Munro v Munro

Case [2017] SASC 48

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

MUNRO & ORS v MUNRO & ORS

[2017] SASC 48

Judgment of The Honourable Justice Stanley

30 March 2017

EQUITY - EQUITABLE REMEDIES - ACCOUNTS AND INQUIRIES

EQUITY - EQUITABLE REMEDIES - ACCOUNTS AND INQUIRIES - JURISDICTION GENERALLY

EQUITY - EQUITABLE REMEDIES

EQUITY - TRUSTS AND TRUSTEES - APPLICATIONS TO COURT FOR ADVICE AND AUTHORITY

SUCCESSION - ADMINISTRATION OF ESTATE

ESTOPPEL - ESTOPPEL BY CONDUCT - ACT, OMISSION OR ASSUMPTION - REPRESENTATION GENERALLY

MORTGAGES

DEEDS

Two applications were before the Court concerning the estate of the late Richard James Munro (Rick) deceased. The first is an application brought pursuant to 6SCR206 by the plaintiffs, who are the widow and children of Rick, seeking orders and directions without administration. Draft minutes of order were handed to the Court seeking, among other things, orders for the transfer of shares, an inquiry and report, and production of documents. The second application is brought by the first defendant, Rick’s brother, in his capacity as executor of the estate seeking advice and direction in relation to the administration of the estate pursuant to s 69 of the Administration and Probate Act 1919 (SA).

The Munro family collectively operated farming businesses through two trusts, the Munro Family Trust (MFT) and the Munro Land Trust (MLT). Over time, the fourth defendant, Herbert Munro and his wife Janet were joined in the farming business by their sons Rick and the first defendant, Kevin. The MFT was established in 1976. The farmland and farm business was owned by Munrose Nominees Pty Ltd (Munrose) as trustee for the MFT. The MLT came into existence in 1988. Galaquill Pty Ltd (Galaquill) was appointed as the trustee for the MLT. The MFT borrowed funds to finance the MLT purchase of farming property known as Galaquill Downs in Western Victoria. These borrowings were secured by a mortgage over Billabong Gums of which Rick was the registered proprietor in his personal capacity, as well as a mortgage over an MFT controlled property called ‘Youngys,’ and a second ranking mortgage over Galaquill Downs. The MLT also borrowed funds to finance the purchase, secured by a mortgage over Galaquill Downs.  In 1992 the MFT drew down on their existing loan in order to discharge the MFT loan.

Sometime during the beginning of the 2004 calendar year a split of the farming businesses occurred. Prior to 2004 the faming businesses were run collaboratively by a number of members of the Munro family including Rick, Kevin and their parents. After 2004 the MFT was primarily controlled by Rick and operated farming properties in the South-East of South Australia. After 2004 the MLT was primarily controlled by Kevin and operated farming properties in Victoria.

A report was prepared by a forensic accountant regarding the operational history of the two trusts and those involved, with certain conclusions drawn about potential liabilities. The report concluded that there was insufficient information before the accountant and also the Court to conclusively determine the answers to pertinent questions…

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AGLC
Munro v Munro [2017] SASC 48
Case
[2017] SASC 48
Decision Date

CaseChat Overview and Summary

The case of Munro v Munro involves the estate of Richard James Munro (Rick) and the farming operations managed by the Munro Family Trust (MFT) and the Munro Land Trust (MLT). Rick's widow and children filed an application under 6SCR206 seeking orders and directions without administration. They requested an inquiry into specific questions arising in the administration of Rick’s estate and the production of relevant documents. Separately, Kevin Raymond Munro, Rick's brother and the executor of Rick's estate, sought advice and direction under s 69 of the Administration and Probate Act 1919 (SA) regarding the administration of the estate. The central dispute revolves around the operations of the MFT and MLT, which managed the family's farming business, and the alleged arrangements regarding the division of the farming operations between Rick and Kevin.

The legal issues before the court included the scope of the court's jurisdiction to direct an inquiry and make orders for the production of documents under 6SCR206 without administration, and whether the court could compel the executor to take certain actions regarding the administration of the estate. The court had to determine whether the requests for an inquiry and the production of documents were necessary for the proper administration of Rick's estate, and whether the executor had sufficient grounds to oppose these requests. Additionally, the court needed to address the executor's concerns about the potential costs and implications of the proposed inquiries and document production.

