Shaun William Boyle as administrator of the Personal Estate and Receiver of the Real Property of the Late Raffaele Farano v Farano
[2023] WASC 303
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SHAUN WILLIAM BOYLE as administrator of THE PERSONAL ESTATE AND RECEIVER OF THE REAL PROPERTY OF THE LATE RAFFAELE FARANO -v- FARANO [2023] WASC 303
CORAM: QUINLAN CJ
HEARD: 9 AUGUST 2023
DELIVERED : 9 AUGUST 2023
PUBLISHED : 11 AUGUST 2023
FILE NO: CIV 1143 of 2023
BETWEEN: SHAUN WILLIAM BOYLE as administrator of THE PERSONAL ESTATE AND RECEIVER OF THE REAL PROPERTY OF THE LATE RAFFAELE FARANO
Plaintiff
AND
CON FARANO
First Defendant
INES MARIA ARCARO
Second Defendant
ANTONIO MICHELE FARANO
Third Defendant
GIOVANNI COSIMO FARANO
Fourth Defendant
RIDAN PTY LTD AS TRUSTEE FOR RIDAN UNIT TRUST
Fifth Defendant
ANGELINA FARANO
Sixth Defendant
FILOMENA FARANO
Seventh Defendant
Catchwords:
Estate Law – Application for directions under Trustees Act 1962 (WA) s 92 – Whether administrator justified in actively defending counterclaim
Legislation:
Administration Act 1908 (WA), s 35
Trustees Act 1962 (WA), s 92
Result:
Directions given
Category: B
Representation:
Counsel:
| Plaintiff | : | G K Paull |
| First Defendant | : | M W Edinger |
| Second Defendant | : | E A Croft |
| Third Defendant | : | S Penglis SC & K Pedersen |
| Fourth Defendant | : | S Penglis SC & K Pedersen |
| Fifth Defendant | : | S Penglis SC & K Pedersen |
| Sixth Defendant | : | S Penglis SC & K Pedersen |
| Seventh Defendant | : | S Penglis SC & K Pedersen |
Solicitors:
| Plaintiff | : | Cullen Macleod Lawyers |
| First Defendant | : | Hall & Wilcox (Perth) |
| Second Defendant | : | Croftbridge |
| Third Defendant | : | Eastwood Law |
| Fourth Defendant | : | Eastwood Law |
| Fifth Defendant | : | Eastwood Law |
| Sixth Defendant | : | Eastwood Law |
| Seventh Defendant | : | Eastwood Law |
Cases referred to in decision:
Application of Ferdinando Scali [2010] NSWSC 1254
Blatchford v Laine [2018] WASC 207
Farano v Arcaro [2021] WASC 461
In re Evans [1986] 1 WLR 101
Marinko v Patrick Bernard O'Sullivan and Ralph Adrian Wilson as executors of the will of Rose Margaret Marinko [2023] WASC 180
Munro v Munro [2017] SASC 48
Plan B Trustees Ltd v Parker [No 2] [2013] WASC 216; (2013) 11 ASTLR 242
Szlazko v Travini [2004] NSWSC 610
Yuen v Louey [2023] VSC 423
QUINLAN CJ:
(This judgment was delivered extemporaneously on 9 August 2023 and has been edited from the transcript.)
The plaintiff, Mr Boyle, is the administrator pendente lite of the estate of the late Raffaele Farano (Estate). He was appointed pursuant to s 35 of the Administration Act 1903 (WA) by order of Strk J on 16 December 2021.
That order was made in a proceeding commenced in this Court by the first defendant, Con Farano (Con), being CIV 1189 of 2020 (estate proceedings). In the estate proceedings, Con seeks an order declaring that Raffaele died intestate and an order directing the Probate Registrar to issue a grant of letters of administration in favour of him as administrator.
At the time of Mr Boyle's appointment as administrator pendente lite, the third and fourth defendants (Tony and John, respectively) brought a counterclaim denying that Raffaele had died intestate and which sought an order pronouncing the force and validity of a will of Raffaele dated 1992. Tony and John also sought orders declaring that interests in various properties held by the Estate are held on trust for Tony and John as tenants in common in equal shares and seeking orders that those interests be conveyed to them.
As will be seen, there have been amendments to the counterclaim that alter the relief sought by Tony and John.
Mr Boyle now seeks directions from the Court pursuant to s 92 of the Trustees Act 1962 (WA). In particular, he seeks orders that he is justified in defending the counterclaim commenced by Tony and John and consequential orders in relation to the payment of his costs in doing so. Mr Boyle also seeks directions, or alternatively orders, that he be allowed to sell, or seek orders compelling the sale of, certain assets of the Estate.
While the application for directions and orders was made by fresh proceedings on originating summons, rather than in the estate proceedings, at the hearing of the application all of the active parties accepted that I relevantly had power to make the orders sought. The dispute before me was as to whether, in my discretion, I should do so.
For the reasons that follow, I am satisfied that I should give a direction in the form sought in relation to the defence of the counterclaim. I am also prepared to make an order permitting the sale of certain estate assets to enable Mr Boyle's costs and remuneration to be paid. Subject to further order of the Court and some qualifications which I will come to, I am satisfied that it is appropriate that Mr Boyle's costs of defending the counterclaim be paid out of the Estate. I will return to those qualifications later.
Background
Much of the background to this matter was set out by Strk J in her Honour's reasons for appointing Mr Boyle in the estate proceedings.[1] I need not repeat it. For present purposes the following matters are of particular significance.
[1] Farano v Arcaro [2021] WASC 461.
Raffaele died on 13 April 2018 and is survived by his four adult children: Con, Tony, John and the second defendant (Ines). Raffaele's wife, Carmina, died on 15 October 1992. Each of the four children is therefore entitled, on intestacy, to equal shares in the Estate.
