Re Baljak; Garfirth v Baljak
[2022] VSC 415
•27 July 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2022 00963
IN THE MATTER of the will and estate of LAZAR BALJAK, deceased
| NEIL PETER WILLIAM GARFIRTH and DARREN STEPHEN GOLDSMITH (as executors of the will and estate of LAZAR BALJAK, deceased) | Plaintiffs |
| v | |
| ALAN BALJAK, MILJENKO BALJAK and MIROSLAV BALJAK | Defendants |
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JUDGE: | Richards J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 July 2022 |
DATE OF JUDGMENT: | 27 July 2022 |
CASE MAY BE CITED AS: | Re Baljak; Garfirth v Baljak |
MEDIUM NEUTRAL CITATION: | [2022] VSC 415 |
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WILLS, PROBATE AND ADMINISTRATION – Application for judicial advice – Whether appropriate for executors to compromise proceedings under Part IV of the Administration and Probate Act 1958 (Vic) in light of an ongoing Croatian proceeding concerning the will – Whether appropriate for executors to distribute estate without making retention or provision for any potential liability arising from Croatian proceeding – Where compromise only concerns property of estate in Victoria, not Croatia – Appropriate for executors to compromise and distribute estate as proposed – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 54.02.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr C Northrop | Goldsmiths Lawyers |
| For the Defendants | Ms E Konstantinou | Frenkel Partners |
HER HONOUR:
Lazar Baljak was born in Croatia in 1928, and migrated to Australia in 1952. He became an Australian citizen and lived here until his death on 7 February 2014. Lazar did not marry and had no children. At the time of his death he was in a domestic relationship with Amila Cimerman. He also had six nieces and nephews, Aleksandra Baljak Bisko, Milica Baljak (also known as Mila Vukotic), Miljenko Baljak, Miroslav Baljak, Alan Baljak and Mirko Baljak.[1]
[1]For clarity and convenience I refer in this judgment to Lazar Baljak, members of his family, and Amila Cimerman by their given names. No disrespect is intended.
Lazar’s estate included two properties in Victoria: a house in Dumfries Road, Keysborough and a commercial property in Coleman Parade, Glen Waverley. He also had an amount of cash invested with banks in Victoria and New South Wales.
By his will dated 29 May 2013, Lazar appointed Neil Garfirth and Darren Goldsmith of the firm Goldsmiths Lawyers as his Executors. Probate of the will was granted by this Court on 4 July 2014. The estate — comprising the real property in Victoria and the cash in the banks — was valued at more than $4,800,000 for probate purposes.
Clause 2 of the will provided for the following bequests:
(a) the Keysborough property to Amila;
(b) the sum of $100,000 to Aleksandra;
(c) the sum of $100,000 to Mila;
(d) the Glen Waverley property to Alan; and
(e) the residuary estate to Miljenko and Miroslav in equal shares.
The will made no provision for Mirko.
Separately from the grant of probate in Victoria, Mirko initiated probate proceedings in Croatia. At a hearing before a notary public on 19 January 2016, it was established that Lazar left no estate in Croatia aside from a commercial property in Obrovac, that he left no debts, and that his estate should be divided according to the will. The value of the Obrovac property was estimated to be $17,200. Subsequently, both Mirko and Aleksandra commenced proceedings in Croatia in which they challenged the validity of the will.
Two proceedings were brought in this Court under Part IV of the Administration and Probate Act 1958 (Vic) in relation to Lazar’s will:
(a) the first Part IV proceeding (SCI 2014 04422) was commenced by Mirko, Mila and her daughter Olga Vukotic on 25 August 2014; and
(b) the second Part IV proceeding (SCI 2014 06899) was commenced by Amila on 29 December 2014.
Both Part IV proceedings were listed for trial on 12 April 2016. Mirko did not appear at the trial, and his claim was dismissed.[2] The balance of the Part IV proceedings were adjourned to a date to be fixed, to allow for the completion of the proceedings commenced in Croatia by Mirko and Aleksandra.
[2]Baljak v Garfirth [2016] VSC 184.
Proposed compromise of Part IV proceedings
The parties to the Part IV proceedings have agreed to resolve the claims made by Amila, Mila and Olga. The proposed compromise relates only to the Keysborough property, the Glen Waverley property, and the money in the bank accounts.
