O'Brien v McCormick

[2005] NSWSC 619

CITATION:	O'Brien v McCormick [2005] NSWSC 619
HEARING DATE(S):	20 June 2005
JUDGMENT DATE :	20 June 2005
JURISDICTION:	Equity Probate List
JUDGMENT OF:	Campbell J
DECISION:	Probate revoked. Fresh grant to remaining executrix.

CATCHWORDS:	SUCCESSION - WILLS, PROBATE AND ADMINISTRATION - probate and letters of administration - revoking probate to one of two executors - applicable principles - SUCCESSION - FAMILY PROVISION AND MAINTENANCE - practice - one of two executors wishes to bring Family Provision Act proceedings against estate - whether possible while probate remains unrevoked - who should be named as defendant in such proceedings - SUCCESSION - EXECUTORS AND ADMINISTRATORS - administration - entitlement to intermediate income of a specific devise - SUCCESSION - EXECUTORS AND ADMINISTRATORS - proceedings against executors and administrators - entitlement of beneficiary to question reasonableness of expenses incurred by executor in defending litigation - SUCCESSION - FAMILY PROVISION AND MAINTENANCE - practice - whether rule requiring plaintiff to serve administrator with notice of eligible claimants applies when one of two executors is the plaintiff
LEGISLATION CITED:	Civil Procedure Act 2005 Family Provision Act 1982 Interpretation Act 1987 Public Trustee Act 1913 Supreme Court Rules 1970
CASES CITED:	Adam v Mullen (Holland J, 15 December 1976, unreported) Bates v Messner (1967) 67 SR(NSW) 187 In Re Beddoe; Downes v Cottam [1893] 1 Ch 547 In Re Buckley's Trusts (1883) 22 Ch D 583 Carver v Duncan (Inspector of Taxes); Bosanquet v Allen (Inspector of Taxes) [1983] 1 WLR 494 Chambers v Smith (1846) 2 Coll 742; 63 ER 942 Collison v Collison (Master McLaughlin, 28 March 1995, unreported) Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639 In re England's Settlement Trusts; Dobb v England [1918] 1 Ch 24 Field v Peckett (No.3) (1861) 29 Beav 576; 54 ER 751 Re Gertsman [1966] VR 45 Gorman v McGuire [2002] NSWSC 1089 In re Grimthorpe deceased [1958] 1 WLR 381 Hasluck v Pedley (1874) 19 LR (Eq) 271 Jarman on Wills, 8th ed p 1079 Re Linning [1995] 1 QdR 274 Lloyd v Frape (1922) 23 SR (NSW) 11 Re Lowe [2000] NSWSC 1180 In Re Marten; Shaw v Marten [1901] 1 Ch 370 In Re Marten; Shaw v Marten [1902] 1 Ch 314 Mavrideros v Mack (1998) 45 NSWLR 80 In Re Pearce; Crutchley v Wells [1909] 1 Ch 819 Permanent Trustee Co of NSW Ltd v Royal Prince Alfred Hospital (1944) 45 SR (NSW) 339 Ritchie, Supreme Court Practice In Re Rooke; Jeans v Gatehouse [1933] 1 Ch 970 Smith v Chambers (1847) 2 Phillips 221; 41 ER 926 In Re Tankard [1942] Ch 69 Theobald on Wills, 10th ed p 130 Union Bank of Australia v Harrison, Jones & Devlin Ltd (1910) 11 CLR 492 Vasiljev v Public Trustee [1974] 2 NSWLR 497 Walford v Walford [1912] AC 658 In Re West; West v Roberts [1909] 2 Ch 180 Williams Mortimer and Sunnucks Executors Administrators and Probate (16th edition) p 930 Re Woodman, deceased; ex parte The Trustee (1940) 11 ABC 159 Worrall v Harford (1802) 8 Ves Jun 4; 32 ER 250
PARTIES:	Rosheen Mary O'Brien - Plaintiff Patricia Mary McCormick - Defendant
FILE NUMBER(S):	SC 106769/05
COUNSEL:	M J Gorrick - Plaintiff R J Brender - Defendant
SOLICITORS:	G J Gooden - Plaintiff Johnson & Sendall - Defendant

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
PROBATE LIST

CAMPBELL J

MONDAY 20 JUNE 2005

106769/05 ROSHEEN MARY O’BRIEN v PATRICIA MARY McCORMICK

JUDGMENT – Ex Tempore (Revised and expanded 23 June 2005)

1 HIS HONOUR: The late Teresa O'Brien died on 13 April 2003. She was at the time a widow and left five children, four daughters and one son. Her last will was one which was made on 28 April 1993. Under it, she appointed two of her daughters, Mrs McCormick and Mrs O'Brien, as executrices. She gave a specific bequest to Mrs O'Brien of:

“… my house property and vacant land at 67 Monkittee Street, Braidwood, together with the furniture, furnishings appliances and contents of such house ...”

