Pave Wealth Services Pty Ltd v Danielle Jones as executor of the estate of Michael Frederick Jones [No 2]
[2021] WASC 489
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: PAVE WEALTH SERVICES PTY LTD -v- DANIELLE JONES as executor of the estate of MICHAEL FREDERICK JONES [No 2] [2021] WASC 489
CORAM: MASTER SANDERSON
HEARD: 23 SEPTEMBER 2021
DELIVERED : 23 SEPTEMBER 2021
PUBLISHED : 18 MAY 2022
FILE NO/S: CIV 1092 of 2021
BETWEEN: PAVE WEALTH SERVICES PTY LTD
Plaintiff
AND
DANIELLE JONES as executor of the estate of MICHAEL FREDERICK JONES
First Defendant
DANIELLE JONES-BALLARD
Second Defendant
Catchwords:
Judgment - Enforcement of judgment relying on Trustees Act 1962 (WA) and statutory remedy of tracing - Turns on own facts
Legislation:
Fair Trading Act 1987 (WA)
Trustees Act 1962 (WA)
Result:
Judgment for plaintiff
Category: B
Representation:
Counsel:
| Plaintiff | : | G J Douglas |
| First Defendant | : | J P Cook |
| Second Defendant | : | J P Cook |
Solicitors:
| Plaintiff | : | Douglas Cheveralls Lawyers |
| First Defendant | : | Mendelawitz Morton Commercial Lawyers |
| Second Defendant | : | Mendelawitz Morton Commercial Lawyers |
Case(s) referred to in decision(s):
Black v S Freedman & Co (1910) 12 CLR 105
Pave Wealth Services Pty Ltd v Danielle Jones as executrix of the estate of the late Michael Frederick Jones [2021] WASCA 7
Re Diplock's Estate [1948] Ch 465
Sinclair v Brougham [1914] AC 398
MASTER SANDERSON:
On 23 September 2021, I made orders in this matter which effectively brought this action to an end. At the time of making the orders I said I would publish reasons for my decision. Regrettably the matter was overlooked and only recently drawn to my attention. These are my belated reasons for entering judgment in favour of the plaintiff against the second defendant.
The relevant facts are as follows. On 14 January 2021, the Court of Appeal made orders (judgment) that the first defendant pay the plaintiff $693,453.15, plus interest and costs (judgment sum). The claim which is the subject of the judgment arose from a sale of an asset (a client list for financial services) that took place on 18 November 2009 and settled on 29 April 2010. The plaintiff succeeded on the basis that Michael Frederick Jones engaged in misleading and deceptive conduct under the Fair Trading Act 1987 (WA): see Pave Wealth Services Pty Ltd v Danielle Jones as executrix of the estate of the late Michael Frederick Jones.[1]
[1] Pave Wealth Services Pty Ltd v Danielle Jones as executrix of the estate of the late Michael Frederick Jones [2021] WASCA 7.
Mr Jones died on 26 May 2013 and the second defendant is Mr Jones' widow and the executrix and a beneficiary of the estate of the late Mr Jones. On or about 3 October 2013, less than three months after probate was granted, the second defendant transferred a property in Dalkeith from the estate to her name. The property was unencumbered at the date of transfer. The defendants were notified of the claim in 2014 and proceedings were commencing in 2015 against the second defendant and a related company. In 2019, the second defendant sold the Dalkeith property for $2.85 million.
It was the plaintiff's position that pursuant to s 65 of the Trustees Act 1962 (WA), the court had the power to order the second defendant to pay to the plaintiff the judgment sum. Section 65 reads as follows:
65. Deceased estate, claims made after distribution of, tracing, following assets
(1)This section applies where a trustee has distributed any assets forming part of the estate of a deceased person or subject to a trust, and there is nothing in any Act to prevent the distribution from being disturbed.
(2)Where this section applies, the Court may make an order on a claim, being -
(a)an application under the Family Provision Act 1972; or
(b)a claim to which section 63 applies; or
(c)a claim by a person to be a beneficiary under the will, or to be entitled on the intestacy, of the deceased person, or to be beneficially interested under the trust;
any of which application or claims are, hereinafter in this section, called the claim.
