Re Estate of Hagendorfer (Injunction)
[2024] VSC 482
•14 August 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TESTATORS FAMILY MAINTENANCE LIST
S ECI 2023 04341
| TANYA ILDA BRINK | Plaintiff |
| v | |
| NATASHA DONNA HAGENDORFER (sued in her capacity as executor and Trustee of the Estate of CLAUDIO TULLIO HAGENDORFER and personally) | First Defendant |
| ALETTA WILHELMINA SPINKS | Second Defendant |
---
JUDGE: | Gorton J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 August 2024 | |
DATE OF RULING: | 14 August 2024 | |
CASE MAY BE CITED AS: | Re Estate of Hagendorfer (Injunction) | |
MEDIUM NEUTRAL CITATION: | [2024] VSC 482 | First Revision: 16 August 2024 |
---
PRACTICE AND PROCEDURE – Where application for family provision order made but estate fully distributed – Where estate distributed prior to six-month period within which application for family provision orders may be made – Where applicant seeks remedies against executor and beneficiaries – Where applicant seeks to ensure distributed funds available to meet claim – Where distributions used in part to repay home loans of first defendant – Whether arguable case for family provision order – Whether arguable case for damages or proprietary remedy – Whether order sought should be characterised as freezing order or an injunction to maintain status quo – Whether order should be made restraining beneficiaries from further encumbering homes – Brooks v Young [2018] SASCFC 81 – Re Simson (deceased) [1950] Ch 38 – Re Faulkner [1999] 2 Qd R 49 – Ernst v Mowbray [2004] NSWSC 1140 – Administration and Probate Act 1958 ss 99(1), 97(4), 99A.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr Bill Gillies | Bayside Solicitors |
| For the First Defendant | Mr Geoff McCormick | Goldsmiths Lawyers |
| For the Second Defendant | Litigant in person |
HIS HONOUR:
A. Introduction
Tanya Brink, the plaintiff, is one of four surviving children of Claudio Hagendorfer. The other surviving children are Robert Hagendorfer, Aletta Spinks and Natasha Hagendorfer. In his will, Mr Hagendorfer appointed Natasha Hagendorfer, the first defendant, his executor, and left his estate to her and to Mrs Spinks.[1] He did not leave anything to Ms Brink or to their brother. Probate was granted on 24 March 2023. The deceased’s estate, totalling some $896,210.27, was distributed by Ms Hagendorfer to herself and to Mrs Spinks by 26 May 2023. They both applied at least part of their distributions to paying down their home loans. On 18 September 2023, Ms Brink commenced this proceeding by which she makes a claim on the estate for maintenance and support under Pt IV of the Administration and Probate Act 1958. The proceeding was brought within the relevant six-month time period.[2] Ms Brink states that she was not told that the estate had been distributed until a mediation in February 2024. She has since amended her claim by adding Ms Hagendorfer in her personal capacity and Mrs Spinks as a second defendant, and she seeks orders that they pay to her a sum equal to the amount the Court would award under Pt IV of the Administration and Probate Act 1958.
[1]That is how she identified herself.
[2]Administration and Probate Act 1958 (Vic) s 99(1).
These reasons concern an application by Ms Brink for orders directed at ensuring that Ms Hagendorfer and Mrs Spinks preserve the moneys they have received as distributions until the claim has been heard. Although the summons was expressed in wide terms, the application as pursued was for an order that would prevent Ms Hagendorfer and Mrs Spinks from disposing of their homes or increasing the extent of borrowings secured by those homes until the determination of this proceeding or further order. Ms Hagendorfer resisted the making of such an order on the grounds that Ms Brink had no proper claim, and also that no ‘freezing order’ should be made because there was no risk of dissipation and the application was in essence an application for security rather than an application to prevent frustration of the Court process by one party ensuring that any orders made could not be satisfied.
B. An arguable case
Ms Brink has to establish that she has an arguable case against either or both of the defendants.
The precise legal framework that controls the remedy in circumstances where an estate has been distributed prior to, and inconsistently with, a later family provision order is not straightforward. However, it is not necessary for me to decide at this stage what framework, or frameworks, apply. The present issue is whether Ms Brinks has an arguable case that she has a right to a family provision order and, if she does, whether she has an arguable case against Ms Hagendorfer and Mrs Spinks.
In my view, Ms Brink has an arguable case that she has a right to a family provision order in her favour because:
(a) She is a daughter of the deceased with limited assets who does not own a home, for whom no provision was made out of a reasonably substantial estate, and for whom provision had been made in a prior will; and
(b) Ms Brink commenced this proceeding within the statutory period for such claims, which is six months from the date of the grant of probate.[3]
[3]Ibid.
