Re Johnson; Blackham v Blackham
[2024] VSC 497
•23 August 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2023 05060
IN THE MATTER of s 34 of the Administration and Probate Act 1958 and s 48 of the Trustee Act 1958
-and-
IN THE MATTER of r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015
-and-
IN THE MATTER of the will and estate of SHIRLEY FAY JOHNSON deceased
| DIANNE FAY BLACKHAM (in her capacity as executor of the estate of SHIRLEY FAY JOHNSON, deceased) | Plaintiff |
| v | |
| DARREN LESLIE BLACKHAM (in his capacity as executor of the estate of SHIRLEY FAY JOHNSON, deceased) | Defendant |
---
JUDGE: | Keogh J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 August 2024 |
DATE OF JUDGMENT: | 23 August 2024 |
CASE MAY BE CITED AS: | Re Johnson; Blackham v Blackham |
MEDIUM NEUTRAL CITATION: | [2024] VSC 497 |
---
ADMINISTRATION AND PROBATE — Application to remove executor — Administration and Probate Act 1958, s 34 — Trustee Act 1958, s 48 — Whether defendant has failed to fulfill duties as executor — Whether defendant has irreconcilable conflict between duties as executor and personal interest — Whether defendant has failed to cooperate to ensure the efficient and timely sale of the estate’s property to the detriment of the beneficiaries — Whether defendant has adopted unreasonably antagonistic approach to dealings with co-executor and others — Application granted.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | S V Kipen | Malkin Lawyers |
| For the Defendant | Self-represented |
HIS HONOUR:
Introduction
The parties are the named co-executors and trustees of the estate of Shirley Fay Johnson (‘the deceased’), who died in March 2022. They have obtained probate of the deceased’s last will.
The deceased’s estate is comprised almost entirely of a residential property in Hedgerow Court, Narre Warren South (‘the property’). The defendant resides in the property but does not pay rent to the estate.
The estate has not been administered. The property remains in the name of the deceased.
The plaintiff wishes to sell the property, administer the estate and therefore discharge her duties to the beneficiaries. She alleges that the defendant has failed to fulfil his duties as executor. She alleges first that the defendant has an irreconcilable conflict between his duty as executor to sell the property, and his personal interest in continuing to reside in the property that he regards as his home; second, that because of the conflict, the defendant has failed to cooperate to ensure the efficient and timely sale of the property causing an unwarranted delay in the administration of the estate to the detriment of the beneficiaries; and third, that in his dealings with the plaintiff and other parties the defendant has adopted an unreasonably antagonistic approach. The plaintiff seeks orders removing the defendant as co-executor and trustee of the deceased’s estate.
For the following reasons I conclude the defendant should be removed as co-executor and trustee of the deceased’s estate.
Background
The parties are siblings and children of the deceased. There is one further child of the deceased, Paris Inanc (‘Inanc’).
At the date of her death the deceased resided in the property. The defendant has also resided in the property since around 2010.
The deceased left a will dated 26 November 2020 (‘will’) appointing the parties as co-executors and trustees. The plaintiff, the defendant and Inanc are the beneficiaries of the estate as tenants in common in equal shares.
The deceased died on 26 March 2022. The parties were granted probate of the will on 18 August 2022.
The deceased’s estate consists primarily of the property. The plaintiff estimates the value of the property at between $700,000 and $750,000. The remaining assets of the estate are a motor vehicle, which is in the possession of the defendant; household furniture in the property; and savings of approximately $2,000 in the deceased’s bank account.
The parties initially engaged solicitors Balfe & Webb in relation to the application for probate of the deceased’s will and administration of the deceased’s estate. Balfe & Webb requested that the defendant provide them with verification of identity documentation, including a birth certificate, for the title of property transmission application for the property to be listed in the parties’ names.
On 30 November 2022, Inanc sent an email to Balfe & Webb enquiring about listing of the property for sale and the timely administration of the estate. Kiralee Middleton, the solicitor at Balfe & Webb with conduct of the matter, forwarded the email from Inanc to the parties. Middleton’s email included:
‘[Inanc] is obviously watching closely and I have no doubt she will get a new lawyer and commence litigation against you if there isn’t obviously progress towards the sale of the house soon. [To the defendant] I hope you have been able to obtain your birth certificate at this stage, if so could you please urgently bring it in to our office so that we can transfer the property [into] your names as Executors in preparation for the sale’.
