Re Estate of Vaughan; Dunn v Dunn-Vaughan

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY AND PROBATE LIST

S ECI 2019 05556

IN THE MATTER of the Estate of HENRY GERAINT MADOC VAUGHAN, deceased

JAMES MARTIN DUNN	Plaintiff
v
SIMON MATTHEW DUNN-VAUGHAN (as Administrator of the estate of Henry Geraint Madoc Vaughan, as Trustee of the Trust established in the Will of the late Henry Geraint Madoc Vaughan and in his personal capacity)	Defendant

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JUDGE:	O’Meara J
WHERE HELD:	Melbourne
DATE OF HEARING:	26, 27, 28 and 31 July, 1, 2, 3, 4, 7, 8 and 28 August 2023
DATE OF JUDGMENT:	31 January 2024
CASE MAY BE CITED AS:	Re Estate of Vaughan; Dunn v Dunn-Vaughan
MEDIUM NEUTRAL CITATION:	[2024] VSC 7

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WILLS AND ESTATES – Trust established by the will of the deceased – Deceased was robotics engineer and inventor – Robotics business conducted via company, System Dynamics, from factory premises in Cheltenham – Executors in the United Kingdom renounced appointment – Plaintiff and defendant are beneficiaries and brothers – Brothers fell out years before the death of the deceased – Relationships between the deceased, the plaintiff and the defendant – Defendant involved in administration of estate prior to appointment as administrator – Defendant appointed as administrator and trustee of estate – Proceedings commenced by plaintiff to remove defendant as administrator and in respect of deceased’s residence and semi-rural land at Balnarring known as ‘Llwynfryn’ – Duties of administrator – Trust property – Contents of factory and residence and shed at Llwynfryn destroyed or discarded – Whether and to what extent intellectual property had been held at the factory and in the residence and a shed at Llwynfryn – Copyright works – Conduct of both parties – Whether administrator knew or ought to have known of potentially valuable intellectual property – Whether administrator failed to protect potentially valuable intellectual property of the estate – Whether breach of administrator’s duty to act as ordinary prudent businessperson would in the management of his or her own property – Speight v Gaunt (1883) 9 App Cas 1 - Value of destroyed property – Placer (Granny Smith) Pty Ltd v Theiss Contractors Pty Ltd (2003) 196 ALR 257 – Whether any and if so what adverse inferences ought to be drawn from administrator’s destruction of intellectual property – Evidence (Miscellaneous Provisions) Act 1958 (Vic), ss 89A-89C, Allen v Tobias (1958) 98 CLR 367 and Jones v Dunkel (1959) 101 CLR 298 – Liability of administrator to pay damages for wasting of estate assets.

WILLS AND ESTATES – Trust power to give options to the defendant and then plaintiff to purchase Llwynfryn – Conduct of the parties – Proceedings commenced by the plaintiff – Summons seeking interlocutory relief settled – Orders of the Court – Trust vested – Whether and when agreement made between the parties – Masters v Cameron (1954) 91 CLR 353 – Express terms of the agreement – Whether any and if so what implied terms of the agreement – Byrne v Australian Airlines Ltd (1995) 185 CLR 410 – Conduct viewed objectively – Engagement of certified valuer – Valuation of property – ‘Validity’ of sworn valuation – Whether options offered in compliance with terms of the agreement (and clause (e) of the will) – Implied offer of option to defendant declined by conduct – Offer of option to the plaintiff impliedly declined by conduct – Plaintiff not ready, willing and able to accept option – Terms of agreement and clause (e) of the will remain to be performed.

WILLS AND ESTATES – Application to remove administrator – Conduct of administrator in respect of brother, destroyed intellectual property and finances of the estate – Administration and Probate Act1958 (Vic), s 34(1)(c) – Miller v Cameron (1936) 54 CLR 572, Dimos v Skaftouros (2004) 9 VR 584, Re Anthony; Rogan v Rogan [2017] VSC 668 and Richardson v Johnson [2018] VSC 85 – Administrator to be removed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	SK Gatford and NJ Baum	Hicks Oakley Chessell Williams
For the Defendant	CH Sparke KC	AMS Lawyers

HIS HONOUR:

A. Introduction

The deceased, Henry Geraint Madoc Vaughan (‘deceased’), was born in Wales and emigrated to Australia in the early 1960s. At trial, he was referred to variously as ‘Henry’, ‘Harry’ and ‘Geraint’. The plaintiff and defendant each referred to him as ‘Dad’.

The deceased was a qualified aeronautical engineer and, from about 1971, conducted business via his company, System Dynamics Pty Ltd (‘System Dynamics’). Several witnesses acknowledged him as having been a talented visionary in the field of robotics.

In 1974, the deceased commenced a relationship with Penelope Carole Dunn, referred to variously in the evidence as ‘Penny’, ‘Penni’ and ‘Carole’. In these reasons, I will refer to her as Carole.

At that time, Carole had two young children: the plaintiff and the defendant. The deceased became their stepfather.

The plaintiff is presently 50 years of age. The defendant is his older brother.

In the mid-1980s, the deceased and Carole separated. The deceased moved to a property at 21 Renown Road, Balnarring. The property contains a residential dwelling and three sheds. The deceased had various animals on the property, including several sheep. Part of the property is zoned ‘general residential’, with frontage to Renown Road. The other part is zoned ‘green wedge’. The residence is on the part of the property zoned ‘green wedge’. The property was named ‘Llwynfryn’, with reference to the deceased’s Welsh heritage. Much more will need to be said about Llwynfryn later in these reasons.

The plaintiff and defendant resided with Carole in Lower Templestowe; at least until finishing school. Thereafter, they took divergent paths.

The plaintiff remained close to Carole and, at the time of trial, seemed to be residing from time to time in Carole’s residences in Lower Templestowe and/or Kinglake. In the course of the trial, it emerged that the Kinglake property had been affected by the Black Saturday bushfires and that the plaintiff had suffered injuries for which he had subsequently received compensation.[1] It also emerged that Carole is a costs consultant.[2]
[1]Transcript (‘T’) 452.
[2]T282.

In terms of career, the plaintiff completed a Diploma of Engineering Technology (Mechanical), which included studies in robotics. He worked in several businesses, but at some point commenced working with the deceased in the business of System Dynamics. At all material times, that business was conducted from rented factory premises at Bricker Street, Cheltenham (‘factory’).

There was no dispute that the plaintiff worked with the deceased in the business from 1993 until about 2006. The plaintiff said that he worked full time until 2008, part time until 2018 and that he thereafter continued to work ‘on call’; which required him to attend the factory relatively regularly until the deceased’s death on 11 June 2019.

The plaintiff said that while he and his stepfather argued from time to time – ‘like any family’,[3] as he put it – they spoke regularly up until the passing of the deceased. Among other things, the plaintiff said that he would have liked to have kept the business running after his stepfather’s death[4] and that he and his stepfather had discussed upgrading the machines in the factory.[5]
[3]T278.
[4]T255.
[5]T275.

By contrast, the defendant pointed to tax and other records and contended that the plaintiff had not had any gainful employment between 2009 and 2019.[6]
[6]Exhibit D5, [10].

The defendant also maintained that the plaintiff had fallen out with the deceased in 2013 and again in about 2015 and/or 2016. The defendant believed that the plaintiff and his stepfather had been largely estranged from that time and until the deceased’s passing. He did not believe that the plaintiff had been in the factory ‘in any meaningful way’ since 2014, and not at all since a ‘massive row and rift’ concerning the factory in 2016.[7]
[7]T714, T799 and T871.

For his part, the defendant moved away from his mother and brother at about the age of 20 and thereafter worked in several employments, including as a chef, until joining the police force. He is presently a detective leading senior constable at the counter-terrorism security investigation unit.

The defendant did not ever work with the deceased in the business. However, the defendant gave evidence of almost daily contact with the deceased in the last years of his life. He described himself as having been his stepfather’s carer in 2016.[8] The defendant said that he saw his stepfather regularly in hospital and that they spoke ‘every day, every second day’.[9]
[8]T668.
[9]T714.

The defendant spoke of the deceased’s poor health in the last years of his life and said that the deceased had not been at the factory much in 2016, less in 2017 and not at all in 2018 and 2019.[10] The defendant said that the deceased had spoken about closing down the factory in 2016, which had led to the ‘massive rift’ with the plaintiff.[11] The defendant said that in about the last week of his life the deceased had been ‘really bad’ and the deceased had told the defendant to ‘get rid’ of the factory and that he had left it in a ‘terrible mess’.[12]
[10]T669.
[11]T714.
[12]T714 and T856-857.

More broadly, the defendant referred to the deceased’s financial position in the last years of his life and tended variously to emphasise that –

(a) such financial records as have been recovered do not suggest that System Dynamics had been undertaking significant business in the years prior to the deceased’s death;

(b) System Dynamics was deregistered on 22 March 2019;

(c) the factory had been rented since 1991 and the deceased had passed away with outstanding rent owing;

(d) on 12 September 2019, the landlords of the factory had given notice that they were re-taking possession of the factory and its contents on account of the outstanding rent;

(e) Llwynfryn was mortgaged to the ANZ Bank; and

(f) in the period prior to his death, the deceased had been living off his credit card and, it seems, drawing down on the mortgage over Llwynfryn.

In that general context, in some periods after their separation, the deceased and Carole seem to have maintained a degree of civility. However, at the time of the deceased’s passing, the relationship between them seems to have been antagonistic, to say the least.

In that connection, parts of the evidence tended to suggest that there was something of a long-standing alliance between the plaintiff and Carole. However, the defendant seemed also to be antagonistic towards Carole.

In that setting, it is of present significance that in about 2014 the plaintiff and defendant fell out in respect of a property development in Heidelberg. That seems to have occurred shortly after the defendant’s wedding to his wife, Michelle; at which the plaintiff had been the best man. The dispute concerning the property development came to be the subject of a proceeding in the Victorian Civil and Administrative Tribunal (‘VCAT’).

Since that time, relations between the brothers have not been good and it seems that they speak rarely, if ever. During the trial, the persisting animosity between them was quite apparent; albeit that, at times, each expressed a measure of distress relating to it. However, it was clear enough that they have not been able to find a way to diminish or resolve their differences. In many ways, the passing of the deceased and what has become the present dispute seems to have exacerbated those differences; which now appear to be entrenched and irretrievable.

As I have indicated, the deceased passed away on 11 June 2019.

In the period that followed, the plaintiff and defendant exchanged text messages relating to several topics, including the deceased’s funeral. In that regard –

(a) on 17 June 2019, the defendant said ‘Dad has said he does not want [Carole] anywhere near the church, his house or his will’ and, specifically in respect of the funeral, said that Carole was ‘unwelcome’, would be asked to leave and would also be breaching a ‘current and active’ intervention order if she were to attend;[13]
[13]Exhibit P16 (937).

(b) the plaintiff responded to the effect that the defendant’s message ‘contradicts [Dad’s] last advices to me at the Rosebud hospital on Sunday 9^th June 2019’ and, among other things, the plaintiff requested a copy of the will and said that church is a ‘public place’ and that ‘mum and I shall be attending’;[14]
[14]Ibid (938).

