider that it is in the best interests of the beneficiaries of the Estate that settlement occur on the basis stated above. First, there will be an opportunity to minimise the CGT payable by the Estate, which is to the benefit of all beneficiaries by increasing their entitlements. Second, three of the six beneficiaries (entitled to 48% of the net estate) will be permitted to exercise their set-off. Third, the arrangement poses no detriment to the other beneficiaries, as any entitlement of the purchaser is reduced by the set-off.
In the circumstances, the purchaser requests the following:
(1)The Estate’s estimate of its expected debts and liabilities, including for capital gains tax arising on the sale of the farm;
(2)Confirmation that the Estate will recognise the purchaser’s equitable set off at settlement (with the value of that set-off to be estimated as at 28 October, but determined in due course).
In the event that the Estate maintains its position that the balance of the price must be paid at settlement according to the Contracts of Sale, I will seek further instructions from the purchaser, including whether to commence proceedings in the Supreme Court of Victoria against the Estate. Such proceedings would be brought on the basis that, inter alia, the Estate is failing to act in the best interests of the beneficiaries by not recognising the purchaser’s set-off at settlement.
The solicitors for the defendant responded on 11 October 2021, stating that the plaintiffs ‘must fully comply with the terms of the contracts’, and expressing the view that what had been proposed by the plaintiffs’ solicitors appeared to be unlawful. The plaintiff’s solicitor took issue with this in his response on 26 October 2021, noting that ‘specialist tax advice may be required’ in relation to his proposal.
On 27 October 2021, the solicitors for the plaintiffs provided the defendant’s solicitor with proposed statements of adjustment in relation to the settlement of the contracts. Relevantly, they each included an adjustment of $504,000 identified as the plaintiffs’ 48% interest in the estate, being an amount to be deducted from the amount otherwise required to be paid by the plaintiffs to complete settlement. The solicitors for the defendant responded the following day stating that the proposed statements of adjustments were ‘plainly unacceptable and do not conform to the terms of the contracts of sale’.
The contracts did not settle as scheduled on 28 October 2021.
On 29 October 2021, the defendant’s solicitor served default notices on the plaintiffs (the default notices). The notices identified the default as being the failure by the plaintiffs to pay the residue of the purchase moneys payable under the contracts by the settlement date. They gave notice that, unless remedied within 14 days, the contracts would be rescinded.
The plaintiffs filed their application for interlocutory relief on 8 November 2021.
Plaintiffs’ application for interlocutory relief
The plaintiffs sought an interlocutory injunction restraining the defendant from treating the contracts as being terminated or rescinded in reliance on the default notices.
The interlocutory relief was sought in a proceeding commenced by originating motion for judicial advice under order 54 of the Supreme Court (General Civil Procedure) Rules 2015 (the Rules). Pursuant to r 54.02(2)(a) of the Rules, the plaintiffs sought answers to the following questions said to have arisen in the administration of the deceased’s estate (the questions for advice):
(a)Is it in the best interests of the estate and of the beneficiaries that the defendant terminate the contracts of sale?
(b)Is it in the best interests of the estate and of the beneficiaries that the defendant transfer the farm to the plaintiffs by exercise of his power of appropriation under the deceased’s will?
(c)Are the plaintiffs entitled to settle the purchase of the farm (alternately receive the farm by appropriation) by crediting their interests as beneficiaries of the estate in lieu of the balance of the purchase price (alternately agreed value of appropriation) or otherwise by effecting an equitable setoff?
The plaintiffs relied upon the observations of Derham AsJ in Avery v Manno[3] where his Honour set out principles applicable to proceedings under order 54 of the Rules. It was contended that the Court could be satisfied that there was, prima facie, a matter that ought to be resolved by way of judicial advice and appropriate directions.
[3](2020) 62 VR 281, [13]–[29].
Central to the plaintiffs’ case was the proposition that the defendant’s intended course of action in terminating the contracts and then, presumably, reselling the farm properties would result in the estate incurring a wholly unnecessary capital gains tax liability and that, prima facie, such an outcome was not in the best interests of the estate or the beneficiaries because, if the plaintiffs instead took the farm properties by exercise of the defendant’s power of appropriation, the estate would reduce, and potentially eliminate, such liability.