2 The residue of her estate was divided equally between her four daughters.

3 The estate at the time of her death consisted of a house located at 67 Monkittee Street, Braidwood, a block of vacant land which lay next door to it and which was sometimes referred to as 69 Monkittee Street, Braidwood, some furniture and personal effects in the house and some money and personal property. The assets other than the real estate and house contents were worth in total just a little over $104,000.

4 At the time of her death, it is common ground in the present proceedings that the vacant land at 69 Monkittee Street, Braidwood, was valued at about $82,000. The house property at 67 Monkittee Street, Braidwood, is more problematic in its valuation, but the value appears, on the present evidence, to lie somewhere in a range of $380,000 to $450,000 as at the date of death. The house contents were valued at a little over $20,000. The effect of these values is that by far the most substantial gift under the will was the one which was given to Mrs O'Brien.

5 Probate of the deceased’s will was granted to Mrs O'Brien (who I will refer to as “the Plaintiff”) and to Mrs McCormick (who I will refer to as “the Defendant”) on 23 February 2004. The application which I am now hearing is a summons which has been brought by the Plaintiff seeking the removal of the Defendant as an executrix, and certain consequential orders.

6 On 29 April 2003, the four daughters of the deceased went to the offices of the deceased’s solicitor to be informed about the provisions of her will. The Defendant showed, immediately, that she did not think that the will was fair. Nonetheless, the Plaintiff and the Defendant instructed the solicitor who had acted for the testatrix, Mr Coffey, to apply for probate on behalf of both of them.

7 On the weekend of 10 and 11 May 2003, the Plaintiff’s three sisters arrived at the Plaintiff’s home and put a proposal that the Plaintiff ought agree to a distribution of the estate between all four of them in equal shares. The Plaintiff refused to agree to that proposal, and the Defendant told her that they were going to contest the will.

8 A few days later, the Plaintiff received a document from the Defendant which explained the Defendant’s view of what would have been a proper distribution of the deceased’s estate. It set out various matters of family history, and the Defendant’s perception of what the basis was upon which the testatrix’s financial affairs had been organised. It put a somewhat modified proposal for even distribution of the testatrix’s estate between the four sisters, which suggested that certain assets which some of the Plaintiff’s sisters had received during the lifetime of the testatrix should be brought into hotchpot.

9 From 16 May 2003 onwards, the Defendant has instructed her own solicitors, in her capacity as executrix. The Plaintiff continued to instruct Mr Coffey, until she retained her present solicitors in May 2004.

10 On 16 May 2003 the Defendant’s solicitors, Messrs Johnson and Sendall of Goulburn, wrote to Mr Coffey saying that the Defendant proposed to bring an application under the Family Provision Act 1982, and that the other two sisters also proposed to bring such an application. They requested that an arrangement for administration of the estate be set up under which documents passing between the two executrices should be forwarded through the office of Johnson and Sendall.

Obtaining Valuation of Estate Realty

11 There was a problem in being able to lodge the documentation which was necessary for obtaining the grant of probate. It arose from the Plaintiff having obtained a valuer’s report dated 20 August 2003 valuing the properties in Monkittee Street, Braidwood as at the date of death, and the Defendant taking the view that that valuation was inadequate. Even though the Defendant’s solicitor had approved the carrying out of a valuation by the valuer whom the Plaintiff instructed, the Defendant then obtained her own valuation report, dated 17 December 2003, which put a higher value on the house at 67 Monkittee Street than the Plaintiff’s valuer had put on it. The Defendant’s valuation report was, for some reason not apparent to me, a valuation as at the date of the report.

12 It was only after those two valuations had been obtained that the Defendant was prepared to lodge the application for probate. Probate was granted on 23 February 2004.

Whether Defendant Should be a Defendant in Family Provision Act Proceedings

13 The application under the Family Provision Act 1982 which had been foreshadowed has been brought, by all three of the Plaintiff’s sisters. It was commenced on 19 April 2004. There have been some considerable delays in advancing those proceedings. One of them had its source in a dispute about how the Family Provision Act 1982 proceedings should be structured. When the proceedings were started, the three sisters who were plaintiffs named as defendants the two executrices. That had the effect that the Defendant was on both sides of the record, as both a plaintiff and a defendant.

14 Mr Gooden, who by then was acting as the Plaintiff’s solicitor, pointed out the inappropriateness of that to the Defendant’s solicitors on 13 May 2004. The Defendant proposed, initially, that this problem be dealt with by filing a summons for revocation of the grant of probate to her. This decision was conveyed by a letter from her solicitors of 2 July 2004, which enclosed a draft summons for revocation of the probate. A brief draft supporting affidavit, to be sworn by the Plaintiff, was enclosed, which attested to the Plaintiff’s belief that the Defendant could not be both executrix and plaintiff, and thus the probate should be revoked.

15 The solicitor for the Plaintiff, by letter of 20 July 2004, put a proposal that the Defendant simply be removed as a defendant in the Family Provision Act 1982 proceedings.

16 On 30 July 2004 the solicitors for the Defendant sent to the solicitors for the Plaintiff a summons and affidavit by which the Defendant sought revocation of the probate. The supporting affidavit was one sworn by her, not a draft, and expressed her own opinion that she could not be both an executrix and a plaintiff.

