Porker v Richards
[2016] SASC 98
•1 July 2016
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
PORKER v RICHARDS & ORS
[2016] SASC 98
Judgment of The Honourable Justice Blue
1 July 2016
SUCCESSION - ADMINISTRATION OF ESTATE - ASSETS
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH
Derivative action by the plaintiff on behalf of a deceased estate for rent or rental value.
The parties’ mother died in July 2007, leaving her assets to the first and second defendants as executors and trustees on trust for her four children in equal shares. The primary asset was a house.
In 2008 the first and third defendants moved into the house. In December 2008 the first defendant commenced making rental instalments to the estate on a fortnightly basis. The third defendant resided at the house until October 2010, and the first defendant until September 2014. The first defendant paid rates and taxes and conducted general maintenance.
The plaintiff on behalf of the estate seeks rent or rental value from the first defendant in contract or alternatively for breach of fiduciary duty or trespass.
The first defendant claims by way of set-off or counterclaim against the estate reimbursement of expenses and other costs and losses that she claims were incurred as a result of her co-occupation and preservation of the property.
The first defendant claims by way of cross action against the third defendant for contribution towards rent payable by her to the estate and damages caused during his co-occupation of the property.
Held:
1. On 15 December 2008 the second defendant in her capacity as executor and trustee of the estate entered into a contract on behalf of the estate with the first defendant for payment of rent on a fortnightly basis (at [90]).
2. The estate is entitled to unpaid rental of $69,160 (at [94]).
3. The estate does not have a cause of action against the first defendant for breach of fiduciary duty or in trespass by virtue of her occupation of the house between September 2008 and September 2014 (at [102] and [104]-[105]).
4. The first defendant has a set off against the estate for $17,828.76 (at [115]).
5. The estate is entitled to judgment against the first defendant for $51,331.24 less any legal costs incurred by the first defendant as executor (at [129]).
6. The first defendant is entitled to judgment against the third defendant for $12,751.85 as contribution to rent and damages for the cost of repairs to damage by him to the house and for the cost or value of work to remedy the poor condition in which he left his room upon his departure (at [128]).
Alexander v Perpetural Trustees WA Ltd (2004) 216 CLR 109; Byrnes v Kendle (2011) 243 CLR 253; Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433; Chahwan v Euphoric Pty Ltd (2009) 73 ACSR 252; Johnson v Trotter [2006] NSWSC 67; Lidden v Composite Buyers Ltd (1996) 67 FCR 560; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; Ramage v Waclaw (1988) 12 NSWLR 84; Sharpe v San Paulo Railway Co (1873) LR 8 Ch App 597 at 609-610 per James LJ, considered.
PORKER v RICHARDS & ORS
[2016] SASC 98Civil:
BLUE J:
This is a derivative action by the plaintiff on behalf of a deceased estate against the first defendant for rent or rental value. The first defendant brings a cross claims against the estate for monies paid and against the third defendant for contribution and damages.
Background
The parties are the children of the late Alison Porker (Alison) and equal beneficiaries of Alison’s estate (the estate). The plaintiff, Garry Porker (Garry), and the third defendant, Bryan Porker (Bryan) are the younger children of Alison. The first defendant, Stephanie Richards (Stephanie), and the second defendant Marjory Schulz (Marjory), are the elder children and the executors of the estate.
The will and the house
By her will made in May 1989, Alison appointed Stephanie and Marjory as her executors and trustees and left her assets to her trustees on trust for her children in equal shares as tenants in common.
As at July 2007, Alison owned a house at Meadows (the house) that was valued by the Valuer-General at $215,000. Alison was living in a retirement village at Morphett Vale. Marjory’s son Antony was living in the house under an agreement with Alison that he would not pay rent but would pay rates and taxes and maintain the house in good condition. Apart from modest furniture and effects in the house and less than $2,000 in a bank account, Alison owned no other assets.
As at July 2007, Marjory was living in Queensland. Stephanie was living at a house she owned in Flagstaff Hill. Stephanie also owned an investment house at Market Place Nairne and a unit in Brisbane. Bryan was living at Kuitpo.
On 14 July 2007, Alison died. On 20 July 2007, Marjory and her husband Ian Schulz attended a meeting with Ben Siegmann of von Doussas, solicitors. Stephanie also attended the meeting, but not from the outset. There is a dispute about the discussion at the meeting about which I make findings below.
On 21 December 2007, probate of the will was granted in favour of Marjory, reserving leave to Stephanie to apply for probate.
On 8 January 2008, the Guardianship Board made an a order appointing Public Trustee as administrator of the estate of Garry on the ground that it was satisfied that he had a mental incapacity within the meaning of the Guardianship and Administration Act 1993 (SA).
In January and February 2008, Mr Siegmann obtained an appraisal of the house from Ray White of $240,000 to $260,000, Marjory obtained an appraisal from Raine & Horne of $220,000 to $235,000 and Mr Siegmann obtained a valuation from Gil Piccinato valuing the house at $240,000.