On 7 December 2022, the defendant emailed Middleton confirming that while he had applied for a birth certificate the ‘process could take a month or more’. The defendant said, in relation to listing the property for sale:
In regard to selling the house, I don't know why [Inanc] was told it would happen in December because I don't recall agreeing to anything specific, and I'm still not sure about the time frame. I'm hoping it'll be fairly early next year but I don't know what I'm doing yet. If [Inanc] wants to find a new lawyer and commence litigation that's up to her. If I was smarter I'd probably do likewise to see how long I can avoid having to move out, given my current situation. For the record, preparing the property for sale isn't the problem as such, but my health hasn't been great so I don't want to rush and stress and end up sick. I've had a doctors certificate since June because I haven't been able to work and the current one is valid until the end of February. In addition to my usual health problems I've been through several bouts of fairly severe depression since our mother passed away, and it didn't help to have [Inanc’s] mentally ill son constantly turning up at all hours and causing me stress, at least until he did something stupid enough for the police to apply for an intervention order to prevent him coming here.
The defendant said that his ‘ex partner Rhonda Ebsary’ (‘Ebsary’) had been living in the property with him since about mid-June 2022. The defendants’ email concluded:
Aside from all that, I'm fairly certain we haven't had more than two consecutive days without rain since April, and I have a garage full of equipment to drag out and sort through, so I haven't started on that yet. Hopefully I'll be able to soon, but [Inanc] will just have to wait.
The plaintiff responded to Middleton with an email dated 13 December 2022, explaining that she had visited the property a few days earlier to discuss vacating the property and Inanc’s foreshadowed legal proceedings with the defendant. She said that the defendant became ‘abusive’ and ‘went on a rant saying [that] he was the one living [in the property] and [that] he’d decide what happens’. The plaintiff noted that she just wanted to ‘get it done’ and asked for suggestions on how to proceed.
On 14 December 2022, the defendant sent a lengthy email to Middleton that is replete with pejorative remarks about his siblings. These include referring to Inanc as a ‘pathological liar’ who slandered him with lies and acted selfishly which adversely affected his health, and that the deceased ‘would be as disgusted as [he is] with [the plaintiff’s] selfish and uncaring behaviour’. The defendant said that he had ‘repeatedly requested to be given until early next year to get [himself] organised, work out [his] financial position and be ready to put the house up for sale’. He said that the plaintiff had ‘made it perfectly clear [she] doesn’t care about [his] needs or that [he has] lived in the house for over 12 years and this is [his] home until [he moves] out’. In relation to sale of the property, the defendant said:
Anyway, I'm done asking to have my needs taken into consideration. Therefore I'm informing you I intend to give myself a full year from the date of our mother's death to be ready to move out and put the house up for sale, so please inform [Inanc] and [the plaintiff] if they think that's unreasonable given my circumstances, and given this house has been my home for over 12 years, I’ll be obtaining legal advice in January with a view to contesting our mother's will. If they'd prefer to spend a large portion of the value of the estate on lawyers and end up in mediation instead of being reasonable, I'll leave that choice up to them. I'm also requesting they explain why they're in such a hurry to have the house sold, because at the moment they've given no reason why asking them to wait a few more months is an unreasonable request. …
My offer to be ready to move out and sell the house by April will also be dependent on the legal advice I receive.
When the defendant was asked about an interaction he had with the plaintiff in December 2022 regarding the sale of the property, he said:
So in December 2022, you decided that you would have a year from your mother's death to move out and put the house up for sale? - - - At least, yes.
And that was your decision? - - - Yes.
And you made that unilaterally without input from [the plaintiff] and [Inanc]? - - - I did that - I made that in spite of [the plaintiff’s] attitude.
The defendant sent another email to Middleton on 14 December 2022, questioning why he was being pushed to put the property on the market in December in light of what he said was Middleton’s previous advice to the parties ‘that December and January would be the worst time of year to sell a house’. Middleton’s responding email sent on the same day states:
I have reviewed my notes of our meeting on 14 April this year and can confirm that we discussed the timeline of the sale of the property and it was agreed that you and [the plaintiff] would try and have it on the market by the end of this year, which I then relayed to [Inanc’s] solicitor.
…
My advice regarding selling around the end of the year is simply regarding the fact that auctions generally are not held on the 4-5 weekends between late December and late January.
Middleton continued as follows:
If the property goes on the market in April it is unlikely the Estate would be finalised before July or August at the earliest, however it is entirely up to yourself and [the plaintiff] to agree on the timeframe. If there is clear evidence that there is progress being made towards selling the house then I can pass this on to [Inanc] and I doubt she would go to the cost and effort of obtaining a lawyer over the matter of a few months’ delay.
I would also remind you that I act for you and [the plaintiff] jointly as Executors, and my role is to facilitate the administration of the Estate and protect you from liability. My advice to push forward with the sale as soon as reasonably practicable is because I must objectively advise you of the course of action that is in your best interests as Executor. Whilst I may personally have sympathy for your circumstances that does not change the legal facts of the situation and that is what I must advise you on. On that note I must mention that if you and [the plaintiff] cannot provide me with joint instructions I must cease to act until any dispute is resolved.