17 That summons and affidavit had actually been filed in the Court. It was filed in the Equity Division without any specific mention that it was filed in the Probate List. It provoked a requisition from the Registry, dated 2 August 2004, which drew the attention of the Defendant to the decision of Master McLaughlin in Collison v Collison (28 March 1995, unreported), and said that commencement of proceedings against the estate by an executor was no ground for revocation of the grant. The decision of the learned Master in Collison v Collison does indeed lead to the conclusion the Registry drew from it, and to the conclusion that the appropriate way of dealing with the situation when one of two or more executors wish to bring a claim under the Family Provision Act 1982 is for that executor simply not to be named as a defendant in the Family Provision Act 1982 proceedings.

18 Part 77 rule 60 Supreme Court Rules 1970 provides:

“(1) In proceedings on an application by summons for an order under section 7 or section 16 (2) or (5) of the subject Act, the summons shall, subject to subrule (2), join as a defendant every administrator.
(2) The summons shall not join as a defendant:
(a) any person, where any plaintiff is the sole administrator,
(b) any person, where there is sufficient reason for not doing so.”

19 That rule, and other rules of court regulating procedure under the Family Provision Act 1982, should be read in the light of the definition of “administrator” in section 6 Family Provision Act 1982, which extends to (inter alia) a person to whom probate has been granted. The decision in Collison v Collison (Master McLaughlin, 28 March 1995, unreported) gives content to Part 77 Rule 60(2)(b), by holding that one type of case where there is sufficient reason not to join every administrator is when there is an executor who is a plaintiff, in which case the plaintiff should not join himself or herself as a defendant.

20 The question of whether the Defendant would remain a defendant in the Family Provision Act 1982 proceedings was not quickly resolved, notwithstanding letters passing between the respective solicitors. On 1 September 2004 the Defendant said she would remove herself from the position of defendant in the Family Provision Act 1982 proceedings, as the Plaintiff had suggested. The Defendant’s solicitors sent the Plaintiff’s solicitors a form of amended summons in the Family Provisions Act 1982 proceedings on 13 October 2004. It took this long notwithstanding a couple of requests for the amended summons from the Plaintiff’s solicitor, and that the amendment involved crossing out the name of one defendant. That amended summons had not been filed. A sealed copy of the amended summons was served on 8 December 2004.

List of Eligible Persons

21 Another source of delay in the Family Provision Act 1982 proceedings was that the Plaintiff and the Defendant could not agree on who should be included in the list of possible eligible persons which was required by Part 77 Rule 59(d)(i) Supreme Court Rules 1970 to be included in an executor’s affidavit. The Plaintiff’s solicitor, on 21 September 2004, sent a draft executor’s affidavit to the Defendant’s solicitor. The list of possible eligible claimants included the Plaintiff’s own son, who it appears for some period of time lived in the house of the testatrix and, according to the Defendant’s own account of family history (para [8] above), was at least in part supported by her. The Defendant, on several occasions, sought details as to why it was appropriate for him to be included in the list of potential eligible claimants. The Defendant’s objections to his inclusion in the list ceased to matter once the Defendant was no longer named as a defendant in the Family Provision Act 1982 proceedings.

Custody of Certificates of Title

22 The certificates of title to the testatrix’s real estate had been lodged by her with her bank. The Defendant at some stage went to the bank, obtained the safe custody envelope in which the certificates of title were located, and removed and kept the certificates of title. She did not tell the Plaintiff she had done so. It was only when the Plaintiff’s solicitor ascertained that the Plaintiff did not have the certificates of title that he inquired of the solicitors for the Defendant about where the certificates of title were, and was told that the solicitor for the Defendant had them.

23 The estate’s real estate has still not been transmitted into the name of the executrices. This is because there is what appears to be an insoluble difficulty between the executrices about who should hold the certificates of title. The Defendant takes the view that her solicitors should hold them; the Plaintiff takes the view that her solicitors should hold them, because she has been given the real estate under the will, and as well because she is the person who has the responsibility for defending the Family Provision Act 1982 proceedings, which is far and away the most important act of administration which remains to be done in the estate.

24 I interpolate here that the testatrix was a pensioner at the time of her death, and had no liabilities worth speaking about. Thus, the tasks of the executrices were, simply, to get the assets in, to deal with the Family Provision Act 1982 claim, and to then distribute the assets in accordance with whatever the applicable provisions governing distribution of the testatrix’s estate would be after the Court had made its decision in the Family Provision Act 1982 case.

Estate Bank Account/Estate Expenses

25 Another difficulty has concerned the payment of estate expenses. By September 2003 no estate bank account had been opened, and there was disagreement between the Plaintiff and the Defendant about how an estate bank account should be conducted. The Plaintiff wanted to be a sole signatory, so that her costs of defending the Family Provision Act 1982 proceedings could be paid, but the Defendant did not agree. Eventually in December 2004, the Defendant caused an estate bank account to be opened in Goulburn, the city in which she lives. The Plaintiff is a co-signatory to that account. However, it is the Defendant who has custody of the cheque book, and is, it appears, the person who receives periodical bank statements.

