Re Estate of Crane - [2005] SASC 379

SUPREME COURT OF SOUTH AUSTRALIA
(Testamentary Causes Jurisdiction: Application)
IN THE ESTATE OF KEITH CHANDLER CRANE
Judgment of The Honourable Justice Besanko
30 September 2005
SUCCESSION - EXECUTORS AND ADMINISTRATORS
Application by co-executor to pass over executor – dispute between estate and executor over ownership of assets – jurisdiction of Court to pass over named executor – limited jurisdiction – importance of having regard to due and proper administration of estate and interests of parties beneficially entitled to estate – inevitability of proceedings in relation to disputed assets – application granted.
Supreme Court Act 1935 s 18; Court of Probate Act 1857 s 3, s 4, s 73; Administration and Probate Act 1919 s 5, s 21, s 36, s 37; Public Trustee Act 1995 s 9; Testamentary Causes Act 1867 s 67; Administration and Probate Act 1891 s 25, referred to.
In re Kuhl; Kuhl and Anor v Liebcheschel [1933] SASR 394; In re Swale [1940] SASR 391; In the Estate of Smith, Deceased (1972) 2 SASR 477; In the Estate of Shephard, Deceased (1982) 29 SASR 247; (1982) 30 SASR 1; In the Goods of William Loveday [1900] P 154; In the Estate of S Decd [1968] P 302; In the Estate of Potticary [1927] P 202; In the Estate of Biggs, Decd [1966] P 118; In the Goods of William Taylor [1892] P 90; In the Goods of Galbraith [1951] P 422; In the Goods of Atherton [1892] P 104; In the Goods of Stewart (1875) LR 3 P and D 244; In re Sawtell (1862) 2 Sw and Tr 448; In the Estate of Leguia; Ex parte Ashworth [1934] P 80; Bates v Messner (1966) 67 SR (NSW) 187; Bowler v Bowler (unreported, Supreme Court of New South Wales, Probate Division, Young J, 7 June 1990); Uniting Church in Australia Property Trust (NSW) v Millane [2002] NSWSC 1070, considered.

IN THE ESTATE OF KEITH CHANDLER CRANE
[2005] SASC 379
Testamentary Causes Jurisdiction

BESANKO J: On 22 October 2002 Mr Keith Chandler Crane died in the Townsville Hospital, Queensland.
The testator died of metastatic bowel cancer, which he had had for 18 months, paraplegia secondary to spinal cord compression from the tumour, which he had for two weeks, and chronic obstructive airways disease, which he had had for 16 years. The testator was ill prior to his death and he was in the Townsville Hospital from about 4 October to the time of his death. He left a will which he executed on 11 July 2000.
In his will the testator appointed his sons, Mr David Glen Crane and Mr Kevin Keith Crane, the executors and trustees of the will. For convenience, I will refer to the testator’s sons by their Christian names. The testator left his furniture and household effects, his articles of personal and domestic use, his shack at the Coorong and its contents, his interest in the leasehold land on which his shack is erected and his Bell-boy boat to Kevin. He left his motor car and caravan to David. He left the residue of his estate after the payment of expenses to David and Kevin in equal shares.
David, who is 46 years of age, lodged a caveat against the sealing of a grant of probate on 3 March 2003 and he renewed the caveat on 28 August 2003. Kevin warned David’s caveat on 29 October 2003 and he entered a caveat against the sealing of a grant of probate on 24 May 2004. He renewed the caveat on 27 November 2004.
On 27 November 2003, David issued a summons for directions in the testamentary causes jurisdiction of this Court seeking the following orders, relevantly:
That Kevin Keith Crane of 26 Kartoo Road, Meningee in the State of South Australia occupation [sic] be passed over as executor of the estate of the above named Keith Chandler Crane deceased.
That the plaintiff [Mr David Glen Crane] be at liberty to apply for a grant of probate of the last will and testament of the said deceased.
The Registrar of Probates referred the summons to me. At the hearing, David sought only the following order:
The defendant [Mr Kevin Crane] be passed over as executor of the estate of the abovenamed Keith Chandler Crane deceased.
At the hearing, David was represented by counsel. Kevin appeared in person. He had previously been represented by solicitors but by the time of the hearing had terminated their instructions. The hearing was conducted on affidavit evidence. Kevin applied to cross-examine David on his affidavit, but I refused his application. I will state my reasons for refusing the application later in these reasons.