On 18 January and 6 February 2008, Mr Siegmann wrote two letters addressed jointly to Marjory and Stephanie. He said that he was still awaiting an appraisal that was being obtained by Stephanie. He expressed the opinion that, if the house were sold to one of the estate beneficiaries, it should be sold for $240,000 being the amount of Mr Piccinato’s valuation. On the other hand, if it were marketed for sale to a third party, it should be listed with Ray White Real Estate with a likely selling range of between $250,000 and $260,000. He asked for their views.
On 12 March 2008, Mr Siegmann wrote a letter to Marjory and Stephanie. He said that he had not received a response from Stephanie to his letter of 6 February and asked her to notify him, as a matter of some urgency, whether she was still considering making an offer to purchase the house. If not, he suggested that the property be listed for sale with Ray White Real Estate as soon as possible.
As at March 2008, Bryan was living in a farmhouse at Meadows, paying rent of $140 per week. He was working two weeks on and one week off at Tanami on the border between Western Australia and the Northern Territory. He subsequently obtained employment instead with Lucas Earthmovers, working three weeks on and one week off at Prominent Hill approximately 650 kilometres north of Adelaide.
Stephanie telephoned Mr Siegmann in response to his letter. She told him that she and Bryan were prepared to purchase the house for $240,000. She said that she was seeking finance and would revert to Mr Siegmann the following week.[1] Mr Siegmann confirmed this in a letter to Marjory on 26 March 2008.
[1] Mr Siegmann did not give evidence. However, he confirmed the conversation in his letter to Marjory dated 26 March 2008, which letter comprises a business record.
On 1 April 2008, Mr Siegmann wrote to Stephanie asking her to notify him as soon as possible of the financial institution from which she would be obtaining finance to purchase the house.
Around May 2008, several events occurred at about the same time. It is not necessary to resolve the precise timing of each event or the order in which they occurred. Antony moved out of the house. Stephanie purchased vacant land at Clover Lane on which she intended to build a cottage. Stephanie rented out her Flagstaff Hill house in which she had been living. Stephanie moved her belongings into the house. Stephanie asked Bryan if he would like to move into the house with her and he agreed. Bryan moved his belongings into the house. Stephanie left Australia to travel overseas.
On 30 June 2008, Mr Siegmann wrote to Stephanie saying that he was instructed to afford her 30 days within which to provide an unconditional letter of financial approval for purchase of the house, failing which he was instructed to list the property for sale on the open market.[2]
[2] The letter is misdated 30 June 2007, but it is clear from its content and from Stephanie's reply that it was in fact prepared on 30 June 2008.
In mid July 2008, Stephanie returned from overseas. There was a conversation between Stephanie and Mr Siegmann. Stephanie moved in with her daughter who lived in Nairne rather than living in the house.
On 30 July 2008, Stephanie wrote to Mr Siegmann in response to his letter. She sought a copy of the will, an itemised statement of costs incurred by the estate and information about the duties of executors and administrators. She complained about the state in which Antony had left the house. She requested that the instructions regarding selling the house be put on hold until she received the information sought.
On 12 August 2008, Mr Siegmann wrote to Stephanie in response to her letter enclosing copies of the grant of probate with will attached. He said that he was instructed to afford Stephanie and/or Bryan 30 days within which to provide him with an unconditional contract to purchase the house for $240,000 with settlement to occur within 30 days of execution of the contract. He said that otherwise he was instructed to list the property for sale on the open market.
In August 2008, Bryan injured his back at work. He had one or two days off work and was then required to return to work. His back injury subsequently deteriorated.
On 1 September 2008, Stephanie moved back into the house.
On 12 September 2008, Stephanie wrote to Mr Siegmann in response to his letter. She complained that he had not provided all of the information sought. She complained again about Antony’s maintenance of the property and the fact that he had not paid rent. She said that she wished to use her discretion under clause 5 of the will to postpone the sale until the information or compensation was provided.
On 1 October 2008, Lucas terminated Bryan’s employment effective forthwith. At some point later, Bryan made a workers’ compensation claim
In November 2008, Mr Siegmann obtained appraisals of the house from Raine & Horne at $230,000 to $245,000, Ray White at $250,000 to $260,000 and Remax at $275,000 to $285,000.[3] Marjory signed a sales agency agreement with Ray White listing the property for sale at $268,000.[4]
[3] The appraisals were not tendered. However, they were referred to in Mr Siegmann's letter to Mr Hart dated 9 December 2008 and to Mellor Olsson dated 12 December 2008.
[4] The sales agency agreement was not tendered. However, its existence and details of it were set out in Mr Siegmann's letters to Stephanie dated 28 November 2008 and Mr Hart dated 9 December 2008.
On 28 November 2008, Mr Siegmann wrote identical letters to Stephanie and Bryan. He said that it had been brought to Marjory’s attention that they were occupying the house without authorisation. He said that the house had been listed for sale with a listing price of $286,000.[5] He said that he was instructed to demand that they vacate the house and remove their possessions by 5 December 2008 and the selling agent would now commence taking people through the house.
[5] This appears to be a typographical error and the price should have been $268,000 according to Mr Siegmann's subsequent letter to Mr Hart dated 9 December 2008.