26 There have been few expenses which have needed to be paid so far. However, it was only in March of 2005 that three cheques were sent to the Plaintiff’s solicitor for countersignature by the Plaintiff. They were for the funeral expenses, the fees of the valuer who the Plaintiff had instructed, and the fees of Mr Coffey’s firm. The Plaintiff had already paid from her own funds the fees of the valuer she asked to value the realty, and the funeral expenses had already been paid (it is not clear by whom). The Plaintiff did not sign the cheques in payment of those two expenses. The total amount of estate expenses which the Plaintiff has paid from her own funds, including rates and insurance on the house, and some cleaning up and repairs at the house, is a total sum of a little more than $7,000.

Payment of Plaintiff’s Fees for Defending FPA Action

27 Another significant dispute which has arisen relates to the manner in which the fees of the Plaintiff in defending the Family Provision Act 1982 proceedings should be paid.

28 The defence of Family Provision Act 1982 proceedings is one of the tasks an executor performs in administering the estate: Re Woodman, deceased; ex parte The Trustee (1940) 11 ABC 159 at 175; Re Linning [1995] 1 QdR 274 at 276; Re Lowe [2000] NSWSC 1180 at [5]. Even if usually when executors are party to litigation they ought in strictness all be party to that litigation (Union Bank of Australia v Harrison, Jones & Devlin Ltd (1910) 11 CLR 492 at 499), that situation does not apply when a rule of court like Part 77 rule 60 Supreme Court Rules 1970 and the practice described in Collison v Collison (Master McLaughlin, 28 March 1995, unreported) permit the estate to be represented in litigation by fewer than all the executors. In defending the Family Provision Act 1982 proceedings the Plaintiff is engaging in one of the types of action where a single executor’s action can bind the estate, without any need for assent or approval by any co-executor: cf Union Bank of Australia v Harrison, Jones & Devlin Ltd (1910) 11 CLR 492. As part of what is involved in defending the proceedings she has the power to pay the estate’s money in payment of the fees of the solicitor acting in the defence of the proceedings, in a way which is valid as between the solicitor and those interested in the estate.

29 As early as 20 July 2004 Mr Gooden had asked the Defendant’s solicitors for:

“an undertaking that she will, if necessary and if called upon to do so, do all acts and steps reasonably necessary to ensure that the estate costs of defending the [ Family Provision Act 1982 ] proceedings be paid in a timely manner (say 14 days) from the date upon which my firm renders interim memoranda of fees and disbursements.”

That request was not responded to, and Mr Gooden in substance repeated it on 19 August 2004.

30 The solicitors for the Defendant replied on 1 September 2004, saying:

“Our client does not intend to disrupt the proper defence of the Family Provision Act proceedings. She proposes to adhere to whatever arrangements are in place about your fees. No other undertakings about your fees are necessary or warranted.”

Notwithstanding that apparent comfort, no fees have been paid to the solicitors acting for the Plaintiff. Indeed, the solicitor for the Defendant, on 27 September 2004, sent along his own account for acting on behalf of the Defendant in relation to the application for probate, and on 15 March 2005 sent along a memorandum of his own fees for acting for the Defendant in her role as executrix and (in what now appears to have been a mistake) a memorandum of fees from counsel who was appearing for the Defendant in the Family Provision Act 1982 proceedings.

31 By letter of 8 December 2004, the solicitors for the Plaintiff informed the solicitors for the Defendant that the arrangements between the Plaintiff and them was one which allowed periodical billing, and that fees had been rendered but not paid. The solicitors for the Defendant have said that the Defendant does not agree to there being an estate account in the name of the Plaintiff only.

32 The situation concerning payment of the fees of the Plaintiff for defending the Family Provision Act 1982 proceedings has still not been resolved. The Defendant has proposed that she would agree to payment of those fees, if she was satisfied as to their reasonableness, and received a copy of all the tax invoices on which they were based. On 9 December 2004, the solicitor for the Plaintiff said that he would not provide those tax invoices. He said, in my view with complete justification:

“My invoices contain confidential information that is privileged from disclosure in the Family Provision Act proceedings. Mrs McCormick cannot expect to sue the estate on one hand and then require to be told confidential information about the estate's defence of her claim on the basis that she is co-executrix. Thus, Mrs McCormick will not have the right to vet my accounts until after the Family Provision Act proceedings have been settled or resolved.”

33 By the end of 2004, the Plaintiff's solicitor was threatening that proceedings would need to be brought to revoke the probate. It was in that context that on 20 December 2004 the solicitors for the Defendant wrote, saying:

“Mrs McCormick will pay your fees on being satisfied that it is reasonable to do so. She requires a copy of the tax invoice. Our client is prepared to allow an independent person, such as an accountant, to assess the tax invoice but is not prepared to sign cheques in favour of any party without being entitled to assess the reasonableness thereof.”