Although the true merits of her claim and the extent of any entitlement she may have will have to be determined after a full hearing, it cannot be said that she does not have a proper claim to prosecute.
The fact that the estate has been distributed is not of itself an answer to an application for a family provision order made within time. There is nothing specific in the Administration of Probate Act 1958 that makes prior distribution a bar to a claim for such an order. Section 97(4) of that Act provides that a family provision order takes effect as if it had been made by the deceased by executing a codicil to the will immediately before death. The Court retains a power ‘to make an order that provision be made for the applicant out of the estate which the executor has purported to distribute.’[4] As Doyle CJ said in Brooks v Young:[5]
Even if distributions have been made, including a final distribution, nevertheless an order for provision may be made in respect of assets distributed to beneficiaries under the will. That is the effect of the decision of the High Court in Easterbrook v Young, as confirmed in respect of the [Inheritance (Family Provision) Act 1972 (SA)] in Blunden v Blunden and Broadhead v Prescott. This ability, to make an order for provision in respect of assets of the estate that have been distributed, is a product of the specification in s 10 that any order for provision operates as a codicil executed prior to the deceased’s death …[6]
[4]Re Jones; Noonan v Jones [1978] VR 272, 273 (McInerney J). See also Walters v Perton (No 3) [2019] VSC 733, [106(a)] (Derham AsJ).
[5][2018] SASCFC 81, [64].
[6]Footnotes omitted. In Easterbook v Young (1977) 136 CLR 308, the High Court said at 318: ‘When an application is made in time, it is out of these assets [that is, the assets of which the testator might at his death dispose] that provision may be made by an order operating as a codicil made by the deceased in his lifetime, even if, at the time the order is made, those assets have been distributed to the intended beneficiaries.’ (Berwick CJ, Mason and Murphy JJ).
If it can be shown that the distribution was made prematurely, then Ms Hagendorfer will be liable to make good any loss that Ms Brink has suffered. There is a real prospect that this could be shown because the distributions were made, and the estate exhausted, well within the six month period within which claims for family provision orders must be made. Although there is no legal prohibition on distributions being made to beneficiaries within the six month period, if a distribution is made by an executor in that period and a claimant suffers loss as a result, the executor may be personally liable to that claimant for that loss.[7] Indeed, it has been said that an executor should not make distributions to beneficiaries ‘while there is any possibility or expectation than an application’ for family provision will be made.[8]
[7]See Walters v Perton (No 3) [2019] VSC 733, [106(b)]-[107] (Derham AsJ).
[8]Re Simson (deceased) [1950] Ch 38, 42-43 (Vaisey J).
There are statutory protections for executors, but they do not apply to a distribution made within six months unless the executor has received notice in writing from the claimant that he or she consents to the distribution or does not intend to make any application that would affect the proposed distribution.[9] Here, Ms Brink had sent an SMS message to Ms Hagendorfer some months prior to probate being granted, saying that she did not ‘want or need anything’ from Ms Hagendorfer.[10] Ms Hagendorfer says that she took this to be an indication that no application for family provision would be made. If that is accepted, a Court could conclude that the distribution was not premature. But Ms Brink has a proper argument that it should not have been so understood in circumstances including where probate had not yet been granted and it was not then clear whether Ms Brink knew she was not a beneficiary under the most recently created will. These are matters for trial.
[9]Administration and Probate Act 1958 (Vic) s 99A(2). It was not suggested that the distributions were made for the purpose of providing for the maintenance education or support of a child of the deceased totally or partially dependent on the deceased immediately before the death of the deceased, as to which see s 99A(1) of the Administration and Probate Act 1958.
[10]Notably, this SMS message was sent by Ms Brink to Ms Hagendorfer in the context of seeking to obtain details about their father’s funeral arrangements, and where heightened language was used by both sisters regarding their own relationship.
Further, in addition to a personal claim against Ms Hagendorfer in her capacity as executor, it is arguable that Ms Brink also has a proprietary claim against Ms Hagendorfer and Mrs Spinks in their capacities as recipients of distributions made contrary to the terms of the will taking into account its notional codicil. Although his Honour was dealing with South Australian legislation that is not identical to the Victorian legislation, Doyle CJ said in Brooks v Young:[11]
3. In the event of a claim brought within six months from the grant of probate, the Court has a discretion to order provision out of any assets of the estate, regardless of whether or not they have been distributed. In the event that an order is made in respect of distributed assets, the beneficiaries who received those assets will be exposed to either a proprietary or personal claim by the successful claimant.
