Secure Funding Pty Limited v George
[2014] NSWSC 1420
•19 September 2014
Supreme Court
New South Wales
Medium Neutral Citation: Secure Funding Pty Limited v George [2014] NSWSC 1420 Hearing dates: 19 September 2014 Decision date: 19 September 2014 Before: White J Decision: Refer to para [25] of judgment.
Catchwords: SUCCESSION - wills, probate and administration - where executrix and trustee mortgaged property subject of right of residence under will in support of loan for her own benefit - where executrix and trustee defaulted on loan and mortgagee obtained possession and exercised power of sale depriving cross-claimant of right of residence - breach of trust and claim for equitable compensation - whether cross-claimant entitled to equitable compensation for breach of trust - held cross-claimant so entitled - family provision and maintenance - Family Provision Act 1982 (NSW) - where need to make application for family provision arose due to executrix and trustee's breach of trust - unopposed application for extension of time for making of application - application granted - appointment of representative of estate under UCPR r 7.10 - appointment of representative of estate where executrix and trustee committed breach of trust and third cross-defendant consented to appointment as representative of estate Legislation Cited: Civil Procedure Act 2005 (NSW)
Family Provision Act 1982 (NSW)Category: Interlocutory applications Parties: Shane Joseph Robinson (Cross-Claimant)
Aliceson Elizabeth George (1st Cross-Defendant)
David Andrew George (2nd Cross-Defendant)
Christine Brizzolara (3rd Cross-Defendant)Representation: Counsel:
J E Armfield (Cross-Claimant)
P Savage (3rd Cross-Defendant)
Solicitors:
Cluff & Associates (Cross-Claimant)
Frontier Law Group (3rd Cross-Defendant)
File Number(s): 2012/19534
Judgment
HIS HONOUR: These proceedings concern a breach of trust by the first cross-defendant. They arise out of the terms of a will of the late Joseph Robinson made on 19 August 2005. The will named the first cross-defendant and first defendant in the proceedings, Ms Aliceson George, as executrix and trustee.
By clause 3 of the will the testator conferred a right of residence in respect of the testator's property in Merrylands to his grandson, Mr Robinson. Mr Robinson is the cross-claimant. The right of residence was given on condition Mr Robinson pay all rates and taxes and other outgoings, keep the property in repair, and insured.
The will provided that the residence would form part of the testator's residual estate on his grandson's death or, if in the opinion of the trustee, he failed to continue to reside permanently in the property or had failed within a reasonable period to comply with the conditions of residence. The residue of the estate was given to the testator's daughter and daughter-in-law who are the fourth and third cross-defendants respectively.
Mr Robinson died on 31 March 2007. Probate of his will was granted to the first cross-defendant Ms George on 1 June 2007. On or about 18 December 2007 she obtained a loan of approximately $50,000 from the National Australia Bank which was secured by a first registered mortgage over the land that was the subject of the gifts under the will.
That loan was discharged on or about 22 August 2008. At that time Ms George and her husband, who is the second cross-defendant, refinanced the loan and increased it with a borrowing from Secure Funding Pty Ltd.
Both Mr and Mrs George, the first and second cross-defendants, entered into an agreement with the lender to borrow $100,000. The loan agreement provided that the security for that loan would be a mortgage over the subject property. Ms George signed a mortgage on 28 July 2008.
The proceedings were commenced by Secure Funding Pty Ltd following a failure by the borrowers to repay the loan. Secure Funding sought and ultimately obtained orders for possession of the property.
Because of Ms George's conduct in mortgaging the land to secure a personal loan for herself and her husband, Mr Robinson, the cross-claimant, has lost the benefit of his right of residence under the will.
That right is a valuable right. There is evidence valuing that right as at 31 January 2014 in the sum of $648,050. The assumptions, on which that assessment is based, and the discount and inflation rates applied as set out in the report of Furzer Crestani, Chartered Accountants, which has been tendered on the application, appear to be a rational assessment of the value of the gift to Mr Robinson that has been lost by Ms George's mortgaging the property.
Mr Robinson, on his own application, was joined as a defendant to the preceding. The first and second defendants, Mr and Mrs George, did not appear. Mr Robinson ultimately did not defend the proceedings. There was no basis to impugn the mortgagee's right to enforce its security. He filed a cross-claim which seeks, amongst other relief, equitable compensation against both the first and second cross-defendants arising from the breach of trust.