Counsel for the plaintiffs advanced this submission by reference to provisions of the Income Tax Assessment Act 1997 and by reference to what was posited to be the ‘cost basis’ of the farm. This was said to support a conclusion that, upon the sale of the farm properties to a third party following the termination of the contracts, the capital gains tax liability would be approximately $400,000. However, if the farm properties were transferred to the plaintiffs pursuant to the defendant’s power of appropriation then, depending upon whether the whole or only part of the farm properties were passed to the plaintiffs by appropriation, the capital gains tax liability would either be reduced by more than $200,000 or, if the whole of the farm properties passed by appropriation, then no capital gains tax liability would arise.
Because the re-sale of the farm properties after the termination of the contracts would result in a wholly unnecessary taxation liability, this was an outcome which prima facie was not in the best interests of the estate or the beneficiaries. Giving effect to the termination of the contracts should therefore be restrained pending the obtaining of judicial advice.
It was also submitted that, upon the termination and resale of the farm properties, the estate would incur further liabilities including additional selling costs and agents commission. It was submitted that it was not in the best interests of the beneficiaries for the estate to incur such liabilities, when the farm properties could be transferred to the plaintiffs by appropriation.
Appropriating the farm properties to the plaintiffs was also said to be a course which would not be to the detriment of the estate or to the beneficiaries, whether generally or particularly. The plaintiffs relied upon the observations of Parker J in St John v St John that:[4]
The effect of an appropriation at a nominated valuation is to sell the appropriated asset to the beneficiary at that valuation, which is set off against the beneficiary’s entitlement under the will: In the estate of Mack (1956) 73 WN (NSW) 218 at 220-221 (Full Court). It must be remembered that the executor’s overriding duty is to realise and distribute the estate for the benefit of all the beneficiaries. A power of appropriation must be exercised consistently with that overriding duty.
[4][2021] NSWSC 399, [30].
It was submitted that the appropriation of the farm properties at a valuation of $2.1 million, as was proposed, being an amount greater than the under bidder, would not cause any detriment to the estate. Likewise, it would not be to the detriment of the other three beneficiaries because the receipt of an appropriation would be set off against the plaintiffs’ entitlements under the will (as altered by the terms of settlement).
Further, the termination of the contracts would cause detriment to the plaintiffs because the plaintiffs would be liable under their terms for the forfeiture of the deposits and a claim for damages for the difference in value between the purchase price and any subsequent selling price for the farm properties. The evidence before the Court was that the plaintiffs were of limited financial means and that such consequences would be catastrophic and wholly avoidable.
The plaintiffs submitted that it was inappropriate to treat the relationship between the defendant executor and the plaintiffs as a commercial arrangement between the estate and a third party. The plaintiffs as purchasers constituted three of six beneficiaries of the estate whose entitlement was equivalent to 48% of the estate’s residue. The relationship in equity between the executor defendant and the beneficiary purchasers was said to be an overlay to the contracts that would not arise in an arm’s length arrangement. As executor of the estate, the defendant was required to consider the exercise of his power to terminate the contract by taking into account the avoidable detriment which would be inflicted upon the beneficiaries with the termination of the contacts and the re-sale of the farming properties.
It was also submitted that it was open for the Court to infer that the defendant had chosen its course of action because of the very effect it was going to have upon the plaintiffs.
In addition to the above matters which concern the first two questions for advice, as to the third proposed question, the plaintiff submitted that an issue arose as to whether the defendant had wrongly denied the existence of an equitable setoff in the settlement of the contracts. It was submitted that the situation was as follows. There was a claim by the estate upon the plaintiffs for the balance of the purchase price due under the contracts, but the plaintiffs also had interests in the residuary estate equal to 48% of the distributed estate. This was in a context where the estate’s single largest asset was the farm and that the plaintiffs’ interests in the estate were substantially their interest in the sale proceeds from the farm properties, of which they are the purchasers. In this way, it was submitted that, in relying on the principles set out in Forest Enterprises Ltd v FEA Plantation Ltd,[5] the claims were said to ‘impeach the title of one another’. The plaintiffs’ interest in the estate therefore was a basis for an equitable setoff which could be applied to the settlement of the farm purchase. The failure by the defendant to recognise the equitable setoff was to the detriment of three of the estate’s six beneficiaries; the defendant’s failure to recognise this equitable setoff formed the third question for judicial advice.