In this context I note that, while John and Tony initially denied that Raffaele had died intestate and sought an order pronouncing the force and validity of a will dated 1992, they have since amended their defence and counterclaim (amended counterclaim), to admit that Raffaele died intestate. They nevertheless maintain that Con is not entitled to the relief claimed in the estate proceedings, although, given the admission of intestacy, that position would appear to be directed principally at Con's claim to be appointed as administrator of the Estate.
The real issue in the estate proceedings concerns the identification of the assets of the Estate available for distribution. It is a significant issue that arises in this way.
Other than a debt owing to Raffaele of $35,521, some private shareholdings of unascertained value and some plant and equipment of likely negligible value, the assets of the Estate consist of interests in real property. Mr Boyle has commissioned valuations of each property, which I will accept as generally accurate for the purposes of this application.
The properties, and the estate's interests in those properties, may be summarised as follows:
Property % Owned by Estate Valuation Value attributable to Estate 16 Lissiman St 50% $160,000 $80,000 18 Lissiman St 100% $335,000 $335,000 22 Lissiman St 100% $500,000 $500,000 7 Gambia Place 50% $320,000 $160,000 Lot 401 Warton Rd 20% $1,400,000 $280,000 69 Fremantle Rd 50% $1,800,000 $900,000 46 Fremantle Rd 50% $350,000 $175,000 Total $2,430,000
The properties at 16, 18, and 22 Lissiman Street together comprise a single area of land upon which is an orchard established by Raffaele and Carmina (the Orchard). The other half interest in 16 Lissiman Street is held by Ridan Pty Ltd (Ridan) on trust for the Ridan Unit Trust. Tony and John are the sole directors and shareholders of Ridan. According to the amended counterclaim all of the units in the Ridan Unit Trust are held by Tony or John, or entities associated with them.
The other half interest in 7 Gambia Place is owned by Tony.
The remaining 80% interest in Lot 401 Warton Road is owned in equal shares by Ridan, John, Tony and Tony's wife, Angelina Fararo (Angelina).
The other half interest in 69 Fremantle Road is held by Ridan.
The other half interest in 46 Fremantle Road is held by Con.
As will be apparent, save for Con's 50% interest in 46 Fremantle Road, all of the properties for which the Estate has an interest are co‑owned by Tony or John, or entities or persons associated with them.
By their amended counterclaim, which they now bring with their wives, Angelina and Filomena Farano (Filomena), Tony and John claim that all of the Estate's interests in the Orchard and in 69 Fremantle Road are held on trust for Tony, Angelina, John and Filomena. As can be seen, the interests claimed in the amended counterclaim differ from those in the original defence and counterclaim, in that the original claim was that the Estate's interests in the Orchard and in 69 Fremantle Road were held on trust for Tony and John, and did not claim an interest by their respective wives.
I will refer to the Orchard and 69 Fremantle Road collectively as the contested properties.
In accordance with the valuations that have been obtained, the value of the Estate's interests in the contested properties, and which are the subject of the amended counterclaim, is $1,815,000, namely:
Property % Owned by Estate Valuation Value attributable to Estate 16 Lissiman St 50% $160,000 $80,000 18 Lissiman St 100% $335,000 $335,000 22 Lissiman St 100% $500,000 $500,000 69 Fremantle Rd 50% $1,800,000 $900,000 Total $1,815,000
The value of the Estate's interests in the remaining properties (that is, excluding the contested properties) is $615,000, namely:
Property % Owned by Estate Valuation Value attributable to Estate 7 Gambia Place 50% $320,000 $160,000 Lot 401 Warton Rd 20% $1,400,000 $280,000 46 Fremantle Rd 50% $350,000 $175,000 Total $615,000
The difference between the two sums is significant. Leaving aside the costs of administration, and so only as a very broad illustration, the distribution on intestacy to each of Raffaele's children if the contested properties are included in the estate is $607,500. If the amended counterclaim is successful (and the contested properties thereby excluded), the distribution would be $153,750. Of course, in those circumstances Tony, Angelina, John and Filomena would retain all of the interests from the contested properties.
The counterclaim to the contested properties
The claims made by Tony, Angelina, John and Filomena in relation to the contested properties are based on promissory estoppels.
In relation to the Orchard, the promise upon which the estoppel is founded (Orchard Promise), is pleaded to have been made from 1992 onwards, following Carmina's death. They plead that promises were made on numerous occasions to Tony, Angelina, John and Filomena to the effect that:
(i)'If you guys want it, you work it and you keep it';
(ii)'If you want to keep it, you work it and it's yours';
(iii)'If you work, you eat. If you don't work, you don't eat';
(iv)'As far as I'm concerned, I'm not interested in the Orchard. I don't want it. You keep it and you do whatever you like with it';
(v)'If I were you, I'd sell it [the Orchard] and put the money somewhere else. You can do better with your money. Stop wasting your time with it. Get out of it. It's yours, but I'm giving you my opinion – don't waste your time'; and
(vi)in approximately 1997/1998, to John, 'I gave you the Orchard. You do all you want. If it were up to me, I would sell it and use the money for something better'.
The amended counterclaim pleads various forms of reliance on the Orchard promise, including taking over the operations of the Orchard, expanding and improving the scope of those operations, foregoing other income and career options, financially maintaining Raffaele and contributing to the value of the Estate. The amended counterclaim pleads that, if the Orchard Promise is not fulfilled, Tony, Angelina, John and Filomena will suffer detriment in the loss of their investment and effort in the Orchard and that it would be unconscionable for Mr Boyle, as administrator, to be allowed to resile from the Orchard Promise.
In relation to 69 Fremantle Road, the amended counterclaim pleads different assurances at different times.
The amended counterclaim pleads that in or about 1969 and 1970, Raffaele asked Tony to help him build a house at 69 Fremantle Road and that Tony would be rewarded if he did 'what he was told to do' and that, in response and relying upon Raffaele, Tony assisted building the house.
