Re Graham
[2022] VSC 757
•9 December 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S PRB 2021 20612
| ALISTAIR HAMISH GRAHAM, FIONA SARAH LLOYD and HELEN LOUISE CANNON | Plaintiffs |
| TIMOTHY PETER GRAHAM | Caveator |
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JUDGE: | Moore J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 15 August 2022 |
DATE OF JUDGMENT: | 9 December 2022 |
CASE MAY BE CITED AS: | Re Graham |
MEDIUM NEUTRAL CITATION: | [2022] VSC 757 |
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SUCCESSION – WILLS, PROBATE AND ADMINISTRATION – Caveats – Application by plaintiffs for a grant of representation opposed by caveator – Caveator alleges plaintiffs ought be passed over due to conflict of duty and interest – Prima facie case not established – Caveat dismissed – Monty Financial Services Ltd v Delmo [1996] 1 VR 65; Re Estate of Crane (2005) 93 SASR 198; Gardiner v Hughes (No 2) [2019] VSCA 198.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Jonathan McCoy | Hall & Wilcox |
| For the Caveator | Paul Reynolds | Aitken Partners |
HIS HONOUR:
The deceased died on 28 August 2018, aged 86. She was survived by six children, including the plaintiffs and the caveator.
The deceased left a will dated 28 February 2014. By her Will, the deceased appointed the plaintiffs as executors of her estate and, following payment of all her debts, funeral and testamentary expenses, divided her estate equally between them. The caveator is not a beneficiary under the Will.
The plaintiffs did not initially make an application for a grant of probate in respect of the Will as they maintain that the deceased’s estate is insolvent. However, they brought such an application on 25 November 2021 to avoid the potential costs involved in what they regarded as unnecessary legal proceedings threatened by the caveator.
The inventory of assets and liabilities filed by the executors with their application for probate reveals that the estate is insolvent. It records assets of approximately $4,548.15 and liabilities of approximately $124,074.53, being the balance of a debt owed by the deceased to Phillagree Pty Ltd (the trustee) as trustee for The Phillagree Island Trust (the trust).
The caveator lodged a caveat against the making of a grant of probate on 10 November 2021.
By further amended grounds of objection dated 1 August 2022 (the grounds of objection), the caveator alleges that the plaintiffs ought to be passed over as executors of the Will because of a conflict of interest between their duties as executors and their personal interests. The caveator does not, however, challenge the validity of the Will.
The principal issue for determination is whether the grounds of objection disclose a prima facie case in opposition to the plaintiffs’ application for a grant of representation. There is also an issue as to whether the caveator has standing to maintain his caveat. It is convenient to first consider whether the caveator has established a prima facie case.
Principles of law
The Court of Appeal authoritatively addressed the approach to determining the existence of a prima facie case in Gardiner v Hughes (No 2).[1] Although made in the context of an application for the revocation of a grant, the relevant statements of principle by the Court are equally applicable to cases involving the objection to the making of a grant.
[1][2019] VSCA 198.
The Court of Appeal identified that the task for a caveator is to show that there is a ‘case for investigation’, or ‘something to go on’.[2] The question is whether the allegations made by the caveator, assuming them to be true, call for further investigation.[3] Mere speculation will not, however, suffice.[4] The Court explained that:
… There may be a case for investigation even if all the facts needed to justify the inference in question are not yet known or alleged, but there is enough to “go on” to call for a trial. That will be the case if there is a reasonable explanation for the facts relied upon which, if shown to be correct, would justify revoking probate. Each case will of course depend on its particular facts. But in every case the onus rests on the party raising the doubt as to validity.[5]
[2]Ibid [41].
[3]Ibid [80].
[4]Ibid [41].
[5]Ibid [42] (citations omitted).
In order to make out a prima facie case, it is not necessary for a caveator to provide affidavits in support of their application; in Gardiner (No 2) the case proceeded on the basis of particulars alone.[6] The Court of Appeal explained the application of the prima facie case requirement as follows:[7]
[A]pplication of the prima facie test did not require a determination whether or not the particulars, in isolation or taken together, justified an inference of testamentary incapacity.
Instead, the question was whether the allegations, assuming them to be true, called for further investigation as to the testamentary capacity of the deceased. If so, resolution of that question was a matter for trial. The fact that a particular allegation might, depending on the context, either support an inference of incapacity or not did not mean that the case did not warrant further investigation based on that allegation. That very process of investigation would determine whether or not the inference should be drawn.