[5](2011) 195 FCR 97, [137]-[148].
Consideration
An application for interlocutory injunctive relief in the context of a proceeding brought under order 54 of the Rules is novel. However, as stated by Gleeson CJ and Crennan J in Australian Broadcasting Corporation v O’Neill:[6]
… in all applications for an interlocutory injunction, a court will ask whether the plaintiff has shown that there is a serious question to be tried as to the plaintiff's entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction.
These are ‘the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed’. Their Honours agreed with the explanation of those organising principles given by Gummow and Hayne JJ.[7]
[6](2006) 227 CLR 57, [19] (‘ABC v O’Neill’).
[7]Ibid [19].
In ABC v O’Neill, the High Court affirmed the applicability of the principles drawn from the judgment of Kitto, Taylor, Menzies and Owen JJ in Beecham Group Ltd v Bristol Laboratories Pty Ltd[8] that, in applications for interlocutory injunctive relief, the first of two main enquiries to be undertaken ‘is whether the plaintiff has made out a prima facie, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief’.[9] In ABC v O’Neill, Gummow and Hayne JJ explained that in this statement:
By using the phrase “prima facie case”, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.[10]
[8](1968) 118 CLR 618.
[9]ABC v O’Neill (n 6) [65], quoting Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618, 622.
[10]ABC v O’Neill (n 6) [65].
Their Honours later emphasised that the governing consideration in an application for an interlocutory injunction is ‘that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought’.[11]
[11]ABC v O’Neill (n 6) [71].
Applying these principles, I do not consider that the plaintiffs have established a prima facie case in the sense of establishing a sufficient likelihood of success at trial to justify in the circumstances of the case the preservation of the status quo pending trial. There are several fundamental problems with the plaintiffs’ case.
First, the first two of the questions for advice[12] in substance invite the Court to consider the wisdom or prudence of the defendant’s exercise of discretion in relation to the contracts. In Morris v Smoel,[13] the Court of Appeal considered the Court’s jurisdiction under r 54.02 of the Rules in light of the decision of the High Court in the Macedonian Church case.[14] President Maxwell, with whom Whelan JA agreed, stated as follows in relation to r 54.02:[15]
[12]See [23(a)-(b)] above.
[13][2013] VSCA 11.
[14]Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66.
[15]Morris v Smoel [2013] VSCA 11, [21]-[24] (omitting citations).
Importantly, that rule provides the only statutory basis in Victoria for the personal representative of a deceased estate, or the trustee of a trust, to seek the advice and direction of the Court. The Trustee Acts in other States generally make express provision for such applications to be made. One such provision is s 63 of the Trustee Act1925 (NSW), which was the subject of an illuminating analysis by the High Court in the Macedonian Church case.
As is explained in the majority judgment in that case, and as appears from the language of r 54.02 itself, the purpose of establishing a procedure of this kind was to enable a trustee or executor to obtain the direction or opinion of the Court on a matter of administration or management, or as to the construction of the will or trust instrument, without the need to commence an administration suit with all its attendant delay and cost. As the High Court noted in Macedonian Church, the 19th century United Kingdom legislation which first established a procedure of this kind was designed:
to give trustees a summary right by petition … to obtain the opinion of the Court of Chancery upon any point which might arise in the administration of the trust estate. This would be of great benefit to trustees, and, by substituting a cheap and simple process of determining questions, prevent the necessity of expensive suits.
The procedure invoked by the executors is thus a summary procedure, intended to enable questions arising in the administration of an estate or a trust to be resolved cheaply and simply. Moreover, as the High Court also pointed out, provisions of this kind operate as an exception to the Court’s ordinary function of deciding disputes between competing litigants. These procedures afford a facility for the Court to give ‘private advice’. It is private because the function of the judicial advice is to give personal protection to the trustee or executor in respect of the course of action sought to be authorised.
The High Court in Macedonian Church emphasised that there were no implied limitations on the Court’s power to give advice of this kind. Under r 54.02(1) such an application may be brought for any relief which could be granted in an administration proceeding. Without limiting those very general words, r 54.02(2) lists a number of purposes for which such a proceeding may be brought, including the obtaining of an order ‘approving any sale by an executor’.