The parties are agreed that clause 2 of the will should be replaced with a substitute clause, providing for the following bequests:
(a) the sum of $445,000, the Keysborough property and various chattels to Amila;
(b) the sum of $100,000 to Aleksandra;
(c) the sum of $295,000 to Mila;
(d) the sum of $195,000 to Olga;
(e) the sum of $218,841.97 to Miljenko;
(f) the sum of $218,841.97 to Miroslav; and
(g) the residuary estate to Alan.
All of the original beneficiaries whose bequest will be altered by this disposition agree to it. While Aleksandra does not agree, she has made no Part IV claim and her bequest will not be affected.
Application for advice
By originating motion filed on 23 March 2022, the Executors have applied under r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) for the advice of the Court in relation to this proposed settlement. Because the settlement is agreed by all parties to the Part IV proceedings, the Executors do not seek the Court’s approval of the settlement. Rather, they seek the Court’s advice as to whether it is appropriate for them to compromise the Part IV proceedings in light of an ongoing proceeding in Croatia concerning the validity of the will.
The questions framed in the originating motion are:
(a)Whether it is appropriate for the executors to compromise the two proceedings under Part IV of the Administration and Probate Act 1958, being proceedings numbered:
(i)SCI 2014 04422; and
(ii)SCI 2014 06899 –
in circumstances where proceedings taken by Mirko Baljak and Aleksandra Baljak Bisko in Croatia have not been or may not have been completed.
(b)Whether it is appropriate for the executors to distribute the estate of Lazar Baljak (deceased) without making any retention or provision in respect of any potential liability arising from proceedings taken by Mirko Baljak and Aleksandra Baljak Bisko in Croatia in circumstances where those proceedings have not been or may not have been completed.
The Executors’ application was supported by:
(a) an affidavit of Darren Goldsmith sworn 17 March 2022, which exhibited documents relevant to the two Part IV proceedings and the Croatian proceedings, as well as confidential legal advice obtained by the Executors;
(b) a second affidavit of Mr Goldsmith sworn 18 July 2022, making a minor but important correction to his first affidavit;
(c) an affidavit of Dicky Abraham, a solicitor employed by Goldsmiths Lawyers, outlining the steps taken to bring the application to Mirko’s attention and to the attention of the beneficiaries under the will; and
(d) a second affidavit of Mr Abraham sworn 8 July 2022, exhibiting recent correspondence with Mirko and Aleksandra.
I was assisted by a written outline of submissions filed on behalf of the Executors, which was supplemented by oral submissions at the hearing of their application.
At their request, Miljenko, Miroslav and Alan were joined as defendants to the proceeding. They unreservedly supported the Executors’ application, and urged the Court to allow the parties finally to resolve this very longstanding dispute.
The Executors’ solicitors sent copies of the originating motion and Mr Goldsmith’s first affidavit to both Mirko and Aleksandra. Neither of them participated in the proceeding, although both of them have engaged in email correspondence with the Executors’ solicitors and, in Aleksandra’s case, directly with the Court. I am satisfied that both Mirko and Aleksandra had adequate notice of the proceeding.
The relevant legal principles can be summarised shortly:
(a) It is not the role of the Court to consider the wisdom of the compromise; rather the Court should be satisfied as to its propriety. This involves considering whether the Executors’ decision to agree to the compromise is within power, whether there was any impropriety in their decision, whether they exercised their discretion in good faith, and whether they gave fair consideration to the relevant issues.[3]
(b) When considering the propriety of a proposed distribution of an estate where there may be outstanding claims, it is relevant to consider the risk of the claim eventuating, and whether adequate provision can be made to cover the contingency.[4]
[3]ExxonMobil Superannuation Plan Pty Ltd v Esso Australia Pty Ltd (2010) 29 VR 356, [87]; Re Centro Retail Australia Ltd (2012) 35 VR 512, [13]–[19]; Tritt v Hoskins [2016] VSC 589, [15].
[4]Barr v Rockman [2017] VSC 581, [32]–[34].
The Croatian proceedings
What follows is based on information provided to the Executors by Danilo Gregovic, their lawyer in Zagreb, Croatia, and some recent correspondence between Mirko and Goldsmiths Lawyers.
On 12 August 2014, Mirko commenced a proceeding in the Municipal Court in Zagreb, in which he sought to have the will cancelled, and instead to have Lazar’s estate divided equally between his six nieces and nephews and his great-niece Olga. Mirko’s application alleged that Lazar did not make the will of his own free will, but was influenced by blackmail, threats and coercion by people including Alan and Amila.