The amended counterclaim goes on to plea that, in 1973, Raffaele and Carmina promised to give the house and land at 69 Fremantle Road to Tony and Angelina as a wedding gift, thereby inducing an assumption by them that the house and land would belong to them. In reliance on that assumption Tony and Angelina moved into the house, maintained it, raised their family there and have lived there ever since.
The amended counterclaim then pleads that in or about 1984, Raffaele and Carmina asked Tony and Angelina to give part of 69 Fremantle Road to John and Filomena to build a house as a wedding gift. In reliance on Raffaele and Carmina's promise to give them part of 69 Fremantle Road as a wedding gift, John built a house and shed, fenced the property, moved into the house with Filomena, raised their family there and have lived there ever since.
The amended counterclaim pleads that, if the assurances in relation to 69 Fremantle Road are not fulfilled, Tony, Angelina, John and Filomena will suffer detriment in the loss of their investment and effort in the property and that it would be unconscionable for Mr Boyle, as administrator, to be allowed to resile from those assurances.
While a defence to the amended counterclaim has not been filed, both Con and Ines filed a reply and defence to Tony and John's original counterclaim, prior to Mr Boyle's appointment. Those pleadings sufficiently reveal Con and Ines' position in relation to Tony, Angelina, John and Filomena's claims to the beneficial interest in the contested properties.
Con's defence to the original counterclaim denied that Tony and John are entitled to any of the relief in the counterclaim. In particular, Con pleaded that:
(a)he continued to assist with operations on the Orchard until around 2000, when he had to cease active work due to a back injury;
(b)after 2000 he continued to assist with selling fruit from the Orchard;
(c)Raffaele continued to work on the Orchard almost full‑time until April 2017;
(d)to the extent that income was generated from the Orchard after 1992, it was substantially the result of the efforts of Raffaele, assisted by the efforts of each of the children;
(e)Tony, Angelina, John and Filomena did not sacrifice income or career options, and that Tony and John had, and have, various income sources and occupations; and
(f)otherwise denies reliance or detriment on the part of Tony and John.
Ines' defence to the counterclaim was to similar effect.
Mr Boyle's appointment as administrator pendente lite
The orders made by Strk J appointing Mr Boyle as administrator are annexed to these reasons.
The following matters are of note.
First, while Mr Boyle is empowered, by order 1, 'to collect, get in and receive the assets of the Estate and to do such acts as may be necessary for the preservation of the same', the powers conferred by order 1 do not extend to him taking possession of the Orchard or 69 Fremantle Road (i.e. the contested properties).
Accordingly, the contested properties are, in effect, quarantined from Mr Boyle's powers as administrator. That is, of course, because the beneficial interest in the Estate's interests in those properties is claimed by Tony, Angelina, John and Filomena in the amended counterclaim.
Secondly, order 1(h) expressly confers upon Mr Boyle power to represent the Estate in proceedings, and to do all things necessary in the exercise of that power, including, but not limited to, obtaining legal advice and other professional advice and representation as appropriate. Mr Boyle, therefore has ample power to defend the counterclaim brought by Tony, Angelina, John and Filomena in the amended counterclaim.
The application for directions
The application before me seeks five orders:
1.A direction as to whether, pursuant to section 92 of the Trustees Act 1962 (WA), Shaun William Boyle (Mr Boyle) in his capacity as administrator of the personal estate and receiver of the real property of the late Raffaele Farano (also known as Raffaelo Farano), is justified in defending the counterclaim commenced by Antonio Michele Farano and Giovanni Cosimo Farano in Supreme Court of Western Australia action CIV 1189 of 2020.
2.An order that Mr Boyle's costs incurred in the proceedings Supreme Court of Western Australia action CIV 1189 of 2020, including in respect of defending the counterclaim, be paid from the Estate of the late Raffaele Farano (also known as Raffaelo Farano) (Estate) on an indemnity basis.
3.A direction as to whether the orders of her Honour Justice Strk made herein on 16 December 2021 (Orders) insofar as they relate to the management and administration of Estate property, extend to allow Mr Boyle to sell, or seek orders compelling the sale of, Estate assets, including but not limited to any real property not expressly excluded by the Orders.
4.Alternatively, if the Court considers that the Orders do not extend to allow Mr Boyle to sell, or seek orders compelling the sale of, Estate assets, including but not limited to any real property not expressly excluded by the Orders, an order that the Orders be amended to allow Mr Boyle to sell, or seek orders compelling the sale of, Estate assets, including but not limited to any real property not expressly excluded by the Orders.
5.That Mr Boyle's costs of this application be paid from the Estate on an indemnity basis.
The summons for directions relevantly raises four issues:
1.whether I should give a direction that Mr Boyle is justified in defending the amended counterclaim;
2.what order I should make in relation to the costs of defending the amended counterclaim;
3.whether I should direct or order that Mr Boyle may sell the interests in the properties owned by the Estate other than the contested properties; and
4.what orders I should make in relation to the costs of these proceedings.
I will deal with the issues in that order and I will hear from the parties in relation to the fourth issue at the conclusion of these reasons.
Evidence and preliminary observations
Mr Boyle relies on the following evidence in support of the application for directions:
(a)affidavit of Shaun William Boyle sworn on 10 February 2023 (Mr Boyle's February affidavit);
(b)affidavit of Shaun William Boyle sworn on 5 April 2023 (Mr Boyle's April affidavit); and
(c)affidavit of Gregory Keith Paull sworn on 15 June 2023 (Mr Paull's affidavit).
Tony and John oppose the application for directions. They relied upon the following evidence:
(a)affidavit of Cameron Victor Eastwood sworn on 22 June 2023 (Mr Eastwood's June affidavit); and
(b)affidavit of Cameron Victor Eastwood sworn on 8 August 2023 (Mr Eastwood's August affidavit).
In relation to these proceedings neither Con nor Ines took an active role. Both filed an intention to abide the Court's decision.