David submits that there is a dispute between the estate and Kevin about the ownership of three significant assets. He submits that the dispute will only be resolved by legal proceedings and that means that Kevin has or will have a conflict of interest and duty and therefore he should not be permitted to assume the office of executor of the estate of the testator. I am asked to make an order that he be passed over as executor. Before considering the jurisdiction of this Court to make an order passing over an executor and the circumstances in which it may be exercised, I will set out the facts as established by the evidence.
The facts
Kevin’s former solicitors prepared a statement of assets and liabilities in relation to the testator’s estate. It shows no real estate owned by the estate. The assets of the estate are said to include personal effects, motor vehicles and boats, monies, rent due and loans. The liabilities of the estate consist of minor debts.
Until shortly prior to this death, the testator was the owner of four shops at 15 Gawler Street, Mount Barker. I will refer to these shops as the Mount Barker shops. The Mount Barker shops are let and the owner is entitled to receive the rental. As at 1 January 2002 the capital value of the Mount Barker shops was of the order of $410,000. There is a mortgage over the Mount Barker shops securing a loan from the ANZ Banking Group Ltd (“ANZ Bank”) of about $210,000. The testator is the registered proprietor of the Mount Barker shops, but Kevin asserts that on 16 October 2002, which was some six days before his death, the testator sold the Mount Barker shops to him for the sum of $100. There is a receipt dated 17 October 2002 recording the receipt of the sum of $100 by the testator from Kevin. There is also a bank document showing the deposit of $100 on 18 October 2002 in an account of the testator with the ANZ Bank. David asserts that this transaction is legally ineffective on the grounds that at the relevant time the testator lacked the requisite capacity and it may be anticipated that David will also assert that the transaction is legally ineffective on the ground of undue influence or unconscionable conduct on the part of Kevin.
Until shortly prior to his death, the testator was also the owner of a caravan which I presume is the caravan referred to in the testator’s will. Kevin asserts that on or about 16 October 2002 the testator sold the caravan to him for the sum of $100. Again there is a receipt dated 17 October 2002 showing the receipt of $100 by the testator from Kevin. The receipt refers to the caravan. Again, David asserts that this transaction is legally ineffective on the ground that at the relevant time the testator lacked the requisite capacity and it may be anticipated that David will assert that the transaction is legally ineffective on the ground of undue influence or unconscionable conduct on the part of Kevin.
There is a third asset which is in dispute and that is an alleged debt of $150,000. In 1999 the testator transferred a dwelling and shop at Nairne to Kevin. The consideration in the memorandum of transfer is $150,000. The evidence is that that amount has not been paid by Kevin. As I understand it, Kevin asserts that the dwelling and shop were given to him by the testator. David asserts that Kevin owes the estate the sum of $150,000. In 2004, Kevin sold the dwelling and shop for a consideration of $250,000.
There are therefore three assets in dispute: the Mount Barker shops, the caravan and the debt. As things presently stand, it seems that Kevin will have to bring legal proceedings against the estate to assert his right to be the registered proprietor of the Mount Barker shops, and the estate will have to bring legal proceedings against Kevin to assert its rights in relation to the caravan and the debt.
As might be anticipated, both parties put before me evidence which is relevant to the merits of their respective claims in relation to the three assets. I will mention this evidence in more detail later, but I make the point at this stage that it is not for me on this application to decide the merits of the respective claims. I must make an assessment of the merits, but I cannot decide the claims.
Jurisdiction to make the order sought
Section 18 of the Supreme Court Act 1935 (“SCA”) provides that this Court, in relation to probate and letters of administration, has the like voluntary and contentious jurisdiction in relation to the granting or revoking of probate of wills, and administration of the effects of deceased persons, as was vested in or exercisable by the Court of Probate established in England under the Court of Probate Act 1857, as amended by the Court of Probate Act 1858, together with full authority to hear and determine all questions relating to testamentary causes and matters. Section 3 of the Court of Probate Act 1857 (20 and 21 Victoria Chapter 77) abolished the jurisdiction of “all Ecclesiastical, Royal Peculiar, Peculiar Memorial and other courts and persons in England now having jurisdiction or authority to grant or revoke probate of wills or letters of administration of the effects of deceased persons”. Section 4 vested all that jurisdiction and authority in Her Majesty to be exercised in the name of Her Majesty in a court to be called a Court of Probate. In addition, s 18 of the SCA provides that the Court has like jurisdiction and powers with respect to real estate as it has with the personal estate of deceased persons, and it has all probate jurisdiction which, under or by virtue of any enactment not repealed by this Act, is vested in or capable of being exercised by the Court.
Section 5 of the Administration and Probate Act 1919 in effect maintains and continues the jurisdiction of this Court as it was before that Act came into operation, and s 21 of that Act provides that the practice of this Court in its testamentary causes jurisdiction shall be as it was immediately before the Act came into operation.