34 The Plaintiff’s solicitor is not prepared to continue acting for the estate unless he is paid his outstanding fees. He has done considerable work concerning the estate. There would inevitably be waste if the Plaintiff could find another solicitor who did not require progress payments of fees. If the Plaintiff could not find another solicitor prepared to act on that basis the defence of the Family Provision Act proceedings would be likely to suffer.

Failure to Let the House – Intermediate Income of a Specific Devise

35 By their letter of 20 December 2004, the solicitors for the Defendant raised a new issue. It was that the testatrix’s house was unoccupied. The solicitors for the Defendant proposed that the furniture should be removed and placed in secure storage, and the house leased at a rental of not less than $200 per week.

36 In fact, the house has not yet been leased. The Plaintiff takes the view that the house would need repairs before it was leased, and she is not willing to advance her own money for those repairs. The Defendant seems not to be of the view that repairs are necessary. The evidence does not enable me to decide which view is right. As well, the Plaintiff takes into account that the house may need to be sold if there were a settlement of the Family Provision Act proceedings, and is concerned that it could bring less if it were tenanted than with vacant possession.

37 The reader will recall that the house is something which was left as a specific devise to the Plaintiff under the will.

38 Income arising after the date of death on property which is left as an unconditional and immediate gift by a specific legacy or devise goes to the specific legatee or devisee: Hasluck v Pedley (1874) 19 LR (Eq) 271; In Re Buckley’s Trusts (1883) 22 Ch D 583; In Re Marten; Shaw v Marten [1901] 1 Ch 370; In Re West; West v Roberts [1909] 2 Ch 180; Jarman on Wills, 8th ed p 1079, Theobald on Wills, 10th ed p 130, Williams Mortimer and Sunnucks Executors, Administrators and Probate, (16th edition) p 930. (Though In Re Marten; Shaw v Marten [1901] 1 Ch 370 was reversed by In Re Marten; Shaw v Marten [1902] 1 Ch 314, the reversal was on the construction of the gift, and did not question the decision below so far as the destination of intermediate income of a specific gift was concerned.) The intermediate income which goes with the specific legacy or devise is that which accrues from the date of death, regardless of when the income comes to hand: section 144 Conveyancing Act 1919. The right to the intermediate income arises from the fact that, once an executor assents to a specific legacy or devise, the assent relates back to the date of the deceased’s death: In Re Pearce; Crutchley v Wells [1909] 1 Ch 819 at 821; In Re West; West v Roberts [1909] 2 Ch 180 at 185; In Re Rooke; Jeans v Gatehouse [1933] 1 Ch 970 at 972.

39 This state of affairs is consistent with the rule that the expenses of upkeep, care and preservation of specifically bequeathed or devised property, from the time of death until the time of the executor’s assent, and the cost of transporting or transferring that property to the specific legatee or devisee, are payable by the specific legatee or devisee, unless the proper construction of the gift is that the legatee or devisee is to receive the gift free of such expenses: In Re Pearce; Crutchley v Wells [1909] 1 Ch 819 at 821; Lloyd v Frape (1922) 23 SR (NSW) 11; In Re Rooke; Jeans v Gatehouse [1933] 1 Ch 970.

40 In this respect a specific legacy or devise differs from a pecuniary legacy not subject to any contingency, which prima facie carries interest at the rate the Court allows, from a date one year after the date of death: Walford v Walford [1912] AC 658 at 662; Permanent Trustee Co of NSW Ltd v Royal Prince Alfred Hospital (1944) 45 SR (NSW) 339; In Re Tankard [1942] Ch 69. (The situation concerning intermediate income of a contingent or future specific legacy is governed by section 36B Conveyancing Act 1919. As to the situation concerning intermediate income of a contingent pecuniary legacy, see Re Gertsman [1966] VR 45 at 47-48.)

41 Thus, any failure to rent the property is something which, unless the will is altered in the Family Provision Act 1982 proceedings, will result in loss only to the Plaintiff. Mr Brender, counsel for the Defendant, rightly points out that if there were to be income earned by the estate realty, that could be a relevant matter to take into account in the Family Provision Act 1982 proceedings, as it would affect the total distributable estate. However, the failure of the Plaintiff to arrange for the house to be let, since the matter was first raised, is not, in my view, directly relevant to the question of whether the Defendant should be removed as executrix. That question depends on the Defendant’s conduct. The Plaintiff’s conduct is relevant only insofar as it provides part of the context in which the Defendant’s actions and inactions are assessed. The failure to let the house has not caused the Defendant to engage in any action or inaction which bears on whether the Defendant should be removed.

Delay in Providing Part 77 Rule 63 Notice

42 When the Defendant and her sisters started the Family Provision Act 1982 proceedings they did not serve a notice of the kind required by Part 77 Rule 63 Supreme Court Rules 1970. That rule requires that a plaintiff under the Family Provision Act 1982 :

“shall, unless he is the administrator, when serving the summons, also serve a notice on the administrator showing who, in his opinion, is or may be an eligible person (designating as a disable person any eligible person who, in his opinion, is or may be a disable person).”