They were nevertheless represented at the hearing and I enquired of both counsel for Con and Ines what their clients' position was in relation to the active defence of the amended counterclaim. Both were reticent to express a firm view about the matter, although it is apparent that, particularly from Con's perspective, part of the motivation for the application to appoint an independent administrator pendente lite was to enable the administrator to take over the defence of the counterclaim. Ines, it must be said, has played a lesser role in all of the litigation to date.
Returning to the evidence, by way of summary, Mr Boyle's February affidavit sets out much of the background to his appointment as administrator and the steps he has taken to investigate and value the assets of the Estate. Mr Boyle's February affidavit attaches the valuations of the properties I summarised earlier.
Mr Boyle's February affidavit also deposes that he has to date committed $32,890.49 of his firm's funds to meet expenses. The unbilled work in progress of his solicitors stands at around $65,000 and his own unbilled work in progress was then currently $62,386 (that is, in February this year).
Mr Boyle deposes that if successful Tony and John's claims to the interests in the Orchard and 69 Fremantle Road will significantly impact the assets available. He deposes that he has sought the opinion of his solicitor, Mr Paull, and senior counsel in relation to defending the amended counterclaim and deposes as to his belief that it is in the best interests of the Estate as a whole and therefore appropriate that he actively defend the counterclaim. He deposes to a belief, based on information from his solicitors that, in addition to the costs already incurred, the estimated costs of defending the amended counterclaim to trial are $127,200 (exclusive of GST).
Mr Boyle's April affidavit annexes an opinion from Mr Paull and an opinion from Mr Matthew Curwood SC. The opinions, which were filed pursuant to orders intended to retain their confidentiality, are marked 'Not to be Opened without an Order of the Court'. While privilege has not been waived in relation to the opinions, the parties accepted that I should consider them for the purposes of the application.
Mr Paull's affidavit simply annexed correspondence providing early notice of Mr Boyle's intention to actively defend the counterclaim.
Mr Eastwood is the solicitor for Tony, Angelina, John, Filomena and Ridan.
Mr Eastwood's June affidavit deposes to his client's objections to the sale of the Estate's interests in both 46 Fremantle Road and 7 Gambia Place. Mr Eastwood annexes correspondence to the effect that Mr Boyle intended to sell the Estate's interest in 46 Fremantle Road to Con and his wife, Rosalie Farano (Rosalie). In that correspondence, Mr Eastwood maintains that his clients maintain that 46 Fremantle Road was a gift to Con and Rosalie, and that 'Tony remained of the belief that [7 Gambia Place] was his'. There is, of course, no counterclaim to beneficial ownership of any of the Estate assets other than the Orchard and 69 Fremantle Road.
Mr Eastwood's June affidavit also deposes to a number of other estimates he has made as to the costs of these proceedings and the estate proceedings. Those calculations and estimates culminate in the following statement:
45.Following a trial of this matter, if the third, fourth, fifth, sixth and seventh defendants succeed in their counterclaim:
a.the value of the estate will be $475,521; and
b.the costs payable by the estate will amount to $692,368.
Thus, Mr Eastwood predicts that the Estate would have a deficit in those circumstances of $216,847.
The figure of $475,521 appears to be the sum of the Estate's interests in Lot 401 Wharton Road and 7 Gambia Place, together with the unpaid debt of $35,521. That is, Mr Eastwood appears to have proceeded upon the basis that the Estate does not include any interest in 46 Fremantle Road.
It was unclear how Mr Eastwood derived the figure $692,368. It does not obviously appear from the various different calculations contained in the preceding paragraphs of his June affidavit. However, Mr Eastwood's August affidavit clarified that the figure comprised:
(a)his estimate of administrators costs up to and including trial of $495,504; and
(b)his estimate of his own clients costs of the estate proceedings of $196,864.
The first sum of $495,504 includes an amount of $41,514 payable to his clients for these proceedings. Whether an order in those terms is to be made remains to be determined.
Mr Eastwood does not depose to a similar calculation in relation to the prospect that his clients are not successful in the amended counterclaim. Using the estimates contained in his affidavit, it is possible to make some rough calculations.
For example, if his clients are not successful and the interest of 46 Fremantle Road included in the value of the Estate, the value would be $2,465,521.
Similarly, if his clients are not successful, adopting the same assumptions as to the successful party being awarded costs, the administration costs would not include his clients' costs of the estate proceedings of $196,864 and, it might reasonably be assumed, his clients would be liable to pay the administrator's costs of those proceedings, which are estimated to be $127,200. The total administration costs on that scenario would be $368,304. If his clients were not awarded $41,514 in costs for these proceedings, that amount would reduce to $326,790.
On that scenario then, that is the scenario of the amended counterclaim not being successful, rather than the Estate having a deficit of $216,847, it would have a value, after expenses, of over $2,000,000.
This is not to suggest any great precision in these estimates, which would, of course, depend upon the actual orders made in the estate proceedings and the costs actually incurred. It is merely to demonstrate what a difference an assumption or two can make to one's perspective.
There is also another alternative scenario that is not specifically addressed in the parties' evidence. What if Mr Boyle does not defend the amended counterclaim and it is successful? In that regard, there is no reason to suppose that a trial of the counterclaim would then be unnecessary. After all, Con and Ines have both disputed the claims made in the amended counterclaim and Mr Boyle, having formed the view, following legal advice, that he would be justified in defending those claims, could hardly disavow the Estate's interests in the contested properties. The most Mr Boyle could do would be to abide the result and either have the children litigate the counterclaim or allow the counterclaim to continue undefended. Tony and John would still incur the costs of the amended counterclaim.