The court held that it had the inherent power to direct an inquiry and make orders for the taking of accounts and the production of documents, even over the opposition of the executor, if such measures were necessary for the due administration of the estate. The court emphasized that 6SCR206 and 6SCR251 empowered it to make these orders to ensure the estate was administered according to legal and equitable principles. The court also considered the necessity of the proposed inquiries and document production to resolve the issues at hand and protect the interests of the beneficiaries. The court concluded that the applications for an inquiry and document production were necessary and would be beneficial for the administration of the estate. Consequently, the court made orders in terms of the draft minutes prepared by the plaintiffs, reserving the question of costs pending the outcome of the inquiry and report, and the production of the documents.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

I received the sixth affidavit of Rodney Lawrence Jones affirmed 25 May 2016, the seventh affidavit of Mr Jones affirmed 8 June 2016, the third affidavit of Christina Rose Flourentzou sworn 29 August 2016 and the third affidavit of Kevin Raymond Munro sworn 11 July 2016.Factual background Central to understanding the applications is the farming business undertaken by the Munro family through the Munro Family Trust (MFT) and the Munro Land Trust (MLT). Rick and Kevin’s parents are Herbert and Yvonne Janet Munro (Janet). They farmed land in the south east of the state near Tintinara. Those properties included Lowan Park and Youngies. In time they were joined in that farming business by their sons Rick and Kevin. The farmland and the farm business was owned by Munrose Nominees Pty Ltd (Munrose Nominees) as trustee for the MFT. The MFT was established in 1976. At some time before 1988 Rick separately acquired a farm property at Billabong Gums, which was held on Crown lease. He became the registered proprietor of Billabong Gums. In 1988 the MLT was established. Galaquill Pty Ltd (Galaquill) was appointed the trustee for the MLT. At about this time the MFT borrowed $350,000 to finance the purchase by the MLT of farmland in western Victoria known as Galaquill Downs. Those borrowings were secured by a first ranking mortgage over the Youngy’s property and Billabong Gums and a second ranking mortgage over Galaquill Downs. This sum was borrowed from Rabobank.[1] At the same time in order to finance the purchase the MLT borrowed a further $350,000 from Rural Finance and that loan was secured against Galaquill Downs. [1] At the time Rabobank was known as PIBA. In October 1992 the Rural Finance loan was refinanced with Rabobank and secured by the existing mortgages on the Youngy’s property and Billabong Gums. The stamped security was $700,000. The Rural Finance mortgage over Galaquill Downs was discharged. It is claimed by Kevin that between 1988 and 2004 the MFT operated the Tintinara properties and the MLT operated Galaquill Downs and Quicks[2] effectively as one combined farming operation although the two Trusts kept separate accounts. Kevin asserts that throughout this period he and Rick and their parents all had the same interest in the South Australian and Victorian properties and the farming operations, except for the fact that Rick was the registered proprietor of Billabong Gums. The beneficiaries of the MFT and the MLT were the same. The shareholdings in Munrose Nominees and Galaquill were the same. Directors of Munrose Nominees and Galaquill were the same. During this time beneficiary loan accounts in favour of Rick and his wife and Kevin and his wife were created in both Trusts. [2] Quicks is another property in western Victoria that was acquired by the MLT in 2001. Kevin says that in 2003 he and Rick agreed to change these arrangements. The agreement embodied what is described as the “2004 split”. By the 2004 split Rick was to take control of the MFT and the South Australian properties and Kevin was to take control of the MLT and the Victorian properties. Rick was to resign as a director of Galaquill and transfer his share to Kevin. Kevin was to resign as a director of Munrose Nominees and transfer his share to Rick. Herbert and Janet were to continue their involvement in both the MFT and the MLT.

Evidence

Evidence Before The Court

The Court has before it two applications concerning the estate of the late Richard James Munro deceased (Rick). There is an application pursuant to 6SCR206 brought by the plaintiffs, who are the widow and children of Rick, which seeks orders and directions without administration. The plaintiffs want orders for an inquiry and report into certain questions arising in the administration of the estate and orders for the production of documents. Subsequently, a separate application has been brought by the first defendant Kevin Raymond Munro (Kevin), the brother of the deceased, in his capacity as the executor of Rick’s estate, seeking advice and direction in relation to the administration of the estate, pursuant to s 69 of the Administration and Probate Act 1919 (SA).The evidence I received the sixth affidavit of Rodney Lawrence Jones affirmed 25 May 2016, the seventh affidavit of Mr Jones affirmed 8 June 2016, the third affidavit of Christina Rose Flourentzou sworn 29 August 2016 and the third affidavit of Kevin Raymond Munro sworn 11 July 2016.Factual background Central to understanding the applications is the farming business undertaken by the Munro family through the Munro Family Trust (MFT) and the Munro Land Trust (MLT). Rick and Kevin’s parents are Herbert and Yvonne Janet Munro (Janet). They farmed land in the south east of the state near Tintinara. Those properties included Lowan Park and Youngies. In time they were joined in that farming business by their sons Rick and Kevin. The farmland and the farm business was owned by Munrose Nominees Pty Ltd (Munrose Nominees) as trustee for the MFT. The MFT was established in 1976. At some time before 1988 Rick separately acquired a farm property at Billabong Gums, which was held on Crown lease. He became the registered proprietor of Billabong Gums. In 1988 the MLT was established. Galaquill Pty Ltd (Galaquill) was appointed the trustee for the MLT. At about this time the MFT borrowed $350,000 to finance the purchase by the MLT of farmland in western Victoria known as Galaquill Downs. Those borrowings were secured by a first ranking mortgage over the Youngy’s property and Billabong Gums and a second ranking mortgage over Galaquill Downs. This sum was borrowed from Rabobank.[1] At the same time in order to finance the purchase the MLT borrowed a further $350,000 from Rural Finance and that loan was secured against Galaquill Downs. [1] At the time Rabobank was known as PIBA. In October 1992 the Rural Finance loan was refinanced with Rabobank and secured by the existing mortgages on the Youngy’s property and Billabong Gums. The stamped security was $700,000. The Rural Finance mortgage over Galaquill Downs was discharged. It is claimed by Kevin that between 1988 and 2004 the MFT operated the Tintinara properties and the MLT operated Galaquill Downs and Quicks[2] effectively as one combined farming operation although the two Trusts kept separate accounts. Kevin asserts that throughout this period he and Rick and their parents all had the same interest in the South Australian and Victorian properties and the farming operations, except for the fact that Rick was the registered proprietor of Billabong Gums. The beneficiaries of the MFT and the MLT were the same. The shareholdings in Munrose Nominees and Galaquill were the same. Directors of Munrose Nominees and Galaquill were the same. During this time beneficiary loan accounts in favour of Rick and his wife and Kevin and his wife were created in both Trusts. [2] Quicks is another property in western Victoria that was acquired by the MLT in 2001.

