Re Connock
[2021] VSC 64
•18 February 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2019 04583
| BARBARA FAYE CONNOCK | Plaintiff |
| v | |
| RICHARD ANTHONY CONNOCK (in his capacity as executor of the estate of Dr Richard Hugh Shephard Connock) | Defendant |
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JUDGE: | MOORE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 9 & 10 February 2021 |
DATE OF JUDGMENT: | 18 February 2021 |
CASE MAY BE CITED AS: | Re Connock |
MEDIUM NEUTRAL CITATION: | [2021] VSC 64 |
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ADMINISTRATION AND PROBATE – Executors – Removal of executor – Whether executor unfit to act in office of executor – Whether executor has conflict of interest – Where the executor is bringing an estoppel claim against a beneficiary of the estate – Where a conflict of interest exists – Where circumstances do not warrant the executor’s removal – Application dismissed – Administration and Probate Act 1958 s 34(1)(c) – Monty Financial Services Ltd v Delmo (1996) 1 VR 65 – Dimos v Skaftouros (2004) 9 VR 584 – Fysh v Coote [2000] VSCA 150.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | M D Tehan | Hall & Wilcox |
| For the Defendant | C Gunson SC with L Hogan | John Keating & Associates |
HIS HONOUR:
The plaintiff, Barbara Faye Connock, is the widow of Dr Richard Hugh Shephard Connock (the deceased). They married in August 2002. Both had previously been married and had children from those relationships.
The defendant, Richard Anthony Connock, is one of the three children of the deceased and his first wife.
In the interests of clarity and without intending any disrespect to the parties, I will refer to the plaintiff and defendant using their preferred names, Faye and Richard.
Richard is the executor of the deceased’s estate. Faye seeks orders for Richard’s removal as executor pursuant to sub-s 34(1)(c) of the Administration and Probate Act 1958 (the Act) on the basis that there is a conflict of interest between his duties as executor of the estate and his personal financial interests as both a plaintiff in a related legal proceeding and as a beneficiary of the estate.
Faye had initially sought orders that she, or alternatively State Trustees, be appointed executor of the estate in place of Richard. In the course of the trial, Faye abandoned her primary claim for relief and only pressed her alternative claim that State Trustees be appointed executor in place of Richard.
Background
The deceased died on 26 October 2017 leaving a will executed on 23 December 2014. The will appointed Faye as executor and Richard as alternate executor. Faye formally renounced her right to probate of the will in February 2018.
The deceased’s estate consists of cash bequests to Faye, Richard and his two sisters as well as a residual estate which is primarily a managed share portfolio, together with personal property and effects. The residuary beneficiaries of the estate are Richard and his two sisters; Faye has no interest in the residual estate.
Faye’s interest in the estate is pursuant to sub-cl 3(a) of the will which states:
I GIVE AND BEQUEATH free of all duties the following:
a)To my said wife BARBARA FAYE CONNOCK the assets of the Shephard Superannuation Fund, all proceeds from my term deposits held with Westpac Bank, National Australia Bank, ANZ Bank and ING Bank (Australia), all proceeds of my bank accounts held with the National Australia Bank, ANZ Bank, Bendigo Bank, ING Bank (Australia) and all proceeds of my bank account with Westpac Bank with BSB Number 033 275 account number 258 191 if she survives me;
No distributions have been made to Faye in accordance with sub-cl 3(a) of the will.
The administration of the estate has largely been finalised. All assets have been gathered in, except part of the residual estate which remains in Faye’s possession at the property where Faye and the deceased resided (and where Faye continues to reside) which is located at Kooroui Court, Drysdale (the Drysdale property). Arrangements for the collection of this personal property have been unable to be finalised.
Approximately $2.5 million of the estate assets is held in a wealth management account and approximately $1 million is currently held on trust by the solicitors for the estate. Faye’s bequest is held separately in an interest-bearing account at National Australia Bank.