[6]Ibid [40].
[7]Ibid [79]–[80].
In relation to the principles relating to passing over, in Monty Financial Services Ltd v Delmo,[8] Ashley J stated that, in considering an application to pass over an executor, a testator’s selection of executor ‘should not be disregarded except, at the least, for serious reason’.[9] His Honour referred to the Court’s inherent jurisdiction to remove a trustee where there is a conflict of duty and interest,[10] but stated that:[11]
It is not every conflict of duty and interest which should result in removal of an executor. The intention of the testator that the executor be a particular person should not lightly be set aside - whether before or after grant. Again, the will itself may show that the testator was aware that his or her executor would face a potential conflict of duty and interest. In such a case - as may arise, for example, where an executor is also one of the beneficiaries - it would not be right, without more, to remove the executor. …
[8][1996] 1 VR 65.
[9]Ibid 75.
[10]Ibid 82.
[11]Ibid 83.
These and other principles were referred to by Besanko J in Re Estate of Crane.[12] His Honour identified two general principles relevant to determining whether the Court will exercise its jurisdiction to pass over an executor: [13]
First, it is clearly established that a court will not readily pass over a named executor and, in general, a person who is named as executor by a testator is entitled to a grant of probate. …
Secondly, when a court does exercise the jurisdiction it does so having regard to the due and proper administration of the estate and the interests of the parties beneficially entitled to the estate.
[12](2005) 93 SASR 198 (‘Re Crane’).
[13]Re Crane (n 12) [24].
His Honour described the latter as the ‘guiding principle’.[14] In considering the exercise of the jurisdiction, his Honour also recognised that ‘in the ordinary case, a potential conflict of interest will not be sufficient to justify the exercise of the jurisdiction.[15] The principles referred to by Besanko J in Re Crane have been applied by this Court.[16]
[14]Re Crane (n 12) [40].
[15]Ibid.
[16]See for example Re Warner [2019] VSC 656, [16] and Sherwell v Young [2017] VSC 115.
Prima facie case – caveator’s submissions
The grounds of objection advanced by the caveator were that the plaintiffs are in a position of conflict between, on the one hand, their duties as executors and, on the other, their interests:
(a)as beneficiaries under the Will who have received substantial benefits from the deceased inter vivos in circumstances that require careful examination; and
(b)as directors of the corporate trustee of two discretionary family trusts of which they are specified beneficiaries and which has received substantial benefits from the deceased inter vivos in circumstances that require careful examination.
It is appropriate to set out in full the particulars of this alleged conflict of interest advanced by the caveator:[17]
[17]In final form incorporating various amendments.
1. The deceased died on 28 August 2018.
2. The deceased left a will dated 28 February 2014 (the Will).
3.The deceased was survived by her six children, including the three plaintiffs and the caveator.
4. The Will:
(a) appointed the plaintiffs as executors;
(b)gave the deceased’s furniture and household effects, motor vehicles and personal chattels to the plaintiffs; and
(c)gave the residue of the deceased’s estate to the plaintiffs in equal shares.
The Phillagree Trust
5.By deed executed on 14 March 1997, the Phillagree Island Trust was established.
6. Phillagree Pty Ltd was the trustee of the Phillagree Island Trust.
7.The Specified Beneficiaries named in the trust deed are the plaintiffs and the deceased’s son, Ian Charles Graham.
8.At all material times since 2011, the plaintiffs have been the directors of Phillagree Pty Ltd.
The Phillagree Island Trust
9.By deed executed on 26 March 1997, the Phillagree Island Trust was established with the deceased’s late husband, Peter Warner Graham, as trustee.
10.On 26 March 1997, Peter Warner Graham retired as trustee and Phillagree Pty Ltd was appointed new trustee of the Phillagree Island Trust.
11.The Specified Beneficiaries named in the trust deed are the plaintiffs and the deceased’s son, Ian Charles Graham.
Gift from the deceased to Phillagree Pty Ltd atf the Phillagree Island Trust
12.By deed executed on 30 January 2017, the deceased purported to give and Phillagree Pty Ltd (atf the Phillagree Island Trust) purported to accept a gift of $475,470 (the Gift).
Direction from the deceased to repay loan to Phillagree Pty Ltd atf the Phillagree Island Trust
13.By document executed on 30 January 2017, the deceased purported to direct her solicitors:
(a)to repay a loan of $369,600 $364,600 to Phillagree Pty Ltd atf the Phillagree Island Trust; and
(b)to pay the Gift to Phillagree Pty Ltd atf the Phillagree Island Trust.