There is no specific section in the Administration and Probate Act 1919 or any other legislation in this State which gives this Court the power to make an order passing over an executor in the circumstances of this case or similar circumstances. There are sections in the Administration and Probate Act 1919 such as s 36 which deals with an executor renouncing, dying or not appearing when cited, and s 37 which deals with an executor to whom probate has been granted who resides out of the State, but these sections are not relevant in the circumstances of this case. There is the power given in s 9 of the Public Trustee Act 1995 to grant administration of the estate of a deceased person to the Public Trustee in the circumstances set out in that section. One such circumstance is that defined in s 9(1)(g), namely, where the estate is in danger of being lost or destroyed or great loss or expense may be incurred by reason of delay and the executor(s) is unfit or incapable of acting. If the facts of this case fell within the terms of that section, the appointment of the Public Trustee might be considered an appropriate solution for the difficulties raised by this case. However, neither party seeks an order under s 9 of the Public Trustee Act 1995.
If this Court has jurisdiction to make the order sought by David, it is because it formed part of the jurisdiction of the Court of Probate established in England under the Court of Probate Act 1857 and maintained and continued by the provisions of the Administration and Probate Act 1919 and its predecessor. In In re Kuhl; Kuhl and Anor v Liebcheschel [1933] SASR 394 Napier J (as he then was) said that the practice of this Court is founded upon that of the Court of Probate in England immediately after the coming into operation of the Court of Probate Act 1857.
In In re Swale [1940] SASR 391 Napier J considered whether this Court had the power to grant letters of administration with the will annexed to a stranger. Such a power was given to the Court by s 67 of the Testamentary Causes Act 1867 but that section had been repealed. The terms of that section are set out in [20] below. Napier J held that s 67 was declaratory of the jurisdiction of the Court of Probate in England, and that by virtue of s 18 of the SCA, this Court had all the inherent powers and authorities which were formerly possessed by the Court of Probate in England.
Walters J considered s 67 of the Testamentary Causes Act 1867 and the probate jurisdiction of this Court in In the Estate of Smith, Deceased (1972) 2 SASR 477. Walters J held that one of the sections of the Testamentary Causes Act 1867 which was kept alive by s 25 of the Administration and Probate Act 1891 (the precursor to s 21 of the Administration and Probate Act 1919) was s 67. Section 67 enacted, with appropriate modifications, the provisions of s 73 of the Court of Probate Act 1857. It provides as follows:
Where a person has died or shall die wholly intestate as to his personal estate, or leaving a will affecting personal estate, but without having appointed an executor thereof willing and competent to take probate, or where the executor shall at the time of the death of such person be resident out of the said Province, and it shall appear to the Court to be necessary or convenient in any case, by reason of the insolvency of the estate of the deceased or other special circumstances, to appoint some person to be administrator of the personal estate of the deceased or of any part of such personal estate other than the person who, if this present provision had not been made, would by law have been entitled to a grant of administration of such personal estate, it shall not be obligatory upon the Court to grant administration of the personal estate of such deceased person to a person who but for this present provision would by law have been entitled to a grant thereof, but the Court may in its discretion appoint such person as to the Court may seem fit to be such administrator, upon his giving such security (if any) as the Court shall direct; and every such administration may be limited as the Court shall think fit.
Walters J made the point that not only was there jurisdiction to make an order granting letters of administration to a stranger in blood by reason of s 67, but, in addition, because the section was declaratory of the inherent jurisdiction of the Court of Probate, authority for the order could be found in the inherent jurisdiction of the Court.
I refer also to the discussion of this Court’s jurisdiction in probate matters in In the Estate of Shephard, Deceased (1982) 29 SASR 247 (Legoe J); (1982) 30 SASR 1 (Full Court).
In my opinion, this Court does have jurisdiction in limited circumstances to pass over an executor named in a will. That jurisdiction is given to this Court by s 18 of the SCA and the provisions of the Administration and Probate Act 1919. This Court also has the power to remove an executor who has been given a grant of probate.
The more difficult question is when the jurisdiction will be exercised. Two general principles may be stated at the outset. First, it is clearly established that a Court will not readily pass over a named executor and, in general, a person who is named as executor by a testator is entitled to a grant of probate. Section 67 of the Testamentary Causes Act 1867 refers to “special circumstances” and the jurisdiction to pass over an executor is properly described as a limited jurisdiction. Secondly, when a court does exercise the jurisdiction it does so having regard to the due and proper administration of the estate and the interests of the parties beneficially entitled to the estate. Although the case was about the revocation of a grant, the decision of Jeune P in In the Goods of William Loveday [1900] P 154 at 156, establishes that proposition.