On 20 December 2022, Middleton emailed the defendant confirming that the plaintiff had agreed to the property going on the market for sale in April 2023.
On 10 February 2023, Balfe & Webb emailed the parties explaining the requirement to obtain a discharge of a registered mortgage before they could be registered as legal personal representatives of the deceased’s estate on the title to the property. The email requested that each party complete and return an attached discharge authority relevant to the mortgage, and that the parties may ‘each complete a separate form, if that is convenient’.
On 3 April 2023, Middleton emailed the parties advising that she had received an email from Inanc enquiring why the property had not yet been listed for sale, and requesting an update. The plaintiff responded to Middleton in an email of 5 April 2023, stating that the defendant had not yet vacated the property and asking for advice on whether she could be removed as executor due to stress.
On 6 April 2023, Middleton responded to the plaintiff stating:
That is very disappointing to hear, and I understand your frustration. At this stage you may wish to seek independent legal advice about your options as Executors can be removed but it requires a Court Order.
I have not had any response from [the plaintiff] to my email, or previous emails from myself and Heather requesting he sign the mortgage discharge and provide a copy of his health care card.
Unfortunately we are now being placed in a similar situation to yourself, if we don't receive instructions and cooperation from [the plaintiff] very soon to sell the property we will be forced to cease acting.
In cross-examination, the defendant was asked:
Balfe & Webb asked you for an update on the sale to pass on to [Inanc] in April 2023, didn't they? - - -Yeah. So it was quite a disgusting example of a solicitor's behaviour, if I remember correct.
And you were aware that [Inanc] still wanted the property sold? - - - [Inanc] is a total narcissist. She - she hasn't asked about my situation or how things are progressing in any way, any more than the plaintiff did.
On 11 April 2023, the defendant responded to Middleton saying that he was ‘not ready’ to list the property for sale. He cited reasons including his battle with Centrelink to obtain benefits, ill health, and inability to find or pay for alternative accommodation. The email contained further pejorative commentary by the defendant about his siblings, including a reference to the ‘unbelievable selfish attitude of [his] vulture sisters’ and stated:
‘Did [Inanc] bother to ask if I was actually ready, or enquire about my situation at all, because [the plaintiff] certainly didn't when she sent me a text. Obviously she's back to being boss executor and didn't feel she should, even if only to pretend she gives a shit. It's who she is too, I guess.’
On 21 April 2023, the plaintiff emailed Middleton stating that she had obtained independent advice on how to progress the administration of the estate. She said that she was advised to send the defendant one last message ‘to see if he will cooperate and outlining what action [she] can take or will take if he doesn’t’. Middleton responded in an email on the same day stating she would email the parties ‘as [her] own last ditch attempt to get [the defendant] to move forward with the Estate’.
On 21 April 2023, Middleton emailed the parties stating that it was apparent that they were not in agreement about the administration of the estate, and in particular the sale of the property. Middleton advised the parties ‘that by failing to administer the estate within a reasonable time frame [they] are in breach of [their] obligations as Executors’. Middleton said that Balfe & Webb would terminate its retainer with the parties if she did not receive joint instructions for sale of the property. The email also attached an invoice for work performed by Balfe & Webb to that date for payment.
The defendant’s email in response to Middleton, dated 23 April 2023, included:
I’ll confess I've wondered several times since mum passed away why you've been encouraging us to put the house up for sale reasonably quickly. It did occur to me that the faster it's sold the sooner you get paid, but I'd managed to keep that thought at bay until now.
The defendant has since repeated on a number of occasions, including at the trial hearing, the assertion that Middleton’s motivation for advising that timely arrangements should be made for sale of the property was so that Balfe & Webb would be paid for their work. There is no basis for that assertion. The email also included:
Putting aside the invoice you just sent us for the moment, if we decide to wait another year to sell the house, how is that any of your business?
On 25 April 2023, Inanc emailed Middleton to enquire about progress with sale of the property. She emailed again on 16 May 2023 raising concerns about whether the parties were meeting their duties to administer the deceased’s estate.
On 17 May 2023, the plaintiff emailed Middleton apologising for the defendant’s ‘uncooperative and difficult’ behaviour, and requesting an update should he provide the required identity documentation. The plaintiff also indicated that if the defendant failed to cooperate, she would be forced to commence legal proceedings with another solicitor. Middleton responded the following day stating that she had not received any proposal from the defendant for resolution of issues relating to administration of the estate.