Payment of the deceased’s RAD by Phillagree Pty Ltd atf the Phillagree Island Trust
14.On 30 January 2017, Phillagree Pty Ltd atf the Phillagree Island Trust purportedly resolved:
(a) to accept the repayment of the loan of $364,600 and the Gift; and
(b)to pay for the deceased’s nursing home refundable accommodation deposit (RAD) as an investment of the trust, despite the RAD not being income producing, and possibly wasting in nature.
15.On the same day, Phillagree Pty Ltd purported to direct its solicitors to pay $840,070 to the deceased’s nursing home provider (Arcare) in satisfaction of the amount due by the deceased to Arcare for the RAD.
Direction to repay RAD direct to the Phillagree Island Trust atf the Phillagree Island Trust
16.By deed poll executed on 30 January 2017, the deceased executed a document entitled ‘Irrevocable Direction’ (the Irrevocable Direction).
17.The Irrevocable Direction recited that Phillagree Pty Ltd atf the Phillagree Island Trust had agreed to pay the RAD to Arcare on behalf of the deceased.
18. By the Irrevocable Direction, the deceased purported (inter alia):
(a)to direct Arcare to repay the RAD direct to Phillagree Pty Ltd upon the deceased’s leaving the nursing home or her death;
(b)in the event that the RAD remaining was less than the RAD paid on entry, to direct that Phillagree Pty Ltd would be repaid first, in full or to the fullest extent possible, before any money was refunded to the deceased or her estate; and
(c)to indemnify Arcare and Phillagree Pty Ltd against any loss incurred by them resulting from their reliance on the Irrevocable Direction.
18A. The Gift and the Irrevocable Direction appears to have had the effect of transferring ownership of the majority of the deceased’s monetary estate to the Phillagree Island Trust.
Inter vivos gifts
19.In 1997, the deceased and her husband, Peter Warner Graham, transferred a property at 123 Cohuna Island Rd, Cohuna (Volume 10162 Folio 389) and a property and carpark at Flat 2, 9–15 Palmer St, East Melbourne (Volume 9118 Folios 056 and 072) to Phillagree Pty Ltd.
20.During her lifetime, the deceased owned many valuable pieces of artwork, including:
(a)a Dickerson charcoal artwork valued at approximately $10,000; and
(b) other artworks valued at approximately $200,000.
21.On 23 March 2021, the plaintiffs told the caveator that the deceased gifted a number of pieces of artwork during her lifetime and that there were no pieces of any significant value owned by the deceased at the date of her death.
Discrepancies in the accounts of the Phillagree Island Trust financial statements
22.By letter dated 26 August 2019, the plaintiffs by their solicitors Hall & Wilcox provided to the caveator the financial statements for the Phillagree Island Trust for the 2016, 2017 and 2018 financial years. The financial statements for the Phillagree Island Trust for the financial year ended 30 June 2016 provided by the plaintiffs shows an unsecured loan owed by the deceased in the amount of $346,864.
23.As noted at paragraph 13 above, on 30 January 2017, the deceased purported to direct her solicitors to repay a loan of $369,600 $364,600 to Phillagree Pty Ltd atf the Phillagree Island Trust.
24.The financial statements for the Phillagree Island Trust for the financial year ended 30 June 2017 provided by the plaintiffs shows an unsecured loan owed by the deceased in the amount of $269,028.
25.The financial statements for the Phillagree Island Trust for the financial year ended 30 June 2018 provided by the plaintiffs shows an unsecured loan owed by the deceased in the amount of $195,107.
26.By letter to the caveator dated 26 August 2019, the plaintiffs represented that the deceased’s estate was insolvent, comprising assets totalling $8000 and liabilities totalling $269,000.
26A. By letter to the caveator dated 23 March 2021, the plaintiffs represented that the deceased’s estate was insolvent, comprising assets of cash in the bank and household contents totalling $8000, and liabilities of only $195,107 rather than $269,000 as advised in their 26 August 2019 letter.
26B. By letter dated 21 July 2021, the caveator, among other things, drew the plaintiffs’ attention to the fact the 2017 financial records failed to record the Gift and loan repayment and that the deceased’s estate should be solvent if those errors in the financial statements were rectified.