There are a large number of English cases where the Court of Probate has passed over an executor or revoked a grant of probate. That has been done on various grounds of which the following are examples:
1The executor was of bad character, had been convicted of manslaughter in relation to the death of the testator and was in prison: In the Estate of S Decd [1968] P 302.
2The executor had neglected his duties: In the Estate of Potticary [1927] P 202.
3The executor had intermeddled in the estate and refused to take a grant: In the Estate of Biggs, Decd [1966] P 118.
4The executor was absent abroad: In the Goods of William Taylor [1892] P 90.
5The executor was suffering from ill-health: In the Goods of Galbraith [1951] P 422.
6The executor was of unsound mind: In the Goods of Atherton [1892] P104.
7The executor was not competent to take probate: In the Goods of Stewart (1875) LR 3 P and D 244.
8The executor had disappeared: In Re Sawtell (1862) 2 Sw and Tr 448.
9The estate was insolvent: In the Estate of Leguia; Ex parte Ashworth [1934] P 80.
The cases and the circumstances they involve are referred to in the standard texts: Mortimer on Probate Practice (2^nd ed, 1927) 402 – 404; Williams, Mortimer and Sunnucks on Executors Administrators and Probate (18^th ed, 2000) 351 – 357; Halsbury’s Laws of England (4^th ed, Vol 17) [954] – [955]; Halsbury’s Laws of Australia (Vol 24) [395 – 2550]; Geddes, Rowland and Studdert, Wills, Probate and Administration Law in New South Wales (1996) 341 – 344.
Counsel for David also referred to a number of Australian authorities and I turn now to consider those authorities.
I start with the decision of the New South Wales Court of Appeal in Bates v Messner (1966) 67 SR (NSW) 187. That case concerned an application to revoke a grant of probate and the grant of letters of administration with the will annexed de bonis non. The executor had done nothing to administer the estate except pay death duty and his whereabouts was unknown. His solicitor refused to disclose his whereabouts. The jurisdiction of the Court in that case was part of its inherent jurisdiction and the Court said that it was appropriate to exercise the jurisdiction when the due and proper administration of the estate has been put in jeopardy or prevented either by reason of acts or omissions on the part of the executor or by virtue of matters personal to him such as mental infirmity, ill-health or (the proof of) other matters which establish that he is not a fit and proper person. The Court referred with approval to the statement of the guiding principle by Jeune P in In the Goods of William Loveday (supra).
In Bowler v Bowler (unreported, Supreme Court of New South Wales Probate Division, Young J, 7 June 1990) Young J considered whether a nominated executor who had persuaded an elderly testator to make a will which he did not understand should be passed over as a co-executor of an earlier will. He referred with approval to the guiding principle stated by Jeune P in In the Goods of William Loveday (supra). However, he said that the inherent jurisdiction to pass over an executor should be exercised only in exceptional circumstances and in accordance with the authorities. He referred to Halsbury’s Laws of England (4^th ed, Vol 17) [955]. He refused to make an order in the circumstances of that case.

In Uniting Church in Australia Property Trust (NSW) v Millane [2002] NSWSC 1070 Windeyer J, in the Supreme Court of New South Wales Equity Division (Probate List), considered an application by two nominated executors for an order that the third nominated executor be passed over. The defendant applied to strike out the application. The basis of the plaintiffs’ application was that the deceased and the defendant had been involved in a transaction involving a property whereby the defendant received the benefit of the property by reason of what was alleged to be unconscionable conduct by him towards the deceased. It was said by the plaintiffs that it would not be possible to commence proceedings against the defendant on behalf of the estate without his consent, which he would be unlikely to give. The plaintiffs relied on the inherent jurisdiction of the court. Windeyer J said that the application to pass over the defendant was bound to fail. He said that pleaded misconduct was very different from proved misconduct and that it was undesirable for the administration of estates to be delayed by having to determine in prior proceedings, or perhaps the same proceedings, disputed claims of unconscionable conduct. He noted that if the defendant was to misconduct himself then he could be removed. If he did not consent to the bringing of proceedings, the court could allow proceedings to be brought. His Honour said (at [8] and [9]):
… Thus the fact that there could be some conflict of interest does not in itself justify passing over a named executor who wishes to take a grant. Many executors named and appointed have some conflict such as being a debtor to the estate. That does not justify their being passed over.
...