On 22 May 2023 Middleton emailed the parties stating that, as joint instructions for administration of the estate had not been received, the Balfe & Webb retainer was terminated.
On 25 May 2023, solicitors acting for Inanc wrote to the parties stating that they had been instructed to request that:
a.The Narre Warren property be listed immediately for sale and by no later than 9 June 2023 (due date). In the event that the Narre Warren property is not listed for sale by the due date, our client will consider making an application to the Supreme Court for orders that the property be listed for sale and/or that both of you be removed as executors of the estate;
b.[The defendant] and [Ebsary] vacate the Narre Warren property contemporaneously with the property being listed for sale, to ensure that a real estate agent has maximum flexibility to market the property; and
c.That [the defendant] pay the estate the sum of $31,000 being 14 months of rent, calculated at $510 per week.
The plaintiff instructed her current solicitors, Malkin Lawyers, in about May 2023. On 26 May 2023, the solicitors wrote to the defendant noting that despite Balfe & Webb’s previous requests for documentation to further the administration of the estate, ‘the documentation and identity documents [had] not been provided’. The solicitors set out details of what they considered was the defendant’s ‘unreasonable delay’ in administering the estate, and said:
Accordingly, we place you on notice that our client intends to make application to the Supreme Court of Victoria pursuant to Section 34(1) of the Administration and Probate Act 1958 to remove you as the personal representative of the Estate on the basis that you have refused and/or are unfit of acting therein.
It is our client’s sincere hope that such application will not be necessary and that you will now produce the documentation and sign all documents necessary for the further administration of the Estate without delay.
The defendant responded to this letter in an email dated 13 June 2023. The response includes:
At least after reading the letter from [Inanc] you must now be aware that there is no longer a solicitor representing the estate, which makes [the plaintiff’s] claims that I'm not co-operating and refusing to sign documents for the solicitor an obvious lie.
[The plaintiff] was given the documents in question two or three months ago and I asked her to leave them in the letterbox so I could sign them but she chose not to do so (she lives a couiple [sic] of minutes away) and there's currently nobody to sign documents for anyway. [The plaintiff’s] decision to behave childishly doesn't mean I'm not co-operating.
The defendant said, in relation to sale of the property:
My ex partner and I are currently looking at the possibility of buying the house ourselves, as she has enough money in a super-fund to finance 1/3rd of it, however we'd still need a loan for the remainder, but I can't commit to anything until I have some income, and trying to see a light at the end of the tunnel is hard enough without [the plaintiff’s] greed making my depression worse.
The defendant said that he had ‘repeatedly stated [his] intention to honour [their] mother’s wishes and sell the house’, and that all he had asked for was time to ‘sort [himself] out’. The defendant again referred to his siblings as ‘vultures’, and to their greed and lack of concern for his welfare. The email includes:
[The plaintiff] has had no respect for the fact that while I'm living in our mother's house it's my home (I've been living with our mother since 2009), and she proved that last August when she arrived at the house the day before our mother's birthday and stripped all the pictures off the walls against my wishes. I was left with no choice but to change the locks and tell her she was no longer welcome.
In cross-examination, the defendant was asked:
Between May and October 2023 when this proceeding was commenced, you could have given Malkin Lawyers or any other lawyers the documents required to sell the property, correct?- - - No, because the plaintiff wasn't speaking to me and we didn't have a solicitor representing the estate.
But you could have gotten your own solicitor, correct? - - - To do what?
To send the documents? - - - I wouldn't know how to go about it.
But you could have? - - - Well, so could have the plaintiff.
You could have done it yourself as well, right? - - - So could the plaintiff.
The plaintiff did, I put it to you, but you didn't it? - - - She signed the documents but it didn't do any good because we didn't have a solicitor representing the estate.
And you took no steps during that period to vacate and prepare the house for sale, did you? - - - No. Because I had - at that - well, in between, um, the first letter - this letter - obviously this letter and the plaintiff started legal action I had a plan that was hopefully going to go buy the house.
You were content to just keep living in the house, yes? - - - Well, given that I was looking to buy it and that simply due to the loan that I wanted to apply for, which I wasn't eligible to apply for until March that seemed like the logical choice.
…
Mr Blackham, my question is that between May and October you were just content to continue living in the house? - - - Well, why wouldn't I be?
On 26 October 2023, the plaintiff filed the originating motion commencing this proceeding. The proceeding was listed for directions on 9 February 2024.
The defendant is not represented in the proceeding. In an affidavit sworn by him on 21 December 2023, which contains a litany of complaints about the plaintiff’s behaviour, the defendant asserts that the plaintiff’s complaint of him being uncooperative in the administration of the estate ‘is completely false’. The defendant states that he and Ebsary wished to purchase the property, and that his best option of doing so was to obtain a particular loan for which he would not become eligible until his 60th birthday on 30 March 2024. He said that if he was unsuccessful in obtaining the loan, he would be ready to list the property for sale ‘probably by the end of April’.