In the next paragraph of his reasons for judgment, Maxwell P continued as follows in a statement of particular significance in this matter:[16]
It was accepted by both parties to the appeal that what Crockett J said in 1972 in Re Green,[17] about the nature of the Court’s consideration of a proposed course of conduct, remained a correct statement of the law. That is, it is no part of the Court’s function to pass judgment on whether what the executors (or trustees) propose to do is wise or unwise.[18] That is a matter for the executors or the trustees, as the case may be. Rather, in a case such as the present, the question for the Court is whether there is power in the administrator to do what is proposed and — assuming that there is power — whether it is:
improper [for the executors] to exercise the power which they possess in the postulated manner.[19]
It is also common ground that the exercise of power by the Court, to authorise or refuse to authorise a proposed course of action, is discretionary. …
[16]Ibid [25]-[26], emphasis added.
[17]Morrisv Smoel [2013] VSCA 11, citing Re Green, deceased [1972] VR 848.
[18]Ibid 850.
[19]Ibid.
In Re Green[20] which was cited by Maxwell P, Crockett J referred to the statement by Lord Cairns in Gisborne v Gisborne[21] that ‘I do not understand it to be the habit of the Court to go on and express any opinion as to whether the exercise of the discretion by the trustees is a wise or an unwise exercise of that discretion’.
[20]Morrisv Smoel [2013] VSCA 11, citing Re Green, deceased [1972] VR 848, 850, quoting Gisborne v Gisborne (1877) 2 App. Cas. 300, 307.
[21](1877) 2 AC 300, 307.
These statements of principle are consistent with the observations of Goldberg J in Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd:[22]
It has long been established that, when a trustee seeks directions concerning the exercise of a discretion, courts will primarily be concerned with the lawfulness of the proposed course of action and will not undertake a determination of whether the action is the most prudent or commercially astute option available. ...
[22](2004) 49 ACSR 1, [71].
The observations by Derham AsJ in Avery v Manno,[23] upon which the plaintiffs rely, must be understood as being subject to the important limitation on the Court’s function under order 54 of the Rules recognised by the Court of Appeal in Morris v Smoel. A ‘question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument’ to which an applicant must point in a proceeding under order 54.02, as referred to by Derham AsJ,[24] must not be a question which in substance is one about the wisdom or otherwise of an executor’s exercise of discretion.
[23](2020) 62 VR 281, [24].
[24]Ibid.
That is, however, the character of the enquiry raised by the first two of the questions for advice. They seek the Court’s advice about whether it is ‘in the best interests of the estate and of the beneficiaries’: (a) ‘that the defendant terminate the contracts’; and, separately, (b) ‘that the defendant transfer the farm to the plaintiffs by exercise of his power of appropriation’. Those questions would fall to be considered in the context of what has occurred, namely, the adjustment of the trusts created under the will by operation of the terms of settlement and then the making of the contracts of sale in respect of the farming properties. It is therefore correct as the defendant submitted that, in substance, the plaintiffs are seeking advice about whether, despite the contractual rights and obligations which the estate has by reason of the contractual arrangements into which it has entered, it is in the best interests of the estate for the defendant to accept the plaintiffs’ invitation to waive those rights and to exercise a power of appropriation in relation to the farming properties. It is an invitation for the Court to express an opinion about how the executor of an estate should deal with the circumstances which have subsisted since the parties have settled their legal rights in the making of the terms of settlement and subsequent contracts. In that way the questions posed for advice are no part of the Court’s function under order 54 of the Rules as they impermissibly seek the Court’s advice about the wisdom or prudence of certain actions by the executor of an estate.
Secondly, in relation to the third question for advice,[25] in substance it is comprised of two questions, namely, whether the plaintiffs are ‘entitled’ to settle the purchase of the farm (or alternately to receive it by appropriation) by: (a) ‘crediting their interest as beneficiaries of the estate in lieu of the balance of the purchase price (alternately agreed value of appropriation)’; or (b) ‘by effecting an equitable setoff’?
[25]See [23(c)] above.
The first of these questions in substance appears as an application for contractual construction. Assuming, without deciding, that such a question is properly cast as a question for advice under order 54 of the Rules, the answer appears to be straightforward and contrary to the plaintiffs’ interests. The terms of settlement and the contracts are devoid of any provision which might be said to ground an entitlement to settle the purchase in the manner proposed by the plaintiffs. My attention was not drawn to any provision of the terms of settlement or the contracts which might ground an entitlement of the type contended for by the plaintiffs.