43 Mr Gooden requested the solicitor for the plaintiffs in the Family Provision Act 1982 proceedings to serve such a notice on 13 May 2004, 21 May 2004, 8 June 2004, 19 August 2004, 2 September 2004, 10 September 2004, and 1 October 2004. The Court made orders requiring such a notice to be served on 5 October 2004, and again on 27 November 2004. It has now been provided.

44 It seems fairly clear that the Defendant’s co-plaintiffs in the Family Provision Act 1982 proceedings were in breach of this rule by not serving a notice. However I see no reason why the breach of the rule engaged in by her co-plaintiffs should be attributed to the Defendant, for the purpose of deciding whether the Defendant should be removed as an executrix.

45 There is a question of construction about whether the rule required the Defendant also to serve such a notice. A plaintiff in Family Provision Act 1982 proceedings is under an obligation to serve such a notice “unless he is the administrator”. The rule is construed in accordance with the principles contained in section 8(a) and 5(2) Interpretation Act 1987 that in an instrument a word that indicates one gender shall be taken to indicate every other gender, except in so far as a contrary intention appears in the instrument concerned. Even when that principle is applied to the rule, to read “he” as “she”, this exception does not apply to the Defendant, because she is not “the administrator” of the estate – she is one of two administrators.

46 As well, the rule would be construed in accordance with the principle, contained in sections 5(2) and 8(b) Interpretation Act 1987, that in an instrument a reference to a word in the singular form includes a reference to the word in the plural form, except in so far as a contrary intention appears in the instrument concerned. In my view, that principle cannot be applied to the particular wording of Part 77 Rule 67 (1) in a way which makes the exception applicable to the Defendant. That is because the rule would allow the rule to be read as though it said “the plaintiffs claiming an order … shall, unless they are the administrators…”, but does not enable it to be read as “the plaintiff claiming an order … shall, unless she is one of the administrators …”

47 This approach to the construction of the rule leads to the same conclusion as does a consideration of the purpose of the rule. The rule is one part of a regime which is designed to make sure that all the people who might be eligible claimants know about the proceedings, and have the opportunity to make a claim if they wish, and which enables the Court to exercise its power under section 20 Family Provision Act 1982 to disregard the interests of an eligible person who has been notified of the proceedings. It is perfectly possible, in some situations, that one of two executors knows of someone who is an eligible claimant, but the other does not. If the executor who knew of the eligible claimant was a plaintiff in Family Provision Act 1982 proceedings, and was not required to serve a notice under Part 77 rule 63 on the other executor who was the defendant in those proceedings, the eligible person might not be notified of the proceedings, and so the purpose of the rule would not be carried out.

48 Thus I conclude that the Defendant was in breach of the rule in not serving the notice at the time of service of the summons.

49 Even so, when in the circumstances of this case there is no reason to believe that the Defendant knew of any eligible claimants of whom the Plaintiff did not know, and when the failure to serve the notice was not in itself a cause of any delay in administration beyond that which also arose from other causes, that breach is not one which I would place weight on for the purpose of deciding whether the Defendant should be removed.

Principles for Revocation of Probate

50 When an application is made to the Court to revoke a grant of probate, it is an application for the Court to exercise its inherent jurisdiction: Bates v Messner (1967) 67 SR(NSW) 187; Mavrideros v Mack (1998) 45 NSWLR 80. The appropriate procedure to adopt if an order is made, where there has been a grant to executors, is to revoke the original grant of probate, and make a fresh grant to the remaining executor: Gorman v McGuire [2002] NSWSC 1089.

51 The appropriate test for revocation of a grant has been stated by Sheller JA (with whom Priestley and Beazley JA agreed) in Mavrideros v Mack (1998) 45 NSWLR 80 at 108, as being:

“...whether the due and proper administration of an estate had either been put in jeopardy or had been prevented either by reason of acts or omissions on the part of the executor or by virtue of matters personal to him, for example, mental infirmity, ill health, or by virtue of the proof of other matters which established that the executor was not a fit and proper person to carry out the duties he had sworn to perform. His Honour applied a far too rigid test by saying that one had to get close to the position of the grant being useless. In this, in my opinion, his Honour erred. Further his Honour did not expressly take into account the degree of delay and inefficiency.”

Application of the Principles

52 The evidence in the present case establishes, in my view, that the due and proper administration of the estate has been prevented by the various acts and omissions of the Defendant set out earlier. The delay that there has been, in administering what is really a very simple estate, has been significant. It has arisen in no small part from the actions of the Defendant which I have described in this judgment. The Defendant’s decision to instruct her own solicitor concerning executorial duties has caused time-consuming, and no doubt expensive, correspondence between the solicitors on the various issues described in this judgment. The most significant of the actions she has engaged in is that Defendant has been seeking to both sue the estate by the Family Provision Act 1982 claim, and also to retain financial control over the manner in which the Plaintiff goes about defending that claim, and receive information, of the kind that can be gleaned from tax invoices, about the work being done to defend it.