Decision

Reasons for decision

I also reserve the question of who is to bear the costs of this application and the costs of the inquiry and report, and the production of documents, pending the outcome of the inquiry and report, and the production of the documents. Conclusion and orders In these circumstances, I would make orders in terms of the draft minutes prepared by the plaintiffs, except for orders 2, 5, 6 and 10 which are not pressed at this stage, and orders 1, 3.2, 7.4, 7.14, 7.15 and 14. I would make order 1 only in respect of the two undisputed shares. I reserve the question of costs. I direct the plaintiffs to bring into court minutes of order reflecting the terms of these reasons.

Ratio Decidendi

Legal Principle Established

6SCR206 provides:206—Actions for administration(1)In an action related to a trust or deceased estate, the Court may (if it thinks fit) determine questions arising in the action without making an order for administration.(2)In any such action, the Court may make orders for the protection of persons who may be interested in the trust or deceased estate (whether or not they are parties to the action).Examples—1 The Court might make orders for the ascertainment of possible beneficiaries.2 The Court might order the trustees, executors or administrators to file accounts of their administration in the Court. 6SCR206 confers on the Court power to give all the directions and make all the orders, without administration, that it could give or make under an order for general administration. The rule avoids the expense and delay which was occasioned by the pre-1947 position reflecting the old Chancery practice where the type of relief the rule provides could only be obtained by an order for general administration which placed the whole of the conduct of the estate under the direct control of the court. The scope of the procedure under 6SCR206, and the extent of the powers exercisable pursuant to it, are defined essentially by what questions could formally have been determined in an administration action. In that respect, the rule only applies to questions arising in the administration of the estate as between the executor and the beneficiaries[9] and, like the administration action, is designed to deal with problems arising within the administration of the estate[10] and to enforce administration according to legal and equitable principle, not to authorise or to direct departures from it.[11] This includes orders for accounts and inspection of documents and orders compelling an executor to act where the executor has failed to administer the estate or complete its administration.[12][9] In re Davies (1888) 38 Ch D 210 at 212; In re Giles (1890) 43 Ch D 391 at 398; Hudson v Gray (1927) 39 CLR 473 per Higgins J at 501-504.[10] Gonzales v Claridades [2003] NSWCA 227 per Mason P at 31, (2003) 58 NSWLR 211 at 218.[11] Gonzales v Claridades [2003] NSWCA 227 per Mason P at 34, (2003) 58 NSWLR 211 at 218; Templeton v Leviathan Pty Ltd (1921) 30 CLR 34 at 56, 65, and 73; In re Davies (1888) 38 Ch D 210 at 212.[12] Haines, Succession Law in South Australia, 2003 [27.3], [25.4] referring to the predecessor to 6SCR206 r 63.04 of the 1987 Supreme Court Rules. The Court has inherent power to direct an inquiry where that is required for the due administration of an estate. It can do so, even over the opposition of the executor. In addition, 6SCR251 expressly authorises the preparation of accounts or a report relevant to a question in issue in an action. This empowers the Court to make orders for the taking of accounts and making inquiries before trial.[13] Where the beneficiaries desire the executor to take a course which the executor is unwilling to take, the Court may direct an inquiry if it does not have sufficient material before it to give the necessary direction.[14][13] Wombats Downunder Pty Ltd & Anor v G & WA Dicenso Pty Ltd & Anor (No 2) [2011] SASC 3 at [16]; Clarke & Ors v Edwards [2012] SASC 213 at [19]-[20].[14] Atkin, Atkin’s Court Forms (Vol 2) Administration of Estates, 2nd Ed 2007, p 191.