The breach of trust by Ms George is clear. Mr Robinson alleges that the second cross-defendant, Mr George, was knowingly involved in, as well as being a beneficiary of, Ms George's breach of trust. The evidence of Mr George's making the loan application using the property in the estate as security supports that allegation.
Both Mr and Ms George have been personally served with the amended cross-claim. Neither has entered an appearance. They have both been advised of today's hearing. Neither has appeared.
I am satisfied that the cross-claimant is entitled to equitable compensation as sought from the first and second cross-defendants. The amount of the compensation to which he is entitled is the value of the right of which he has been deprived which, in accordance with the report of Furzer Crestani, I assess in the amount of $650,000 as at 31 January 2014.
Mr Robinson had vacated the property before that date. In my opinion he is entitled to interest on that sum at the rates provided for the purpose of s 100 of the Civil Procedure Act 2005 (NSW).
For these reasons I will enter judgment for the cross-claimant against the first and second cross-defendants in the amount of $674,708.82.
The third and fourth cross-defendants have been joined because there is an issue as to how the net proceeds of sale after the discharge of the registered mortgage should be dealt with. Amounts totalling more than $387,000 were received from the mortgagee and have been paid into a controlled moneys account pending the determination of these proceedings.
The cross-claimant does not claim, or at least does not claim today, a beneficial interest in the net proceeds of sale. Prima facie the third and fourth cross-defendants would be beneficially entitled to those moneys, as the right of residence of the cross-claimant had come to an end and the subject property fell into residue.
However, Mr Robinson has sought and obtained leave to amend his cross-claim to seek an order for provision under the Family Provision Act 1982. He alleges, and there is evidence to support this, that he is an eligible person entitled to make an application for family provision under that Act as he was partly dependent on the deceased, a grandchild of the deceased, and a member of the household of which the deceased was also a member.
The claim for provision is well out of time unless an extension of time is granted.
There is also a question as to how the family provision proceedings should go forward.
Ms George, as executrix of the estate, would in the ordinary course be the defendant to the claim for a family provision order. But given that she has played no part in these proceedings and given the serious breach of trust in question, I do not think it appropriate that she be appointed as the representative of the estate.
The third and fourth cross-defendants are the only persons with an interest to oppose Mr Robinson's claim for provision. The third defendant appears and consents to an order that she be appointed to represent the estate for the purposes of the balance of the proceedings. The fourth cross-defendant has not appeared at any stage in the proceedings. An order for substituted service of the cross-claim has been made in respect of her, although that was done before the cross-claim was amended to include the claim for a family provision order.
At one point, the cross-claimant foreshadowed that he might press his claim for an order for provision today. An agreement has been reached between him and the third cross-defendant as to how the net proceeds of sale should be divided between the three persons entitled. However, the fourth cross-defendant has not been a party to that agreement and she has not been able to be contacted. It is not known whether or not she would agree with what has been proposed.
It would not be right to proceed instanter with the application for a family provision order. Indeed, the extent of the plaintiff's entitlement to provision, if any, may depend upon whether or not the judgment he obtains against the first and second cross-defendants can be enforced.
However, it is appropriate to deal with the application for extension of time for the bringing of the claim under the Family Provision Act 1982 (NSW). The circumstances that make it necessary for that claim to be brought have only arisen in recent times. That is to say, it is the fact that the cross-claimant has been deprived of his interest under the will that now prompts him to claim that adequate provision for his future education, maintenance and advancement in life has not been made. That assessment is to be made as at the date of any order for provision.
In my view it is clear the extension sought should be given. It is not opposed by the third cross-defendant.
For these reasons I make orders in accordance with the short minutes of order which I initial and date today and will place with the papers. Those orders provide for judgment against the first and second cross-defendants in the amount of $674,708.82, an order for the appointment of the third cross-defendant as representative of the estate pursuant to r 7.10 of the Uniform Civil Procedure Rules, an extension of time for the making of the application under the Family Provision Act, orders for service of the Third Amended First Cross-Claim on the fourth cross-defendant by way of advertisement in The Australian newspaper to include details of the proposed settlement, an order for substituted service on the fourth cross-defendant, orders for costs against the first and second cross-defendants, and other orders of a procedural nature.
Decision last updated: 16 October 2014
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