Related proceedings
There are two other related legal proceedings involving the parties. The first is a claim by the deceased’s three children under Part IV of the Act which was filed with the Court on 4 October 2018 (the Part IV proceeding). Although Richard was granted leave in August 2019 to discontinue his claim in that proceeding, the claims made by his two sisters remain on foot. Faye was initially the sole defendant in the Part IV proceeding; Richard was added by consent in February 2020 in his capacity as executor of the estate.
The second related proceeding is the central basis upon which Faye seeks Richard’s removal as executor. It is an estoppel claim commenced in this Court by Richard in August 2019 in his capacity as executor of the estate (the estoppel proceeding). Faye is the sole defendant in that proceeding. I address the nature of the claims made in that proceeding in detail below but, in general terms, it relates to a benefit paid to Faye from a fund known as the Shephard Superannuation Fund upon the deceased’s death (the superannuation fund), her interest in the Drysdale property and to cash held in bank accounts in the deceased’s name at the date of his death. Richard seeks a declaration that Faye holds these interests on trust for her own benefit and maintenance during the course of her lifetime, but, on her death, for the benefit equally of the deceased’s children.
The above assets are those referred to in the bequest in sub-cl 3(a) of the will. However, only the cash in the deceased’s bank accounts forms part of the deceased estate.[1]
[1]As a result of a binding death benefit nomination executed by the deceased, the superannuation fund did not form part of the deceased’s estate; at all times since the deceased’s death it has been in the Faye’s possession and control. In relation to the Drysdale property, although the property was registered in the deceased’s sole name when he purchased it in July 2000, it was transferred to the joint names of him and Faye in 2009, as a joint tenancy. Ownership of the Drysdale property has accordingly passed solely to Faye under the principles of survivorship.
It is important to observe that, contrary to the claim asserted by Richard in the estoppel proceeding, the deceased’s will makes no provision for any property or assets – including those referred to in sub-cl 3(a) - reverting to the deceased’s children after Faye’s death.
Both the Part IV proceeding and the estoppel proceeding have been held in abeyance until the determination of this removal application.
Requests for distribution by the plaintiff
On 16 October 2018 and on 17 January 2019, Faye’s solicitors requested that, as executor of the estate, Richard make a distribution to her in accordance with her bequest under the will.
On 14 February 2019, the solicitors for the estate informed Faye’s solicitors that they had been instructed by Richard not to make any distributions from the estate ‘as it is subject to claims from the three Connock beneficiaries’.
Faye’s solicitors again wrote to the solicitors for the estate on 10 September 2019, reciting sub-cl 3(a) of the will and asserting that Richard was obligated to make a distribution. They also alleged that Richard had a conflict of interest in relation to his duties as executor and his personal financial interests as in the estoppel proceeding and as a beneficiary of the estate.
The solicitors for the estate responded on 13 September 2019, stating that Faye was on notice that the estate had not been distributed because it was subject to litigation in the Part IV proceeding and that Richard did not believe that it was necessary or appropriate for him to be removed as executor. Faye then filed her application for the removal of Richard as executor on 7 October 2019.
Legal principles
The Court has power to remove an executor pursuant to sub-s 34(1)(c) of the Act where an executor is ‘unfit to act in such office or is incapable of acting therein’. The principles relevant to the exercise of this power are well established and not controversial in this proceeding.
The leading authority on the meaning and operation of sub-s 34(1)(c) of the Act is the judgement of Ashley J (as he then was) in Monty Financial Services v Delmo.[2] I will later address aspects of the facts of this case in further detail as it was central to Faye’s submissions on removal. However, at the level of principle, in the absence of any authority in which an executor had been removed in such circumstances, after undertaking what has been described as a scholarly analysis of the authorities,[3] Ashley J concluded that unfitness to act within the meaning of sub-s 34(1)(c) of the Act comprehended a situation in which an executor has a conflict of duty and interest in carrying out their executorial duties.[4] However, as his Honour observed:[5]
… not every conflict of duty and interest which should result in removal of an executor. The intention of the testator that the executor be a particular person should not lightly be set aside .…
[2](1996) 1 VR 65, 82 (‘Monty v Delmo’).