In those circumstances, assuming the counterclaim is successful, the remaining assets of the Estate would be significantly depleted in any event. The already known fees and expenses of Mr Boyle to date are approximately $160,000 (see [49] above) and Mr Eastwood estimates the costs payable for the appointment of the administrator to be $125,000. In addition the costs of bringing these proceedings, at least insofar as the administrator is concerned, would be payable from the Estate. It is likely that half of the Estate (on that scenario) has already gone, even more if the Estate's interest in 46 Fremantle Road is excluded. Depending upon whether Con and Ines took an active role in the estate proceedings, of course, Tony and John may be able to obtain a costs order against them but insofar as the Estate would be concerned, little would remain.
I turn then briefly to the principles applicable to an application for directions pursuant to s 92 of the Trustees Act 1962 (WA).
Applicable legal principles
The principles applicable to an application for directions pursuant to s 92 of the Trustees Act 1962 (WA) have been summarised in a number of decisions of this Court, including most recently by Forrester J in Marinko v Patrick Bernard O'Sullivan and Ralph Adrian Wilson as executors of the will of Rose Margaret Marinko.[2] I need not repeat them all.
[2] Marinko v Patrick Bernard O'Sullivan and Ralph Adrian Wilson as executors of the will of Rose Margaret Marinko [2023] WASC 180.
In Blatchford v Laine,[3] Vaughan J (as his Honour then was), summarised the relevant principles in the particular context of the position to be taken by a trustee (which includes a personal representative) in litigation. Relevantly, his Honour said:[4]
(1)There is a 'jurisdictional bar' under s 92(1). However, that is simply that the applicant must point to a question respecting the management or administration of trust property or a question respecting the interpretation of a trust instrument. The jurisdiction is enlivened when the question raised for directions is whether the trustee is justified in prosecuting or defending a particular claim.
(2)The court has a discretion as to whether to provide a direction under s 92(1). Advice does not have to be provided.
(3)The key question is to determine whether, on the material available, it would be proper for the trustee to prosecute or defend the proceedings. That in turn involves two issues. First, whether the legal issues are properly arguable. Second, whether there are sufficient prospects of success to warrant the trustee in proceeding with the litigation. These enquiries necessitate 'sufficient investigation' of the underlying issues.
(4)The judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceedings. The process is meant to be a summary one.
(5)The court is not bound to investigate the evidence and make a finding as to whether the proposed proceedings would be successful. The question is whether the litigation is justified. The court is not finally resolving the merits of the underlying proceedings.
(6)Relevant overlapping considerations include: (a) the prospects of success; (b) the means of the other party to satisfy any judgment; (c) the potential for the litigation to deplete the trust estate; (d) the likely adverse costs if the litigation is unsuccessful and whether those costs are likely to be proportionate; (e) the likely irrecoverable costs; and (f) the nature of the case and issues raised and what will be gained if the trustee succeeds in the action.
[3] Blatchford v Laine [2018] WASC 207 (Blatchford v Laine).
[4] Blatchford v Laine [57] (Vaughan J) (citations omitted).
The level of generality at which the Court assesses whether the litigation is justified is significant. As Vaughan J observed Blatchford v Laine:[5]
It is important to emphasise that examination of the trustee's likely prospects in the litigation at an 'exhaustive level' is neither necessary nor appropriate. The assessment is made at a 'preliminary level'. The court's role is not to try the issues themselves. The court's function is limited to being satisfied that the material before it is sufficient to determine the general range of the prospects of success; and determining whether it is appropriate to pursue the proceedings having regard to the prospects of success, the benefits of the litigation and the resources available. But there must be sufficient information before the court for it to be satisfied that the proposed action would be for the benefit of the beneficiaries as a whole and otherwise would be prudent to pursue.
[5] Blatchford v Laine [58] (Vaughan J) (citations omitted).
In this case, as I have said, Mr Boyle has filed with the Court, on a confidential basis, the opinions of both Mr Paull and Mr Curwood SC. In that regard, as Edelman J (as his Honour then was) said in Plan B Trustees Ltd v Parker [No 2]:[6]
A court will usually be reluctant to exercise discretion in favour of sanctioning, as justified, a course of action by a trustee unless the trustee has taken reasonable steps necessary to form its own opinion on the subject. Where the direction sought is that legal action is justified then it will generally be necessary for the trustee to obtain a legal opinion before approaching the Court. This is because the trustee should have taken reasonable steps to form its own opinion on the subject about directions which are sought before approaching the Court for directions. Legal action should never be commenced unless the trustee is satisfied that it is properly arguable.
[6] Plan B Trustees Ltd v Parker [No 2] [2013] WASC 216; (2013) 11 ASTLR 242 [48] (Edelman J) (citations omitted); see also Blatchford v Laine [61] ‑ [65] (Vaughan J).
While every application of this kind depends on its own facts,[7] the assessment of whether the conduct of certain litigation is 'justified' must be viewed in the context of the duties of an administrator generally, which include the basic obligation to secure the assets of the estate, for the benefit of the beneficiaries as a whole.
[7] In re Evans [1986] 1 WLR 101, 106 (Nourse LJ); Blatchford v Laine [88] (Vaughan J).
In this context, as Stanley J said in Munro v Munro [2017] SASC 48:[8]
The basic obligation of an executor is to identify and take steps to secure the assets of the estate. In certain circumstances, that may necessitate the executor litigating claims against, or defending claims by, third parties, and compromising the same.
While it is the duty of the executor to discharge obligations of the deceased, it is equally the duty of the executor not to ignore available defences to any claim to enforce the obligation, and even to make use of available opportunities to compromise those claims. As was said in Midgley v Midgley by Lindley LJ:
The general principle is, that it is the executor's duty to protect the estate against demands which by law cannot be enforced against it. That is his duty. That general principle is a wholesome principle, not to be cut away or narrowed, and it was discussed and recognised and enforced in a recent cause in this Court of In re Rownson, where the point was whether the executor could pay a debt to which the Statute of Frauds was pleaded. The Court said, No. On general principle I take it to be clear that it was distinctly wrong for the executor to pay a debt which had been judicially decided not to be recoverable out of the estate which it is his duty to protect.
