Re Gooriah
[2016] VSC 659
•4 November 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S PRB 2015 06751
IN THE MATTER OF the estate of VARUNADFEWA GOORIAH
| MICHA LUFOR | Plaintiff |
| v | |
| CYNTHIA GOORIAH | Defendant |
S CI 2016 01974
| MIRELLA CHRISTIANE AURORE LATCHMAN | Plaintiff |
| v | |
| MICHA LUFOR (who is sued as administrator of the estate of VARUNADWFEWA GOORIAH deceased) | Defendant |
---
JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 29 August 2016, further written submissions by emails dated 2 and 2 September 2016 |
DATE OF RULING: | 4 November 2016 |
CASE MAY BE CITED AS: | Re Gooriah |
MEDIUM NEUTRAL CITATION: | [2016] VSC 659 |
---
SUCCESSION LAW — Compromise of probate proceeding — Approval of compromise — Further proceeding by another claimant alleging interest in estate after compromise of probate proceeding — Compromise of subsequent proceeding subject to approval — Whether compromise should be approved — Whether contravention of overarching obligations of claimant — Civil Procedure Act 2010, ss 18, 41, 42 — Supreme Court (General Civil Procedure) Rules 2015, r 15.08
---
S PRB 2015 06751
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N Jones | Kavanagh Lawyers |
| For the Defendant | Mr E Luff, solicitor | Wilmoth Field and Warne |
S CI 2016 01974
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Shepherd | Contested Wills & Probate Lawyers |
| For the Defendant | Mr N Jones | Kavanagh Lawyers |
HER HONOUR:
Introduction
Varunadfewa Gooriah died intestate on 8 February 2015 (‘the deceased’). He was survived by his widow (‘the plaintiff’), his two adult children, Sandy aged 32 and Cynthia (‘Cynthia’) aged 31, and his infant child born on 3 April 2012. The plaintiff is the mother of the infant child.
The deceased’s estate at the date of his death comprised of his property in Sunbury (‘the Sunbury property’) valued at approximately $607,000 and liabilities of approximately $230,425 being in large part a mortgage over the Sunbury property, making a net value of $376,575.
These reasons concern the consideration of terms of settlement in two proceedings, both of which are subject to the approval of the Court.
Background
On 11 May 2015, the plaintiff filed an application filed for a grant of administration of the intestate estate of the deceased (‘the estate proceeding’).
Cynthia had filed a caveat against the making a grant of representation on 21 April 2015 on the ground that she had a better right to representation of the estate as a child of the deceased.[1] Another caveat against the making of a grant of representation was filed by Mirella Christiane Aurore Latchman (‘Ms Latchman’) on 23 April 2015 on the basis that she is the de facto partner of the deceased.
[1]This caveat was withdrawn on 26 May 2015 as a result of the plaintiff’s application for a grant of representation made on 11 May 2015.
As required by the Supreme Court (Administration and Probate) Rules 2014 (‘the Rules’), the Registrar of Probates gave notices to Cynthia and Ms Latchman of the plaintiff’s application.
Ms Latchman did not file any grounds of her objection to the making of the grant within 30 days of the notice having been given and her caveat expired.[2] On 11 June 2015, Cynthia filed a notice of her objection to the plaintiff’s application for a grant of administration, grounds of objection to the plaintiff’s application and affidavits sworn by Cynthia and Sandy.
Settlement of the estate proceeding
[2]Pursuant to r 8.02 of the Rules.