[3]As described by Dodds-Streeton JA in Dimos v Skaftouros (2004) 9 VR 584, 606 [103].
[4]Monty v Delmo (n 2) 82.
[5]Monty v Delmo (n 2) 83.
Justice Ashley’s analysis was approved by the Court of Appeal in Fysh v Coote[6] and in Dimos v Skaftouros.[7] In the former decision, Ormiston JA referred to Ashley J’s judgment as giving ‘compelling reasons why an executor's conflict of duty and interest of a kind likely to affect the efficient and satisfactory administration of the estate is a proper basis for removing an executor and substituting another’.[8] His Honour then referred to Dixon J’s seminal statement in Miller v Cameron that:[9]
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. But in a case where enough appears to authorise the court to act, the delicate question whether it should act and proceed to remove the trustee is one upon which the decision of a primary Judge is entitled to especial weight.
Although this statement is expressed by reference to the duties of a trustee, Ormiston JA observed that there was no reason why those principles should not also apply to the removal of an executor.[10]
[6][2000] VSCA 150, [20] (Ormiston JA, with whom Batt and Chernov JJA agreed).
[7](n 3) 606.
[8]Fysh v Coote (n 6) [20].
[9]Fysh v Coote (n 6) [20], citing Miller v Cameron (1936) 54 CLR 572, 580–1.
[10]Fysh v Coote (n 6) [20].
In Dimos v Skaftouros, Winneke P stated that:[11]
The Court will not lightly exercise its discretion to remove a person who has been chosen by the testator as the personal representative. However, it is the welfare of the beneficiaries and the protection of their interests in the estate which must be regarded by the Court as the paramount considerations in exercising the discretion.
[11]Dimos v Skaftouros (n 3) 592-593.
Plaintiff’s submissions
Faye submitted that Richard should be removed as executor because there is a conflict between his duties as executor and his interest in the estoppel proceeding. Richard has refused to distribute the estate as directed by the will because of the other extant proceedings, including the estoppel proceeding. He has thereby preferred not to uphold the terms of the will, and instead pressed a claim which is inconsistent with the terms of the will and from which he will personally benefit.
The estoppel proceeding
In order to properly understand the extent and nature of the conflict of interest asserted by Faye, it is necessary to more closely examine the estoppel proceeding. In that proceeding, Richard advances a claim of proprietary estoppel. He alleges that, in the course of their marriage, the deceased and Faye allowed, encouraged or created the expectation in one another that the assets that they each brought to the marriage would pass upon their death to their respective children either immediately, or upon the death of the second of them, with such assets first being available solely for the use, benefit and maintenance of the survivor during that person’s lifetime.
This ‘Asset Expectation’ is alleged to be oral and partly express and partly implied, or inferred from the conduct of the deceased and Faye and the circumstances of their marriage. For present purposes, it is sufficient to examine only the express basis on which the asserted Asset Expectation is pleaded. Two matters are relied upon:
(a) A conversation alleged to have occurred between the deceased and Richard on 9 January 2015, in the presence of Faye, in which the deceased said that Richard was the sole executor of new wills recently made by him and Faye and:
(i) in which the deceased said that, on his death, Faye was to receive the Drysdale property, the superannuation fund and cash and amounts within certain bank accounts (described as the ‘Connock Children property’) , but on her death, the deceased’s children, including Richard, would receive equally such of that property as Faye held on her death;
(ii) in which the deceased said that the deceased’s three children would receive the residue of the estate; and
(iii) in which conversation, Faye indicated her assent or acquiescence by nodding and smiling towards Richard.
(b) Certain conversations between Faye and Richard alleged to have occurred after the deceased’s death in November–December 2017. It is alleged that, in these conversations:
(i) Richard said that the deceased’s will did not say anything about any property reverting to the deceased’s children on Faye’s death and that the will appointed Faye as executor, with Richard as the alternative executor.