[11][2018] SASCFC 81, [74].
Later, his Honour spoke of the beneficiary being:
…potentially liable to a proprietary order that she hold those assets or their traceable proceeds subject to the order for provision in the plaintiff’s favour …[12]
[12]Brooks v Young [2018] SASCFC 81, [79] (Doyle CJ).
Analogously, there is also an argument that if Ms Brink is able to establish a right to family provision then Ms Hagendorfer is not just potentially liable to pay compensation but is also liable to repay funds to the estate, so that the family provision may be met. In Re Faulkner,[13] Moynihan J treated premature distributions as a breach of trust and ordered that the distributions be set aside or retransferred to the estate. In Ernst v Mowbray,[14] Young CJ indicated that where an executor has made a premature distribution the executor would be required ‘to restore the money which they have taken into the estate with interest’ and that the payment made consequent upon the family provision order would be made out of the estate.[15]
[13][1999] 2 Qd R 49.
[14][2004] NSWSC 1140.
[15]Ernst v Mowbray [2004] NSWSC 1140, [64]-[65]. Cf Blunden v Blunden [2008] SASC 286, [27]-[28] (Bleby J).
An approach that requires the estate to be made good, rather than simply compensation to be paid, sits easily with the notion that a family provision order operates as a codicil to the will, because it is certainly arguable that an executor who diminishes an estate by making a distribution greater than provided for in the will may be obliged to restore the estate, and that a beneficiary who receives an overpayment by mistake may have to repay that overpayment.[16]
[16]See, eg, the Canadian case of Best v Hendry [2021] NLCA 43, [128] (Hoegg JA, O’Brien and Butler JJA concurring), referred to in G E Dal Pont, Law of Executors and Administrators (Lexis Nexis, 2022) [18.48].
Again, I emphasise that I am at present only concerned with whether Ms Brink has an arguable claim.
C. Should the order be made?
As noted above, Ms Brink, in her oral argument, confined her application to an application for orders that Ms Hagendorfer and Mrs Spinks not sell or further encumber their homes (or perhaps that they ensure that there remains at least $200,000 in equity in each home) until further order or the determination of this proceeding.
Ms Brink has deposed, or the Court file otherwise reveals, that:
(a) Probate was granted on 24 March 2023;
(b) The deceased’s estate, totalling some $896,210.27, was distributed to the defendant and to Mrs Spinks by 26 May 2023. Both of them used the money, in part, to reduce the amount of borrowing secured by their properties at 76 Screen Street, Frankston and 9 Portchester Boulevard, Beaconsfield, respectively;
(c) The plaintiff commenced this proceeding on 18 September 2023;
(d) On 5 February 2024, the Court ordered that the first defendant (then the only defendant) file and serve any position statements in opposition to the plaintiff’s claim by 5 March 2024, that there be a mediation not before 23 March 2024, and that between 7 and 14 days prior to the mediation the defendant file and serve an affidavit setting forth the financial position of the estate;
(e) On 12 March 2024, the first defendants’ solicitors informed the plaintiff that the estate had already been fully distributed and asserted that therefore the plaintiff’s claim is doomed to fail; and
(f) This was the first time that the plaintiff had been informed that the estate was without assets.
Ms Hagendorfer submitted that no ‘freezing order’ should be made because it was a ‘drastic remedy’ that is not designed to provide security and Ms Brink has not established that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of her either removing assets or disposing or dealing with them so as to diminish their value.[17]
[17]See, eg, Zhen v Mo [2008] VSC 300, [22]-[26] (J Forrest J).
In my view, however, and having regard to the scope of the order now sought and the matters set out in Part B above, Ms Hagendorfer is not right to characterise the application as a ‘freezing order’, or, perhaps, the application does not have all the qualities of a typical freezing order.[18] The high hurdle that the Court requires applicants for a freezing order to leap applies particularly where a claimant has a claim for compensation and seeks to prevent the respondent to that claim from spending their own money in a way that would render them unable to meet an award. The same principles do not apply quite the same way, it seems to me, where the allegation is that a person has obtained an asset or a sum of money to which they are not entitled, and the relief is directed at ensuring only that that asset or sum of money, in substance, remain in place so that it may be recovered if the claim is successful. I see this application as more akin to an application for an interlocutory injunction, as originally framed by Ms Brink, designed to maintain the status quo pending the determination of a case.[19]
[18]That is, this is more akin to an application under Ord 38 than Ord 37A of the Supreme Court (General Civil Procedure) Rules 2015 (Vic). I note for completeness that the plaintiff initially used the word ‘injunction’ rather than the words ‘freezing order’ in their application material, the first defendant used the words ‘freezing order’ in her written submissions, and all parties used the words ‘freezing order’ in their oral submissions.