On 21 July 2015, orders were made for mediation of the estate proceeding. On 26 August 2015 the estate proceeding settled at mediation. The settlement provided, inter alia that, subject to the approval of the Court, Cynthia would withdraw her caveat and the plaintiff would proceed with her application for a grant of administration of the estate of the deceased. Subsequently, letters of administration of the estate of the deceased were granted to the plaintiff.[3]
[3]After the proceeding settled at mediation, Cynthia filed a withdrawal of caveats on 28 September 2015 and plaintiff consented to the withdrawal of her caveat: r 8.04(2)(b) of the Rules. The grant of representation to the plaintiff was made on 17 November 2015
The plaintiff issued a summons seeking the approval of the compromise as set out in the terms of settlement dated 26 August 2015 (‘the estate terms of settlement’).[4] On 25 September 2015, orders were made by consent adjourning the proceeding to 16 October 2015. On 16 October 2015, counsel for Ms Latchman, who was not a party to the estate proceeding, informed the court that Ms Latchman was considering making an application for further provision from the estate.[5] Ultimately, Ms Latchman either did not issue her claim or it was discontinued at the last minute.
[4] Affidavit of Michael Kavanagh, solicitor for the plaintiff, sworn 17 September 2015, exhibit ‘MK-1’.
[5]Pursuant to Part IV of the Administration and Probate Act 1958.
Consequently, on 15 February 2016, the plaintiff filed a further summons seeking the approval of the estate terms of settlement. The estate terms of settlement provided for the Sunbury property to be sold, the deceased’s superannuation funds to be paid into the estate and, after 30 days of the payment of those funds, all beneficiaries to receive an interim distribution of their entitlements under the estate. The terms provided that when the liabilities of the estate were paid, the estate was to be distributed by a payment to the plaintiff of $75,000 by way of a family provision entitlement and the balance of the estate to be distributed in accordance with the intestacy provisions of the Act.
The approval of the terms of settlement for the estate proceeding (‘the estate terms of settlement’) were supported by an affidavit of the plaintiff’s solicitor and an advice of counsel as to the reasons for the compromise being in the best interests of any person who is a minor and a beneficiary of the estate. The advice of counsel for the plaintiff explained that the net estate of the deceased was $442,943 and under the terms the plaintiff would receive $294,000 and the deceased’s three children would each receive $49,647. Counsel set out the calculation of the estate’s assets and liabilities as follows:
Assets
Estimated value of Sunbury property $540,000
Superannuation payment $257,907
$797,943
Less liabilities
Mortgage $240,000
Child support arrears $ 17,000
$247,000[6]
Net estate $540,943
Less
Plaintiff’s legal costs $33,000
Cynthia’s legal costs $65,000
$ 98,000
Net estate for distribution after costs $442,943[6]This should be $257,000.
The Court considered that the quantum of the legal costs required explanation considering the net value of the estate of the deceased, the details which are referred to below at [26].
The foreshadowed claim against the estate by Ms Latchman
Before an explanation as to the legal costs was provided, the plaintiff’s solicitors notified the Court that there was an issue with the estate terms of settlement. Two caveats claiming interests in the Sunbury property had been lodged by Ms Latchman which prevented its sale. One caveat claimed a freehold interest in the property on grounds of an implied, resulting or constructive trust and the other claimed a freehold interest in the property on the basis of an unregistered transfer of the property signed by the deceased. The plaintiff’s solicitors informed the Court that this raised another potential claim against the estate that could affect the approval of the estate terms of settlement. It was said that Ms Latchman ‘will likely issue proceedings if settlement of [her claim] cannot be agreed with the estate’ and the plaintiff’s solicitors sought further time to assess and address her claim.
After further time had elapsed with no resolution, the Court listed the proceeding for directions on 6 May 2016. Counsel for Ms Latchman also attended and was informed by the Court of the consequences of preventing the completion of the sale of the Sunbury property. The directions hearing was adjourned to 13 May 2016 and, on that occasion, counsel for Ms Latchman informed the Court that his client intended issuing a proceeding against the estate seeking relief on the basis that Ms Latchman had a proprietary interest in the Sunbury property. The Court ordered Ms Latchman to withdraw the two caveats by 4 pm on 16 May 2016 and the plaintiff provided an undertaking to the Court to pay the net proceeds of sale into an interest bearing term deposit in the name of the estate pending the hearing and determination of Ms Latchman’s proposed proceeding or until further order. The application for the approval of the compromise was adjourned to a date to be fixed.