26C. On 9 June 2022, the accountant for the Phillagree Island Trust, Damien Francis Burke of Koustas & Co Chartered Accountants swore an affidavit in the proceeding that was filed on behalf of the plaintiffs on the same day.
26D. Mr Burke deposes in his affidavit that the discrepancies in the Phillagree Island Trust financial statements are the result of an ‘accounting error’ and exhibits ‘amended’ financial statements for the year ended 30 June 2018 (‘Amended Financial Statements’), as well as a table summarising loan account movements and capital gifts by the deceased to the Phillagree Island Trust (‘Summarising Table’) in 2017 and 2018.
26E. The Amended Financial Statements and Summarising Table show that in the 2017 financial year, when the deceased was aged 85 years, that allegedly:
(a)the deceased paid a total of $404,916.20 to her loan account with the Trust to pay down her loan balance including:
(i)the ‘loan repayment’ of $364,600 to discharge her loan account balance of only $346,864, leaving a surplus of $17,736;
(ii) ‘Straw Payments’ of $15,550;
(iii) an income distribution from the Trust to the deceased of $24,766.20;
(b)the deceased made the following capital gifts to the Trust totalling $607,310:
(i) the Gift of $475,470;
(ii)Pension income from the deceased’s self-managed super fund of $131,840;
(c)the Trust paid the following expenses for the deceased totalling $94,319.80 that were treated as loans to the deceased:
(i) Arcare fees of $41,596.61;
(ii)‘Other Expenses and Fees’ of $52,723.19, without further explanation, despite the fact that the deceased resided in aged care secured by a Refundable Accommodation Deposit and is unlikely to have had significant expenses in addition to her Arcare fees, leaving a closing loan account balance of $36,267.60 for the loans allegedly owed by the deceased.
26F. In total in the 2017 financial year, after clearing her loan debt of $346,864, the deceased’s net estate was reduced by $759,682, entirely due her alleged transactions with the Phillagree Island Trust, based on the payments into her loan account, her capital gifts and the incurring of further loans.
26G. The second and third plaintiffs knew of the Gift and loan repayment as they were present at the Directors Meeting on 30 January 2017 at which they resolved, in their capacities as directors of the trustee of the Phillagree Island Trust, to accept the repayment by the deceased of the loan of $364,600 and the giving of the Gift.
26H. The Amended Financial Statements and Summarising Table for the 2018 financial year, when the deceased was aged 86 years, show that allegedly:
(a)the deceased paid $28,015.43 to her loan account with the Trust to pay down her alleged loan balance including:
(i) ‘Straw Payments’ of $585;
(ii)an income distribution from the Trust to the deceased of $27,430.43;
(b)the deceased also made a ‘capital gift’ of her pension income totalling $153,500;
(c) the Trust paid the following expenses for the deceased totalling
$107,594.92 that were treated as loans to the deceased, despite her making a capital gift of her superannuation income that exceeded her alleged expenses:
(i) Arcare fees of $51,581.55;
(ii)‘Other Expenses and Fees’ of $56,013.37, without further explanation, despite the fact that the deceased resided in aged care secured by a Refundable Accommodation Deposit and is unlikely to have had significant expenses in addition to her Arcare fees;
leaving a closing balance of $115,847.09 for her loan account.
26I. In total in the 2018 financial year, after clearing her loan debt of $36,267.60 from 2017, the deceased’s net estate was reduced by $252,842.75, entirely due her alleged transactions with the Phillagree Island Trust, based on the payments into her loan account, her capital gifts and the incurring of further loans.
26J. The Plaintiffs have provided no supporting documentation, such as deeds of gift or resolutions of the trustees, to verify the further loans allegedly made to the deceased by the Trust and the further capital gifts allegedly made by her to the Trust, other than the Gift, in 2017 and 2018.
26K. Despite the caveator first raising his concerns regarding the assets and liabilities of the deceased’s estate and the financial statements of the Phillagree Island Trust in August 2019, Mr Burke’s affidavit filed 9 June 2022 was the first time the plaintiffs have:
(a)conceded there was an error in the financial statements and provided ‘amended’ accounts;
(b)made that caveator aware that the deceased had a self-managed superannuation fund;
(c)claimed the Trust paid aged care fees and other expenses for the deceased and treated such payments as loans – despite the caveator requesting by letter dated 20 January 2021 a copy of any loan agreement between the deceased and either of the Trusts;
(d)advised that the deceased allegedly made significant capital gifts to the Trust of her income from her self-managed super fund.