The proper course in proceedings such as this is, in ordinary circumstances, to assume that a person named by a deceased person as his or her executor will act properly and that the testator expects that person will do so. The proper course is not to have some prior determination of proceedings which will properly arise in the administration of the estate of the deceased person. It is my view that the proceedings as constituted are bound to fail and ought to be dismissed.
Should an order be made in this case?
In my opinion, the circumstances surrounding the three assets and their disposition require the most careful investigation. At the time of his death on 22 October 2002, the testator was the registered proprietor of the Mount Barker shops. The shops were worth in the region of $410,000 and there was a mortgage over them in favour of the ANZ Bank securing a loan in the region of $210,000.
Kevin asserts that the testator sold the Mount Barker shops to him on 16 October 2002. There is no contract of sale. There is a receipt for the sum of $100. At David’s request, a handwriting expert has examined the receipt. That evidence suggests that the testator signed the receipt and that the other handwriting on the receipt is Kevin’s handwriting. The evidence suggests that a sum of $100 was deposited in an account of the testator at the ANZ Bank on 18 October 2002.
There is evidence from David that he spoke by telephone to the testator on a number of occasions in October 2002 and that he, the testator, found it increasingly difficult to talk or to maintain a conversation. David was not in Townsville at the time of these conversations. David’s evidence is that when he telephoned his father on 17 October 2002, Kevin answered the telephone and said the following (or words to the effect), “Dad’s freaking out, he wants to sell his car and caravan to have our teeth fixed”, and, when David asked Kevin if he should travel to Townsville, Kevin said, “You might only get five minutes with him, he is on liquid morphine.”
David travelled to Townsville, went to the hospital and spoke to the testator on 18 October 2002. David’s evidence is that the testator was hallucinating and “he reached into the air and moved his arms and hands as if he was picking fruit from a tree.” David visited his father on the following days but he was unconscious on each occasion.
I have already referred to the evidence put forward by David in relation to the purported transaction involving the sale of the caravan for $100 on or about 17 October 2002. For present purposes, it is similar to the evidence involving the Mount Barker Shops.
I have also referred to the evidence concerning the debt relating to the dwelling and shop at Nairne. David puts forward evidence that stamp duty was paid on the consideration of $150,000 and yet by reference to various local council notices the capital value was $125,000.
David also gives evidence of his relationship with the testator and his mother, but it is not necessary to relate the details.
Kevin applied to cross-examine David on his affidavit and, as I have said, I refused that application. I did so because I am not determining the merits of the claims at this stage and, in any event, none of what I consider to be the essential facts are in dispute. It is not disputed that the testator, shortly prior to his death, and when he was ill, purported to transfer to Kevin very substantial assets for what were, relatively speaking, nominal amounts. It is not disputed that the stated consideration for the dwelling and shop at Nairne has not been paid.
I have read carefully Kevin’s affidavit. He annexes to his affidavit a medical report from the Director of Palliative Care at the Townsville Hospital, who expresses the opinion that there was no evidence that the testator’s judgment would have been impaired by medication or his disease on 17 October 2002. It is not necessary, for the same reasons I have given in relation to David, to refer to the other matters in his affidavit including details of his relationship with the testator and his mother.
In considering whether this is an appropriate case to exercise the jurisdiction to pass over Kevin, I must have regard to the due and proper administration of the estate and the interests of the parties beneficially entitled to the estate. That is the guiding principle. I must also recognise that the jurisdiction is limited and that, in general, Kevin, as a person who is named as executor by the testator, is entitled to a grant of probate. I also recognise that, in the ordinary case, a potential conflict of interest will not be sufficient to justify the exercise of the jurisdiction. As Windeyer J observed in Uniting Church in Australia Property Trust (NSW) v Millane (supra), not infrequently an executor will have some conflict, such as being a debtor to the estate. However, in my opinion, this is a different case (from that of an executor who has some conflict by reason of being a debtor to the estate). Kevin has made it clear that he maintains that the transactions involving the Mount Barker Shops and the caravan are legally effective and that he owes no money to the estate. There is every reason to think that he will continue to maintain that position until a Court determines otherwise. If made an executor, I think that it can be said with a high level of confidence that he will not consent to the estate asserting rights in relation to the three assets. In that event, an application to the court for the estate to bring or defend proceedings would be almost inevitable.
I emphasise that at this stage I am not determining the merits of the claims, but at the same time I have reached the conclusion that, on the face of it, the claims require careful investigation, and, as near as one can tell at this stage, litigation in relation to one or more claims is likely. In the particular circumstances of this case, I think the order sought should be made.
Conclusion
For these reasons, I will make an order that Kevin be passed over as executor of the estate of Keith Chandler Crane deceased. I will hear the parties on the question of costs.