(c) the defendant took issue with that account, reiterated that the deceased had insisted that he did not want Carole ‘anywhere near him, hospital, home or anywhere near the handling of his affairs after he passed’ and concluded as follows –

Please let me assure you he despised her intensely. I advise you to rethink your position as … it stands, you are once again doing what you want, and not considering what the guy in the coffin wants. I’m not engaging with you any further.[15]
[15]Ibid (940).

(d) the plaintiff responded saying, among other things, ‘he was my dad too’, and, shortly after midnight, expanded in the following terms –

She is going to his funeral to pay her respects. Thats it.
Who made you in charge. You say you have been given explicit instructions supporting your allegations but not mentioned by who.
I have received no such advice from the executor of his estate and don’t expect to because it is an unreasonable request to make.
Am I to understand you and the executor of his estate are in private consultation making private arrangements without notifying all beneficiaries.
I would say that constitutes a breach of executorial duties and would entitle those involved to make application to have the executor removed by legal right in the Supreme Court. Be careful. You weren’t present when I saw him so you don’t know.
You forgot you told me dad was unconscious the whole time you were with him before he passed, and could easily be confirmed with the hospital. I know Sian [Millane] was the only one with you at that time because I spoke with her on the phone.
Be advised that no part of dads estate is to be removed from where it is.
Any photographs or items needed for the funeral are to be returned after that time. It is an offence to interfere with an estate before the probate has been granted. If it is the executor is the one held accountable. So think.
I am aware of everything dad possessed. Right down to his fathers pocket [watch].
Dad wanted us to handle things together. That was his last wish to me.
Do not take your friends, wife or in laws to dads property or business.
He was a very private person and did not want other people involved at that level.[16]
[16]Exhibit P16 (941-943).

(e) the plaintiff pursued matters further the following morning, and also asked for the identity of the executor – to which request the defendant did not respond;[17]
[17]Ibid (944).

(f) the following day, 19 June 2019, the plaintiff texted to the effect that he was at the factory and had been told that the defendant had changed the lock. He reiterated that the defendant had no authority to dispose of the deceased’s assets and indicated that Supreme Court proceedings would be brought if any assets were removed. The defendant, again, did not respond;[18]
[18]Exhibit P16 (945).

(g) more than 10 days later, on 30 June 2019, the defendant texted that the deceased’s will ‘and associated docs’ had been placed in the plaintiff’s letterbox;[19]
[19]Ibid (946).

(h) the plaintiff responded with various queries – to which the defendant ultimately responded ‘Not your concern’ and ‘Just collect and read’;[20]
[20]Ibid (946-947).

(i) a week later, on 7 July 2019, the plaintiff texted that he had received copies of the will ‘and associated paperwork’ and posed queries which the defendant initially answered (albeit tersely), but when the queries continued the defendant texted –

Why do you care?
You have dads letters of intention – you are not to be involved.
Don’t worry you’ll be looked after![21]

(j) the plaintiff responded saying, among other things, ‘I am involved’, but the defendant restated his position and then essentially refused to engage any further;[22] and

(k) later, in September 2019, the plaintiff asked the defendant to contact him ‘regarding dad’s estate’ to which the defendant initially responded ‘Have a good day’ and then did not respond at all.[23]

[21]Ibid (948-949).

[22]Ibid (949-950).

[23]Ibid (950-951).

It will be evident that the text exchanges carry an entrenched flavour of suspicion and disputation that may also be seen in the correspondence and other communications that followed. It will be necessary to go to parts of that material in due course.

The last will of the deceased is dated 1 May 2013 (‘will’).[24] The defendant gave evidence that, before he passed, the deceased told him about the location of the will as well as some letters.[25]
[24]Exhibit P16 (837-849).
[25]T672. The letters seem to have included letters addressed to both the defendant and Carole, although those letters were not received into evidence and their contents received no attention at trial.

The letters included two unsigned letters of the deceased addressed to the plaintiff dated 14 and 25 April 2013 respectively (‘2013 letters’).

The first of the 2013 letters reads relevantly as follows –

Dear James,
I feel increasing[ly] sad as each day passes without any contact from you — the last time was Christmas 2012. I realize that you feel duly justified since some wrong has been inflicted upon you – what it is I have no idea.
In the intervening time Simon and Michelle became officially engaged and I went through hip surgery — both apparently of little significance in your view.
You obviously realize that Michelle, in particular, was more than a little hurt by your non-attendance at their engagement party, 100 plus people were glad to go — but not his brother.
Try if you can, to reverse the situation — where Simon & I could not be bothered to neither attend your engagement party nor visit you in hospital — I suspect you would not like it at all and feel poorly done by.
Anybody who is aware of the situation realizes that the root cause of the problem stems from your mother’s paranoia regarding any woman in Simon’s life — and her need to control others — including yourself. The worst decision you made was to move into her house whilst your townhouses were being built, we won’t go into that subject in detail.
I wonder what life has in store for you — in a few weeks you will be 40 — normally a milestone in most people’s lives.
It does not seem right that you value financial security and property ownership to such a degree that inhibits any normal social life – friends, female relationships, interests, travel etc — but also in not having a job, despite all your skills, means you are missing out on what most people enjoy — a feeling of worth & fulfillment — think back to your days at Tasman Engineering.
It seems obvious that the sooner you break free of your mother’s clutches — the better off you’ll be and hopefully get life back to normal.
Please accept this as constructive advice, not as unfair criticism meant to wind you up. If you wish to respond, then I would look forward to hearing about your future plans.
All the best,

Dad.[26]

[26]Exhibit P16 (664).

The second of the 2013 letters reads relevantly as follows –

James,
I have come to realize that there is nothing I can do to help you regain a normal life as you simply don’t want to. You prefer to stay in the relationship with your companion.

No response to my letter of 14 April — from you — but a predictable stream of vitriolic insults from your deranged and alcohol fuelled mother.
It is an awful position for a family to be in, but your disdain for my personal well-being and the sound advice given to you in good faith has triggered off this closure.
It is hard to reconcile your attitude when reflecting on all the assistance given to you in the past, to name just a few:
•        apprenticeship with System Dynamics
•        assistance with specialized courses
•        World trip — Asia, Europe, USA, Canada and Great Britain.
•        Exposure to large companies here in Australia.
•        Multiple bonuses for your RX-7, most of the cost of a new ute tray.
•        The use of the Falcon ute & the Clubsport from time to time.
You have certain items in the factory, which you own, if you wish to retrieve them you will have to arrange a suitable time, since the locks are being changed — I need to know who has access to my factory.
If I don’t hear from you they will go to the tip.
I am sick and tired of having to worry about your future, it is in your hands now, you will shortly be 40.
Dad.[27]

[27]Ibid (665).

I have extracted the whole of the relevant parts of the 2013 letters; partly because they were referred to in the text messages detailed above. However, the defendant also referred to the 2013 letters directly and indirectly in the course of his oral evidence and it was quite plain that they have borne very significantly upon his thinking and conduct.

For his part, the plaintiff denied receiving the 2013 letters on or about the dates they bear; although, as I have earlier noted, he seems to have received them from the defendant by about 7 July 2019.

As to the will, by clauses 2 and 3, the deceased appointed his brother, David Rheinallt Vaughan, as executor and trustee of his estate as well as the trustee of a trust fund established by the will. At trial, Mr Vaughan was generally referred to as ‘Rheinallt’.

In the event that Rheinallt was unwilling or unable to act as executor and trustee, the deceased appointed his niece, Angharad Vaughan. At trial, Ms Vaughan was generally referred to as ‘Angharad’.

Rheinallt and Angharad each reside in the United Kingdom.

As I have earlier noted, the deceased sought, by clause 5 of the will, to establish a trust fund in respect of which his trustee should hold his right, title and interest in Llwynfryn and his shares and interest in System Dynamics.

The preamble and clauses relating to the trust fund are contained in a schedule to the will and provide, relevantly, as follows –

IT IS MY WISH AND I DIRECT that my Trustee hold the Trust Fund for the purposes set out herein as follows:
(a)to provided holiday accommodation for my extensive family including my sons and my relatives in the United Kingdom and Canada (but always excluding my former wife Penelope Dunn).
(b)to be used as an animal sanctuary as far as practicable as determined by my Trustee in his or her sole and absolute discretion which animal sanctuary is to be managed by my son said SIMON MATTHEW DUNN-VAUGHAN under the guidance of my Trustee, and always excluding any involvement of the said Penelope Dunn whatsoever.
(c)my Trustee is empowered to raise sufficient funds for the general maintenance and upkeep of the property and the well-being of the animals and my Trustee may raise funds in any way my Trustee sees fit including from outside sources, including but not limited to utilising the property and all the animals in any commercial venture, accepting contributions from visitors or in any way my Trustee sees fit in his or her sole and absolute discretion.
(d)my shares and interest in the company SYSTEM DYNAMICS PTY LTD are to be held by my Trustee as long as possible and IT IS MY WISH that my Trustee use as much of the funds therefrom to reduce the registered mortgage over Llwynfryn.
(e)on the vesting day I DIRECT my Trustee to give my said son SIMON MATTHEW DUNN-VAUGHAN the option to purchase Llwynfryn from my estate for market value as determined by a sworn valuation of Llwynfryn obtained by my Trustee. If Simon does not wish to purchase Llwynfryn then my said son JAMES MARTIN DUNN may be given the option to buy Llwynfryn from my estate on the same conditions as offered to my son Simon. If neither of my said sons wish to purchase Llwynfryn, or fail to complete the purchase of Llwynfryn within ninety (90) days from the date of being offered to do so, then my Trustee is to sell Llwynfryn and distribute the proceeds in accordance with Clause 3 of this Schedule.
(f)it is my intention that my sons contribute equally towards the running costs of Llwynfryn and I require them to contribute the sum of Two Hundred and Fifty Dollars ($250.00) per calendar month each from the date of my death for that purpose, such amounts to be paid to my Trustee or as my Trustee directs. If either or both of my said sons fail to contribute the said amount and the amounts referred to in (g) of this Preamble then my Trustee may in my Trustee’s sole and absolute discretion:
i.elect to vest the Trust Fund two years from the date of my death, in which case the Trust Fund shall be deemed to have failed, and the proceeds of the Trust Fund shall be paid in accordance with Clause 6 of my Will; or
ii.deduct such amounts as have not been paid by either or both of my said sons from the final amount to be paid to that son or those sons upon the vesting of the Trust Fund.

(g)my Trustee is authorised to obtain a second mortgage over Llwynfryn if my Trustee considers this is necessary for the running of Llwynfryn and my said sons are required to also share equally the costs of that second mortgage.
(h)for clarity, my intention is that if my said sons fail to contribute the required amounts to the running of the Trust Fund then I would like my said brother David Rheinallt Vaughan to pay for those expenses for two (2) years and if he does so then I will reward him by giving him one third of the Trust Fund.
(i)for clarity, it is my express direction that under no circumstances is any assistance or advice to be sought from or accepted by the said Penelope Dunn and it is my express direction that she is not permitted to enter Llwynfryn at any time, even with one of my sons.[28]

[28]Exhibit P16 (841-843).