Insofar as question (a) above fixes upon the concept of appropriation, that is a power granted under the terms of the will[26] and by s 46 of the Administration and Probate Act 1948. However, it is a misconception to speak of a beneficiary under a will as having a right or entitlement for estate property to be appropriated in any particular way.
[26]Clause 7(q).
The proposition that the plaintiffs may have an entitlement to an equitable setoff is also lacking any sufficiently arguable foundation. In order to invoke the principles discussed by the Full Court of the Federal Court in Forest Enterprises Ltd v FEA Plantation Ltd,[27] it is incumbent on the plaintiffs to establish that the estate’s right to be paid the settlement sum under the contracts is impeached by an equity which is directly connected to that right and ‘goes to the root’ of the demand for payment. The plaintiffs have not identified any such equity. The most that can be said is that they have an interest in the residue of the estate which has not yet been determined.
[27](2011) 195 FCR 97, [137]–[148].
The third reason the plaintiffs have failed to demonstrate a prima facie case justifying the grant of interlocutory relief is because the claim based on the asserted disparity in capital gains tax treatment of the farm properties, as between their sale or appropriation, being the central plank of the plaintiffs’ case, proceeds from a premise which is not sufficiently established on the material before me. The plaintiffs’ submissions assume the correctness of the asserted differential taxation treatment. However, in circumstances where the plaintiffs have, quite properly, adopted the view that the issue of the capital gains tax treatment of the transfer of the farm properties in either of the scenarios is a matter for specialist taxation advice,[28] but where there is no evidence indicating such advice has been obtained, there is no proper basis for the plaintiffs to submit unconditionally and without qualification, as they have done, that the course of action proposed by the defendant will incur an unnecessary tax liability. The plaintiffs’ application for interlocutory relief rests on that premise. The evidence does not, however, provide a basis for the Court to proceed on such a footing. And it is plainly inappropriate to determine such questions in the context of an application for interlocutory relief.
[28]See [17] above.
As to weighing the balance of convenience, in theory, the most compelling basis advanced by the plaintiffs for the grant of an injunction was that interlocutory relief was needed to preserve the subject matter of the application for judicial advice. The imminent termination of the contracts and the potential re-sale of the farm properties would operate to destroy the factual basis of the application for judicial advice.
The difficulty with this contention is that, for the reasons I have explained, the application for judicial advice is fundamentally flawed in a number of respects. Accordingly, in the event that the contracts terminate and the existing factual basis underlying the dispute dissolves, the ill-founded basis of the plaintiffs’ claims for judicial advice means that it cannot be said that a legal remedy of any substance would be lost.
A further significant matter which weighs against the grant of interlocutory relief is the unwarranted and substantial delay in bringing the application, for which the plaintiffs are wholly responsible. They first raised the possibility of a setoff on 1 September 2021 and were promptly rebuffed by the defendant.[29] Given their financial circumstances, they must have always harboured at least some doubt about their capacity to complete the contracts in accordance with their terms. Certainly by 5 October 2021, it was clear that they had only been able to obtain partial funding to complete the purchase of the farm properties. Two days later, their solicitors sent the defendant’s solicitor the lengthy correspondence set out in [16] above proposing that the estate ‘recognise the purchaser’s equitable set off at settlement’ and foreshadowing proceedings in this Court if the defendant maintained its position that the balance was to be paid in accordance with the contracts. Although this demand was rejected on 11 October 2021, the plaintiffs did not even bring their application before settlement was due; the application for interlocutory relief was not filed until 8 November 2021, about five days before the expiry of the default notices. No satisfactory explanation for these delays was proffered.
[29]See [13] above.
The deceased died two years ago. It is in the interests of all of the beneficiaries of the estate that the administration of the estate be concluded in a timely way. The plaintiffs have not demonstrated a prima facie case which warrants the grant of interlocutory relief and their unexplained delay in seeking relief further militates against the grant of relief.
The application is dismissed. The parties are to submit any minute of proposed orders in respect of costs within seven days or, in the absence of agreement, short submissions on costs limited to three pages.
---
4
0