On 2 December 2008, Jeff Hart of Club Financial Services sent an email to Mr Siegmann. He said that he had been liaising with Bryan for several months regarding his potential purchase of the house but finalising finance approval had been delayed due to difficulties in communicating with Bryan. He requested a contract of sale or transfer description to demonstrate the proposed transfer of legal title.
On 9 December 2008, Mr Siegmann wrote to Mr Hart. He set out a history of previous communications with Stephanie concerning a potential sale of the house to her. He said that the house was now listed for sale with Ray White at $268,000. He said there was no contract on foot between the estate and Stephanie, but the estate was prepared to sell the house to Bryan depending on the amount offered and the commitment to Ray White. He asked Mr Hart to advise him immediately of the financial approval status of Bryan.
Rental agreement
On 8 December 2008, Elizabeth Olsson of Mellor Olsson spoke by telephone to Mr Siegmann. Mr Siegmann told her that Marjory was willing to consent to Stephanie residing at the house as long as rent was paid. He said that he would inform her what was considered to be a reasonable rent. Ms Olsson wrote to Mr Siegmann confirming their telephone conversation.
On 9 December 2008, Mr Siegmann obtained from Raine & Horne a rental appraisal of the house at $230 to $240 per week.
On 11 December 2008, Mr Siegmann wrote to Ms Olsson referring to a rental appraisal of the house at $230 to $240 per week.[6] He requested that Stephanie commence making rental payments of $230 per week to the estate. He requested rental arrears of $920 because Stephanie had already been in occupation of the house for at least one month. He noted that Stephanie might like to seek contribution from Bryan towards the rent. He also enclosed copies of the market appraisals by Raine & Horne and Remax and invited Stephanie’s offer in relation to the purchase of the house.
[6] He said that he enclosed a copy, but in fact sent a copy the following day.
On 11 December 2008, Ms Olsson wrote to Mr Siegmann. She said that, subject to seeing the rental appraisal from Raine & Horne that was not enclosed with Mr Siegmann’s letter, Stephanie consented to the payment of rent at $230 per week, the first payment being due on 15 December 2008. She said that Stephanie would pay the rent arrears of $920 at the rate of $100 per month. She said that Stephanie wished to make an offer to purchase the house and they would respond more fully in the near future. She said that Stephanie had instructed her to obtain probate on the will.
On 12 December 2008, Mr Siegmann wrote to Ms Olsson enclosing the Raine and Horne rental appraisal. He also enclosed a rental appraisal by Ray White dated 11 December 2008 at approximately $250 per week.
On 15 December 2008, Mr Siegmann wrote to Ms Olsson providing von Doussas’ trust account bank details for rental payments by Stephanie, saying that the first payment due on that day would be in respect of the fortnight from 15 December to 28 December 2008.
On 22 December 2008, Ms Richards paid the first rent instalment of $230. She made the following rental payments into von Doussas’ trust bank account:
Date Rent Arrears 22.12.08 230 12.1.09 230 100 28.1.09 230 100 19.2.09 230 100 14.4.09 230 28.7.09 460 6.10.09 230 27.10.09 230 3.11.09 230 24.11.09 230
Subsequent communications
On 30 January 2009, Stephanie applied for probate of the will.
At some point in 2009, WorkCover required Lucas to re-employ Bryan on a part-time basis.
On 1 April 2009, double probate of the will was granted in favour of Stephanie. On 2 April 2009, Ms Olsson wrote to Mr Siegmann requesting an account of receipts and payments of the estate.[7]
[7] The letter was not tendered. However, I infer its contents from Mr Siegmann's reply dated 28 April 2009.
On 28 April 2009, Mr Siegmann wrote to Ms Olsson in reply. He provided details of receipts and payments made on behalf of the estate. He said that on 20 July 2007 it had been agreed between Marjory and Stephanie that an application for probate would be made in Marjory’s name with leave reserved to Stephanie. He asked Ms Olsson to advise him of Stephanie’s intention in relation to purchase of the house.
On 3 August 2009, Mr Siegmann wrote to Ms Olsson saying that he was awaiting Stephanie’s update as to her intentions in relation to purchasing the house. He enclosed a copy of his letter to the Crown Solicitor’s Office, which was acting for Public Trustee in relation to Garry’s estate. On 13 October 2009, he wrote again to Ms Olsson saying that he had not received a response to his previous letters and inquiring whether Stephanie still intended to purchase the house.
On 22 December 2009, Ms Olsson wrote to Mr Siegmann requesting information and documents relating to the administration of the estate. She enclosed a list of accounts that Stephanie had paid on behalf of the estate which she requested be taken into consideration when the assets of the estate were divided. She said that Stephanie intended to instruct that the property be listed with Raine & Horne for sale, but was not prepared to do so until the issue of what had previously occurred in the administration of the estate had been clarified.
In August 2010, an incident occurred between Bryan and Stephanie relating to Bryan smoking in the house. This marked a breakdown in the relationship between them.
On 7 September 2010, this action was instituted by Public Trustee in the name of Garry against Stephanie seeking orders for the sale of the house and distribution of the proceeds. The summons was supported by an affidavit of Jennifer Hill of the Crown Solicitor’s Office.