The Latchman proceeding
On 23 May 2016, Ms Latchman issued proceeding S CI 2016 1974 (‘the Latchman proceeding’) against the plaintiff, in her personal capacity and in her capacity as the administrator of the estate of the deceased, seeking an interest in the Sunbury property, alternatively, in the proceeds of its sale.
Her statement of claim pleaded that she lived with the deceased from December 1997 to June 2009. During that time the deceased purchased land in Sunbury and they subsequently built a house on it. They moved into the Sunbury property in 2004. Ms Latchman alleged that, in 2006, the deceased executed a transfer of land whereby he gifted a joint interest in the Sunbury property to Ms Latchman.
Ms Latchman’s relationship with the deceased broke down in June 2009 and thereafter she commenced a proceeding in the County Court which resulted in a property settlement, with the deceased paying Ms Latchman receiving the sum of $110,000.
Ms Latchman then alleges that in October 2010 she reconciled with the deceased. He told Ms Latchman that the plaintiff was pregnant with his child. The deceased and the plaintiff married in October 2011 but the marriage broke down in December 2011. The deceased moved to a house in Altona Meadows where Ms Latchman cared for him but lived elsewhere with her daughter.
Ms Latchman alleges that in August 2012 the deceased signed a contract to sell his interest ‘as joint proprietor’ of the Sunbury property to her for the sum of $340,000 and in October 2012 executed a transfer of his interest as joint proprietor for the consideration of $340,000. Ms Latchman alleges that as the deceased died, the Sunbury property passed to her by survivorship, alternatively, she held an interest as unregistered transferee on the death of the deceased.
The defence to the Latchman proceeding
The estate denied that Ms Latchman has any interest in the Sunbury property or in its proceeds of sale. It pleads that Ms Latchman is not able to rely on the 2006 transfer or alleged gift of the Sunbury property because she agreed to a settlement of the County Court proceeding whereby that deceased paid her the sum of $110,000 and she would give vacant possession of the Sunbury property and withdraw a caveat she had lodged over the Sunbury property. She also agreed that the settlement in the County Court would finally determine her financial relationship with the deceased and avoid further proceedings between them in relation to any property settlement and spousal maintenance.
The defence pleads that because of the terms of settlement in the County Court proceeding, Ms Latchman’s claims in the Latchman proceeding relying on the alleged 2006 transfer of the Sunbury property to her and the alleged gift of it to her have been subsumed, incorporated and satisfied by the deceased’s payment to her of the sum of $110,000. Alternatively, Ms Latchman is prevented by res judicata and issue estoppel from making any further claims after the settlement with the deceased in relation to the alleged 2006 transfer and alleged gift; alternatively, she is estopped from making a claim which is subject to those terms of settlement; alternatively, it is an abuse of process for her to make her claims in relation to 2006 transfer. Alternatively, the 2012 transfer does not constitute a binding contract of sale or disposition as it is void for uncertainty as it does not contain a settlement date, any general conditions relating to a terms contract, nor does it contain any dates for payment of any instalments of purchase price; alternatively, the purported contract signed 15 August 2012 is repudiated by virtue of the fact that no consideration was paid by Ms Latchman to the deceased.
On 29 July 2016, Counsel for Ms Latchman and counsel for the estate sought an adjournment of the Latchman proceeding to 5 August 2016 to allow the parties further time to discuss settlement.
The Latchman terms of settlement
On 5 August 2016 the Court was informed that terms of settlement dated 4 August 2016 had been signed by the solicitors for Ms Latchman, the estate, and Cynthia and Sandy (‘the Latchman terms of settlement’).