(ii) Faye said she was surprised that she, and not Richard, was appointed as executor; that it had always been her understanding that ‘the Connock money would go back to the Connocks after she died’; and that she wished to change her will, including to ensure that the ‘Connock money would go back to the Connocks after she died’.
It is further alleged by Richard in the estoppel proceeding that:
(a) By no later than January 2015 until the deceased’s death, Faye must have, or ought to have, known that the deceased assumed that either his will or her will would give effect to the transfer of the Drysdale property, the superannuation fund and the cash in identified bank accounts in the manner contemplated by the Asset Expectation and further that, in relation to her will, the deceased’s assumption was mistaken in that her will would not cause a transfer of assets contemplated by the Asset Expectation.
(b) The deceased did certain things in reliance on and induced or encouraged by the Asset Expectation and further that Faye knew that, before his death, the deceased relied upon the Asset Expectation in the making of his will.
(c) Faye had resiled from the Asset Expectation and that as a consequence he had suffered detriment. Amongst other things, it is alleged that, on or around 27 September 2018, Faye informed Richard’s partner that she wanted to give money from the superannuation contribution to her daughter; that she may give another daughter $100,000 or $200,000; and that she could in future give money or proceeds of assets she had received from the deceased to her children.
(d) There existed a common intention constructive trust because, from the date of their marriage or no later than the date of the deceased’s death, the deceased and Faye had a common intention that the survivor of them would hold property received from the first of them who died for the children of the first deceased and preserve that property, save insofar as it applied for the benefit and use solely of the survivor during his or her lifetime.
(e) It would be unconscionable for Faye to resile from the Asset Expectation in respect of the superannuation fund, the Drysdale property and the cash in bank accounts. Alternative relief in the nature of floating fiduciary obligations are also pleaded.
In her defence filed in the estoppel proceeding, Faye:
(a) Denies the alleged Asset Expectation and pleads that, during the course of their marriage, she and the deceased did not discuss the terms of their respective wills with each other and did not discuss with each other their intentions as to their assets following their death, whether those assets were ones which they brought to their marriage, or accumulated during the course of their marriage.
(b)Denies the allegations made in relation to the alleged conversation between the deceased and Richard on 9 January 2015 referred to in [27(a)] above, or that she assented or acquiesced to the subject matter of any such conversation. Faye further alleges that she and the deceased never discussed or agreed that the ‘Connock Children property’ would be left to the deceased’s children upon her death.
(c)As to the conversations alleged to have occurred in November–December 2017 referred to in paragraph [27(b)] above, Faye admits that she was surprised to have been appointed an executor under the will. However, she denies saying that it had been her understanding that the Connock money would go back to the Connocks after she died or that she wished to change her current will to ensure same.
Faye submitted that the nature of the estoppel claim placed Richard in a position of conflict between duty and interest. As outlined above, that claim is in part based on conversations between the deceased, Faye, Richard and others which are asserted to give rise to an expectation that the deceased’s assets would be bequeathed in a particular way. In order to bring the claim, Richard, as executor, has had to form a view as to the truthfulness of his own account of those conversations.
Faye submitted that several authorities have identified Richard’s situation as being one of untenable conflict between duty and interest. Reliance was placed on Monty v Delmo, where Ashley J removed an executor who alleged that an amount of money that he had given to the deceased in her lifetime was a loan and not a gift.[12] The executor said that, even if the other beneficiary of the residue of the estate did not agree with the executor’s claim, ‘he would still accept it as a good one unless a court stopped him from doing so’.[13] His Honour said:
In my opinion an order for the removal of [the executor] is required. It is not required because he is at once executor and a beneficiary. It is required because in the particular circumstances of this case there is a conflict of duty and interest, the conflict necessarily requiring a decision by the executor whether to accept or reject his own truthfulness…[i]t seems to me wrong, in the particular circumstances, that [the executor] resolve this conflict of duty and interest.[14]
It was said that an analogy obtains between the present case and Monty v Delmo because Richard, too, is in the position of having to accept his own truthfulness in order to bring the estoppel proceeding.
[12]Monty v Delmo (n 2) 83.