26L. The plaintiffs and the accountant engaged by them in their capacities as the directors of the corporate trustee of the Phillagree Island Trust have not explained:
(a)how the error in the financial statements of the Trust occurred and remained unrectified for five and a half years until 9 June 2022 when the plaintiffs were aware of the loan repayment and Gift;
(b)why this error was not rectified when the caveator highlighted inconsistencies in the financial statements to them 2.5 years ago by letter dated 20 January 2020;
(c)why, since the deceased’s death, the plaintiffs have provided four different figures for the loan owed by the deceased to the Phillagree Island Trust being:
(i) $269,000 in their letter dated 26 August 2019;
(ii) $195,107 in their letter dated 23 March 2021;
(iii)$124,074.53 in their inventory of assets and liabilities dated 25 November 2021;
(iv)$115,847.09 in the ‘amended’ financial statements exhibited to Mr Burke’s affidavit made 9 June 2022; and
(d)why the financial statements are only being rectified almost 7 months after the caveator filed his original grounds of objection.
Inventory of assets and liabilities
27.According to the inventory of assets and liabilities filed in support of the plaintiffs’ application for probate, as at 25 November 2021 the deceased’s estate was insolvent, with assets totalling $4,548.15 and liabilities totalling $124,074.53, comprising:
(a) $3000 in a bank account;
(b) a refund of $1548.15 from the deceased’s health insurer; and
(c)the balance of a loan owed by the deceased to Phillagree Pty Ltd of $124,074.53.
27A. As outlined above at paragraph 26L, the loan balance in the Inventory is inconsistent with their previous advice regarding the liabilities of the estate on 26 August 2019 and 23 March 2021, and their most recent position in Mr Burke’s affidavit made 9 June 2022.
Conclusion
28.The circumstances described above are such as to require careful examination.
At the most general level, the caveator’s case was that the plaintiffs are subject to a classic conflict of interest between, on the one hand, their duty as executors to bring in the assets of the estate and, on the other, their personal interests as beneficiaries and controllers of the trust. This conflict was said to arise because of numerous inter vivos transactions referred to in the grounds of objection which collectively had the effect of emptying the assets from the deceased’s estate and moving them into the trust, being a discretionary family trust for which the plaintiffs are the specified beneficiaries and which they controlled as directors of the trustee.
The collective value of these transactions, which I will refer to as ‘the impugned transactions’, was approximately $1.3 million. They were said to warrant very careful investigation and the plaintiffs were particularly unsuited to that task. The caveator submitted that a prima facie case was made out because it was reasonably arguable that the inter vivos transactions referred to in the grounds of objection warranted very careful investigation.
The principal footing upon which the caveator relied in his submissions was that the impugned transactions which resulted in some $1.3 million being removed from the deceased’s estate in the last 2 years of her life were of themselves highly unusual. The trustee was the beneficiary of those transactions, and the plaintiffs were the directors of the trustee which authorised both ‘sides’ of those transactions. It was submitted that this, of itself, was suspicious and merited investigation. The qualities said to underline the suspicion were that the plaintiffs were the actors on both sides of the transactions; that some $1.3 million was removed from the estate and moved into a trust ‘for the plaintiffs’ benefit under their control’.
The impugned transactions were comprised of the following amounts, which are also referred to in the grounds of objection:
(a) a gift by the deceased to the trustee on 30 January 2017, which the trustee accepted, of $475,470;
(b) on 30 January 2017, the deceased directed her solicitors to repay a loan of $364,600 to the trustee and, on the same date, the trustee accepted that repayment;
(c) the creation of a loan to the deceased from the trust in 2017 in the total amount of $94,319.80 comprising:
(i) ‘Arcare fees’ totalling $41,596.61; and
(ii) ‘Other expenses and fees’ totalling $52,723.19.
(d) the making of a further loan to the deceased from the trust in 2018 in the total amount of $107,594.92 comprising:
(i) ‘Arcare fees’ totalling $51.581.55; and
(ii) ‘Other expenses and fees’ totalling $56, 013.37; and
(e) transfers to the trust from the deceased’s self-managed superannuation fund of $131,840 in 2017 and $153,500 in 2018.
The caveator’s principal case was that, like the transactions in Re Crane and Mataska v Brown,[18] the very nature of these transactions merited careful investigation, that the plaintiffs had benefitted from them and, as a result, they were not the appropriate persons to carry out those investigations.