Accordingly, the duties of an executor are not limited to simply identifying assets and liabilities, whether they be present liabilities or contingent liabilities. It extends to protecting the estate from claims that are defensible.
[8] Munro v Munro [2017] SASC 48 [25] ‑ [25] (Stanley J).
The critical word in this context is, of course, 'defensible'. It is those claims to which an administrator's duty of protection will extend, although it must be recognised that that duty may take on a different complexion where, as here, the administrator is an administrator pendente lite. In any event, is to be remembered that in determining whether to defend proceedings, and in conducting such proceedings, any administrator must act with a due sense of proportion and seek to compromise claims, if at all possible, in a manner that will be in the best interests of the estate and the beneficiaries as a whole.[9]
[9] Szlazko v Travini [2004] NSWSC 610 [11] (Young CJ in Eq); Application of Ferdinando Scali [2010] NSWSC 1254 [10] (Brereton J).
I turn then to the first issue on the application.
Is Mr Boyle justified in defending the amended counterclaim?
First, is Mr Boyle justified in defending the amended counterclaim?
For the reasons that follow, having regard to all of the circumstances, in my view the answer to that question is 'yes'.
Before synthesising the various considerations, it is useful to briefly address each of the overlapping considerations identified by Vaughan J in Blatchford v Laine, albeit in different order.
The nature of the case and what will be gained if the administrator succeeds in the action
First, 'the nature of the case and issues raised and what will be gained if the [administrator] succeeds in the action'.
The nature of the case, of course, is a claim in equity against assets in the name of the Estate. This is not a case in which the issue is whether the administrator is justified in commencing proceedings but whether he is justified in defending them.
In that context, as I have already observed, there have been a number of amendments to the counterclaim in the estate proceedings since Mr Boyle's appointment as administrator. I have already referred to two of them: first, Tony and John admit that Raffaele died intestate, thus clarifying the likely distribution of the Estate and, secondly, the claims to the Orchard and 69 Fremantle Road are now made by Tony, Angelina, John and Filomena (rather than Tony and John alone).
There is another significant amendment in the amended counterclaim. That is that, in the Prayer for Relief, the counterclaim is expressly brought against Mr Boyle alone. The counterclaim, is not in terms brought against Con or Ines. In addition, the Prayer for Relief now seeks alternative relief, against Mr Boyle, that he pay 'compensation or damages to Tony and Angelina and John and Filomena'.
The quantum of the claim against Mr Boyle accounts for almost three‑quarters of the estimated assets of the estate. What will be gained if the administrator succeeds in the litigation is therefore very significant. Absent success by Mr Boyle in the litigation, or a sensible resolution of the estate proceedings, there is likely to be very little for distribution to the beneficiaries of the estate (particularly having regard to the costs consequences referred to below).
Indeed, the potential effect of the amended counterclaim on the Estate is so significant that, in my view, Mr Boyle would have required direction from the Court if he had decided not to defend the amended counterclaim. That is, he would have faced the real risk of criticism – and more – from the beneficiaries of the Estate, particularly Con and Ines, if he had unilaterally decided to accept Tony, Angelina, John and Filomena's position as to the available assets of the Estate.
The significant impact of the litigation on the Estate is therefore an important consideration in the present case.
The prospects of success
Secondly, 'the prospects of success'.
I am satisfied that Mr Boyle has taken reasonable steps to form his own opinion that it is in the best interests of the Estate as a whole that he actively defend the amended counterclaim. Without disclosing the content of the advice, I am satisfied that he has obtained legal advice and that the legal advice has not omitted any significant matter. Of course, the Court cannot abdicate to counsel the task of determining whether a proposed defence has sufficient prospects of success to justify a trustee in proceeding with litigation.[10] Nevertheless, Mr Boyle has sought appropriate advice and acted reasonably in forming his opinion that it is in the best interests of the Estate to defend the amended counterclaim.
[10] Blatchford v Laine [63] (Vaughan J).
It must be accepted that the likely prospects of success of a claim, or a defence to a claim, such as that made by Tony, Angelina, John and Filomena is very difficult to assess in the abstract. So much depends upon the evidence of the individuals concerned as to the relevant promises and assurances, the evidence as to reliance and detriment and the court's conclusion as to whether it would be unconscionable for the administrator to fail to fulfil the expectations based on the promises and assurances or otherwise to avoid any detriment. Documentary and real evidence in such a case is unlikely to be particularly fruitful.
In addition, of course, is the principle that when an equitable estoppel is made out, the relief accorded to it is generally no more than is necessary to avoid the detriment.[11]
[11] Meagher, Gummow & Lehane's Equity: Doctrine and Remedies (5th ed, 2014) [17-285].
In those circumstances, neither active parties in the application before me sought to address in detail the merits of the amended counterclaim or the defence.
On the face of the available material, which consists largely of pleadings, there may also be differences between the case as it applies to the Orchard and the case as it applies to 69 Fremantle Road.
69 Fremantle Road is, after all, the site of Tony and John's homes, as is 46 Fremantle Road for Con. The issues in relation to reliance and detriment are likely to be quite different in relation to that property than the Orchard, in which the children all appear to make more recent claims of contribution and involvement.
As I expressed at the hearing today, one might reasonably have hoped, at least, that the disputes between these adult siblings could be resolved so that at least they are secure in relation to their homes. That is, of course, a matter for them.
Having regard to the competing claims, and bearing in mind that the onus rests with Tony, Angelina, John and Filomena, I am satisfied that both the claims and the defences to the claims have reasonable prospects of success. At this point, particularly given the stage at which the estate proceedings have reached (the pleadings have not closed), I can put it no higher than that.