On 29 September 2010, the summons and supporting affidavit were served on Stephanie.
Some time after the incident in August 2010, Stephanie located the key to a lock on the door that she and Bryan had not been using and locked that door. In October 2010, Bryan returned to the house after being away for some time and could not get in the door. He levered open the screen door and main door, damaging both doors and the door jamb in the process. From that time on, Bryan no longer lived in the house. On occasions, he or a friend visited the house for the purpose of collecting his possessions and on some occasions some of his possessions were collected.
On 13 October 2010, Ray Frost of Treloar & Treloar wrote to Mr Siegmann saying that he now acted for Stephanie. He said that Stephanie was agreeable to the appointment of Gary Dawe of Raine & Horne as land agent to sell the house and would consider the appointment of any other agent nominated by Marjory.
On 22 October 2010, Henry Ringwood of von Doussas wrote to Mr Frost agreeing to the engagement of Raine & Horne to sell the house. Mr Ringwood subsequently wrote to Mr Frost enquiring as to progress in the listing of the property for sale.
On 20 May 2011, Mr Frost wrote to Mr Ringwood saying that Stephanie was waiting for tradesmen to complete repair of damage caused by Bryan and for Bryan to collect his belongings and she was intending to appoint Raine & Horne upon the damage being repaired.
On 22 November 2011, Mr Frost wrote to Mr Ringwood attaching an email from Stephanie saying that Bryan had not collected his tools and junk and that this was holding up her putting the house on the market for sale.
On 24 April 2012, Mr Ringwood wrote to Mr Frost saying that Mr Dawe had told Marjory that he was still awaiting instructions from Stephanie to list the house for sale. He enquired as to the present position.
On 8 May 2012, Mr Ringwood wrote to Mr Frost saying that Mr Dawe had informed Marjory that Stephanie was not willing to list the property for sale. He said that he invited Stephanie to agree to listing the house for sale on an urgent basis so that the estate could be finalised. He said that otherwise Marjory would seek payment of her legal fees by Stephanie rather than their coming out of the estate.
On 21 May 2012, Stephanie and Raine & Horne signed a sales agency agreement appointing Raine & Horne as sole agent for 90 days to sell the house to be advertised for $285,000.
On 6 August 2012, Mr Dawe obtained from prospective purchasers a signed contract offering $270,000 subject to finance. On 8 August, Stephanie instructed Mr Dawe to reject the offer.[8] On 10 August, Mr Dawe sent an email to Marjory informing her of this.
[8] These details are set out in emails sent by Mr Dawe to Marjory on 10 August 2012 and 19 March 2013, being business records.
On 20 August 2012, Mr Dawe’s sales agency agreement lapsed. He prepared a new sales agency agreement which he gave to Stephanie but which she did not sign. At one point, Stephanie told Mr Dawe that she or a friend were looking at buying a house.
On 22 May 2013, Mr Dawe sent a new sales agency agreement to Marjory, which she signed and returned to him. He asked Stephanie to sign the agreement. Stephanie said that she had a friend who wanted to buy the house privately, that she was being railroaded and that there were problems with the estate.[9] On 27 June 2013, Mr Dawe sent an email to Mr Ringwood informing him of these matters. On 7 August 2013, Mr Dawe sent a further email to Mr Ringwood saying that the status quo remained.
[9] These details are set out in an email sent by Mr Dawe to Mr Ringwood on 27 June 2013, being a business record.
On 13 September 2013, Ms Hill wrote to Mr Frost, Mr Ringwood and a solicitor who had acted for Bryan. She expressed concern that the house remained unsold six years after the death of Alison. She identified three alternatives, being transfer of administration of the estate to Marjory, appointment of Public Trustee to administer the estate or continuing with the current administration by Stephanie and Marjory. She enquired as to their preferences.
On 30 October 2013, an interlocutory application supported by an affidavit of Ms Hill was filed on behalf of Garry seeking joinder of Marjory and Bryan as additional defendants and the filing of pleadings to progress the action.
In December 2013, Treloar & Treloar filed a notice of address for service in the action on behalf of Stephanie.
In April 2014, an order was made joining Marjory and Bryan as additional defendants.
On 20 August 2014, Stephanie and Benjamin Walker of Remax in Mount Barker executed a sales agency agreement appointing Remax for 90 days as agent to sell the house, to market it in the range $285,000 to $305,000. Mr Walker contacted a potential buyer on 21 August, but did not conduct any other marketing because he was instructed by Stephanie not to do so until further notice.
On 1 September 2014, Stephanie vacated possession of the house.
In November 2014, a statement of claim was filed on behalf of Garry seeking orders for the sale of the house and distribution of the estate and payment of an occupation fee or mesne damages by Stephanie in respect of her occupation of the house.
In March 2015, an order was made by a Master that Treloar & Treloar cease to act for Stephanie in the action.
In March and April 2015, defences were filed on behalf of Marjory and Bryan supporting the claims made on behalf of Garry.
In October 2015, Stephanie filed a notice of acting in person.
On 30 October 2015, Stephanie and Mr Walker executed a sales agency agreement appointing Remax for 90 days as agent to sell the house, to market it in the range $285,000 to $305,000.