[18]Re Crane (n 12); Mataska v Brown [2013] VSC 62.
In addition to the character of the transactions themselves, the caveator also placed reliance on what was said to be the ‘evasiveness’ of the plaintiffs in relation to the composition of the estate. This was said to add to the need for there to be a careful investigation of the propriety of the impugned transactions. The caveator relied on three matters in support of this claim. First, when questioned by the caveator, the plaintiffs had given, at different times, four different amounts as representing the estate’s total liabilities, ranging from approximately $115,000 and $269,000.[19] Secondly, the plaintiffs’ failed to acknowledge these discrepancies and to respond to correspondence from the caveator. Thirdly, the caveator found nature of the explanations provided for these discrepancies unsatisfactory.
[19]Being the amounts referred to in paragraph 26L(c) of the grounds of objection on the different dates their identified.
Consideration
Upon careful consideration and in light of the materials relied upon by the plaintiffs,[20] the grounds of objection and the contents of the affidavits relied upon by the caveators[21] do not reveal a case for investigation. Contrary to the caveator’s submission, the inter vivos transactions involving the deceased’s personal estate have no parallel with the dubious and inherently suspicious dealings considered in Re Crane and Mataska v Brown.
[20]Affidavit of Damien Francis Burke dated 9 June 2022 and affidavits of the plaintiffs dated 25 November 2021 and 8 December 2021.
[21]Affidavits of Daniel James Black dated 28 July 2022 and 3 August 2022.
Mr Damien Burke is a chartered accountant in a firm of accountants which has provided accounting advice to the trust since 2012. In an affidavit filed in the proceeding, Mr Burke exhibited the minutes of meeting of directors of the trustee held on 30 January 2017 (the minutes). Amongst other things, the minutes note that:
(a) the deceased proposed to make a gift to the trust in the amount of $475,470;
(b) the deceased proposed to repay a loan owed by her to the trust in the amount of $364,600; and
(c) the trustee intends to pay the amount of $840,070 to Arcare Pty Ltd to pay for the refundable accommodation deposit (RAD) to secure the deceased’s accommodation in the Arcare facility in Caulfield, and to enter into an ‘Irrevocable Direction - Third Party Contributor' to ensure the RAD is repaid to the trust on the deceased’s death, or on the termination of her accommodation arrangements with Arcare.
The minutes then record that the directors of trustee resolved as follow:
(a) to accept payment of the sum of $364, 600 into the Hall & Wilcox trust account held on its behalf from the Hall & Wilcox trust account held on behalf of the deceased in repayment of the loan owed to the trustee by the deceased;
(b) execute the Deed of Gift and accept the gift of $475,470 from the deceased to the trust pursuant to the Deed of Gift, and for the gift to be transferred into the Hall & Wilcox trust account held on its behalf from the Hall & Wilcox trust account held on behalf of the deceased;
(c) to purchase the RAD for the benefit of the deceased as an investment of the Trust, despite the RAD being an investment that is not income producing, and possibly being an investment that is wasting in nature;
(d) to execute the 'Irrevocable Direction - Third Party Contributor' and provide the same to Arcare; and
(e) to direct Hall & Wilcox to pay the amount of $840,070 from the trust account held on its behalf to Arcare in payment of the RAD and execute an Irrevocable Direction to give effect to this direction.
Mr Burke also exhibited to his affidavit a deed of gift apparently executed by the deceased relating to her the gift to the trust of $475,470.
Importantly, the grounds of objection do not contain any allegation that the deceased lacked legal capacity at any time before her death. Nor do they contain any allegation of undue influence by any person over the deceased’s decision-making at any time.
It is apparent from the above that $840,070 of the impugned transactions totalling $1.3 million was paid by the deceased to the trust which in turn applied those funds for the purposes of funding the deceased’s accommodation at an aged care facility. On its face, there is no arguable basis to doubt that this was an expenditure of funds for the deceased’s benefit.
The same conclusion emerges in relation to the remainder of the impugned transactions.
Mr Burke deposes in his affidavit that the trust paid for the deceased’s living and accommodation expenses during her lifetime and treated these amounts as loans. This is reflected in the contents of the trust’s amended 2018 financial statements which are exhibited to Mr Burke’s affidavit. The summary of the movements in the deceased’s loan account which is also exhibited to Mr Burke’s affidavit, records loan amounts equal to those components of the impugned transactions referred to in subparagraphs 18(c) and (d) above. They and the 2018 financial statements also refer to capital gifts in the form of the pension income from the deceased’s self-managed superannuation fund in the amounts equal to the remaining component of the impugned transactions referred to in subparagraph 18(e) above.