In early February 2024 the plaintiff enquired with H&R Block, Berwick, about the potential for the deceased’s estate to be subject to a capital gains tax (‘CGT’) liability. The H&R Block office manager responded that according to rulings of the Australian Taxation Office (‘ATO’), there was no CGT liability where deceased estate property was held for a period of less than two years, but that after that time the estate property would be subject to CGT assessment that may impact the beneficiaries. The office manager wrote:
However, If your brother remains in the property after the 2 year period, he will NOT be liable for Capital Gains tax under the Main Residence Exemption. Yourself and your sister WILL still be liable for Capital Gains Tax[.]
On 7 February 2024, the plaintiff’s solicitors wrote to the defendant proposing settlement of the proceeding on terms set out in a minute of consent. The proposal included adjournment of the directions hearing listed on 9 February to 17 May 2024; that the defendant execute all documents necessary for transmission of the property into the names of the parties; and that the defendant have until 30 April 2024 to purchase the property, failing which he would vacate the property and it would be listed for sale. The solicitor suggested as a condition that the plaintiff would do all things necessary to seek to obtain an exemption from any CGT applied to the transfer or sale of the property, but that the defendant ‘agree that any capital gain tax liability will be deducted from [his] share of the estate’.
On 21 February 2024, the solicitors for the plaintiff wrote to the defendant to arrange transmission of the property into the parties’ joint names and discharge of the registered mortgage. Relevant documents were enclosed with the letter with a request that the defendant sign and return them. The solicitors strongly recommended that the defendant obtain independent legal advice in relation to the estate.
In cross-examination, the defendant was asked:
Mr Blackham, you agree in February this year Malkin Lawyers sent you a mortgage discharge authority and verification of identity form? - - - They did.
You didn't complete those documents, did you? - - - I did not.
At no time since did you provide any other solicitor with your identity documents to facilitate that transmission application, did you? - - - No.
The defendant said that according to the discharge documents the process took 10 days, adding:
So up until ten days before the house was to be sold, if it's got to be done beforehand, it can be done up until then. I'm not - not having done it has not prevented a single thing from happening. It hasn't changed the course of events at all.
On 27 February 2024, the defendant emailed the plaintiff’s solicitors responding to the settlement proposal as follows:
Due to your recent correspondence and the conditions of your consent agreement, I'm now concerned that my desire to save the estate legal expenses by representing myself may eventually be to my own detriment. Therefore I will probably seek legal advice in the near future with a view to finding my own representation. I naively thought, when [the plaintiff] commenced these legal proceedings without bothering to find out if they're actually necessary, we'd go to court and it would quickly be decided whether she had grounds for removing me as an executor or she just needs to learn how to behave like a half-decent human being. It's become apparent though, the biggest obstacle to resolving this now is likely to be the legal process itself, but as far as I'm concerned [the plaintiff] needs to be held accountable for her irresponsible behaviour and unnecessary legal action, the cost of which I don't think either myself or the estate should be responsible for. While I am responding now due to a desire to not to delay these proceedings if it can be avoided, finding my own legal representation is something I intend to look into quite soon.
In relation to the transmission documents sent to him, the defendant indicated his desire to seek legal advice before signing anything, as there appeared to him ‘to be a conflict of interest’ in relation to the request made by the plaintiff’s solicitors. The defendant said that he intended to adhere to the timetable he proposed in his affidavit for his purchase of the property, or by putting it up for sale, but that he considered the plaintiff’s ‘irresponsible legal proceedings could in fact make it impossible for me to adhere to it’. The defendant did not agree to vacate the property or to pay rent for the period of his occupation. The defendant’s email included links to ATO website pages that he said explained the availability of extensions to the two-year CGT limit. He said that it was totally unreasonable that he should ‘be expected to blindly agree to pay any tax [the plaintiff] may incur’.
On 21 March 2024, the defendant emailed the plaintiff’s solicitors stating that while he was ‘perfectly happy to sign any mortgage discharge documents, or to do whatever might need to be done in respect to administering the estate’, he should have been consulted by the plaintiff about finding a new solicitor to act for the estate, and that this should now be done. In relation to his proposal to purchase the property, the defendant said:
I'd hoped to determine whether I could purchase our mother's house myself early next month, but I'll need to know the maximum amount I'd have to borrow first. Assuming the court doesn't decide [the plaintiff] should be responsible for her own legal expenses and either myself or the estate has to pay them instead, it will obviously affect the amount I'll need to borrow. Therefore I need to know the extent of her legal expenses to date, and an estimate as to the total after the trial. If you can supply that information for me it'd be appreciated, otherwise I see no other option than to wait until after the trial, which would be utterly ridiculous.