As I also said in the course of argument, the prospects of success are not to be considered in the abstract; their significance will be affected by the likely benefits in the litigation. A relatively small claim might be justified if it has very strong prospects but not justified if the prospects are more marginal. Conversely, a very large claim may be justified in circumstances in which the claim has some reasonable prospect but nevertheless cannot be described as strong. The game must be worth the candle.
That is why the key question is expressed in terms of 'sufficient prospects of success to warrant the trustee in proceeding with the litigation'.
For the purposes of this application, and subject to the other considerations I will soon discuss, the significant impact of the litigation on the Estate and the reasonably arguable basis for defending the counterclaim, strongly suggest that the administrator should take an active role to defend the Estate against the amended counterclaim.
The means of the other party to satisfy any judgment
Thirdly 'the means of the other party to satisfy any judgment'.
This is a consideration more apt to a case in which the administrator proposes to prosecute, rather than defend, proceedings. Insofar as Tony, Angelina, John and Filomena's means of satisfying a costs order (in the event that the amended counterclaim fails) are concerned, the evidence supports the conclusion that they have ample means. As I noted above, save for Con's 50% interest in 46 Fremantle Road, Tony, John, or entities or persons associated with them, co‑own all of the properties in which the Estate has an interest, including the contested properties.
The potential for the litigation to deplete the trust estate
Fourthly, 'the potential for the litigation to deplete the trust estate'.
This is a significant issue. It almost entirely depends upon whether the amended counterclaim is successful or not.
If the counterclaim is successful, the assets of the Estate will be significantly depleted. To the extent that the costs of defending the amended counterclaim would be borne by the Estate (which would be the case if Mr Boyle defends the counterclaim), it may be accepted that the value of the Estate will almost certainly be wiped out. Even if the costs of defending the amended counterclaim are not borne by the Estate, as I have already said, the assets of the Estate will be depleted in any event. The amounts currently to be paid out of the Estate are already likely to be in excess of $300,000, given that the costs of these proceedings have not yet been brought to account.
Of course, if the counterclaim is unsuccessful, it is a very different picture. The value of the Estate in those circumstances would be well in excess of $2,000,000 and, even after expenses, may still be in excess of that figure.
The likely adverse costs if the litigation is unsuccessful and whether those costs are likely to be proportionate
Fifthly, 'the likely adverse costs if the litigation is unsuccessful and whether those costs are likely to be proportionate'.
The likely adverse costs if the defence of the amended counterclaim is unsuccessful would no doubt be substantial. Mr Eastwood estimated a cost to Tony, Angelina, John and Filomena of $196,864. Whether that would be the amount recoverable on a costs assessment against the Estate is not clear, but it may be accepted that the costs payable from the Estate would be in that order. That is a matter to be given real weight, although, I would observe that even that amount is significantly less than the costs to the Estate that have already been incurred as a consequence of the estate proceedings, the administration and these proceedings.
In those circumstances, particularly given the potential benefit to the Estate from the proper defence of the amended counterclaim, I would not regard that potential costs exposure as disproportionate.
The likely irrecoverable costs
Sixthly, 'the likely irrecoverable costs'.
This I take to be a reference to the costs to the Estate, following success, that cannot be recovered from the unsuccessful party. No doubt there would be a gap between the costs of defending the amended counterclaim and those that would be recoverable on a costs assessment that would need to be borne by the administrator, and thereby the Estate.
Of course, as I have said, there are already significant costs that properly meet that description. For the purposes of this consideration, in the event that the amended counterclaim was successfully defended, the additional irrecoverable costs would be proportionate to, and in my view more than justified, by the benefit to the Estate.
Other considerations referred to by Tony, Angelina, John and Filomena
Counsel for Tony, Angelina, John and Filomena submitted that there was no reason to justify Mr Boyle defending the amended counterclaim because there were already proper contradictors to the amended counterclaim; namely Con and Ines, who expressed their opposition to the relief sought by John and Tony in their defences to the original counterclaim at a time when there was no administrator and the claims were not directed to the administrator as such.
Counsel submitted that it was the four children who had the relevant knowledge and were able to give evidence relevant to the amended counterclaim and that, in essence, the litigation should be fought out by the children without the involvement of Mr Boyle. That is, Con and Ines should be left to defend the amended counterclaim. In those circumstances, it was submitted, justice would be better served because, in the event of success on the amended counterclaim, the costs of defending the counterclaim would not be borne by the Estate but would be borne by Con and Ines (on the basis that costs orders would be made against them). Otherwise, to use the vernacular I put to counsel at the hearing, Con and Ines would get a 'free kick' in having the amended counterclaim defended in a manner that would better benefit them.
Counsel submitted that unless there was evidence that Con and Ines did not intend to defend the amended counterclaim there was no justification for Mr Boyle becoming involved. He submitted that, in the event that circumstances changed, and Con and Ines manifested such an intention, Mr Boyle could then make a further application for directions.
In the course of the hearing I put to counsel that one advantage of having Mr Boyle actively defend the counterclaim was that the counterclaim would then be defended by a fiduciary with an obligation to the Estate, who would be obliged to act objectively and with due proportion in the conduct of the proceedings, and who would be able to compromise the proceedings in a manner that he considered would be for the benefit of the Estate and the beneficiaries as a whole. Counsel accepted that this was a relevant consideration, but submitted that it was not sufficient to justify the direction sought.
Synthesis and conclusion as to the defence of the counterclaim
If the amended counterclaim in the present case is successful, whoever defends the proceedings, the outcome for the Estate looks Bleak. The large proportion of the assets in the name of the Estate will be transferred to Tony, Angelina, John and Filomena and the value of the remaining Estate will be significantly depleted. It already is. Of course, Con and Ines have the most to lose in that scenario: they will be left with nothing, or next to nothing, from the Estate, while their brothers and their families will have the Orchard and 69 Fremantle Road. If they actively defend the proceedings brought against Mr Boyle, lose, and are subject to costs orders, they will certainly be left with nothing.
But either way, the position is Bleak.
