Public Trustee v CBA

Case [2018] SASC 25

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

PUBLIC TRUSTEE v CBA & ORS

[2018] SASC 25

Judgment of The Honourable Justice Bampton

9 March 2018

SUCCESSION - ADMINISTRATION OF ESTATE - DISTRIBUTION

SUCCESSION - PERSONAL REPRESENTATIVES - EXECUTOR DE SON TORT AND INTERMEDDLER

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

GUARANTEE AND INDEMNITY - INDEMNITIES

EQUITY - EQUITABLE REMEDIES - GENERALLY

The plaintiff is a sole executor of the estate of the deceased pursuant to a grant of probate made on 15 May 2013 of the deceased’s last will dated 22 October 2002.  Following the deceased’s death, the defendant banks paid the balance of the accounts held in the deceased’s name to the deceased’s son who purported to act as the executor pursuant to a will made 27 April 2008.  On 27 September 2012, the Court pronounced for the 22 October 2002 will and against the purported 27 April 2008 will.  The plaintiff seeks recovery of the sums paid to the deceased’s son alleging the defendant banks are liable to it in debt and as executors de son tort.  The defendant banks plead that they already paid the monies to the deceased’s son who was entitled to give and did give a valid release and discharge to them on behalf of the deceased’s estate and further that the deceased’s two other living children consented to the deceased’s son’s discharge of the debts and the plaintiff is bound by those consents.

Whether the defendant banks are liable in debt and as executors de son tort to the plaintiff – whether the defences of discharge or, alternatively, ratification, consent, estoppel and equitable set off are made out in respect of the debt claim.

Held:

1. The plaintiff has claims in debt against each of the defendant banks.

2. The deceased’s son is an executor de son tort in respect of his transactions with the defendant banks.

3. The defendant banks are not executors de son tort.

4. The first defendant is entitled to set-off its claim in equity pursuant to the indemnity given by the deceased’s son against the plaintiff’s claim to the extent of the amount the deceased’s son would otherwise receive from the residuary estate.

5. The second defendant is entitled to set-off its claim in equity pursuant to the indemnities given by the deceased’s living children against the plaintiff’s claim to the extent of the amount the deceased’s living children would otherwise receive from the residuary estate.

Trustee Act 1936 (SA); Administration and Probate Act 1919 (SA) s 44, s 45, s 46, s 71, s 120; Income Tax Assessment Act 1936 (Cth) s 161; Supreme Court Civil Rules 2006 (SA) r 83, referred to.
Chan Kit San v Ho Fung Hang [1902] AC 257; Maddock v Registrar of Titles (Vic); Miller v Registrar of Titles (Vic) (1915) 19 CLR 681 ; Ryan v Davies Bros Ltd (1921) 29 CLR 527; Whitehead v Taylor (1839) 10 AD & E 210; Ingle v…

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AGLC
Public Trustee v CBA [2018] SASC 25
Case
[2018] SASC 25
Decision Date

CaseChat Overview and Summary

In this case, the Public Trustee sought to recover funds from the Commonwealth Bank of Australia (CBA) and Bank SA in relation to the administration of Mary’s estate. The dispute involved issues concerning the validity of the wills, the role of the executors, and the bank accounts held by the deceased. The Federal Circuit and Family Court of Australia was tasked with resolving the legal issues presented.

The key legal issues the court had to address were whether the Public Trustee, as the executor of Mary’s estate, could recover the funds from the Banks, and whether the Banks could be held liable for the debt. The Banks raised various defences, including discharge, ratification, consent, estoppel, and equitable set-off. The court also had to determine if the Banks could be considered executors de son tort.

The court found that the Banks were liable in debt to the Public Trustee, but the defence of equitable set-off was made out. The court did not consider the Banks to be executors de son tort and therefore did not address the defences raised in respect of that claim. The court concluded that the Public Trustee, by consenting to the Compromise, did not ratify the Banks' actions in discharging the debts. Furthermore, the Public Trustee was not bound by the representations made by the Martins to each of the Banks, and the claim against the Banks was independent of and unrelated to those representations. The court found that the Banks took a risk in circumstances where they could have acted conservatively and prudently by insisting upon the production of a grant of probate.

The court ordered that the Banks were liable to account for the assets of Mary’s estate that they had illegitimately dealt with. The finalization of the administration of Mary’s estate awaited the determination of these proceedings. The court emphasized that the beneficiaries had an interest in the collection of the remaining assets of the estate being collected in accordance with fairness and equity.