The Latchman terms of settlement were subject to the approval of the Court and provided that the Latchman proceeding be dismissed by consent with no order as to costs, that each party to bear their own costs and provided for releases by Ms Latchman against the defendant, in her personal and representative capacity, and the estate.
Reservation of rights by Cynthia and Sandy to bring a family provision claim against the estate
The solicitors for Cynthia and Sandy sought a further mediation given the minimal value of the estate and also reserved their rights to bring a family provision claims against the estate out of time in the event that it became necessary.
Financial effects of the Latchman terms of settlement on the estate terms of settlement
By the time of the Latchman terms of settlement, the Sunbury property had been sold, the mortgage discharged and the superannuation had been paid into the estate leaving a net amount of $540,740. The other liabilities of the estate increased from $17,000 to $83,654 mainly comprising unpaid tax of $18,712 and a potential tax liability of up to $55,000 for moneys received from the superannuation fund, with the latter amount possibly being reduced if the moneys are paid to the deceased’s dependants. The legal costs of the plaintiff and Cynthia and Sandy also increased substantially with the estate’s legal costs increasing from $33,000 (inclusive of counsel’s fees and GST) to $157,625 (inclusive of counsel’s fees and GST) — an increase of $124,625.
The plaintiff’s solicitors explained the increase in the legal costs and disbursements arose principally as a result of dealing with Ms Latchman’s three claims against the estate, being the caveat against the application for a grant of letters of administration, her claim for family provision that was discontinued at the last minute and the Latchman proceeding. The plaintiff’s solicitors estimate their legal costs for dealing with Mrs Latchman’s claims at approximately $60,127 to $62,627 (inclusive of GST), being $47,627 for their professional fees and $12,500 to $15,000 counsel’s fees. Without the legal costs said to be attributable to dealing with these claims, their fees and disbursements were estimated at $94,998 to $97,498.
Further legal costs may have been incurred as the solicitors for Cynthia and Sandy indicated their claimed fees of $65,000 had also increased as a result of dealing with Ms Latchman’s claims.
The plaintiff’s solicitor provided a document setting out the financial position of the estate at the time of the estate terms of settlement and at the time of the Latchman terms of settlement. The comparison demonstrates a significant detrimental financial effect on the quantum to the intestacy beneficiaries in that instead of the plaintiff in the estate proceeding receiving $294,000 she would receive $220,603; and instead of the deceased’s three children each receiving $49,647 they would receive nothing.
Claimed costs of the parties
As stated, in February 2016, the Court’s view as to the quantum of the claimed legal costs in the estate terms of settlement required explanation considering the size of the estate of the deceased.
The plaintiff’s solicitors provided an explanation of their costs by emails dated 20 and 22 April 2016 and subsequently further details were provided together with an itemised account of the work undertaken by them.
The solicitors for Cynthia provided a response as to their costs by email dated 3 May 2016 and 2 September 2016 which set out the work undertaken by them in general terms.
The parties in the estate proceeding were informed by the Court on a number of occasions of the requirement that the costs should be reasonable and proportionate to the issues in dispute. They were also informed that all the claimed costs would not necessarily be paid from the estate. Whilst the parties submitted their claimed costs and provided further details of them, their claimed costs remain subject to further analysis to determine the amounts that will be allowed to be paid from the estate.
Consideration of the approval of the estate terms of settlement and the Latchman terms of settlement
The terms of settlement in the estate proceeding and the Latchman proceeding provide for the approval of the Court as both compromises affect the interests of a minor. On an application for approval of a compromise pursuant to r 15.08 of the Supreme Court (General Civil Procedure) Rules 2015, the Court must be satisfied that the compromise will benefit the infant child.
In addition, the provisions of the Civil Procedure Act 2010 (‘the CP Act’) are relevant, reflecting as they do the broader concerns about the cost and efficiency of litigation and case management principles in the context of the administration of justice and the just and efficient resolution of cases.