[13]Monty v Delmo (n 2) 67.
[14]Monty v Delmo (n 2) 83.
In Hill v Fry, Mandie J removed an executor who believed that the will of the deceased did not reflect the deceased’s intention or instructions and intended to bring a proceeding to rectify the will so that the estate was shared between the executor and his son, rather than the executor and his sister.[15] Counsel for the plaintiff relied on the following extract of his Honour’s judgment:[16]
However it seemed to me that the defendant (or at least the first and third defendants) were in a situation of acute conflict of interest in that there was a conflict between their duties as trustees and their personal financial interests. Indeed, [counsel for the defendants] conceded that there was “a degree of tension” between the two sets of interests. The plaintiff on the one hand, and the first defendant on the other, presently have a significant dispute about their entitlements under the will of the deceased. The first defendant (and, naturally, his son, the third defendant) clearly intend to establish their claimed entitlement to the sole ownership of the business interests operated by the various companies in the which the estate is said to have a shareholding. …
[15]Hill v Fry [2008] VSC 13, [14]–[15].
[16]Hill v Fry (n 15) [14].
Faye also submitted that there is a significant benefit to be gained by having an independent executor decide whether to pursue the estoppel proceeding, as it is delaying the administration of the estate. The parties agree that the estoppel proceeding must be determined prior to the Part IV claim, as the former has a bearing on what each beneficiary will receive under the will. She accepted that the appointment of an independent executor would involve cost to the estate, but submitted that the administration of the estate is almost complete and there may be little to do beyond assessing the estoppel proceeding and taking appropriate steps in light of that assessment.
Consideration
Although it was not conceded by senior counsel for Richard, for the reasons advanced on behalf of Faye, it is clear that there exists a conflict of interest between Richard’s duties as executor and his personal interests in the outcome of the estoppel proceeding. In that proceeding, Richard seeks to secure an outcome concerning the legal and equitable entitlements to certain assets, including assets of the estate,[17] which claims involve the assertion of legal rights different to those provided for under the will. In other words, whereas under sub-cl 3(a) of the will Faye has an absolute entitlement to the cash in the relevant bank accounts, in the estoppel proceeding, Richard seeks a declaration that the cash in these accounts is held on trust for Faye’s benefit and maintenance during her lifetime, but for the benefit equally of himself and his siblings on her death.
[17]Being the cash held in certain of the deceased’s bank accounts.
In light of the allegations and denials made in the estoppel proceeding to which I have referred, I also accept that an aspect of this conflict between Richard’s duties as executor and his personal interest in the estoppel proceeding is that the making and maintenance by him of the claims in that proceeding necessarily involves him preferring and accepting his own version of events in respect of the contents of contentious conversations.
The authorities make clear that not every conflict of duty and interest will result in the removal of an executor. The question is whether in the circumstances at hand, having identified the particular conflict of interest involving Richard, I should exercise my discretion to order that Richard be removed as executor of the deceased’s estate. For the reasons which follow, I have reached the conclusion that, having regard principally to the welfare of the beneficiaries and the protection of their interests in the deceased’s estate, the circumstances do not warrant Richard’s removal.
The facts of Monty v Delmo,[18] upon which heavy reliance was placed by Faye, are distinguishable in a critical respect. As executor of an estate, Mr Delmo was required to decide whether to accept his own personal claim against the estate, and his own characterisation of a contribution to a property as a loan, not as a gift. Mr Delmo:[19]
… acknowledged a duty to ensure that only debts truly owed by the estate were paid; but he frankly said that he regarded his own claim as being a proper one, one that he intended to pay. … He said that, if the trustee did not agree that the claim should be paid, he would still accept it as a good one unless the court stopped him doing so.
[18](n 2).
[19]Ibid 67.
Whereas Mr Delmo had the capacity as executor to accept or reject his own claim, Richard has no adjudicative role in respect of the claims made in the estoppel proceeding. Only the Court can determine the validity of the claims made in that proceeding. Unlike Mr Delmo, Richard is not in a position to unilaterally confer the benefit claimed in the estoppel proceeding.