In December 2015, the action was listed for trial to commence on 15 March 2016.
On 2 March 2016, Mr Walker obtained from a prospective purchaser a signed contract offering $275,000 subject to finance. On 10 March 2016, Marjory signed the contract. Stephanie subsequently signed the contract.
On 9 March 2016, Stephanie filed an interlocutory application supported by an affidavit seeking an extension of time in which to file a defence and effectively seeking an adjournment of the trial.
On 15 March 2016, I heard Stephanie’s application at the commencement of the trial. I refused the application for an adjournment, but extended the time for Stephanie to file a defence. Stephanie filed a defence to the statement of claim and separate defences to Marjory’s and Bryan’s defences on 17 March 2016.
In light of execution of the contract for the sale of the house, Garry did not seek relief by way of an order for sale. Garry pursued a claim against Stephanie for rent or damages for breach of fiduciary duty or trespass. Stephanie pursued a counterclaim against the estate for monies paid and work done and a cross claim against Bryan for contribution and damages.
The trial commenced on the afternoon of 15 March and was completed on 17 March 2016. I made orders by consent on 17 March 2016 appointing von Doussas as conveyancer for settlement of the sale of the house and ordered that, after discharge of outgoings, von Doussas pay the net proceeds of sale into Court.
On 30 May 2016, $255,600.93, being the net proceeds of sale, was paid by von Doussas into Court.
The evidence and findings
Garry did not adduce any oral evidence. Garry tendered an affidavit by Ms Hill sworn on 9 March 2016. Garry tendered an expert report by Mark Sanderson, a land agent, who expressed the opinion that the rental value of the house in 2007 was $260 per week increasing in increments each year up to $300 per week in 2014.
Marjory and her husband Ian gave evidence. They both gave evidence concerning the meeting on 20 July 2007. Marjory gave evidence that all relevant dealings with Stephanie after that time were undertaken by von Doussas and not by her personally. An affidavit by Marjory exhibiting communications between von Doussas, Stephanie, her solicitors as well as other parties and other documents was tendered.
Marjory tendered an affidavit by Benjamin Walker addressing his appointment by Stephanie to sell the house in 2014 and 2015 and the contract entered into in March 2016.
Bryan gave oral evidence.
Stephanie gave oral evidence. Several affidavits by Stephanie were tendered.
All parties tendered various documents.
Meeting on 20 July 2007
Marjory and Ian gave evidence that, at the meeting at von Doussas on 20 July 2007, Stephanie said that she was interested in purchasing a house and for this reason it was decided that Marjory alone would apply for probate. They gave evidence that Mr Siegmann said that three appraisals of the value of the house would need to be obtained for consideration of an offer by Stephanie.
Stephanie gave evidence denying that there was any discussion about the possibility of her purchasing the house or about her not applying jointly with Marjory for probate. She said that it was agreed that three appraisals of the house would be obtained, one by her, one by Marjory and one by von Doussas. She accepted later in her evidence that it was possible that there was discussion about Marjory alone applying for probate and that she did not notice or recall it.
I find that Stephanie did say that she was interested in purchasing the house and for this reason it was decided that Marjory alone would apply for probate. Marjory and Ian were straightforward witnesses and Ian’s evidence corroborated that of Marjory. In his letter to Elizabeth Olsson dated 28 April 2009, Mr Siegmann said that it was agreed at the meeting that application for probate would be made by Marjory with leave reserved for Stephanie. This corroborates the evidence of Marjory and Ian.
Objectively, there was no reason for von Doussas not to apply for joint probate in the names of Marjory and Stephanie unless Stephanie was in a position of conflict of interest such as having expressed an interest in purchasing the house. Mr Siegmann’s letters to Marjory and Stephanie in January and February 2008 proceed on the premise that Stephanie had indicated an interest in purchasing the house and in obtaining an appraisal of its value for this purpose and on the evidence there is no explanation, other than that this had been discussed in July, for Mr Siegmann to have proceeded on that premise.
Moving into the house
Bryan gave evidence that his girlfriend did not move her major belongings into the house and never stayed at the house when he was away working or elsewhere from the house. He said that, when he was staying overnight at the house and not away, his girlfriend stayed overnight approximately 40 per cent of the time between August and December 2008, approximately 25 per cent of the time between January and December 2009 and approximately 15 per cent of the time between January and August 2010.
Stephanie in her evidence did not substantially contradict Bryan’s evidence in this respect.
Bryan gave evidence that, when he ceased to live in the house in October 2010, his bedroom was not in as good a condition as when he moved in, but the rest of the house was in good condition.
Ultimately, there were not many issues on which there was a major divergence between the evidence of Bryan and Stephanie. Where there was a major divergence, I prefer the evidence of Bryan who was a very candid and reasonable witness.
Claim against Stephanie in respect of rent
The claim brought by Garry against Stephanie for rent or rental value is a derivative claim in which Garry sues on behalf of the estate.