In the proceeding, particular attention came to be directed to clause (e); and both parties essentially came to accept that the trust had vested by 17 December 2019.[29]
[29]See, in particular, the plaintiff’s further claims document dated 6 June 2023, [47] and the defendant’s reply to the plaintiff’s further claims document dated 14 June 2023, [47]. At trial, the defendant’s application to withdraw such an admission was refused for reasons delivered ex tempore on 26 July 2023. In light of that position, certain pleaded issues relating to the interpretation of the will, including whether certain provisions carried a charitable purpose, did not ultimately arise.

The will otherwise relevantly provides that –

(a) if the gifts contained in the trust fund should fail, the trustee should hold Llwynfryn and the deceased’s shares and interest in System Dynamics on trust to divide such into three equal parts to be paid or transferred to the defendant, plaintiff and Rheinallt respectively (clause 6);

(b) specific gifts should be made of a Rover vehicle and pocket watch to Rheinallt, a Triumph vehicle to the defendant and a utility motor vehicle (‘ute’) to the plaintiff (clause 7); and

(c) the residue of the estate should be called in, converted to money and held on trust to pay the debts and any other liabilities of the estate and the balance paid equally between the defendant and plaintiff (clause 8).

I have earlier indicated that it will be necessary to examine some of the relevant events and evidence in detail, however it is presently sufficient to note that –

(a) in the period after the deceased’s death, Rheinallt and the defendant communicated concerning the estate and the defendant took various steps in respect of the administration of the estate – he said, as agent for and on behalf of Rheinallt;[30]
[30]T677-678 and T700.

(b) those steps included[31] –
[31]See, in particular, defendant’s spreadsheet: Exhibit P16 (813-817).

(i) reviewing the will;

(ii) dealing with the ANZ Bank;

(iii) retaining a solicitor (Tony Bowlen of Bowlen Dunstan & Associates Pty);

(iv) identifying and dealing with the real estate agent of the factory landlords (Morrison Commercial);

(v) attending the factory, including changing the lock and arranging for his father in law, Greg Marchio, to video parts of its interior and contents;[32]
[32]Exhibit D17.

(vi) contacting and dealing with an auctioneer (Michael Bent) with a view to appraising and clearing various contents of the factory; and

(vii) attending and arranging for a valuation of Llwynfryn;

(c) in respect of the latter, by report dated 17 July 2019, AJ Kensley, certified practising valuer, valued Llwynfryn at $1,800,000 (‘Kensley valuation’);[33]
[33]Exhibit P16 (780-795). I note that the defendant’s spreadsheet records that on 18 June 2019 he met at Llwynfryn with ‘Ian of Patton Real Estate’ who provided ‘an estimate value between $2.5-2.75 Million’: Exhibit P16 (816). Similarly, the defendant later obtained a letter from another real estate agent, Grant Perry of Homes & Acreage, which expressed a ‘belief’ based upon (unspecified) ‘current listings in a comparable market’ that ‘your property should be advertised as $2,500,000’, although it was also stated that ‘specific buyers may well see value above this range’: Exhibit P11. At trial, the defendant could not say when he obtained the Homes & Acreage letter and said that he would be ‘hazarding a guess’ and then said ‘potentially October’: T650.

(d) as early as 14 June 2019, Rheinallt indicated that neither he nor Angharad were willing to be executor and trustee of the will, which he then confirmed on 17 June 2019[34] – albeit that, in oral evidence, the defendant maintained that Rheinallt had ‘flipped and flopped’;[35]
[34]Exhibit P16 (814-815).
[35]T729.

(e) during the period from late July until early August 2019, Rheinallt and Angharad each formally renounced appointment as executor and trustee of the will;[36]
[36]Exhibit P16 (801-807).

(f) on 27 August 2019, the defendant sought advice from new solicitors (AMS Ivanhoe Lawyers) (‘AMS’);[37]
[37]Exhibit P16 (820).

(g) on about 17 September 2019, the defendant made application for letters of administration with the will annexed – which application was accompanied by an affidavit that exhibited an inventory of assets and liabilities of the estate signed by the defendant;[38]
[38]Ibid (828-833 and 850-852).

(h) on 23 September 2019, the plaintiff lodged a caveat in respect of the estate of the deceased – which later lapsed;[39]
[39]Ibid (886).

(i) on 4 November 2019, the Court issued the defendant letters of administration with the will annexed;[40]
[40]Ibid (952).

(j) on 28 November 2019, the plaintiff lodged a caveat over Llwynfryn;[41]
[41]Ibid (985).

(k) on 29 November 2019, AMS wrote to the plaintiff relevantly as follows –

1. Security of Property
The Administrator has now taken steps to secure all Estate property and you are forbidden from attending the factory and Llwynfryn without prior consent of and arrangement with the Administrator. Any transgression is considered to be a trespass and action will be taken against you.
You are not to attend to livestock or undertake any of the responsibilities that fall to the Administrator. The Administrator has assumed all such responsibilities and you have no authority by which to act.

2. Sale of Property
The Administrator has previously advised you that he is undertaking the sale of all the contents of the factory and there is no further role for you to play in that exercise.
Further, your offer to purchase Llwynfryn is rejected.
The Administrator is in the process of appointing an Estate Agent and Llwynfryn will be auctioned as soon as practicable.[42]
[42]Exhibit P16 (987).

(l) by originating motion filed 5 December 2019, the plaintiff sought, among other things, that the defendant be removed as administrator and that Llwynfryn be formally valued and an option to purchase offered to the plaintiff;

(m) by summons filed 8 December 2019 (‘summons’), the plaintiff sought orders restraining the defendant from putting Llwynfryn up for auction;

(n) although the precise terms on which the application by summons was settled remain in dispute, there is no doubt that the application was settled between the parties (‘agreement’) and that, by orders made on 17 December 2019, the summons was dismissed;

(o) the estate subsequently retained Hugh McLean, registered valuer, to prepare a written valuation in respect of Llwynfryn;[43]
[43]Ibid (1015).

(p) in January 2020, the defendant discarded various items at Llwynfryn deemed by him to be ‘valueless or in a state of disrepair’, including ‘boxes of System Dynamics documents comprising designs, manufacturing drawings, operating manuals and maintenance manuals’;[44]
[44]Statement of agreed facts, Court Book (‘CB’) 2715 and CB2722.

(q) Mr McLean prepared a written valuation dated 9 January 2020 (‘first McLean valuation’), in which he expressed the following opinion –

The sum of Two million three hundred and fifty thousand dollars ($2,350,000) is a fair and reasonable current market value for the subject property, with the existing improvements in their current condition thereon, as at the 7th January 2020, subject to any limiting conditions and assumptions as stated in this Report.[45]
[45]Exhibit D15 (CB1717) (emphasis in original).

(r) the plaintiff took issue with the first McLean valuation and correspondence ensued in the course of which he obtained another valuation, prepared by Christine Cox of Opteon (‘Cox valuation’) on 20 March 2020, which valued Llwynfryn at $1,650,000;[46]
[46]Exhibit P16 (1225-1261).

(s) in the meantime, on 7 February 2020, the defendant authorised Michael Bent of Michael J Bent Auctioneers Pty Ltd to sell listed items at the factory and to deposit the proceeds of any sale in the trust account of the lawyers to the landlords of the factory;[47]
[47]Ibid (1157-1161).

(t) on 14 February 2020, the listed items were sold at a public auction held at the factory – which auction realised total proceeds of $21,620;[48]
[48]Ibid (1188-1193).

(u) the costs funded by the auction were greater than the proceeds raised;

(v) on 24 February 2020, the plaintiff wrote to AMS in terms including the following –

…
Finally I was not advised that an auction was going to take place or offered the opportunity to attend the auction. This is despite the fact that your client was on notice of all the relevant issues by reason of my list of issues provided to your client’s counsel on 4 February 2020. This, in addition to other matters raised in this and other correspondence, clearly demonstrates a lack of good faith on the part of your client in exercising his duties as administrator of the estate.
Intellectual Property
Please advise what has your client done with the documentation, software and manuals which form the deceased’s intellectual property stored in his multiple filing cabinets and on his computers in the factory and at the Balnarring property. Such items were not listed in items for auction, indeed, the report of Michael J Bent dated 26 June 2019 states “We have excluded from our valuation :- stock, work in progress, promotional materials, patents, trademarks, registered designs, intellectual knowledge and possible good will”.
These documents were the product of over 50 years of design work by the deceased. He undertook proprietary design and consultancy work for Esso, Toyota, Mitsubishi, CSR, Hilton Manufacturing and many other clients as System Dynamics.
The administrator was notified of the intellectual property and its potential value in my letter of 14 September 2019 (page 2 last paragraph to page 3 first paragraph).
On 21 February 2020, Hilton Manufacturing, contacted me and advised that a hydraulic system that the deceased and I had built needed repair. Hilton Manufacturing also sought to order a new system from System Dynamics Pty Ltd. It can readily be seen that the intellectual property created by the deceased still has value.
If it is the case that the administrator has disposed of or destroyed the deceased’s intellectual property, this will be yet another case of the administrator failing to properly secure the property of the estate.[49]

[49]Exhibit P16 (1186-1187).

From the context generally outlined, it will be evident that from an early time the parties were in dispute concerning an evolving collection of issues. Principally, however, the present dispute came to be directed to –

(a) the factory and certain of its contents, particularly what came broadly to be described as ‘intellectual property’;

(b) Llwynfryn (as well as its contents; particularly any ‘intellectual property’); and

(c) particular acts and omissions of the defendant and whether, consequently, he should be removed from the office of administrator.

B. The proceeding

As I have indicated, the proceeding was commenced by originating motion dated 5 December 2019. It was later ordered that the proceeding continue as if commenced by writ and the parties filed and served pleadings.

It is a feature of the various pleadings that the fact of many of the underlying events and correspondence is not in dispute. That said, the parties each tend to have their own points of emphasis or ‘spin’ in respect of the content and/or significance of many if not most relevant events.

By amended statement of claim dated 21 March 2021, the plaintiff advanced a series of allegations in respect of –

(a) steps taken in respect of Llwynfryn, particularly the obtaining of the Kensley valuation in July 2019 (the existence of which, at that time, was not disclosed to the plaintiff by the defendant),[50] the settlement of the summons in December 2019 and the obtaining of the first McLean valuation, which was alleged to be ‘so defective it cannot be a valuation for the purposes of the terms of [the will]’;[51]
[50]It seems that the Kensley valuation was discovered by the defendant in the present proceeding on 11 January 2021: see, Plaintiff’s closing submissions, [73].
[51]Amended statement of claim dated 21 March 2021, [11]-[30].

(b) the failure of the defendant to obtain a valuation in respect of a great number of items held at Llwynfryn, including various boxes of ‘System Dynamics documents’ and the ute as well as the destruction or disposal of such chattels for ‘no consideration’;[52]
[52]Ibid [31]-[36].