In Mandie v Memart Nominees, the Court of Appeal noted the influence of the CP Act on litigation generally, stating:
The CP Act has changed the litigation landscape. One of the main purposes of that legislation is to reform practice and procedure in civil proceedings... More than ever, the focus is now pointedly on efficiency and cost-effectiveness, albeit that they are not the only, nor the predominant, considerations...[7]
[7]Mandie v Memart Nominees [2016] VSCA 4 (5 February 2016) [42].
Pursuant to s 8 of the CP Act, the Court is required to give effect to the overarching purpose of the CP Act in exercising its powers in relation to civil proceedings, defined as ‘the just, efficient, timely and cost-effective resolution of the real issues in dispute’.
Part 2.2 of the CP Act requires a party to conduct a proceeding in a manner that is consistent with the overarching obligations set out and a party’s legal practitioner must take into account his or her overarching obligations and assist the client to comply with the duties. Section 18 of the CP Act prescribes that, inter alia, any claim in a civil proceeding must have a proper basis on both the legal and factual material before the person to whom the obligations apply. The obligation under s 18 of the CP Act is complementary with the obligation to certify under s 42 of the CP Act. Where any of the overarching obligations are contravened, the Court is empowered to make certain orders, including orders for costs or any other orders in the proceeding, of its own motion or on the application of any party to the proceeding.[8]
[8]Civil Procedure Act 2010, s 29; Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) [2014] VSC 400 (15 December 2014) [87] (Dixon J).
In relation to the estate proceeding, the parties acted efficiently in reaching the estate terms of settlement. They agreed that a mediation should take place promptly having regard to the quantum of the estate and the number of claimants to the estate and settlement was achieved promptly. Since the estate terms of settlement were signed, the estimated liabilities taken in to account at the mediation have been clarified. The liabilities have increased principally because of the estate’s tax liabilities, the most substantial one being a potential liability which may not occur. Nevertheless, based on the now known estate liabilities, all of the intestacy beneficiaries would still benefit financially from the settlement. Those benefits would be more favourable to the intestacy beneficiaries than if the estate proceeding went to trial with the consequent increase in legal costs. If this occurred, there would be a real risk that the outcome would not be as financially favourable to the intestacy beneficiaries as that contained in the estate terms of settlement. Accordingly, subject to the issue of the claimed costs that ought be paid from the estate, I am satisfied that the compromise of the estate proceeding is in the best interests of the infant child.
In relation to the Latchman terms of settlement, although it can be said that it was resolved reasonably promptly once the Latchman proceeding was issued, regard must be had to the drawn out process adopted by Ms Latchman in making her claims against the estate before she issued the Latchman proceeding, as well as her timing in making these claims and whether she had a proper basis for making the claims at all. The effect of Ms Latchman’s conduct has resulted in the estate terms of settlement not being approved by the Court and has caused substantial further costs to the incurred by the estate and the adult children of the deceased.
The financial effect of the Latchman terms of settlement on the intestacy beneficiaries is not a result that can be said to be in the best interests of the infant child, or for that matter, the adult intestacy beneficiaries. The deceased’s widow receives a substantially reduced amount and the deceased’s three children receive nothing. In percentage terms, based on the figures provided by the plaintiff’s solicitors of the value of the estate, the deceased’s widow would receive 49.77 per cent and the legal costs would be 50.23 per cent.
The result of the Latchman terms of settlement is financially disastrous for the estate of the deceased. Whilst it might be said there is a financial benefit arising from the Latchman proceeding ending, that comes at a significant financial cost to all of the beneficiaries of the estate, with no financial benefit to the infant child.
For these reasons, the Court will not approve the Latchman terms of settlement. Further directions
The parties in the estate proceeding and the Latchman proceeding are now required by the Court to re-consider the Latchman terms of settlement in light of these reasons. If they are unable to resolve their differences within two weeks, the Court will invite submissions as to whether Ms Latchman or her legal practitioners have contravened s 18 of the CP Act.
---
2
1
0