Standing
A beneficiary may sue on behalf of an estate or trust if the executor or trustee is unable or unwilling to bring the action and the executor or trustee is joined as a co-defendant to ensure finality.[10] Originally, at the suit of a beneficiary, Chancery would compel an executor or trustee to bring an action if the executor or trustee was unable or unwilling to do so and the action was meritorious.[11] Later, to avoid circuity of actions, the beneficiary was permitted to bring both proceedings in the one action. It does not matter whether the cause of action is in equity or at common law.[12] Although it is said that it is necessary that there be exceptional or special circumstances, the better view is that it is sufficient that the executor or trustee is unable or unwilling to bring the action and the action is meritorious.[13]
[10] Ramage v Waclaw (1988) 12 NSWLR 84 at 91-93 per Powell J; Lidden v Composite Buyers Ltd(1996) 67 FCR 560 at 563-564 per Finn J; Alexander v Perpetual Trustees WA Ltd [2004] HCA 7, (2004) 216 CLR 109 at [55] per Gleeson CJ, Gummow and Hayne JJ.
[11] Sharpe v San Paulo Railway Co (1873) LR 8 Ch App 597 at 609-610 per James LJ.
[12] Ramage v Waclaw (1988) 12 NSWLR 84 at 91-93 per Powell J; Lidden v Composite Buyers Ltd(1996) 67 FCR 560 at 563-564 per Finn J.
[13] Chahwan v Euphoric Pty Ltd [2009] NSWSC 805, (2009) 73 ACSR 252 at [17] per Brereton J.
In this case, Stephanie is an executor and trustee and was obviously unwilling to sue herself. Marjory is a co-executor and co-trustee but Marjory did not institute proceedings against Stephanie. The action is meritorious. Both Stephanie and Marjory have been joined as co-defendants. I am satisfied that this is an appropriate case in which Garry can bring a derivative action on behalf the estate against Stephanie. I am reinforced in that conclusion by the fact that Marjory does not oppose Garry’s standing to bring the action itself but supports it.
Contract
I find that on 15 December 2008, Marjory in her capacity as executor and trustee of the estate entered into a contract on behalf of the estate with Stephanie. Von Doussas acted as agent for Marjory and Mellor Olsson acted as agent for Stephanie in entering into the contract. The express terms of the contract included that Stephanie would pay rent of $460 per fortnight with effect from 17 November 2008, the tenancy would continue indefinitely on a fortnightly basis, Stephanie would make the first fortnightly payment of $460 on 15 December in respect to the period from 15 to 28 December 2008, and Stephanie would make a payment of $920 by instalments of $100 per month in respect of her occupation prior to 15 December 2008.
The contract was performed on both sides in that Stephanie commenced paying rent and Marjory permitted Stephanie to remain at the house in circumstances in which she would otherwise have taken steps to evict her.
The tenancy continued until Stephanie vacated possession of the house on 1 September 2014. Although Stephanie last paid rent in November 2009, on her part she remained in possession of the house until the end of August 2014 and did not at any stage terminate or purport to terminate the tenancy. On Marjory’s part, she did not at any stage terminate or purport to terminate the tenancy on the ground of breach, repudiation or otherwise.
It is not suggested by Garry or Marjory that it was an implied term of the contract that the rental of $230 per week was to be adjusted annually by reference to the consumer price index, market rental valuation or otherwise. It is not suggested that there was any variation to the contract after December 2008 whereby the parties agreed to adjustments to the weekly rental.
The estate was entitled to rental totalling $71,990 being rent at the rate of $230 per week for 313 weeks. Stephanie paid a total of $2,830, leaving a balance owing to the estate of $69,160.
It is clear from the correspondence between the solicitors constituting the contract that the tenant was Stephanie. While it was contemplated that Stephanie might seek contribution towards the rent from Bryan, this was to be a matter between them. Bryan was not a co-tenant with Stephanie from the perspective of the estate.
Garry on behalf of the estate claims that the rent payable by Stephanie should be calculated based on market value rather than contract value because Stephanie occupied the house in breach of her fiduciary duties. Garry seeks payment of rent at the rates set out in Mr Sanderson’s report ranging from $260 per week in 2007 to $300 per week in 2014. I reject that claim insofar as it is made in contract. In a cause of action in contract, market value is irrelevant. I address the alternative cause of action for breach of fiduciary duty below.
Garry on behalf of the estate claims rent payable by Stephanie from 1 September 2008 on the basis that Stephanie was occupying the house from that date. I reject that claim insofar as it is made in contract. It was an express term of the contract that Stephanie would pay $920 back rent and this is inconsistent with rental being payable in respect of any earlier period. I address the alternative cause of action for breach of fiduciary duty below.
Breach of fiduciary duty
Garry on behalf of the estate contends that where the asset of an estate or trust is real property capable of being rented and the property is not being kept vacant for the purpose of marketing for sale, an executor or trustee acts in breach of fiduciary duty if he or she does not take adequate steps to rent the property and secure an income from it for the estate.[14]
[14] Johnson v Trotter [2006] NSWSC 67 at [23] per White J; v Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 at [22]-[23] per French CJ, [67] per Gummow and Hayne JJ and [119] per Haydon and Crennan JJ.