Orders

Orders of the court

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Background

Background to the litigation

The Banks raise the defences of discharge, ratification, consent, estoppel, and equitable set-off to the debt claim. For the reasons that follow, I have found that the Banks are liable in debt to the Public Trustee and that the defence of equitable set-off is made out. I have found that the Banks are not executors de son tort and as such have not considered the defences raised in respect of the claim for liability as executors de son tort.BackgroundMary’s Children Mary and Edward had eight children. Mary’s death certificate records the names and dates of birth of the children as follows:[2][2] Exhibit P19.·John, 15 January 1947;·Philomena Maude, 14 February 1948;·Michael Edward, 4 January 1950;·Mary Veronica, 6 September 1951;·Therese Mary, 21 January 1953;·Francis Joseph, 20 October 1954;·Brigid Anne, 10 September 1956; and·Monica Catherine, 21 July 1959. John died the day after his birth on 16 January 1947.[3] Mary Veronica died approximately 6 weeks after birth on 24 October 1951.[4] Brigid Anne died aged six on 2 March 1963. Monica Catherine died approximately three weeks after birth on 10 August 1959. Therese Mary (“Tracy”) died aged 53 on 20 May 2007. Only three of Mary’s eight children were living at her death, namely Philomena, Michael and Francis. [3] Exhibit P33.[4] Exhibit P33. I introduce Alba into the factual matrix. Alba was married to Michael. It is not known whether they have been divorced. It is agreed that by at least 2007 they had separated and their relationship was acrimonious. Despite efforts to locate him, neither the Public Trustee nor the Banks know the whereabouts of Michael.Mary’s willsWill dated 22 October 2002 (“the 2002 will”) In October 2002, Mary made the 2002 will through the Public Trustee under which the Public Trustee was designated as sole executor and trustee. The structure of that will was a gift of household furniture and effects to Therese, with the remainder of the estate dealt with by way of pecuniary legacies to Therese, Philomena, Michael, Francis, and Michael’s wife, Alba. The residue of the estate was to be given to three charitable bodies, the Low Vision Centre, the Mary Potter Foundation and the Saint Vincent de Paul Society (“the three charities”). By the bye, I note the 2002 will records that its contents were read over to Mary as she was vision impaired. This is the will that was ultimately pronounced for and probate granted to the Public Trustee on 15 May 2013.Purported will dated 16 October 2007 (“the purported 2007 will”) The purported 2007 will, prepared by a solicitor, appointed Alba as executor of Mary’s estate. This will provided a pecuniary legacy to Alba and the three charities, however it did not benefit any of Mary’s children.Purported will dated 27 April 2008 (“the purported 2008 will”) The purported 2008 will was prepared in the form of a will kit. In this will, Michael was named executor, Francis was named as a substitute executor, and Philomena, Michael and Francis received the entirety of the estate in equal shares. None of the charities named in the previous wills were named as beneficiaries. This is the will Michael produced to the Banks when he sought payment to him of the balances of Mary’s accounts. Closure of the CBA and Bank SA accountsCBA

Evidence

Evidence Before The Court

The CBA relied on an affidavit of Brendon Joseph Dillon sworn on 28 November 2016.[39] Bank SA relied on an affidavit of Phillip Charles Young sworn on 28 November 2016.[40]The Public Trustee’s administration of Mary’s estate by reference to David Dinning’s evidence, Michel Meegan’s evidence and the documentary evidence[39] Exhibit 1D1.[40] Exhibit 2D1. Mr Dinning said he received Mary’s estate in 2012 in his role as Senior Estates Services Officer following the settlement of the legal proceedings. Upon the 2002 will being accepted, he was tasked with administering the estate. Mr Dinning stated that he was not involved with the decision to approve the Compromise, but assumed that the manager of estate services would have been responsible for that decision. Mr Dinning confirmed the Public Trustee held a document titled “Indemnity” which is undated and apparently signed by Michael indemnifying the Public Trustee in respect of the administration of Mary’s estate.[41][41] Exhibit P54. Mr Dinning said there was a delay of six months until the grant of probate was obtained. The delay was caused by the process of collecting details of the assets and ascertaining what happened to them. It was Mr Dinning’s task to prepare a statement of assets and liabilities. Mr Dinning first approached Alba’s solicitors, Treloar & Treloar, who held power of attorney for Mary. The solicitors replied by letter dated 12 November 2012,[42] listing the known assets of the estate, including the account held by the CBA and two accounts held by Bank SA.[42] Exhibit P66. Mr Dinning made further enquiries regarding the assets by corresponding with the Banks. The CBA replied by letter dated 20 November 2012[43] detailing the balance of the CBA account, but did not refer to the closure of the account. Mr Dinning was made aware in November 2012 that the Bank SA accounts had been closed and subsequently made enquiries as to where the money had gone. Bank SA could not provide an explanation. [43] Exhibit P4. Mr Dinning contacted Alba’s solicitors, Treloar & Treloar, and Michael’s solicitors, Andersons, on 26 November 2012[44] in an attempt to find out what happened to the funds from the Bank SA accounts. Treloar & Treloar replied by letter dated 30 November 2012[45] stating that Alba had no knowledge of any withdrawal since Mary’s death.[44] Exhibit P67.[45] Exhibit P78. Mr Dinning also corresponded with Ms Linda Dodd, an employee of St George Bank, by email between 26 November 2012 and 1 February 2013[46] regarding the Bank SA accounts. Ms Dodd informed Mr Dinning on 1 February 2013 that a sum had been paid to Michael on 23 July 2009. This was when Mr Dinning was first able to identify the recipient of the funds on the closure of the Bank SA accounts. [46] Exhibit P79; Exhibit P80 and Exhibit P81. On 15 May 2013, probate was granted to the Public Trustee.[47][47] Exhibit P6. On 29 May 2013, the Public Trustee wrote to the CBA requesting the closure of Mary’s account.[48] On 11 June 2013, the CBA confirmed by letter to the Public Trustee that Mary’s account was closed.[49][48] Exhibit P7.[49] Exhibit P10.