53 Even in recent times, the Defendant has vacillated in what her attitude is to the payment of the Plaintiff’s costs concerning the Family Provision Act 1982 proceedings. In a letter of 28 April 2005, the Defendant’s solicitor said that she would agree for those fees to be paid immediately, provided the Plaintiff undertook, if so requested, to seek an assessment on a solicitor and client basis of the fees at the conclusion of that litigation. That offer was in effect withdrawn on 4 May 2005, when the solicitors for the Defendant put a different proposal, namely that the Defendant would authorise payment of $10,000 plus GST of $1,000 as payment of costs incurred to date in the proceedings. The amount of costs the Plaintiff has been billed to 9 March 2005 exceeds $20,000. By her affidavit sworn in the proceedings on 6 June 2005, the Defendant said that she was prepared to cause the estate to pay the fees which had been rendered provided the Plaintiff agreed to have those costs assessed after the fees had been paid. She said if that happened, she would be prepared to cause the estate to pay the outstanding fees now and future fees when they were due.

54 Mr Brender submits that this matter can be adequately dealt with by the Court giving directions to the executrices, collectively, about how they ought run the estate. He says that as well some guidance could be given to the executrices by my reasons for judgment about the way in which they ought exercise their discretions. I do not regard that as a satisfactory way of dealing with the problems. The Court ought not be in a situation where it is conducting the administration of an estate by remote control, or the giving of directions, except in those cases where the executrices apply to the Court for judicial advice or the determination of a question under Part 68 Supreme Court Rules 1970. The way in which this estate has been conducted in the past gives me no confidence that it would be a practical way of dealing with the present difficulties to adopt the course which is urged upon me by Mr Brender.

55 More fundamentally, the test for removal of an executor looks at the way in which the estate has been conducted in the past. It would not be satisfactory for an executor to be able to engage in a course of unreasonable obstruction, and then, only after a co-executor has taken the time and trouble of bringing an application to the Court for removal, avoid being removed by offering undertakings as to future conduct.

56 There is opportunity for the Defendant to have redress if any fears which she has that the fees charged in defence of the Family Provision Act 1982 claim will be unreasonable are borne out. (I should say that, on the basis of the evidence at present, there is no reason to believe there is any substance in any such fears, although this is not a matter which has been gone into in any detail on this application). It has been the law for a very long time that a trustee is entitled to be reimbursed out of the trust property in respect of all the charges and expenses properly incurred in the execution of the trust: Worrall v Harford (1802) 8 Ves Jun 4 at 8; 32 ER 250 at 252; In re Grimthorpe, deceased [1958] 1 WLR 381; Carver v Duncan (Inspector of Taxes); Bosanquet v Allen (Inspector of Taxes) [1983] 1 WLR 494 at 502. That principle also applies to executors. A corollary of that principle is that, if there is any challenge to the executor’s accounts, executors can be disallowed indemnity from the estate for expenses not reasonably incurred: Field v Peckett (No.3) (1861) 29 Beav 576; 54 ER 751. In particular, an executor can be disallowed indemnity from the estate for the costs of an action which they improperly commenced or defended – and in this context “improperly” means in a way which was not reasonable and honest: Chambers v Smith (1846) 2 Coll 742; 63 ER 942; Smith v Chambers (1847) 2 Phillips 221; 41 ER 926; InRe Beddoe; Downes v Cottam [1893] 1 Ch 547 at 557, 562; In re England’s Settlement Trusts; Dobb v England [1918] 1 Ch 24. Whether conduct of an executor in defending Family Provision Act 1982 proceedings is reasonable is influenced by the executor’s duty to place before the court all material which a beneficiary wishes to have placed before the Court, except to the extent that the executor knows that that material is false: Vasiljev v Public Trustee [1974] 2 NSWLR 497 at 503-4; Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639 at 654 per Kirby P, 655 per Hope JA.

57 Other ways, besides by challenging the executor’s accounts, exist to challenge the reasonableness of an executor’s action in defending litigation. Even though the costs of defending an application under the Family Provision Act 1982 are costs of administration, and thus prima facie payable both in the first instance, and ultimately, out of the residue of the estate, the wide power of the court as to the incidence of costs under section 33 Family Provision Act 1982 is enough to give the Court jurisdiction, at the hearing of an application, to order that the costs of the application be borne by some particular part of the estate, if that is a proper order to make.

58 As well, under the Civil Procedure Act 2005, which will come into operation shortly, section 98 confers a wide discretion on the Court to decide what costs should be allowed, both in making an order in litigation that one party pay another’s costs, and also (as section 98(6)(a) shows) in certain circumstances where the costs of administration of any estate or trust need to be considered.

59 Thus, I would not, in the exercise of my discretion, regard any prospect that there might be unreasonable incurring of costs by the Plaintiff in the defence of the Family Provision Act 1982 proceedings, as a reason for declining to make an order removing the Defendant as executrix when that order is otherwise justified.

Grant to the Public Trustee?