(c) the conduct of the auction relating to the contents of the factory, including the failure of the defendant to accept a prior offer made by the plaintiff as well as the loss of a valuable wind turbine system, a Data General Eclipse industrial computer system and certain factory fittings;[53]

(d) a failure to obtain a valuation in respect of intellectual property contained within a ‘large number of diagrams, designs, drawings … and software and computer code for machinery’ created by the deceased and stored at the factory which was said to have been ‘disposed of by way of the auction … for no consideration’;[54] and

(e) the obtaining by the defendant of finance to pay out the debts of the estate at a higher rate of interest than would have been available if he had accepted an offer made by the plaintiff.[55]

[53]Ibid [37]-[45].

[54]Ibid [46]-[53].

[55]Ibid [54]-[56].

Broadly speaking, the steps taken in respect of Llwynfryn and the ute were alleged by the plaintiff to have been ‘in flagrant disregard’ of the terms of the will.

The plaintiff also alleged that the steps taken in respect of the various chattels and the offer of finance amounted to a failure of the defendant to call in and protect assets of the estate, negligence and/or a breach of trust.

In that regard, the plaintiff sought, among other things, the removal of the defendant as administrator and a repayment by the defendant to the estate in respect of the losses suffered.

For his part, the defendant relevantly responded to the effect that –

(a) albeit that he had obtained the Kensley valuation, he believed the market value of Llwynfryn at the date of death of the deceased to have been $2,250,000 ‘taking into account the intrinsic value of the property by paddock division’;[56]
[56]Amended defence dated 12 April 2021, [10A]-[10B].

(b) in settlement of the summons the parties had agreed upon a protocol for the sale of Llwynfryn, the terms of which are set out in Other Matters recorded in connection with the orders of the Court made on 17 December 2019;[57]
[57]Ibid [19].

(c) the first McLean valuation was not ‘defective’;[58]
[58]Ibid [25].

(d) albeit that he did not admit the allegations made in respect of chattels at Llwynfryn, in January 2020 certain items deemed to be ‘valueless or in a state of disrepair or decay’ were discarded in a bin, particularly ‘Systems Dynamic documents’ said to have been ‘old, in varying states of disrepair and decay’;[59]
[59]Ibid [31].

(e) the ute was at Llwynfryn, albeit that a solicitor’s letter, during a period in which the plaintiff was represented, was said to suggest that it had been disassembled and needed to be towed away to the tip. The defendant contended that the ute had been sold to ‘Atlas Auto Pty Ltd on 7 January 2020 for $1’;[60]
[60]Ibid [35]-[36].

(f) in respect of the factory –

(viii) the auctioneer, Mr Bent, had been engaged by the defendant ‘in good faith to auction the chattels’; and

(ix)there had been no wind turbine system or ‘complete and working Data General Eclipse Industrial system’ on or after the date of death of the deceased;[61]
[61]Amended defence dated 12 April 2021, [40] and [40H].

(g) more broadly, the defendant contended that all chattels and other property complained of, including the alleged intellectual property, was of ‘no value’ and otherwise that –

(i) the lessors had re-entered the factory and given notice that they intended to sell the plant and equipment to satisfy the arrears of rent, which were then at $9,035.04;

(ii) the plaintiff had estimated the best price for those contents at $6,205; and

(iii) the defendant had accepted the lessors’ offer to accept the factory contents in lieu of the arrears of rent.

Later, during a period in which the plaintiff was self-represented, he replied. Among other things, he contended that –

(a) the defendant had not disclosed the Kensley valuation and had put a ‘magnified figure’ of $2,250,000 in the inventory of assets and liabilities so as ‘to entice the plaintiff into paying a higher than market price’ for Llwynfryn ‘and/or to force an auction’;

(b) records suggest that the ute had been given to Atlas Auto Pty Ltd free of charge; and

(c) the wind turbine system was partially shown in photographs that had been taken by the auctioneer, Mr Bent.

In that context, various interlocutory issues later arose, including in respect of compliance with orders, the defendant’s discovery and subpoenas.

The plaintiff issued more than one summons, including a summons dated 1 February 2022 in respect of the allegedly neglected condition of Llwynfryn. That application was determined on the papers by McMillan J. Her Honour dismissed the application and, in that connection, stated –

The plaintiff’s application also fails to take into consideration that the Balnarring property [Llwynfryn] forms part of the trust established by the deceased’s will. The principal issue of whether the purpose trust in the will is effective to any extent as a valid charitable trust must be determined before the plaintiff’s interest in the Balnarring property can be determined. If the trust is effective to any extent, neither the plaintiff, the defendant nor the deceased’s brother will have an interest in the Balnarring property or any proceeds from the sale of the property, until the vesting day defined in the trust arrives or until it is conclusively determined that the trust is not a valid trust.[62]

[62]Re Vaughan; Dunn v Dunn-Vaughan [2022] VSC 337, [33].

What her Honour described as the ‘principal issue’ came to be determined by other events. In particular, the parties served a further round of pleadings that, in many respects, further articulated aspects of the claims and defences earlier pleaded and, in the case of the plaintiff, articulated certain further claims.

In that regard, by a ‘further claims document’ dated 6 June 2023, the plaintiff, who by that time was again represented, among other things –

(a) further articulated his claims in respect of the agreement relating to the dismissal of the summons on 17 December 2019, particularly alleging the breach by the defendant of express or implied terms; alternatively, a breach of the ‘powers or discretions conferred upon him as Trustee’;[63]
[63]Plaintiff’s further claims document dated 6 June 2023, [40]-[45] and [50]-[51].

(b) contended that the defendant had waived or disclaimed and therefore should be precluded from exercising any option to purchase Llwynfryn under the will or the agreement;[64]
[64]Plaintiff’s further claims document dated 6 June 2023, [53]-[56].

(c) contended that the first McLean valuation was ‘void’ and that the plaintiff therefore should be offered an option to purchase Llwynfryn at ‘the market value at or around the time of vesting’; alternatively, equitable compensation;[65]
[65]Ibid [57]-[64].

(d) contended that if the first McLean valuation was ‘valid’, the defendant had nonetheless breached the terms of the will in various respects and the plaintiff should be granted the opportunity to purchase Llwynfryn at the value stated in the first McLean valuation; alternatively, equitable compensation;[66]
[66]Ibid [65]-[73].

(e) further articulated his claims in respect of the ‘intellectual property’, particularly alleging that the defendant failed in his duty as administrator to ‘call in and protect the assets of the Estate’; alternatively, that he ‘acted negligently’ as administrator;[67]

(f) contended that in borrowing $300,000 from the Bank of Melbourne in his personal capacity and causing the estate to pay ‘all of the principal and interest repayments that were required as part of the defendant’s personal loan obligations’, the defendant had used his position as administrator to obtain an unauthorised benefit and concealed that from the plaintiff as beneficiary;[68] and

(g) much more fully articulated his various claims for relief, including a contention that the value of the lost intellectual property was $2,528,000.[69]

[67]Ibid [74]-[99].

[68]Ibid [100]-[108].

[69]Ibid [109]-[112].

In response, relevantly –

(a) the defendant admitted that he was not in a financial position to and did not want to exercise an option to purchase Llwynfryn at ‘what he believed to be its true market price’ and contended that ‘it would have been an impermissible conflict of interest’ for him to exercise an option to purchase Llwynfryn at the value placed on it by Mr Kensley when the defendant ‘believed [that] was below its true market value’;[70]
[70]Defendant’s reply to plaintiff’s further claims document dated 14 June 2023, [22(a)-(c)].

(b) in that regard, the defendant contended that the value placed on Llwynfryn by Mr Kensley was ‘unclear’ and ‘did not properly consider the possibility of subdivision’ and so was ‘at a value below the true market price’;[71]
[71]Ibid [25(b)-(c)].

(c) the defendant also contended that he had not provided the Kensley valuation to the plaintiff ‘as it did not, in his belief, reflect a true market value’[72] and that any such failure did not constitute any breach of his duties as trustee;[73]
[72]Ibid [36(b)].
[73]Ibid [51(b)].

(d) as to the plaintiff’s claims in respect of an option to purchase Llwynfryn, among other things, the defendant contended that –

(iv) by a letter dated 6 November 2019 he had offered the plaintiff the opportunity to state whether he wished to purchase Llwynfryn at a value placed upon it by a valuer;

(v) the plaintiff had agreed to the orders made on 17 December 2019 and thereby agreed to the ‘mechanism’ by which such a valuation would be obtained;

(vi) the plaintiff had agreed to the appointment of Mr McLean to value Llwynfryn;

(vii) the plaintiff had declined to purchase Llwynfryn at the value determined by Mr McLean; and

(viii) accordingly, the plaintiff had been given an opportunity to exercise the option in clause (e) of the will and so had not suffered any loss;[74]
[74]Defendant’s reply to plaintiff’s further claims document dated 14 June 2023, [28].

(e) as to the plaintiff’s claims in respect of the agreement, the defendant contended that the terms of an offer made in a letter dated 13 December 2019 were ‘superseded’ by the agreement of the plaintiff and defendant to ‘the terms of the 17 December 2019 consent orders’;[75]
[75]Ibid [37(a)]. See also, [38(a)].

(f) as to the claims made in respect of Mr McLean, the defendant –

(i) admitted that he did not collaborate with the plaintiff in giving instructions to Mr McLean;

(ii) admitted that he did not inform the plaintiff of all instructions and information given to Mr McLean;

(iii) admitted that he did not permit the plaintiff to provide his own instructions and information to Mr McLean;

(iv) admitted that he provided instructions that required that Mr McLean not consult with the plaintiff;

(v) contended, however, that the orders made by the Court on 17 December 2019 did not require him to do any of the steps listed at (i) to (iv) above;[76]
[76]Ibid [44].

(vi) contended that his obtaining of a valuation from Mr McLean did not involve any breach by him of his duties as trustee[77] and that the first McLean valuation ‘in fact determined the value of [Llwynfryn] as at the vesting day’;[78]
[77]Ibid [50(c)].
[78]Ibid [58(a)].

(vii) contended that the plaintiff ought not to be permitted to rely upon his refusal to accept the first McLean valuation and subsequent delay and to now purchase Llwynfryn at its market value as at the vesting day;[79] and
[79]Defendant’s reply to plaintiff’s further claims document dated 14 June 2023, [60].

(viii) contended that by letter dated 10 January 2020 and an email dated 15 January 2020, the plaintiff had been offered an option to purchase Llwynfryn;[80]
[80]Ibid [68].

(g) the defendant admitted that he had been obliged to exercise the powers and discretions conferred upon him as trustee in good faith, for the purposes for which such power was given and not so as to accomplish any ulterior purpose;[81]
[81]Ibid [45].

(h) the defendant contended that whilst he wished to sell Llwynfryn by public auction, he was willing to consent to the plaintiff purchasing it at ‘its current market value’;[82]
[82]Ibid [56(f)].

(i) as to the claim in respect of intellectual property, the defendant –

(i) did not admit the existence of any intellectual property;[83]
[83]Ibid [74(b)-(d)].