(3)An order under subsection (2) may provide that -
(a)any person to whom any assets, to which the section applies, were distributed, or his personal representative, shall pay to the person making the claim or to the trustee a sum not exceeding the value of those assets; or
(b)any person, who has received, otherwise than in good faith and for valuable consideration, any interest in any assets, to which this section applies, from the person to whom they were distributed or his personal representative, shall pay to the person making the claim or to the trustee a sum not exceeding the value of that interest;
and for the purpose of giving effect to that order the Court may make such further order as it thinks fit.
(4)The remedies given to any person by this section are in addition to all other rights and remedies (if any) available to that person, and nothing, other than the provisions of subsection (7) and (8), restricts those other rights and remedies.
(5)Subject to the provisions of subsection (6), an order under this section shall not be made by the Court -
(a)where the claim is an application for an order under the Family Provision Act 1972, unless -
(i)the application is made within the period specified in section 7(2)(a) of that Act; or
(ii)leave to file out of time has been given under section 7(2)(b) of that Act;
or
(b)in the case of any other claim, unless the application for that order is made within the time within which the applicant could have enforced his claim in respect of the estate, without special leave of the Court, if the assets had not been distributed;
but, notwithstanding the foregoing provisions of this subsection, the order may be made, with the special leave of the Court, on application made within the time within which the applicant could have enforced his claim, in respect of the estate, with special leave of the Court, if the assets had not been distributed.
(6)Notwithstanding anything to the contrary in subsection (5), where a trustee has made a distribution of any assets forming part of the estate of a deceased person or subject to a trust, and any person who is entitled to apply for an order under this section has, within the time specified in that subsection, applied to the Court for an order on the claim and that person was not aware of the distribution at the time when he made that application, the Court may hear an application by that person under this section after the expiration of the period prescribed by subsection (5), if it is made within 6 months after the date on which the person first became aware of the distribution, and may make an order accordingly.
(7)Notwithstanding any rule of law to the contrary, where a trustee has made a distribution of any assets forming part of the estate of a deceased person or subject to a trust -
(a)a person may exercise the remedies (if any) given to him by this section and all other rights and remedies available to him (including all rights that he may have to follow assets and any money or property into which they have been converted) without first exercising the rights and remedies (if any) available to him against the trustee in consequence of the making of the distribution; and
(b)a person shall not exercise any remedy that may be available to him against the trustee in consequence of the making of the distribution, until he has exhausted all other remedies available to him, whether under this section or in equity or otherwise.
(8)Where a trustee has made a distribution of any assets forming part of the estate of a deceased person or subject to a trust, relief (whether under this section or in equity or otherwise) against any person other than the trustee or in respect of any interest of any such person in any assets so distributed and in any money or property into which they have been converted, shall be denied, wholly or in part, if the person from whom relief is sought received the assets or interest in good faith and has so altered his position in reliance on his having an indefeasible interest in the assets or interest, that, in the opinion of the Court, having regard to all possible implications in respect of the trustee and other persons, it is inequitable to grant relief or to grant relief in full.
(9)Without prejudice to the provisions of subsection (8), an order under this section may provide that any payment directed to be made by that order shall be made by periodic payments or by instalments, and the Court may fix the amount or rate thereof in the order, and may from time to time vary, suspend or discharge the order for cause shown, as the Court thinks fit.
This section would appear to be a statutory embodiment of the equitable doctrine of tracing. There is however a difference between the two remedies. In equity, for tracing to be available there must be a subsisting fiduciary relationship: see Re Diplock's Estate.[2] The decision of O'Connor J in Black v S Freedman & Co[3] involved a theft of money. But even allowing for that decision and the English decision in Sinclair v Brougham,[4] the better view is tracing is only available when there is an existing fiduciary relationship. But such a relationship is not required by s 65. It has an altogether wider operation.
[2] Re Diplock's Estate [1948] Ch 465.
[3] Black v S Freedman & Co (1910) 12 CLR 105.