Decision

Reasons for decision

BAMPTON J
I agree with the submission that Morier rests on its own particular facts where there were two accounts with a bank, one in surplus and the other in overdraft. A better understanding of its reasoning is that, on the facts, there was an insufficient connection between the liquidator’s claim against the son’s overdraft account and the executors’ claim for payment of the debt account, despite the son being one of the executors and a residual beneficiary.Conclusion The Public Trustee, as executor of Mary’s estate has a claim in debt against the CBA and Bank SA pursuant to contracts between customer and banker. Michael is liable to account for the assets of Mary’s estate that he illegitimately dealt with in his capacity as an executor de son tort. The Banks are not executors de son tort. The Banks took a risk in circumstances where they could have acted conservatively and prudently by insisting upon the production of a grant of probate. As the “Waiver of Probate/LOA Assessment Sheet” reveals, the CBA “assessed the risk as minimal and [their] requirements [were] not difficult to be met”.[131] Without a grant of probate, the Banks could not obtain a valid release from their debts to Mary from Michael as a person claiming to be the executor of her estate pursuant to an unproven will.[131] Exhibit P24. Unaware of Michael’s unlawful acts, the Public Trustee, by consenting to the Compromise, cannot be taken to have ratified Michael’s conduct in discharging the debts of the Banks. The Public Trustee is not bound by the Martins’ consent and its claim against the Banks is independent of and unrelated to the representations made by the Martins to each of them and is not subject to an estoppel. The Public Trustee gave no reason for not adducing any evidence regarding Philomena and Francis’ knowledge of and involvement in Michael’s intermeddling. It is evident that the Public Trustee had access to them at least at the time of the interim distribution. I am highly suspicious that Philomena and Francis were, putting it colloquially, in cahoots with Michael. The Banks took a risk in circumstances where it was within their power to have properly protected themselves as well as the estate assets and they were duped by Michael and ostensibly by Philomena and Francis. It cannot be that the lawful executor of Mary’s estate is entitled in its administration to collect an asset which has been collected by one of the beneficiaries on behalf of himself and, as the evidence suggests, two of the other five beneficiaries. This is a matter that touches the conscience of the Court. The finalization of the administration of Mary’s estate awaits the determination of these proceedings. Bearing in mind that the interest any beneficiary has in an unadministered estate springs from the duty of the executor to administer the estate, to preserve the assets and to deal with them in the proper manner, each of Mary’s beneficiaries have an interest in seeing the whole of the assets are treated in accordance with the executor’s duties. In that sense, they as a class may be said to have an interest in the entire estate. I also keep in mind that it does not follow that each piece of property which goes to make up the estate is held on a particular trust for a particular beneficiary named as its intended recipient upon completion of administration per Schultz. The beneficiaries have an interest in the collection of the remaining assets of the estate being collected in accordance with fairness and equity. This must result in the Martins being regarded as having received their share of the estate’s assets that were held by the Banks.[132][132] In Re Dacre [1916] 1 Ch 344.

Ratio Decidendi

Legal Principle Established

Established by: BAMPTON J

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