(ii) contended that he had not been aware of any intellectual property;[84]
[84]Ibid [82(b)].

(iii) contended that the plaintiff had not alerted him or the named executors to the existence of any intellectual property;[85]
[85]Ibid [83(b)].

(iv) contended that the plaintiff had informed the defendant that the contents of the factory had no real value;[86]
[86]Ibid [83(b)] [That is, the second paragraph [83(b)] therein].

(v) contended that he had had no reason to inquire of the plaintiff as to whether there was any intellectual property or its value ‘as the deceased [had] said he had little or no contact with the plaintiff for many years before his death’;[87]
[87]Defendant’s reply to plaintiff’s further claims document dated 14 June 2023, [83(c)].

(vi) admitted that Mr Bent had not been expressly authorised to auction any intellectual property as none had been known to the defendant;[88]
[88]Ibid [90(b)].

(vii) admitted that he had considered whether the deceased might have had any intellectual property, and had searched an IPA Register, but found nothing registered in the name of the deceased;[89]
[89]Ibid [91(a)].

(viii) admitted that the landlords of the factory had instructed Mr Bent to provide a ‘clean factory’;[90]
[90]Ibid [92(a)].

(ix)contended that as the landlords intended to dispose of goods, both the plaintiff and defendant could be ‘presumed’ to have known that the landlords would require a ‘clean factory’;[91] and
[91]Ibid [93(a)].

(x) contended that the plaintiff had been asked to remove any items of his own from the factory, been referred to the website of the auctioneer and been‘capable of making enquiries for himself about the date of the auction’;[92]

(j) the defendant contended that the alleged ‘financial arrangements’ by which he took a loan in the amount of $300,000 had resulted in ‘no benefit to the defendant, nor loss to the estate’;[93] and

(k) the defendant denied all of the plaintiff’s claims for relief.[94]

[92]Ibid [96(c)-(e)].

[93]Ibid [108(e)].

[94]Ibid [109]-[112].

In reply, the plaintiff addressed various contentions of the defendant. In particular, the plaintiff averred that –

(a) he had never been given an opportunity to exercise the option given under clause (e) of the will;[95]
[95]Plaintiff’s reply to the defendant’s defence to plaintiff’s further claims document dated 28 June 2023, [28(c)(iii)].

(b) Mr McLean had at all material times been appropriately qualified to give an opinion as a valuer;[96]

(c) the defendant had not ever offered to the plaintiff an option to purchase Llwynfryn at the valuation stated by Mr McLean;[97] and

(d) when he had contacted the solicitors for the landlords in connection with the contents of the factory, they had responded to the effect that, among other things, they would ‘cease further correspondence’ and had referred him to the solicitors for the defendant.[98]

[96]Ibid [43(a)(iii)].

[97]Ibid [56(b)(ii)].

[98]Ibid [88(b)(iv)].

I should add that as a consequence of developments late in the trial, the plaintiff sought more fully to articulate and in some respects expand upon his claims in connection with the first McLean valuation. In particular –

(a) the plaintiff alleged further implied terms in the agreement as well as further duties upon the defendant as trustee which, he said, had been breached;

(b) the plaintiff undertook a detailed critique of the methods by which, it was said, Mr McLean had performed the first McLean valuation and so, it was contended, the first McLean valuation was and is ‘void and of no effect’; and

(c) ‘adopting the usual and most appropriate valuation methodology’, the plaintiff contended that the value of Llwynfryn ‘on or within a reasonable time of the vesting day’ had been $1,850,000.

For his part, the defendant formally resisted the granting of any leave to the plaintiff to rely upon those allegations. That said, the oral submissions of senior counsel for the defendant did not expand upon that resistance and advanced submissions in a manner that would seek to answer any and all such allegations against him.

In the circumstances, I would grant leave to the plaintiff to rely upon the further allegations articulated in his document entitled ‘plaintiff’s additional and alternative claims arising from the provision at trial [of] Mr McLean’s working documents’.

In that context, the substance of the claims made by the plaintiff against the defendant came to be in some ways refined and in other ways expanded during the course of the trial.

It is, however, presently sufficient to say that in the course of written closing submissions and final addresses, the issues broadly identified as being in dispute were –

(a) whether the defendant had breached his duties as administrator in causing any intellectual property of the estate to be destroyed;

(b) whether the defendant had breached the agreement and/or the terms of the will and his duties as administrator in respect of the valuation and sale of Llwynfryn; and

(c) whether, for those and other reasons, the defendant should be removed and replaced by an independent administrator.

C. Applicable principles

The administrator’s powers and duties

The parties were agreed that an administrator and trustee of an estate –

(a) has a paramount duty to observe the terms of the will;

(b) has power and a duty to preserve the assets of the estate; and

(c) owes a duty to act as an ordinary prudent businessperson as if the assets of the estate were his or her own and to exercise his or her best skill and judgement.

When a trustee is required to exercise a discretionary trust power, he or she must exercise that discretion in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred.

Contract

A contract is made when, viewed as a whole and objectively from the point of view of a reasonable person on both sides, dealings show a concluded bargain.[99]
[99]Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32, 82-83; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153.

In the present case, argument concerning the point of time at which agreement was made to settle the dispute presented by the summons, and therefore the terms on which the agreement was made, was directed to the ‘categories’ identified and explained as follows by Dixon CJ, McTiernan and Kitto JJ in Masters v Cameron –

Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.[100]

[100]Masters v Cameron (1954) 91 CLR 353, 360 (‘Masters’).

Thereafter, their Honours explained that a binding contract is made in the first two cases, or categories, but not in the third. In that regard –

(a) in the first category, a contract binding the parties is made ‘at once’ whether ‘the contemplated formal document comes into existence or not’;

(b) in the second category there is a contract binding the parties to ‘join in bringing the formal contract into existence and then to carry it into execution’; and

(c) the third category is ‘fundamentally different’, in that ‘the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own’.[101]

[101]Masters (n 100) 360-361.

In respect of the third category, their Honours explained further, as follows –

The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summer-greene v Parker or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v Miller. Lord O’Hagan said: “Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made”. And Lord Blackburn said: “parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent that he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement”. So, as Parker J said in Von Hatzfeldt-Wildenburg v Alexander in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract.[102]

[102]Ibid 361-362 (citations omitted).

As their Honours thereafter explained, the question depends upon the intention disclosed by the language used by the parties.

Implied terms

A term may be implied into a contract if necessary for its reasonable or effective operation.[103]
[103]Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 422 and 442, Hawkins v Clayton (1988) 164 CLR 539, 573 and BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266.

As a general rule, each party to a contract agrees, by implication, to do all things necessary to enable the other party to have the benefit of the contract.[104]
[104]Secured Income Real Estate (Australia) Ltd v St Martin’s Investments Pty Ltd (1979) 144 CLR 596, 607.

A duty of good faith and reasonableness may be implied into a contract.[105] Ordinarily, such a term imposes an obligation to act honestly and with fidelity to the bargain and not to undermine the bargain entered into or the substance of the contractual benefit bargained for.[106]
[105]Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228.
[106]Paciocco v ANZ [2015] 236 FCR 199, [288].

Proof of loss and damage

In respect of the claim directed to intellectual property, the plaintiff bears the burden of proving that the estate has suffered loss and damage as a consequence of some breach by the defendant as administrator.

In cases in which a plaintiff cannot adduce precise evidence of what has been lost, estimation or guesswork may be necessary in order to assess the damages to be allowed.[107]
[107]Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257, [38].

In that connection, the plaintiff sought to rely upon authorities relating to the destruction of documents[108] and, in particular, relied upon what was described in argument as the ‘classic statement’ from The Ophelia[109] quoted with evident approval by Dixon CJ, McTiernan and Williams JJ in Allen v Tobias –

If any one by a deliberate act destroys a document which, according to what its contents may have been, would have told strongly either for him or against him, the strongest possible presumption arises that if it had been produced it would have told against him; and even if the document is destroyed by his own act, but under circumstances in which the intention to destroy evidence may fairly be considered rebutted, still he has to suffer. He is in the position that he is without the corroboration which might have been expected in his case.[110]

[108]Armory v Delamirie (1722) 1 Strange 505, Allen v Tobias (1958) 98 CLR 367 (‘Allen’), British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524 and Little v Shell Refining Australia Pty Ltd [2014] VSC 546.

[109]The Ophelia [1916] 2 AC 206 (‘The Ophelia’).

[110]Allen (n 108) 375.

In that connection, both parties referred broadly to ss 89A to 89C of the Evidence (Miscellaneous Provisions) Act 1958 (Vic), which provide as follows –

89A Meaning of unavailability of document
For the purposes of this Division, a document is unavailable in a civil proceeding if—
(a)the document is, or has been but is no longer, in the possession, custody or power of a party to the civil proceeding; and
(b)the document has been destroyed, disposed of, lost, concealed or rendered illegible, undecipherable or incapable of identification (whether before or after the commencement of the proceeding).

89B Court may make ruling or order
(1)If, in a civil proceeding, it appears to the court that—
(a)a document is unavailable; and
(b)no reproduction of the document is available in place of the original document; and
(c)the unavailability of the document is likely to cause unfairness to a party to the proceeding—

the court, on its own motion or on the application of a party, may make any ruling or order that the court considers necessary to ensure fairness to all parties to the proceeding, having regard to the matters set out in section 89C.
(2)Without limiting subsection (1), a ruling or order may be—
(a)that an adverse inference will be drawn from the unavailability of the document;
(b)that a fact in issue between the parties be presumed to be true in the absence of evidence to the contrary;
(c)that certain evidence not be adduced;
(d)that all or part of a defence or statement of claim be struck out;
(e)that the evidential burden of proof be reversed in relation to a fact in issue.

89C Matters the court must consider
Before making an order under section 89B, the court must have regard to—
(a)the circumstances in which the document became unavailable; and
(b)the impact of the unavailability of the document on the proceeding, including whether the unavailability of the document will adversely affect the ability of a party to prove its case or make a full defence; and
(c)any other matter that the court considers relevant.

Removal of administrator or trustee

In respect of removal of a trustee, in Miller v Cameron, Dixon J stated –

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 execution 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.[111]

[111](1936) 54 CLR 572, 580-1.

Grounds for the removal of a trustee or administrator include –

(a) a lack of impartiality;[112] and

(b) any preference for his or her own interests over those of the beneficiaries.[113]

[112]Re Whitehouse [1982] Qd R 196, Nicholls v Louisville Investments (1991) 10 ACSR 723.

[113]Mansour v Mansour (2009) 24 VR 498, [49].

In oral submissions, counsel for the plaintiff referred to authority[114] that, in turn, referred to s 34(1) of the Administration and Probate Act 1958 (Vic). That provision states as follows –
[114]Richardson v Johnson [2018] VSC 85. See also, Monty Financial Services Ltd v Delmo [1996] 1 VR 65, Fysh v Cook [2000] VSCA 150, Dimos v Skaftouros (2004) 9 VR 584 and Denby v Power [2016] VSC 535.