[4] Sinclair v Brougham [1914] AC 398.
The plaintiff submitted applying the terms of s 65 to the facts:
(a)the second defendant (as trustee) distributed the property to herself;
(b)there is nothing to prevent that distribution from being disturbed;
(c)the claim against the estate, which is the subject of the judgment, is a claim 'in respect of the estate of a deceased person';
(d)the value of the property is far in excess of the judgment sum; and accordingly
(e)the court may order that the second defendant shall pay to the plaintiff the judgment sum.
The plaintiff noted that s 65(2) and s 65(3) embodied a discretion. There is nothing in the section which gives any indication as to how the discretion can be exercised. Of course the discretion must be exercised judicially but that gives no real guide to the parameters governing the exercise of the discretion. There are no authorities in relation to s 65 which deal with the exercise of discretion and no assistance can be obtained from decisions in other states. Counsel did refer me to a helpful academic analysis of the section by Mr Peter Creighton and Professor Elise Bant in the University of Western Australia Law Review. I acknowledge the assistance I have received from that learned article.
The learned authors in outlining the operation of the section say:
In essence, section 65 provides a remedy for those entitled to receive trust property in circumstances where the trustee has distributed the property to someone else. … Liability is strict in the sense that it is imposed whether or not the recipient knew or ought to have known of the plaintiff's interest in the property. (page 221)
The authors go on to deal with the legislative intent which led to s 65 being enacted. Relevantly they say s 65:
… was introduced as part of a scheme designed to enable executors and trustees to distribute deceased estates and trust property as soon as possible, without having to wait for all possible claims to the property to materialise. Trustees who followed specified procedures for identifying creditors or beneficiaries would be protected against latent claims that emerged after the distribution, while the late claimants would have recourse against the recipients of the property. (pages 221 ‑ 222).
In the present case the second defendant must have been aware of the plaintiff's claim against the estate of the deceased. There is nothing in the evidence to suggest it was necessary for her to make a prompt distribution of funds held in the estate. That said, she was quite entitled to make a distribution. But there is nothing on the face of it which would warrant an exercise of discretion so as to refuse the relief sought by the plaintiff.
On behalf of the second defendant, counsel pointed out that s 65(2) identifies the 'claim'. The section empowers the court to make an order on 'a claim'. Subsections (2)(a) and (c) do not apply in this case. Therefore, the plaintiff's claim must be under s 63. Counsel then notes what is effectively a temporal limitation found in s 65(5). Counsel further noted the mandatory terminology of 'shall not be made' if the section is engaged subject to the concluding exception and subject to subsection (6).
Counsel submitted s 65(5) prohibited the court from making an order under s 65 unless the application for that order (being the originating summons dated 17 February 2021) was made within the time which the plaintiff could have enforced his claim with respect to the estate. It was counsel's position the 'claim' in respect of the estate was a claim pursuant to s 79 of the Fair Trading Act 1987 (WA) for damages to compensate for loss suffered by the plaintiff caused by conduct of the deceased. It was submitted the time within which the plaintiff could have enforced his claim in respect of the estate was at any time within three years after the date on which the cause of action accrued. The cause of action accrued no later than a date one year after the date of the settlement of the sale of the client list on 29 April 2010 by reason of the fact the claim related to an overstatement of annual fees payable by the listed clients. Applying the language of s 65(5)(b) to these facts, counsel submitted the court could not make an order under s 65 unless the application for that order was made on or before 29 April 2014.
That submission, although ingenious, ought be rejected. In my view, the 'claim' in this case was the amount of the judgment entered after the decision of the Court of Appeal. With respect, the approach of counsel for the second defendant attaches far too narrow a meaning to the term 'claim'. There is no reason why the term should be confined. Remembering this legislation is remedial it would run counter to the aims and purposes of the legislature to confine the definition of 'claim' as submitted by counsel for the second defendant.
In my view, the plaintiff was entitled to the relief he sought. It was for that reason I made orders to the effect that judgment for the judgment sum be entered against the second defendant.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MM
Associate
18 MAY 2022
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