60 An alternative submission which Mr Brender made was that if the probate ought be revoked, then the grant should be made to the Public Trustee. There is no evidence of consent of the Public Trustee, but section 18(2) Public Trustee Act 1913 confers power on the Court to transfer a partly administered estate to the Public Trustee. I do not pause to consider whether the Public Trustee ought be a party to the proceedings before an order for transfer is made, because I do not see there as being sufficient reason why the Plaintiff, as the person nominated by the testatrix, ought not continue to carry out the role of executrix. She has the responsibilities that anyone in a fiduciary capacity has to deal responsibly with the assets which are committed to her care, and in my view that provides a sufficient control upon her behaviour. By far the most important task of administration remaining is defending the Family Provision Act 1982 proceedings, which the Plaintiff is already doing by herself. I am not persuaded that the failure of the Plaintiff to take steps to lease the house since the matter was first raised is something which shows that she is unfit to continue as an executrix, and that the grant should be made to someone else. In these circumstances I shall remove the Defendant as executrix.

* * * * * *

Costs

61 The Plaintiff applies for costs. Mr Brender opposes there being any order for costs at all. He points out that the Defendant was on occasions conciliatory about the problems which had arisen and which were causing delay. He also submits that this is in substance party/party litigation, as the Plaintiff is really defending her own interests. I do not accept that that submission is completely correct. The Plaintiff will be defending her own interests insofar as she is acting in relation to the Family Provision Act 1982 proceedings, but otherwise she will be advancing the interests of all of the beneficiaries by carrying through the rest of the administration of the estate. Insofar as the submission is correct, and this is party/party litigation, the usual rule that costs follow the event should be applied.

62 He also submits that this is a situation where the differences of opinion which have arisen between the Plaintiff and the Defendant are the consequence of the testatrix’s action in appointing both of them as executrices, in a will which significantly preferred the Plaintiff. He points to the conciliatory attitude of the Defendant continuing in that, as recently as 7 June, an offer, without prejudice save as to costs, was made that the probate be revoked on the basis that the Public Trustee be appointed as executor, the applicant’s costs of the application be paid by the estate, and there be no order as to the Defendant’s costs concerning the revocation proceedings.

63 The Defendant has not, as Mr Brender concedes, done better in this litigation than the offer made by that letter.

64 I would accept that, in one way, a remote cause of the litigation is the testatrix’s action in having appointed both the Plaintiff and the Defendant as executrices of a will of the kind she left. However, a more immediate cause is the actions of the Defendant, of the kind which I have outlined. It is appropriate to order the Defendant to pay the Plaintiff’s costs of the proceedings.

65 The Plaintiff sought to have costs awarded on an indemnity basis. There is nothing in the conduct of the Defendant of this litigation which leads to the making of any such order. The appropriate order, in my view, is for an order for costs to be made on the ordinary basis.

66 The question of whether there ultimately will be an indemnity to the Plaintiff from the estate for any costs she might have incurred in these proceedings and does not recover under the costs order to be made against the Defendant is one which will be decided when the accounts of the estate are finalised. People other than the Defendant have an interest in that question.

67 I have given some consideration to whether it would be appropriate to make a note of the kind which Holland J made in Adam v Mullen (15 December 1976, unreported); noted in Ritchie, Supreme Court Practice, paragraph 13024. The situation in the present case is one which is distinguishable from that case. In that case, the Defendant, who had no reason to know what the facts of the litigation brought against him were, where that litigation was brought in his capacity as executor, defended the proceedings and lost. Holland J refused an order for the Defendant to have the totality of his costs from the estate, but noted that the Defendant had defended the proceeding solely in his capacity as executor, and on the material before him it would appear the Defendant was fully justified in putting the Plaintiff to proof of his claims and in defending the proceedings. His Honour made that note without prejudice to the rights of any beneficiary under the will to object to the Defendant recovering an indemnity for the costs ordered against him out of the assets of the estate. The present case is factually distinguishable, in that the Plaintiff has not lost, and furthermore was in a situation where the facts were all known to her before the proceedings started. That is sufficient to distinguish Adam v Mullen from the present case.

Orders

68 The formal orders of the Court are:

(1) That the grant of probate issued in proceedings number 102475/04 in this Court on 23 February 2004 be revoked;

(2) That the Defendant deliver up to the Probate Registry within seven days the grant of probate number 102475/04;

(3) That a new grant of probate issue to the Plaintiff as sole executrix;

(4) I dispense with any advertising of the application of the Plaintiff to be appointed as executrix;

(5) I refer the grant to the Registrar to decide what, if any, other requirements there are before a grant should issue;

(6) Order the Defendant to deliver to the Plaintiff all cheque books, bank statements and other documents relating to any estate bank account within 14 days;

(7) Order the Defendant to deliver to the Plaintiff the certificates of title relating to the properties numbered 67 and 69 Monkittee Street, Braidwood, being lots 2 and 3 in deposited plan 635290, within 14 days;

(8) Order the Defendant to deliver to the Plaintiff any other documents which the Defendant holds in her capacity as executrix of the estate within 14 days;

(9) Reserve further consideration;

(10) Reserve liberty to apply;

(11) Order the Defendant to pay the Plaintiff’s costs;

(12) These orders may be entered forthwith.

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