In respect of the period before 30 January 2009 when Stephanie applied for probate, based on my factual finding at [81]-[82] above, Stephanie had not accepted the role of executor and Marjory was the sole executor of the estate. Until at least the date of the application for probate, Stephanie did not owe fiduciary duties to the estate. It may be that Stephanie did not become an executor or owe fiduciary duties to the estate until 1 April 2009 when double probate was granted, but it is unnecessary to decide that question.
In respect of the period after 1 April 2009 or 30 January 2009, in the absence of a relevant contract between Stephanie and the estate, Stephanie would have acted in breach of fiduciary duty if she had occupied the house without paying rent and without taking steps to secure a rent-paying tenant in circumstances in which the house was not being kept vacant for the purpose of marketing for sale. In that event, Stephanie would have been liable to account to the estate for the market value of the rent forgone. If Garry on behalf of the estate succeeded in such a cause of action for breach of fiduciary duty, I would have ordered that Stephanie account to the estate for the market value of the rent in accordance with Mr Sanderson’s opinion from either 30 January or 1 April 2009 to 1 September 2014.
However, there was a contract between Stephanie and the estate which covered the field of the rights and obligations between Stephanie and the estate in relation to occupation of the house. Stephanie was obliged to pay rent pursuant to that contract. In relation to such occupation, Marjory represented the estate to the exclusion of Stephanie. It is obvious that Stephanie would have had a conflict of interest in seeking to represent the estate in dealings with herself in her personal capacity. It had been in recognition of that very conflict that the parties had agreed in July 2007 that Marjory alone would seek probate as executor of the estate, reserving leave to Stephanie to apply later.
In the circumstances, the estate does not have a cause of action against Stephanie for breach of fiduciary duty by virtue of her occupation of the house between September 2008 and September 2014.
Trespass
Garry on behalf of the estate contends that Stephanie was a trespasser by entering into and remaining in possession of the house between 1 September 2008 and 1 September 2014 and is liable to pay damages to the estate by way of mesne profits.[15]
[15] Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433 at 442 per Lord Denning MR (with whom Fenton Atkinson and Megaw LJJ agreed); Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 39 per Brennan J.
In respect of the period between 1 September and 15 December 2008, it is unnecessary to decide whether Stephanie’s occupation of the house amounted to trespass. On the assumption that it did amount to trespass, the rights of the parties as between the estate and Stephanie merged in the contract made in December 2008. Marjory agreed on behalf of the estate that Stephanie would pay back rent of $920 for Stephanie’s occupation of the house before 15 December 2008. Stephanie’s agreement to pay that back rent was made in consideration for the entire agreement which included that Stephanie was not liable to the estate for any earlier occupation.
In respect of the period between 15 December 2008 and 1 September 2014, Stephanie was in possession of the house pursuant to the rental contract made in December 2008. The contract and the tenancy were never terminated by either party and continued until 1 September 2014 when Stephanie vacated possession.
Claims by Stephanie against the estate
Stephanie claims by way of set-off or counterclaim[16] against the estate for reimbursement of expenses paid on behalf of the estate and for other costs and losses that she claims were incurred as a result of her occupation of the house in the interests of the estate.
[16] Stephanie did not plead a set off in her defence and did not file a counterclaim. However, in light of the fact that Stephanie was conducting the trial as a litigant in person, all parties proceeded on the basis that Stephanie was entitled to advance a set off and counterclaim as advanced in substance at trial without regard to the technical form of her pleadings.
Rates and taxes
Stephanie claims reimbursement of $10,091.87 paid for council rates, water rates and emergency services levy in respect of the house. The other parties accept this claim in full.
Other house expenses
Stephanie claims reimbursement of $6,436.89 paid for insurance, pest control, a hot water service, garden maintenance and other items of repairs and maintenance in respect of the house. The other parties accept this claim in full. This acceptance is generous because some items of repairs and maintenance would ordinarily be regarded as the responsibility of the tenant rather than the landlord.
Tillett Memorials
Stephanie claims reimbursement of $1300 paid for a headstone. The other parties accept this claim in full.
Clover Lane property
Stephanie claims $42,790.31 for mortgage payments in respect of her Clover Lane land. Stephanie claims that the incurring of the liability to make these payments was caused by her living at the house and devoting her attention to the house rather than building a cottage on the Clover Lane land. I reject this claim. There is no basis on which these payments were incurred in Stephanie’s capacity as an executor of the estate or on which they could otherwise be recovered from the estate.
Stephanie claims $15,440.14 for council rates, water rates, emergency services levy, a land tax penalty and the cost of grass maintenance in respect of her Clover Lane land. Stephanie claims this on the same basis as for her mortgage payments. I reject this claim. There is no basis on which these payments were incurred in Stephanie’s capacity as an executor of the estate or on which they could otherwise be recovered from the estate.
Market Place property
Stephanie claims $8,680 for lost rent in the second half of 2010 and August 2014 in respect of her Market Place property. Stephanie claims that the loss of rent was caused by her living at the house and devoting her attention to the house. I reject this claim. There is no basis on which this could be recovered from the estate.
Electricity
Stephanie claims $485.98 for electricity at the house. I reject this claim. This is a normal expense that is borne by the tenant rather than the landlord.