A further important consideration in the exercise of my discretion is the unchallenged evidence that all of the other residual beneficiaries, being Richard’s sisters Linda and Patricia, support the bringing and continuation of the estoppel proceeding and have been properly informed by Richard about it. This is not a case where a residual beneficiary claims that an executor is embarking on imprudent litigation with risk to the estate which they oppose.
As to Faye’s interests as a beneficiary, her interest is protected as it has been isolated from the residue of the estate and is being held on trust by Richard’s solicitors in an interest-bearing account.
The matters referred to in the previous two paragraphs explicitly concern the welfare of the beneficiaries and are matters of significance in my conclusion that the circumstances of this case do not warrant Richard’s removal as an executor.
A further matter which supports this conclusion is the fact that the administration of the estate has largely been finalised. In circumstances where Faye’s interests as a beneficiary are protected, there is little utility in ordering Richard’s removal at this time.
This is particularly so given the absence of any allegations of misconduct or misbehaviour by Richard, beyond the claim of a conflict of interest the subject of this proceeding. Richard, as barrister and solicitor admitted to practice in this Court, is an officer of this Court. He also holds the office of Ombudsman in the State of Tasmania. His unchallenged evidence was that, as part of his statutory role, he is regularly required to recognise and manage potential and actual conflicts of interest and ethical issues. I accept this evidence and have no reason to doubt Richard’s capacity to properly discharge his duties as executor of the estate, including managing the conflict between those duties and his personal interests in the estoppel proceeding.
It is also relevant to note that, unlike in the circumstances in Monty v Delmo, there is no evidence that State Trustees or any other third party has consented to appointment as a replacement trustee. There is likewise no evidence about the costs which will be incurred by the estate in the event that State Trustees or another third party was appointed in place of Richard. However, Richard’s unchallenged evidence, which I accept, is that he has not charged the estate any executor’s commission or other fee in relation to his work in administering the estate and will not do so. By contrast, the appointment of a replacement trustee will inevitably be conducive of some further delay in the administration of the estate as well as resulting in the estate incurring further costs of an indeterminate amount. Those costs would inevitably be borne by the residual beneficiaries; Faye has not made any proposal to contribute towards those costs. All of these matters militate against the exercise of the discretion to order Richard’s removal, particularly given that the administration of the estate is nearly complete.
I also generally accept the submission advanced on behalf of senior counsel for Richard that, once it is recognised that the authority to resolve the estoppel claim is vested in the Court and not Richard, it is difficult to identify the prejudice that Faye will suffer as a result of the estoppel proceeding, beyond the very fact of it being brought against her. Her bequest under sub-cl 3(a) of the will is preserved. Irrespective of what occurs in respect of the estoppel claim, the finalisation of the administration of the estate will be delayed while the Part IV proceeding remains on foot. That proceeding necessarily delays any distribution of the deceased’s estate.[20] If the estoppel proceeding is unsuccessful, Faye will presumably be compensated by a costs order and if she is unsuccessful it cannot be said that she has suffered any prejudice in the relevant sense.
[20]Dimos v Skaftouros (n 3) [30].
Richard’s removal may also be conducive of a multiplicity of proceedings. Faye acknowledged that Richard’s removal as executor could result in the beneficiaries bringing another action to compel the new executor to bring the estoppel claim against Faye. This would further lengthen the delay and increase the cost of administering the estate.
A further matter which weighs against Richard’s removal is that Richard’s continuation in office as executor appears to be consistent with the wishes of the deceased.[21]
[21]Faye’s evidence, which I accept, is that it was her understanding that Richard was to be the executor of the deceased’s estate. Further, as I have noted, the will identifies Richard as an alternate executor.
For the above reasons, Faye’s application for Richard’s removal as executor of the deceased’s estate is dismissed.
Within 14 days, the parties are to submit any proposed minute of consent order in respect of costs or, in the absence of agreement on costs, short submissions on costs limited to four pages.
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