On 8 April 2024, the plaintiff’s solicitors wrote to the defendant discussing the proposal for him to obtain finance to purchase the property and arrangements for the sale of the property if that was not possible. On 12 April 2024, the defendant responded in a lengthy email in which, amongst other things, he requested details of the plaintiff’s legal expenses and said:
As I explained previously, should for some reason the court decide that [the plaintiff] shouldn't be responsible for her own legal expenses, it will affect the amount I'll need to borrow, assuming I'll still be in a position to buy the house at all, and assuming of course, the bank will even look at the application while the estate is the subject of legal action.
The plaintiff’s solicitors responded to the defendant in a letter dated 26 April 2024, confirming that the plaintiff agreed to engage an independent solicitor to administer the estate and requesting ‘details of [the defendant’s] preference of solicitor for this purpose’. The solicitors told the defendant that the plaintiff’s current legal expenses were just under $12,000. They advised that they were unable to quantify the plaintiff’s future legal expenses as they did not know when the litigation would be finalised.
As of the date of judgment, the property remains in the deceased’s name. There has been no application made for transmission to the parties as executors of the estate. No steps have been taken to list the property for sale. The defendant has also not proposed any terms for he and Ebsary to purchase the property, nor has he applied for finance to fund the purchase.
The defendant and Ebsary continue to reside in the property. They are not paying rent. In oral evidence, the defendant said that he considered the property his home and that it suited him to continue living there rent-free, as he could not afford to pay rent. He said that for so long as the property remained unsold, he could keep living there and that was of benefit to him. He agreed that at no time had the plaintiff or Inanc agreed to him (or Ebsary) continuing to live at the property rent-free.
The defendant disagreed that his unilateral decision to move out of the property on his own timeframe was uncooperative. The defendant was also asked about advice he received from Balfe & Webb at that time, and said:
So you agree that you were advised by Balfe & Webb in December 2022, that to sell the property as soon as practicable? - - - Yes, although I think that was based on her own needs, her own desires more than anything else.
…
But you agree that in December 2022, they told you to sell - that their advice, in your best interests as executor, was to sell the property as soon as possible? - - - Well, yes, obviously.
But you didn't heed those warnings, did you? - - - It's not a matter of heeding it. It's ability.
The defendant was asked about maintenance and other steps in preparation for sale of the property. He said:
You haven't organised it, have you? - - - Well, I haven't – I haven't prevented it. I don't know what my – I don't know what you are referring to.
You haven't cleaned the property out from your belongings, have you? - - - Well, I'm still in there, so obviously not.
And you still have equipment at that property, don't you? - - - Well, I'm still in there. So obviously I do .
You haven't sorted through any of that, put anything into storage, have you? - - - Why would I do it – put it in storage?
In August 2023, you changed the locks to stop [the plaintiff] entering the property, didn't you? - - - No. I told her I was going to do it, but I didn't actually do it.
So you lied to her? - - - Yes, to prevent her from coming in and ransacking the house without my consent.
…
Is it cooperative behaviour to lie to your co-executor? - - - When the co-executor is doing things without my consent. In order to prevent her from doing that, I think that was pretty reasonable. I wasn't preventing her from coming to the house. She was quite welcome to come to the house. I just changed the locks so she couldn't come into the house without me being there, without my agreement.
So you said you did change the locks? - - - No, I told I her I changed the locks, sorry. I didn't actually change them.
Authorities and principles
The plaintiff relies on the power in s 34 of the Administration and Probate Act 1958 (Vic) (‘Act’) for the Court to discharge or remove an executor.
The plaintiff has also applied under s 48(1) of the Trustee Act 1958 (Vic), out of caution, to remove the defendant as trustee of the deceased’s estate. There is no relevant difference between the tests for removal of an executor and a trustee.
Application of s 34 of the Act was authoritatively considered by Ashley J in Monty Financial Services Ltd v Delmo [1996] 1 VR 65. After concluding ‘that unfitness to act does comprehend a situation in which an executor has a conflict of duty and interest in carrying out his executorial duties’,[1] Ashley J said:
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.[2]
[1]Monty Financial Services Ltd v Delmo [1996] 1 VR 65, 82.
[2]Ibid 83.
The paramount consideration in whether to exercise the discretion to remove an executor ‘is the welfare of the beneficiaries and the protection of their interests in the estate’.[3] An executor’s conflict that is likely ‘to affect the efficient and satisfactory administration of the estate is a proper basis for removing an executor’.[4]
[3]Dimos v Skaftouros (2004) 9 VR 584, [13] (Winneke P).