[19]See eg Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, [162]: ‘The recognition of the fact that in some areas the law is not certain but is in a process of development may make it appropriate, in each case, to preserve the status quo and to protect the rights of the plaintiff until, at trial, the issues of fact and law can be elucidated and a conclusive determination made by a court with power to do so. Where a case is presented that is seriously arguable, and where damages would not be an adequate remedy, that may be the proper course to adopt; and is certainly available to a judge to so decide.’ (Kirby J).
The power to make an order of the type sought is discretionary and, although it has to be exercised judicially, there are no inflexible rules. Here, I consider the facts that Ms Hagendorfer distributed the funds of the estate within a few months and well within the six-month period within which family provision claims may be made, in circumstances where her sister had not been included in the will despite having been included in prior wills and thus might have a claim for family provision, and did so without first raising the matter with Ms Brink, and indeed did not inform her that the estate had been distributed until the mediation, combined with the balance of convenience, is sufficient reason to conclude that an order of the type sought is appropriate to ensure that the distributions are available to be repaid or otherwise applied to satisfy Ms Brinks’ claims if required.
In forming that view, I have placed considerable weight on the balance of convenience. Mrs Spinks did not advise orally or in writing whether she applied the distribution she received towards repaying a home loan, but submitted to the Court ‘My mortgage has been paid for’, and that she did not plan to sell the property at least in the near future. Neither Ms Hagendorfer nor Mrs Spinks led any evidence or submitted that the making of an order limiting their ability to dispose of or further to encumber their properties would cause any inconvenience, save that Ms Hagendorfer is undergoing a separation and her house is in the joint names of her and her partner. In this respect, Ms Brink (through her counsel) specifically stated that the order sought was not intended to preclude Ms Hagendorfer or Mrs Spinks from drawing down any loans that were already secured to the full extent of that security, but were only sought to preclude any increase in the maximum amounts of any secured loans. It was also acknowledged by her (through her counsel) that the orders would be effective only against the named defendants, and would not be binding on any other persons.
Ms Brink offered the usual undertaking as to damages. Ms Hagendorfer and Mrs Spinks submitted that it should be supported by some security. Ms Brink is not the owner of a house and nothing specific was identified that she could put up as security. In the circumstances, I will not require that any security be given. In light of the scope of the orders sought and that I will make, it seems unlikely that there will be any substantial damages suffered by reason of the making of the order, and that an undertaking without the provision of security is sufficient.
Finally, I should note that Ms Brink indicated that the restriction to be imposed should allow for a figure of $400,000 (that is, almost 50% of the estate). I consider that excessive. I consider that the orders should be fashioned to ensure that no less than $150,000 for each of Ms Hagendorfer and Mrs Spinks remains available to meet any claim. That is not something that may easily be achieved in the absence of some reliable information about the current value of their homes. In the circumstances, I propose to make orders essentially in the form of those set out below, but, if need be, the orders may be varied to make specific provision, having regard to the estimated value of the houses, for some further borrowings to be obtained.
D. Disposition
For the above reasons, I consider it appropriate to order that:
(a) Until further order, Ms Natasha Donna Hagendorfer not sell, transfer, dispose of or further encumber the property known as 76 Screen Street, Frankston, more particularly described in Certificate of Title Volume 09283 Folio 070;
(b) Until further order, Mrs Aletta Wilhelmina Spinks not sell, transfer, dispose of or further encumber the property known as 9 Portchester Boulevard, Beaconsfield, more particularly described in Certificate of Title Volume 10639 Folio 199; and
(c) The costs of this application be reserved.
I will hear the parties on the precise form of order. As noted above, if Ms Hagendorfer or Mrs Spinks wish to behave in a manner that is inconsistent with these restrictions, but consistently with my conclusions set out above, they may approach the Court to apply to have the orders varied. I will reserve liberty to apply.
Ms Brink significantly reduced the scope of the application when the matter was heard. This gives Ms Hagendorfer and Mrs Spinks an argument that there should be some costs consequences of that change. That said, they opposed the making of the application even on the reduced basis, which gives Ms Brink an argument that the scope of her application made no difference to the costs incurred. My preliminary view is that costs should be reserved, because credit may be an issue in the case and costs are better determined after the case has been heard and determined, but I will hear the parties on that issue too.
---
0
5
0