Although the trust benefited from receiving the funds the subject of the impugned transactions, it is apparent that the trust used those funds for the benefit of the deceased. There is no suggestion that the plaintiffs personally benefited from any of the transactions. Neither is there any suggestion that the deceased lacked capacity or was the subject of duress, undue influence or unconscionable conduct in making any of these transactions. In those circumstances, the caveator’s principal grounds of objection based upon the claimed ‘highly unusual’ nature of the impugned transactions do not, upon examination, raise a case for investigation.
Neither is a case for investigation apparent from the claimed ‘evasiveness’ of the plaintiffs in relation to the composition of the estate. The discrepancies in the trust’s financial statements,[22] which the caveator argued bolstered the need for an investigation into the propriety of the impugned transactions, were explained by the plaintiffs to be the result of accounting errors.
[22]As referred to at [2120] above.
In the first instance, the 2018 financial statement of the trust initially provided to the caveator (in 2019) was inaccurate insofar as it was, in fact, a statement from 2017 and therefore outdated. The second financial statement provided to the caveator (which I will refer to as ‘the unrectified 2018 financial statement’) was purportedly an up-to-date financial statement for the 2018 financial year, but was inaccurate to the extent that it failed to account for two substantial transactions the deceased had made the previous year. I will outline the circumstances which led to the accounting error in the creation of the unrectified 2018 financial statement below. The third and fourth financial statements provided to the caveator are both accurate insofar as they rectify the accounting error of the statement that preceded them, but are accurate as to different points in time: the third statement being accurate as for the 2018 financial year, and the fourth statement being accurate as at the date of the deceased’s death on 28 August 2018 (thereby accounting for the extra two months in which the deceased lived and incurred additional debt that was owed to the trust).
In relation to the unrectified 2018 financial statement, Mr Burke deposed to the fact that this statement, prior to being rectified, did not account for either the loan repayment or deed of gift made by the deceased on 30 January 2017. This was because those transactions did not pass through the bank account of the trust, but were transacted through the external trust account of the trustee’s solicitor, Hall & Wilcox. The minutes of the meeting, which I have referred to above and which record the relevant resolutions concerning the transactions, reveal that the loan repayment and the gift were to be transferred into the Hall & Wilcox trust account. [23] The two rectified financial statements (which were subsequently provided to the caveator), adjust the 2017 comparative balances to account for the omitted transactions, which had the consequence of the plaintiffs providing the caveator with seemingly inconsistent amounts in relation the estate’s total liabilities.
[23]See above at [23(a)-(b)].
For the above reasons, I am satisfied that the discrepancies in the value of the estate’s total liabilities were the result of an accounting error. Contrary to the caveator’s submissions, I do not regard any of the explanations provided by Mr Burke and in submissions as unsatisfactory
In relation to the purported failure of the plaintiffs to acknowledge the discrepancies or respond to correspondence by the caveator, the plaintiffs at trial conceded that their explanations may have come late, in part, because of the historical animosity and mistrust between the parties and in a context where: there was a significant delay on the part of the caveator to respond to the initial contact made by the plaintiffs, the caveator had made repeated requests for information to which he was not entitled, and there was a protectiveness of the information based on instructions the plaintiffs received from their mother. The delay was further explained on the basis that all the parties were aware that the estate was insolvent and the rectification of the accounting errors on the financial statements would not have changed this fact. These explanations are credible and consistent with documents annexed to the affidavits filed by the parties. The caveator’s complaints about the conduct of the plaintiffs do not ground a case for investigation.
The only remaining aspects of the caveator’s grounds of objection concern the claims made about inter vivos transactions in paragraphs 19-21 of the grounds. These were not the subject of any submissions by the caveator and lack any particulars so as to raise a case for investigation.
In light of my conclusion that the grounds of objection do not disclose a prima facie case in opposition to the plaintiff’s application for a grant of representation, it is unnecessary to consider the question of the caveator’s standing.
The Court will order that the caveat be dismissed and that the proceeding be referred to the Registrar of Probates for the making of a grant of probate of the Will of the deceased, subject to any requirements the Registrar may have.
Within seven days the parties are to file any proposed order in respect of costs or, in the absence of agreement, short submissions on costs limited to three pages.
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