On 4 October 2017, the Municipal Court dismissed the proceeding for lack of jurisdiction. Mirko appealed that ruling. On 22 October 2021, the County Court in Zagreb quashed the Municipal Court’s ruling, and returned the matter to the Municipal Court for review. The County Court’s decision noted:[5]
The court of first instance is to take notice that courts in the Republic of Croatia are competent to quash only that part of the will in which the testator disposed of his property on the territory of the Republic of Croatia, so that first of all, it is necessary to inform the Applicant to amend his claims accordingly, i.e. to precisely and specifically name the testator’s real property situated in the Republic of Croatia which is included in the estate, as prescribed by provisions of articles 106 and 109 of the [Civil Procedure Act].
[5]According to a certified translation of the ruling.
The proceeding returned to the Municipal Court in Sesvete. On 12 April 2022, that court ordered Mirko to amend his application to name only Lazar’s real property in Croatia. Mirko appears to have complied with this order, in a document dated 26 April 2022 that names as respondents the six beneficiaries named in the will. In his amended claim, Mirko seeks a ruling that the will be declared invalid, or quashed, because it was made in hospital after Lazar had a heart attack, when he was under the influence of strong medication. Mirko further claims that the Obrovac property should be distributed to all legal beneficiaries in equal parts.
Mirko has recently advised Goldsmiths Lawyers that he is proceeding with this claim.
Aleksandra also commenced a proceeding in the Municipal Court in Zagreb, challenging the validity of the will. Her proceeding was dismissed for want of jurisdiction in August 2018. Aleksandra appealed this ruling, but in July 2019 she withdrew her appeal. The withdrawal of the appeal was confirmed by the County Court in Rijeka on 25 November 2019 and by the Municipal Court in Zagreb on 1 September 2020.
Consideration
The Executors plainly have power to agree to the proposed compromise.[6] There is no suggestion in the affidavit material that the compromise involves any impropriety or bad faith on the part of the Executors. It is apparent from the court documents and correspondence exhibited to Mr Goldsmith’s first affidavit that the Executors have acted with proper caution, and have given careful consideration to relevant matters. In particular, I note that they have obtained advice from counsel as to whether a decision by a Croatian court to invalidate the will could be enforced in Australia. Having considered that advice, I am satisfied that the prospect of that occurring is extremely remote.
[6]Trustee Act 1958 (Vic), s 19(1)(f).
I am satisfied that it is appropriate for the Executors to compromise the Part IV proceedings in circumstances where the proceeding brought by Mirko in Croatia has not been completed. The main reason for that conclusion is that the proposed compromise relates only to the property of the estate in Australia, while Mirko’s proceeding concerns only the property in Croatia. In other words, the proposed compromise of the Part IV proceedings will not affect the subject matter of the Croatian proceeding.
I am also satisfied that it is appropriate for the Executors to proceed on the basis that there is no longer any proceeding brought by Aleksandra in Croatia in which she disputes the validity of the will.
Further, I am satisfied that it is appropriate for the Executors to distribute the property of the estate in Australia without making any retention or provision in respect of any potential liability from the Croatian proceeding. That is because that proceeding relates only to the Obrovac property, which will not be distributed by the Executors under the proposed compromise.
Nor do I consider that the Executors should retain any of the estate in Australia in case Mirko or Aleksandra commences some other proceeding in Croatia in relation to Lazar’s estate. The advice of Mr Gregovic and the ruling of the County Court in Zagreb in the current proceeding is clear: the courts of Croatia only have jurisdiction to quash that part of the will that disposed of property in Croatia. That property will remain available after distribution of the estate’s Australian assets.
Disposition
The orders of the Court are as follows:
1.It is proper for the plaintiffs as executors of the will and estate of Lazar Baljak (deceased) to compromise the two proceedings under Part IV of the Administration and Probate Act 1958, being proceedings numbered:
a. SCI 2014 04422; and
b. SCI 2014 06899
in circumstances where proceedings taken by Mirko Baljak in Croatia have not been completed.
2.It is proper for the plaintiffs as executors to distribute the estate of Lazar Baljak (deceased) without making any retention or provision in respect of any potential liability arising from proceedings taken by Mirko Baljak or Aleksandra Baljak Bisko in Croatia.
3.Pages 233 to 250 of the affidavit of Darren Stephen Goldsmith filed on 23 March 2022 are to remain confidential and no person or party may inspect or obtain a copy of those pages without an order of the Court.
4.The plaintiffs’ costs of and incidental to this proceeding are to be paid out of the estate on an indemnity basis.
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