[4]Fysh v Coote [2000] VSCA 150 [20] (Ormiston JA) (‘Fysh’); Manocchio v Wilson [2012] VSC 76, [38] (Habersberger J) (‘Manocchio’).
In Fysh v Coote [2000] VSCA 150, the Court of Appeal ordered that the appellant be removed as executor of a deceased estate. The Court found that her conduct and attitude towards her co-executor, the beneficiaries and their representatives had placed her in a position of such conflict as to make it impracticable for her to administer the estate fairly and with reasonable speed.[5] The conflict identified in that case included that the appellant was in possession of a residence that was the primary estate asset without paying rent; in circumstances where the appellant expressed a wish to purchase the property but always seemed to place an impenetrable barrier to settlement of an agreement to do so.[6] It was a relevant consideration that the appellant had taken no significantly useful steps in circumstances where all other beneficiaries insisted that she conclude the administration of the estate.[7]
[5]Fysh (n 4) [21] (Ormiston JA).
[6]Ibid [22]–[23].
[7]Ibid [22].
In Jortikka v Haukka [2023] VSC 20, the parties as appointed joint executors obtained probate of the deceased’s will. The primary asset of the estate was a residential property, which the defendant sought to purchase by agreement. There was an extended period of negotiation that was ultimately unsuccessful, during which the defendant occupied the property without paying rent. Orders were ultimately made that the defendant vacate the property and remove her possessions, and that the plaintiff be authorised to sell the property. The defendant did not vacate the property within the time stated in the orders. The reasons of Daly AsJ for ordering that the defendant be removed as executor of the estate included:
As the authorities make clear, it does not really matter whether Ms Haukka’s inattention to her duties as an executor was motivated by her desire to acquire the property on favourable terms, or to delay the sale of the property for her benefit, or whether there was a more benign explanation for her inattention, such as her being overwhelmed by her work commitments and travel arrangements. The practical effect is the same: Ms Haukka’s failure to attend promptly (and sometimes not at all) to requests by the estate’s solicitors for instructions, and her erratic conduct during the negotiation period has unduly prolonged the administration of the estate and has no doubt caused the estate to incur unnecessary legal costs.[8]
Daly AsJ noted that the defendant’s occupation of the property was clearly for her own convenience, and said:
Ms Haukka was clearly in a position of conflict of interest, and she was told as such, bluntly, by the estate’s solicitor. But the mere existence of a conflict of interest does not disqualify an executor. What matters is how they manage that conflict of interest. However, Ms Haukka’s conduct during the negotiation period, and her refusal to vacate the property until a court order was made to that effect indicated that she simply does not appreciate the duties and responsibilities of an executor.[9]
[8]Jortikka v Haukka [2023] VSC 20, [47].
[9]Ibid [48].
In Manocchio v Wilson [2012] VSC 76, the major asset of the estate was a residential property that the defendant (as co-executor) occupied for over two years without paying rent. There had been unsuccessful negotiations between the parties for the defendant to purchase the property. Habersberger J concluded that those circumstances put the defendant in a position of conflict of duty and interest, explaining:
Obviously, the longer Commercial Street remained unsold, the longer the defendant was able to live there rent free. The plaintiff, his co-executor, could not sell the property or require him to vacate without his agreement. This continued state of affairs was to the detriment of his fellow beneficiaries because they were receiving no benefit from their one third entitlement to the one remaining, and largest, asset of the estate.[10]
Habersberger J concluded that the interest of all beneficiaries could only be equally protected by removing the defendant as a co-executor ‘so that the plaintiff would be able to obtain vacant possession of the Commercial Street property, prepare it for sale, put it on the market and decide whether or not to accept any offer to purchase the property without being delayed and frustrated by the defendant acting in his own interest.’[11]
[10]Manocchio (n 4) [39].
[11]Ibid [43].
In Morgan v Morgan [2000] VSC 445, Beach J concluded that the defendant co-executor’s failure to agree to the sale of a property which was the major asset of the estate until after proceedings had been instituted, demonstrated a clear incapacity to perform his executorial duties within a reasonable period of time.[12] His Honour found that in light of the defendant’s past behaviour, he was not confident that sale of the property would proceed smoothly if he remained an executor.[13] Beach J said:
In the circumstances, including the fact that the house is the one substantial asset in the estate, it is my opinion that it is now appropriate to remove the defendant as an executor of his father's estate.[14]
[12]Morgan v Morgan [2000] VSC 445 [29].
[13]Ibid [31].
[14]Ibid [32].