34 Discharge or removal of executor or administrator
(1)Notwithstanding anything contained in any Act where an executor or administrator to whom probate or administration has been granted whether before or after the commencement of this Act or where an administrator who has been appointed under this section or any corresponding previous enactment—
(a)remains out of Victoria for more than two years;
(b)desires to be discharged from his office of executor or administrator; or
(c)after such grant or appointment refuses or is unfit to act in such office or is incapable of acting therein—

the Court upon application in accordance with the Rules of Court may order the discharge or removal of such an executor or administrator and also if the Court thinks fit the appointment of some proper person or trustee company as administrator in place of the executor or administrator so discharged or removed upon such terms and conditions as the Court thinks fit; and may make all necessary orders for vesting the estate in the new administrator and as to accounts and such order as to costs as the Court thinks fit.

D. The deceased, the defendant, the plaintiff and related witnesses

The plaintiff and defendant were witnesses of great significance across a range of issues in the case.

The credibility and reliability of each of them was raised in the respective written submissions and was relevant to many of the contentions advanced in final address; although it was not a focal point of either address. In a real sense, however, the credit and reliability of the plaintiff and defendant is directly or indirectly relevant to the evidence bearing upon almost every area of difference between them.

That which follows takes account of the whole of those areas of difference, but does so by reference to specific aspects of the evidence. The fact that particular evidence is not referred to in the following analysis does not mean that it has been overlooked. There are, however, limits to the extent to which reasoning of the present kind can be grounded in every area of the evidence of the witnesses concerned.[115]
[115]Cf., Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, 271-274 and 280-281; Whisprun Pty Ltd v Dixon (2003) 200 ALR 447, [62].

During the trial, it was plain that the actions and statements of the plaintiff and defendant had been greatly influenced by their differing perspectives and antipathetic positions. That influence seemed direct, in that they have been bitterly estranged since falling out in 2014; as well as indirect, in that they are also in opposing factions of the family.

In respect of the latter, I have noted that the plaintiff seemed allied with Carole. For his part, the defendant appeared closer to Rheinallt, as well as to his wife, Michelle, and father in law, Mr Marchio. The only witness who claimed to be able to speak and deal with both brothers was Ms Millane.

In that context –

(a) both brothers claimed to have had a significant connection with the deceased prior to his passing;

(b) the defendant, however, generally sought to suggest that the plaintiff had been estranged from the deceased for several years prior to his passing; and

(c) the plaintiff denied any such suggestion.

The deceased

In the midst of the tension sponsored by the circumstances outlined above, the deceased emerged as an eccentric and complicated figure.

He was plainly a brilliant inventor who appears to have been devoted to his work in robotics.[116]
[116]Mr Hartley, for example, described the deceased as ‘a brilliant man’ and ‘a bit of an old professor’: T175.

In that regard, at the time of the deceased’s passing in June 2019, the rent for the factory seems to have been paid up until about May 2019.[117] That suggests that even in the midst of his deteriorating health,[118] the recent deregistration of System Dynamics and some degree of personal financial stress, the deceased had optimistically prioritised the payment of rent on the factory.
[117]See, Exhibit P16 (1137).
[118]In that regard, I note that a photograph apparently taken while the deceased was in hospital in June 2018 shows him to have then been quite frail: see, Exhibit P16 (739).

Consistent with the stereotype of a brilliant but eccentric inventor, a video of the interior of the factory taken shortly after his passing reveals a ramshackle arrangement of items, equipment and projects in various apparent states of completion.[119] A photograph of the factory office also shows a large quantity of boxes, folders and papers piled on a desk adjacent to what was referred to as the ‘A1 filing cabinet’.[120]
[119]Exhibits P16 (1156), D17 and D18.
[120]Exhibit P16 (1156).

The defendant and several of his witnesses sought to emphasise the presence of mess and dust in the factory. Mr Marchio took the video on about 17 June 2019, which is only days after the deceased’s passing. The video certainly shows mess and dust, particularly in the working areas.[121] However, the video shows the office area very briefly.[122] It is not possible to tell whether, at that time, the office area was as dusty as the working area, although it was certainly messy.
[121]Exhibit D17.
[122]In particular, see Exhibit D18.

The photograph of the office area was apparently taken by Mr Bent.[123] It is not clear exactly when the photograph was taken, although it was said by senior counsel for the defendant to have been taken by Mr Bent after a ‘clean up’.[124] The photograph seems to show auction related stickers on the drawing board, filing cabinet and the ‘A1 filing cabinet’.[125] The defendant’s spreadsheet, which is a contemporaneous record of his actions in respect to the estate, shows Mr Bent to have attended the factory for significant periods on 21 and 26 June 2019.[126] Mr Bent’s auction of the factory contents took place on 14 February 2020.
[123]See, Exhibit P16 (1156).
[124]T390-392.
[125]Exhibit P16 (1156).
[126]Exhibit P16 (816-817). In oral evidence, the defendant described his spreadsheet as an ‘information collection plan’ used within Victoria Police. He said that it was ‘accurate’, ‘accountable’ and ‘transparent’ and that it ‘records what happened, because I had to brief up to Rheinallt’: T676. The spreadsheet records the relevant actions of the defendant between 4 June 2019 and 27 August 2019: see, Exhibit P16 (813-820).

In the photograph, the condition of the office area is in some ways different to that shown fleetingly in the video. No attention was given to that difference during the trial. In the photograph, no dust can distinctly be seen and the table in the foreground appears to be cleaner than at the time at which the video was taken.

I would conclude that there probably was some dust in the factory office at the time of the deceased’s passing, although the contents of the office may well have been to some extent re-arranged or tidied by the time that Mr Bent’s photograph was taken.

In any event, the defendant and other witnesses to whom I have referred tended to emphasise the mess and dust at the factory as if it had accumulated during an extended period in which the factory and all of its contents were unused. That may well explain such dust as appears; however, most of the mess is likely to have been created in the course of the deceased’s work during his lifetime. Some of it could have been created by the plaintiff, but I would have thought that the major contributor to the mess in the factory was the deceased. After all, it was his factory.

In that context, the really striking thing about the video, and photograph, is how much they reveal a work space resembling a home workshop or the garage of someone who must have devoted every available moment to pondering and tinkering with projects of invention. In a sense, the mess revealed that the person who created it must have been largely oblivious to it; as well as to any modern notions of occupational health and safety. The mess is consistent with a person who was, for the most part, totally engrossed in his passion for invention and from which he derived a significant part of his personal identity.

Similarly consistent with the stereotype, such financial records of System Dynamics as have been able to be retrieved reveal the business to have generated earnings of a modest kind in the years leading up to 2016; and there are no records of any earnings generated between 2016 and 2019. The evidence also suggested that the deceased had not been very focussed on money and had at times performed work for practically nothing or very little.

In that regard, the evidence suggested that in and after about 2017 the deceased had been earning little or nothing in the way of income and, in the end, had been living off his mortgage and credit card.

The deceased seems also to have had a great passion for animals, particularly in and around Llwynfryn. In that regard, I have earlier extracted the relevant part of the schedule to the will in which the deceased expressed a wish that, as far as practicable, Llwynfryn be used and managed by the defendant as an ‘animal sanctuary’.

Albeit that the deceased plainly had a deep passion for his work, as well as a great affection for animals, that sense of passion and affection does not seem to have extended at all times to all members of what might broadly be described as his family.

In particular, I have already referred to the evidence concerning his antipathy towards Carole. In that connection, in the will made in May 2013 the deceased indicated his wish that Carole should be excluded from any involvement in, among other things, the proposed ‘animal sanctuary’ at Llwynfryn.

That said, it seemed not ultimately to have been in dispute that the deceased subsequently celebrated Christmas with Carole, as well as with the plaintiff.[127] However, as I have earlier noted, after the passing of the deceased, and in connection with the proposed funeral, the defendant said that the deceased ‘despised [Carole] intensely’.
[127]Cf., Exhibit P5, [43]-[47].

The defendant

As I have noted, the defendant said that for some years prior to his passing the deceased had been essentially estranged from the plaintiff. The defendant also sought to suggest that the plaintiff had not worked at all – including with the deceased – for many years prior to June 2019.

In his written outline of evidence, which was accepted as his evidence in chief, the defendant stated relevantly as follows –

Simon did not know James to work in the deceased’s employment after 2016. There are letters written by the deceased in 2013 which show that James and Henry did not get along in 2013. … Their relationship was sporadic in the years after that. In 2013 there was no contact between them. James was invited to spend time with the deceased at Simon’s home at Christmas time, but James did not come. James and Henry then reunited in early 2014 and went overseas for about 6 weeks in April/May 2014. James was a groomsman at Simon and Michelle’s wedding in 2014. Following the wedding, the deceased and James had another falling out and based on what the deceased said at the time, Simon believes that they barely spoke until around 2015. The deceased spent Christmas with James and Carole Dunn at Carole’s property in Kinglake in 2015. However, not long after that, based on what the deceased said at the time, Simon believes that James and the deceased fell out again and reverted back to their 2013 position. They were effectively estranged. They remained that way until the day he died. The deceased said to Simon that [he] was not sure that he wanted to see James before he passed. James had not visited him in his illness or in hospital. Henry instructed Simon not to inform James as he did not want to see him. Days prior to his eventual death, Simon asked the deceased if he wanted James to visit, the deceased said “I’m not sure”. Simon said “What about if James comes, but not (Carole Dunn)”. Henry agreed. Simon got word to James via their mutual friend Sian Milane and James saw the deceased in his last few days.[128]

So much seems apparent in the plaintiff’s subsequent letter dated 25 March 2020, which relevantly stated –

As should be apparent, the request in my letter of 23 March 2020 extends simply to asking whether your client accepts that the valuation he obtained from Hugh McLean Valuers Pty Ltd is so defective that it cannot be a “sworn valuation” as to the “market value” of the property for the purposes of the above clause. Again I request you to inform me by 4pm today as to whether your client accepts this position or not and if he does not do so, then I will issue a summons as previously foreshadowed.
In terms of my willingness to negotiate to purchase the property on the basis of the valuation I have obtained, I note that this is not a binding offer and merely an invitation to negotiate.[607]

[607]Ibid (1303).

Consistently with that understanding, in evidence the plaintiff conceded that he could not have paid $2,350,000 for Llwynfryn; and it seemed apparent that he took no relevant steps to obtain finance. It is also not apparent how he would ever have been granted such finance.

Notwithstanding the above, the plaintiff said in evidence that he would have purchased Llwynfryn at the McLean valuation if there were ‘no other option’ or ‘the court had ordered [it]’.

There is, of course, a considerable degree of prevarication in that evidence, and it has been observed that care must be taken with evidence of that general kind.[608]
[608]Rosenberg v Percival (2001) 205 CLR 434, [153]-[158]; Hoyts Pty Ltd v Burns (2003) 77 ALJR 1934, [23], [54].