Legal costs
Stephanie claims $14,392.14 for legal costs paid to her solicitors Mellor Olsson. Mellor Olsson acted for Stephanie in her personal capacity in relation to the occupation of the house and as a beneficiary of the estate. Legal costs incurred by Stephanie by reason of Mellor Olsson undertaking that work are not recoverable from the estate. However, Mellor Olsson also undertook some work for Stephanie in her capacity as executor of the estate. That work comprised at least the application for double probate. I do not have sufficient information to assess the costs that are recoverable from the estate and will hear the parties further on this question.
Conclusion
Stephanie is entitled to a set off against the estate of $17,828.76.
Claims by Stephanie against Bryan
Stephanie claims by way of cross action[17] against Bryan for a contribution towards rent payable by her to the estate and damages caused by Bryan’s actions.
[17] Stephanie did not file a cross claim. However, in light of the fact that Stephanie was conducting the trial as a litigant in person, both parties proceeded on the basis that Stephanie was entitled to advance a cross-claim as advanced in substance at trial without regard to the technical form of her pleadings.
Contribution towards rent
Stephanie claims against Bryan two thirds of any rent payable by her to the estate. The claim of two thirds is made on the basis that Bryan and his girlfriend were living in the house and it is fair and equitable that the rent be divided into thirds.
Bryan accepts a responsibility to pay half of any rent payable by Stephanie to the estate in respect of the period from May 2008 to October 2010.
Both Stephanie and Bryan were vague in their evidence about discussions between them concerning rent. There is no suggestion that there was any discussion about Bryan paying rent before December 2008. Stephanie did not give evidence that at any point Bryan agreed to pay any specific amount of rent or any clear evidence that Bryan explicitly agreed to pay rent.
I find that in December 2008, Stephanie told Bryan that she was required to pay rent of $230 per week to avoid their being evicted from the house by von Doussas acting on the instructions of Marjory. I find that there was some discussion about the possibility of Bryan paying rent but both parties accepted that Bryan could not actually pay rent at that time because he had no significant income.
The start of the period for which Bryan is responsible to pay rent is 17 November 2008 being the start of the period for which Stephanie is responsible to the estate to pay rent.
I find that it was it an implied term of the arrangement between Stephanie and Bryan that, when Bryan had the means to do so, he would pay Stephanie half the rent that she was obliged to pay to the estate for the period during which Bryan was living in the house. I reject Stephanie’s contention that Bryan is obliged to pay two thirds of the rent because his girlfriend stayed at the house from time to time. I accept Bryan’s evidence that this was not continuous. I find that at no stage did the parties agree to vary the arrangement between them pursuant to which it was an implied term that Bryan would pay half the rent. I find that it was irrelevant whether Bryan’s girlfriend stayed overnight at the house.
The end of the period for which Bryan is responsible to pay rent is mid October 2010 being the date by which Stephanie had effectively locked Bryan out and made it plain to him that she did not want him living in the house and being the date after which Bryan no longer lived in the house. The mere fact that Bryan still had some belongings in the house does not entail that his obligation to pay rent continued.
Bryan is liable to pay Stephanie $11,500 being $115 per week for 100 weeks. It is common ground between Stephanie and Bryan that at one point Bryan gave to Stephanie $1,000. That amount should be deducted from the rent for which Bryan is liable. Bryan gave evidence that he believed that he gave money to Stephanie on other occasions, but could not be specific about dates or amounts and accepted that no other deductions should be made against the rent he owes to Stephanie.
Damages for damage to or poor condition of house
Stephanie claims against Bryan damages for the cost of repairs to damage by him to the house and for the cost or value of work to remedy the poor condition in which she alleges he left his room in particular and the house in general upon his departure.
Bryan accepts responsibility for the cost of repairs to damage caused by him to the house. Stephanie spent $1,510 repairing the damage to the front doors and jamb between January and May 2011. She spent $171.85 repairing damage to a roller shutter and shed latch in May 2011 and April 2013. Bryan accepts liability for the cost of these repairs totalling $1,681.85.
Stephanie spent $90 steam cleaning one room and the hall in February 2011. Stephanie gave evidence that, after Bryan ceased to live in the house, she spent two days cleaning his bedroom walls, floor and curtains. She claims an hourly rate of $50 for this work on the basis that that was the rate that she was paid for nursing work during night shift. She accepted in evidence that the hourly rate for a cleaner in 2015 was $30 per hour. I award $480 being 16 hours at $30 per hour.
Conclusion
Stephanie is entitled to payment of $12,751.85 by Bryan as contribution to rent and damages for the cost of repairs to damage by him to the house and for the cost or value of work to remedy the poor condition in which he left his room upon his departure.
Conclusion
The estate is entitled to judgment against Stephanie totalling $51,331.24 less any Mellor Olsson costs incurred by Stephanie as executor. Stephanie is entitled to judgment against Bryan for $12,751.85.
I will hear the parties concerning interest and the form of the judgments that ought to be entered in light of my conclusions. I will hear the parties concerning the payment out of the monies paid into court and any other orders needed to finalise the action. I will hear the parties as to costs.
4
8
0