Submissions
Plaintiff
There is an irreconcilable conflict between the defendant’s duty as executor to sell the property, and his personal interest to remain in the property that he regards as his home. For so long as the defendant remains living in the property and it is not sold, none of the beneficiaries can receive any of their entitlement pursuant to the will.
The significant delays in the administration of the estate are largely attributable to the defendant. Despite repeated requests, he has failed to cooperate in the administration of the deceased’s estate. The fact that the defendant denied in cross-examination that his conduct had been uncooperative reflects just how clearly he does not understand the conflict of duty that exists.
The evidence shows that the defendant has adopted an unreasonably antagonistic approach to the plaintiff, Inanc, and to the solicitors involved in the attempted administration of the estate. That is a factor which should weigh against his remaining as an executor.
It is in the interests of the welfare of the beneficiaries that the testator’s choice of executor be disturbed. The plaintiff should be permitted to administer the deceased’s estate alone for the benefit of all the estate’s beneficiaries.
Defendant
The defendant has not refused to cooperate in the administration of the estate nor has he acted in an unreasonable manner. Neither the plaintiff nor Inanc have properly considered the welfare of the defendant, regarding both his health and financial situation, such that their attempts to list the property for sale are unreasonable. Once Balfe & Webb ceased acting as solicitors for the estate, it was not possible for the defendant to complete the mortgage transmissions documents. It was also onerous for the defendant to deliver the requested documents to the Balfe & Webb office given the travel distance and the defendant’s poor physical health. The defendant had previously complied with all requests by Balfe & Webb, including by providing a copy of his birth certificate.
The plaintiff has, from the time probate was granted, sought to administer the estate unilaterally. Both Balfe & Webb and the plaintiff have ignored correspondence from the defendant regarding his intention to purchase the property, or in the alternative the timeframe for sale. The plaintiff’s proposal in February 2024 was made in bad faith and the defendant received no response after requesting clarification on that proposal.
The advice received by the plaintiff from H&R Block in relation to CGT is incorrect.
Analysis
The following matters are not in dispute:
(a) The property is the primary asset of the estate. Until the property is sold the beneficiaries will be deprived of their interest in the deceased’s estate.
(b) Probate of the will was granted on 18 August 2022. In the two years since, virtually no steps have been taken to administer the estate and to sell the property.
(c) The defendant continues to reside in the property with his former partner Ebsary. Neither the defendant nor Ebsary pay rent on the property.
(d) The defendant has expressed a desire to purchase the property. However, he has not proposed terms for this to occur.
I accept the plaintiff’s submission that there is a clear conflict of interest between the defendant’s duty as executor to sell the property and distribute the estate to the beneficiaries, and his personal interest in continuing to reside at the property. By his conduct the defendant has shown an inability to manage that conflict in a manner that protects the interests and welfare of all beneficiaries.
First, there has been unreasonable delay by the defendant in providing documents and taking necessary steps to discharge the mortgage on the property and transmit it into the names of the executors. I do not accept the defendant’s explanation that completing and delivering the documents was unduly onerous on him, or that it was unreasonable to do so given that Balfe & Webb had ceased to act on behalf of the estate.
Second, the defendant has not taken any step towards selling the property in circumstances where he acknowledges the obvious benefit he derives from continuing to live in the property rent-free. The defendant has declined to provide instructions at any time for the sale of the property. He has reneged on any timeframe to vacate and sell the property proposed by him. His duty as co-executor to sell the property is in direct conflict with his financial and personal incentive to remain living in the home.
Third, despite raising the prospect of purchasing the property from the estate, the defendant has taken no concrete steps for this to occur. He has not put the terms of any proposal to purchase the property to the plaintiff or Inanc, nor has he applied for a loan. The defendant was unable to provide a reasonable explanation for why he had failed to do so.
Fourth, the antagonistic behaviour by the defendant towards his siblings and the legal practitioners involved in the administration of the estate, suggest that future cooperation with the plaintiff to administer the estate is unlikely.
The defendant is principally responsible for the continuing delays that have occurred in administration of the estate, and for the lack of any progress towards sale of the property. The defendant has asserted on a number of occasions that he intends to administer the estate in accordance with the will, and that he is not responsible for the delays in doing so. I reject those assertions. The defendant has failed to take any positive steps to discharge his duties as an executor and has repeatedly placed an impenetrable barrier to the administration of the estate by the plaintiff, to the obvious detriment of the beneficiaries. It is likely that the timely and efficient administration of the estate will continue to be frustrated for so long as the defendant remains in the position of co-executor and trustee.
Conclusion
The plaintiff’s application for removal of the defendant as co-executor and trustee of the deceased’s estate is granted. I will hear from the plaintiff as to the form of orders.
5
6