In any event, even if the plaintiff now believes that to be the case, I cannot accept that he would have purchased Llwynfryn at the first McLean valuation in 2020. Among other things –

(a) he plainly regarded the first McLean valuation as ‘unacceptable’ and ‘fundamentally flawed’;

(b) he set about obtaining ‘another valuation’ from Ms Cox;

(c) even in respect of that valuation, at the considerably lower figure of $1,650,000, the plaintiff did not indicate that he would purchase Llwynfryn; and

(d) in any event, he did not have financial resources sufficient to purchase Llwynfryn at the first McLean valuation.

In short, I cannot accept that the plaintiff was ready, willing and able to take up the option offered and, of course, he did not do so.

Further, the plaintiff’s correspondence and conduct extended over a period of nearly three months after the option was offered. There is nothing in those events which suggests that the plaintiff had any intention or capacity to purchase Llwynfryn at the first McLean valuation; every contemporary indicator is to the contrary. Overwhelmingly, those events indicate that what the plaintiff was seeking to do was to have the first McLean valuation consensually discarded and replaced with the much lower Cox valuation and, even then, he seems to have been intent upon seeking to negotiate the purchase of Llwynfryn at an even lower price.[609]
[609]In that regard, of course, much of the plaintiff’s evidence concerning what he would have paid for Llwynfryn was premised in the notion that he would only ever be paying 50% of the purchase price and relevant debts, as he and the defendant were the only beneficiaries of the will. Whilst that ‘bottom line’ style approach might be considered to be a practical solution, what the agreement actually provided for was the offering of an option to purchase Llwynfryn at the figure determined by a sworn valuation. In the present instance, that was $2,350,000; albeit that the plaintiff might subsequently receive nearly half of that back as a distribution made under the will. The plaintiff could only ever approach the problem in his proffered manner if the defendant agreed. The terms of the agreement did not specifically provide for it.

The defendant sought to characterise the conduct of the plaintiff as amounting to a ‘waiver’. However, it seems to me to be more appropriate to approach the issue with reference to the specific language of the agreement. In that regard, the agreement speaks of declining to exercise the option.

In my view, in the present circumstances, just as the conduct of the defendant means that he should be taken to have impliedly declined to exercise the option given to himself and to have taken the second contractual step and given an option to the plaintiff; the plaintiff, by his conduct, should be taken to have impliedly declined to take up that option. It is absolutely plain, in my view, that he was never going to take it up in 2020.

In the circumstances, the position is that Llwynfryn was valued, both options were offered and, by conduct, both were impliedly declined. From that point, the agreement provides that Llwynfryn should be sold by public auction. That has not yet occurred, but that is what the agreement requires.

It follows that the plaintiff is entitled to neither specific performance nor damages. The agreement should be performed. Llwynfryn should go to public auction and the proceeds of that auction should subsequently be distributed to the beneficiaries. That, of course, would not prevent the plaintiff or defendant from seeking to purchase Llwynfryn at auction.[610]
[610]I would accept, of course, that the relevant term of the agreement could be satisfied if, in the usual way, prior to auction, the plaintiff, the defendant or any other person made an offer to purchase Llwynfryn that, in the opinion of the relevant auctioneer and the administrator, was appropriate to be accepted such that a public auction of the property need not thereafter proceed.

G. Removal of the defendant as administrator

Pursuant to s 34(1)(c) of the Administration and Probate Act 1958 (Vic), the defendant may be removed as administrator if he is ‘unfit to act in such office’ and the Court may make ‘all necessary orders for vesting the estate in the new administrator’.

As I have earlier noted, the jurisdiction is to be exercised with a view to the interests of the beneficiaries, the security of trust property and the efficient and satisfactory execution of the trust. In that regard, the Court must form a view that the welfare of the beneficiaries is opposed to the defendant’s continued occupation of the office of administrator.

In that connection, ‘unfitness’ may arise by reason of the administrator’s breach or neglect of duty.[611]
[611]Dimos v Skaftouros (2004) 9 VR 584, Denby v Power [2016] VSC 535, [21]-[33] and Richardson v Johnson [2018] VSC 85, [44]-[47].

In the present instance, I have, at some length, addressed both the administrator’s sustained treatment of his brother, who is also a beneficiary under the will, and his actions and inactions which led to the destruction of trust property valued at $300,000. His conduct in respect of Llwynfryn has been somewhat mischievous, although the substance of the contractual scheme (and clause (e) of the will) was ultimately followed.

In my view, the defendant’s attitude towards and treatment of his brother, who is a beneficiary, as well as his culpability in connection with the destruction of trust property, are sufficient for me to conclude that it is not in the interests of the beneficiaries for him to continue in office (noting that the defendant is one of those beneficiaries).

Indeed, I could hardly come to conclusions of that nature and determine that a sitting administrator ought be allowed to continue in office, even if the steps remaining to be completed might be thought to be relatively straightforward. Even if the remaining steps might presently appear to be straightforward, the matters to which I have referred give me no confidence that the defendant would be able to finalise the estate without the provocation of further controversy and an attendant risk of significant error.

In addition to the matters to which I have referred, the plaintiff relied upon the defendant’s management of the estate finances.

In that connection, counsel for the plaintiff submitted as follows –

We don’t seek to prove a loss to the estate arising from finances; we just have no idea what’s occurred, and neither, it seems, does the defendant. As set out in the plaintiff’s primary submissions, Simon has sworn at least two affidavits that he made a loan of $300,000 to the estate.
The estate accounts, the veracity of which is attested to by him, are consistent with that proposition because they contain expenses paid by Simon from the estate account as estate expenses. If they were, in fact, expenses paid by Simon from his own funds, they wouldn’t be in the administration account. If Simon has paid them and not the estate, then until Simon exercises his right of indemnity, the estate has not paid them and they shouldn’t be there.[612]

[612]T1214.

For her part, senior counsel for the defendant submitted that it was all a ‘non-issue’ and a ‘storm in a teacup’. She submitted that the defendant had merely ‘made money available’ to assist in ‘propping up [the] estate’. She also sought an order that the defendant be permitted to recover an indemnity from the estate to the extent that he is out of pocket as well as an order that the defendant be permitted to charge interest.[613]
[613]T1274-1276.

Notwithstanding the above, senior counsel acknowledged that the defendant had made ‘one mistake’, in ‘possibly two’ affidavits, and that ‘the interest was sought to be wrapped up as part and parcel of what the estate now owes him’.[614] She also acknowledged that there was probably some intermingling of funds, but that it was to a ‘negligible degree’ and not to a degree that would suggest that the defendant is incapable of managing the estate accounts.[615]
[614]T1275.
[615]T1276-1277.

In Re Anthony; Rogan v Rogan,[616] McMillan J stated –

The Court has long recognised that an executor owes a duty to account to the persons who are to take under a testator’s will. This duty exists both at common law, and is enshrined in statute. Essential to this duty is the requirement that an executor keep proper account and records. These records should be unambiguous, clear and distinct so as to provide accurate information to the beneficiaries sufficient to inform them as to the state of the administration. To this end, receipts, vouchers or other documentation should support each transaction.[617]

[616][2017] VSC 668.

[617]Ibid [16] (citations omitted).

In the present instance, what was broadly described in argument as the ‘finances’ of the estate emerged as a significant issue prior to the commencement of the trial. In that connection, the defendant swore affidavits on 11 May 2023 and 21 May 2023 verifying administration accounts of the estate.[618]
[618]Exhibits P8 and D8.

The administration account in connection with the affidavit dated 11 May 2023 referred to a ‘Loan from Simon Dunn Vaughan’ in the sum of $300,000 and ‘Loan Repayments to Simon attributed to the loan funds of $300,000’ in the sum of $55,205.[619]
[619]Exhibit P8 (CB2607).

The administration account in connection with the affidavit dated 21 May 2023 continued to refer to the loan in the sum of $300,000, identified those funds as received by the estate and referred to ‘Part principal repaid by Simon to BoM’ in the sum of $1,571.77. That account included lengthy explanatory footnotes in respect of various items.

On 26 May 2023, the defendant swore an affidavit directed to ‘aspects of the finances of the estate’. He deposed to errors in the affidavit of 11 May 2023 and sought to ‘clarify’ his affidavit of 21 May 2023.[620] He also produced a significant bundle of bank statements and related documents.
[620]Exhibit D6.

The defendant deposed that he had borrowed $300,000 from the Bank of Melbourne ‘so as to make funds available to the estate’ and also deposed to a loan referred to as ‘BOM 901’, an ‘Incentive Saver Account’ referred to as ‘BOM 131’ and payments that he had made in respect of liabilities of the estate. He said that ‘the amount expended on estate expenses is likely to exceed $300,000’ and that the arrangement had been re-financed in February 2023 by combining BOM 901 with the defendant’s own pre-existing housing loan in order to obtain ‘a better interest rate’.

The defendant deposed that he continued to make payments in respect of the ‘combined loan’ and in order to pay estate expenses. In respect of his earlier affidavits and the issue of interest, he deposed further as follows –

29.The Affidavit of verification of the Administration account I swore on 11 May 2023 contains errors as to calculations and characterisation of the monies I borrowed. I do not seek to rely upon that affidavit.
30.The Affidavit of verification of the Administration account I swore on 19 May 2023 characterised what I am owed by the estate as being the $300,000 loan I borrowed and made available to the estate. It explains that I borrowed that money at a rate of 4.74%. In fact, I recognise that some of that borrowed money has been used to reduce the capital of that borrowed amount.
31.In an attempt to answer various questions posed by the defendant [sic] as to the interest paid on the loan, my solicitor has calculated that:-
(a)the amount of interest attributable to the BOM 901 Loan is $27,239.82.
(b)since the loans were combined, the interest which has been incurred on the part of the combined loan which is referable to the BOM 901 Loan, at the current BOM rate, is estimated at $1571.77. I have in fact met that from my own resources.

32.I intend upon the ultimate sale of the Balnarring property, to claim an indemnity from the estate for such amount as I am properly entitled to out of the estate. I remained liable for $279,906.82 on the BOM 901 Loan as at February 2023 and remain liable for that amount (subject to any increase or reduction in that amount when I get statements), all of which has been utilised for estate related expenses or to repay that borrowing. I have paid funds from my other resources into the BOM 131 account in order to meet interest payments and other expenses. I have also met various expenses from my other resources. I would seek an indemnity and reimbursement for those amounts for which I am liable or out of pocket. I note that I am liable for, and I am paying, the interest accruing on the borrowed amount and will seek reimbursement from the estate for such interest as I am authorised to claim.[621]

[621]Exhibit D6 (CB2970).

The defendant was cross-examined extensively concerning the finances of the estate.[622] In the course of that evidence, he referred to a loan from Rheinallt to the estate which did not appear in the administration accounts.[623]
[622]T815-835.
[623]T816.

Counsel pressed the defendant to confirm that BOM 131 was the ‘estate account’, but the defendant said that it was not.[624] He then produced further records relating to his accounts with the Bank of Melbourne.[625]
[624]T818.
[625]Exhibit P10.

When the proceeding resumed he sought to explain what had occurred. That evidence was not easy to follow.

Among other things, the defendant seemed quite unsure as to whether he had ever made a loan to the estate.[626] He acknowledged that there was no loan document.[627]
[626]T824.
[627]T827.

The defendant gave evidence concerning the ‘combined loan’, but said that BOM 131 continued to exist. He seemed also to be saying that he continued to make payments out of it.[628]
[628]T833.

I should say that the defendant had earlier acknowledged that he made ‘mistakes’ in the ‘financial affidavits’. However, he said that he had tried to rectify his mistakes and that they were ‘genuine’.

On the strength of the defendant’s various explanations, I would certainly not conclude that he sought to do anything dishonest in respect of the estate finances. That said, his understanding of the precise character of what had occurred seemed quite unclear and, consequently, his various explanations did not greatly assist in clarifying the issue.

Without seeking to be unduly critical, much of what seems to have occurred has been highly amateurish, at best, and it was not obvious that much if any of it was done on advice in circumstances where the defendant has had access to such advice. Rather, the defendant seems to have sought to muddle along, to some extent innocently. That might make the situation understandable, in a broad sense, but it does not make it a remotely satisfactory one.

In that context, the plaintiff submitted that I was required ‘to make a determination as to what the true position is’; particularly, whether BOM 131 is an ‘estate account’ or a ‘personal account’.[629] The defendant, of course, pressed me to make the findings to which I have earlier referred. To be perfectly honest, I do not consider the state of the evidence to be such that I could confidently do any of it.
[629]T831.

Of course, the fact that I cannot make any such findings is not a good point for the defendant. As was essentially acknowledged, he has made ‘errors’. Those ‘errors’ concern the finances of the estate. While some of his intentions may have been innocent, the fact that he has had to undertake so much in the way of explanation and that the true position continues still to be difficult to be in any way confident about, suggests that he has breached his obligation to prepare and retain ‘unambiguous, clear and distinct’ estate accounts.

In the circumstances, I would accept that the state of the estate finances is a further reason why the defendant is ‘unfit’ to continue to act as administrator and should be removed.

I should, perhaps, add that it will be apparent that I have been very troubled by some of the defendant’s other actions and inactions together with his purported explanations.

In particular, it will be recalled that his inventory of assets and liabilities dated 13 September 2019 prepared in connection with his application to become administrator identified the value of Llwynfryn as $2,250,000.[630]
[630]Exhibit P16 (831-832).

In contrast with both of the defendant’s subsequent administration accounts,[631] that inventory did not identify the foundation for the stated figure of $2,250,000.
[631]Exhibit P8 (CB2606) and D8 (CB2782).

Of course, at the time at which that inventory was made, the only valuation that the defendant had received was the Kensley valuation; which valued Llwynfryn at $1,800,000.

Later, after the defendant became the administrator, the plaintiff wrote multiple letters to AMS seeking copies of any sworn valuations relating to Llwynfryn.[632] No direct response was ever provided to that request and, of course, the Kensley valuation was not produced to the plaintiff until much later and in connection with the present litigation.
[632]See, for example, Exhibit P16 (969, 971-972 and, indirectly, 981-983).

In respect of all of the above, in oral evidence the defendant variously sought to suggest that –

(a) the Kensley valuation had been obtained ‘for probate purposes’;[633]
[633]T737.

(b) the Kensley valuation had ‘a valuation of [$]2.2 or [$]2.6 [million]’ which was ‘[w]ithin his costings’;[634]
[634]T739.

(c) after ‘the report’ had been ‘done’ –

I was in the paddock, um, and I saw–Dad’s neighbour Keith, um, who’s a - he works on the council, and, um, we’re just having a general chat and I said, ‘Oh, you know, the, yeah, we had the valuer, blah, blah, blah.’ He said, ‘Oh, did he value the top block?’ I - I - I hadn’t jerried to that. And I said, ‘Oh, I guess so. I don’t know.’ And so he said, ‘Well, yeah, the top block you can subdivided [sic]. Did your dad - your dad knew that, didn’t he?’ Okay? Um, I made enquiries with the council. The council said, ‘Yeah, the top block is - is able to be subdivided.’ I’m like, ‘Oh, okay. Is this - is this the way it works? I’m – I’m not sure.’ And then I made enquiries with, um, yeah, I’m - I - I guess I spoke to a real estate agent on the phone, um - -- [635]

[635]T741.

(d) the Kensley valuation seemed ‘hokey’ and so he made further inquiries;[636]
[636]T742.

(e) there had been a lot of ‘movement’ in value ‘in the area’ in connection with which he had spoken with a real estate agent;[637]
[637]T743.

(f) the figure of $2,250,000 was –

a reasonable proposition of what the property properly - probably was worth 3 or 4 months after the previous valuation had been done when I spoke to a real estate agent.[638]
[638]Ibid.

(g) he had spoken with Mr Kensley about it and ‘he was just – I don’t know, he was pretty nonplussed with me, and … I didn’t find him great to deal with in any way, shape, or form’;[639] and
[639]T744.

(h) when he became the administrator in November 2019 he did not give the Kensley valuation to the plaintiff because –

Well, it was made in - for probate purposes in June or the start of July. We’re now in November. Um, I think this court has heard that the valuations are 90 days. In respect to, um, the last document we looked at yesterday, which was James’ offer to me, which was put before me and then we never really discussed that. Is that - that was the - the last document before we went to - well, it was when the - - - [640]

[640]T748.

I cannot accept any of that evidence. Among other things –

(a) the defendant’s spreadsheet, which was prepared contemporaneously and chronologically, identifies no relevant discussions between him and any Council officer, or the neighbour, ‘Keith’;

(b) the spreadsheet records a meeting on 18 June 2019 between the defendant and ‘Ian of Patton Real Estate’ and refers to an ‘estimate[d] value between $2.5-2.75 Million’;[641]
[641]Exhibit P16 (816).

(c) no letter from ‘Ian of Patton Real Estate’ was in evidence and, in any event, the noted meeting with him was certainly not a valuation by a certified valuer;

(d) the spreadsheet records that the defendant spoke with Mr Kensley on 21 June 2019 in connection with a valuation ‘for inventory/probate purposes’ and that on 24 June 2019 the defendant agreed to the scope of works in respect of that ‘independent valuation’;[642]
[642]Ibid (816-817).

(e) the Kensley valuation is dated 17 July 2019;[643]
[643]Ibid (793).

(f) even if it was only obtained ‘for probate purposes’, the Kensley valuation was still a valuation by a certified valuer;

(g) the defendant’s spreadsheet refers to an email sent by the defendant to Mr Kensley on 17 July 2019 ‘re valuation update’ and the defendant having received the valuation on 18 July 2019 and thereafter forwarding it to Mr Bowlen;[644]
[644]Ibid (819). I note that no email from the defendant to Mr Kensley dated 17 July 2019 seems to have been in evidence.

(h) it follows that the defendant very likely received the Kensley valuation on 18 July 2019;

(i) it also follows that the meeting with ‘Ian of Patton Real Estate’ occurred well before receipt of the Kensley valuation, not after it had been ‘done’;

(j) the spreadsheet records no subsequent discussion between the defendant and Mr Kensley and no suggestion that, at that time, the defendant considered the Kensley valuation to be ‘hokey’;

(k) in respect of the reference in the Kensley valuation to $2,620,000 –

(xi)that figure is stated to refer to the ‘lot value’;

(xii) the figure appears in the middle of a sequence of Mr Kensley’s ‘workings’;

(xiii) the subsequent workings clearly show Mr Kensley to have deducted various expenses and costs in order to come to an ‘indicated land value’; and

(xiv) the ‘indicated land value’ is stated to be ‘say $1,700,000’;

(l) the ‘workings’ appear prior to Mr Kensley’s quite plain statement that he assessed the value of Llwynfryn at $1,800,000;[645]
[645]Exhibit P16 (793).

(m) as to ‘validity’ of the Kensley valuation, the assumptions and qualifications stated within it read relevantly as follows –

Due to possible changes in market forces and circumstances in relation to the subject property, this report can only be regarded as relevant as at the date of valuation.
This assessment is current as at the date of valuation only. The values assessed herein may change significantly and unexpectedly over a relatively short period (including as a result of general market movements or factors specific to the particular property). I do not accept liability for losses arising from such subsequent changes in value.
I draw attention to the provisions of my professional indemnity insurance that all assessments are only valid for 90 days from the date of valuation, no responsibility being accepted for client’s reliance upon reports beyond that period. Accordingly, any party is authorised to rely upon my opinion should be aware of the need for a review as necessary.[646]
[646]Ibid (794).

(n) construed literally, that would mean that Mr Kensley’s valuation should be regarded as relevant only ‘as at the date of valuation’;

(o) however, the stated qualifications are directed to issues of insurance and specific reliance and do not mean that it would not be appropriate for others to have regard to the valuation within a reasonable time thereafter, particularly other certified valuers; and

(p) the defendant did not call any of Mr Kensley, the neighbour ‘Keith’ or the Council officer to give evidence.

That to which I have referred confirms much of that which I said much earlier about the defendant’s reliability as a witness.

Further –

(a) none of the above supports or would reasonably seem to justify the defendant’s inclusion of the figure of $2,250,000 in his inventory of assets and liabilities – which was neither the figure identified in the Kensley valuation, nor either of the figures apparently referred to by ‘Ian of Patton Real Estate’;

(b) indeed, the reference in the defendant’s spreadsheet to obtaining an independent valuation from Mr Kensley ‘for inventory … purposes’ suggests that the defendant did not refer to that valuation in connection with one of the very purposes for which it was obtained;

(c) in that regard, even if the defendant was right about his claim that the Kensley valuation was only valid for 90 days, that cannot explain why he did not refer to it in his inventory of assets and liabilities dated 13 September 2019 (which was only 58 days after the date of the Kensley valuation); and

(d) all of the above tends to confirm the very great capacity for the defendant to misdirect himself in respect of the present matter, particularly when it comes to financial matters.

For those further reasons, I have no doubt that the defendant is unfit to act in the office of administrator in respect of the will and that he should be removed. An order should be made to that effect as well as orders in respect of the appointment of an identified independent administrator and trustee.[647]
[647]Exhibit P16 (1830-1831).

For completeness, I should, perhaps, add that at various points in the trial the plaintiff pursued a range of further issues said to have been going to the present issue; particularly, the actions or inactions of the defendant in respect of the ute, a wind turbine said to have been at the factory, the Data Eclipse computer system, the factory contents and fittings and obtaining finance for the estate at a rate of interest higher that could have applied if an offer from the plaintiff had been accepted.

In respect of the Data Eclipse computer, I prefer and accept the evidence of Mr Pass. Accordingly, no present issue arises.

As to the remainder of those points, and any other such points ultimately pursued by the plaintiff only in support of his contention that the defendant should be removed from the office of administrator, I have already accepted that the defendant should be removed and it is simply unnecessary to determine them.

H. Conclusion

The plaintiff has succeeded, particularly in respect of his claims directed to the destruction of intellectual property and the removal of the defendant as administrator.

I will let the legal representatives of the parties consider these reasons and propose final orders.

[2024] VSC 7

31 January 2024