While the children qua beneficiaries will all be in the same position, the children qua children of Raffaele and Carmina will be in very different positions.
If the amended counterclaim is unsuccessful, as I have said, the picture will be very different. And, as I have already said, prima facie the significant impact of the litigation on the Estate and the reasonably arguable basis for defending the counterclaim, strongly suggest that the administrator should take an active role to defend the Estate against the amended counterclaim.
Given that the amended counterclaim will have to be litigated in any event, the real issue raised by the application before me is not whether the counterclaim should be defended, but who should defend the counterclaim. In that regard, I have given careful consideration to the matters raised by Tony, Angelina, John and Filomena; namely that Mr Boyle should, in effect, be required to stand by and to require Con and Ines to defend the amended counterclaim.
In the end, however, I am not persuaded by that consideration, nor that the Court should put that decision off to another time and another application like this.
Mr Boyle has been appointed administrator pendente lite. He already has power to defend the amended counterclaim. He has taken reasonable steps to enquire as to the merits of doing so and he has obtained legal advice to that effect. He is prepared, and indeed intends to do so, as a fiduciary whose interests are to the Estate as a whole. Prima facie, he has an obligation to defend the assets of the Estate, where claims are made against the Estate that are defensible. In my view, he would not be justified in, in effect, delegating that task to two of the beneficiaries of the Estate who are not required to act with the same impartiality and proportion as a fiduciary.
I accept that by defending the amended counterclaim Mr Boyle would thereby relieve Con and Ines from the expense of doing so. That might involve something of a strategic 'free kick' in a broad sense, although in the scheme of the estate proceedings as a whole it is, in my view, preferable to have the conduct of the proceedings with the administrator. Moreover, to the extent that the Estate may be depleted in the course of the litigation, it is to be remembered that the orders made by Strk J effectively quarantine the Orchard and 69 Fremantle Road from Mr Boyle's powers. That itself gives Tony, Angelina, John and Filomena a strategic advantage in the estate proceedings.
In addition, Con and Ines remain, of course, parties to the estate proceedings. It will remain within the power of the Court determining those proceedings to make whatever additional orders in relation to the costs of the proceedings as are appropriate at their conclusion.
I also do give weight to the fact that Mr Boyle's defence of the proceedings is more conducive to the impartial and objective conduct of the proceedings, and to their potential compromise for the benefit of the Estate and the beneficiaries as a whole. Given the issues that are at stake, in my view, this is an important consideration in the present case. I would not propose, of course, to give any directions as to how Mr Boyle should conduct the proceedings – but it would be expected that a litigant in his position would take steps to have the estate proceedings managed towards the most efficient and cost effective resolution possible.
In that regard, Mr Boyle would be best placed to achieve a compromise, if that is at all possible, and would be able to seek direction from the Court to give effect to a compromise that he considered to be in the best interests of the Estate if he met resistance from any of the beneficiaries.
In particular, I do not consider that it would be appropriate, in effect, to decline to give directions on the basis that Mr Boyle could return with a subsequent application if the position changes. In that regard, Mr Boyle should be actively involved in the proceedings precisely in order for him to be able to make a realistic assessment of the merits of the estate proceedings as they progress and the relative positions of the parties can be further assessed. Nor, given the expense to which the parties have visited the Estate thus far is it in the interests of the Estate to defer the issue to another, potentially costly, application.
I would therefore propose to give a direction in terms of order 1 in the originating summons.
In that context, I should note that I did give consideration to limiting the direction to Mr Boyle's active participation up to a particular point in the estate proceedings (such as discovery etc), so that the Court might be able to give further direction as further material is available to Mr Boyle and his advisors. In the end, I have decided against that course. First, as it may itself increase the cost to the Estate and, secondly, as I have said, it is not for me to give directions as to how to run the litigation.
In any event, I can deal with my inclination in a slightly different way, to which I now turn.
What order should I make in relation to the costs of defending the amended counterclaim?
Having advised that Mr Boyle is justified in defending the amended counterclaim, it follows, as reflected in O 66 r 9(2) of the Rules of the Supreme Court, that he should be entitled to be paid his costs incurred in doing so from the Estate. No party before me suggested otherwise.
As to the quantification of those costs, Tony, Angelina, John and Filomena submitted that the form of the order should be that the costs be paid on a 'solicitor and client' basis rather than an 'indemnity' basis, relying upon Vaughan J's observations in Blatchford v Laine at [151].
It must be said that the practical, as opposed to conceptual distinction, between the two types of orders can prove illusory. In the circumstances however, to the extent that an order for 'solicitor and client' costs retains a check on the reasonableness of the costs actually incurred, I propose to make an order in those terms.
In order to provide some check on proportionality, however, I propose a further amendment to order 2, which is to limit the extent of the indemnity to a fixed sum, with liberty to apply to increase the amount. That was the course recently adopted by Irving AJ in Yuen v Louey,[12] which counsel for Mr Boyle referred to at the hearing. In that way there is a trigger for Mr Boyle and his representatives to give active consideration to the proportionality of the costs of the proceedings at a reasonable stage.
[12] Yuen v Louey [2023] VSC 423.
I will cap the amount the subject of order 2 for future costs in the sum of $82,200, which reflects the estimate of costs in Mr Boyle's February affidavit (at [59]), save for the costs of senior counsel at trial. I would, however, give liberty to apply to increase the fixed amount for Mr Boyle's costs and expenses.
Should I direct that Mr Boyle may sell the interests in the properties owned by the Estate other than the contested properties?
The next issue is whether I should make an order directing that Mr Boyle may sell, or seek orders requiring the sale of, any of the interests in the Estate other than the Orchard and 69 Fremantle Road.
Those orders, which are set out, in the alternative, at proposed orders 3 and 4 of the originating summons, have been sought on the basis that it was unclear from the orders made by Strk J as to whether Mr Boyle's powers extended to such a sale. Accordingly, the alternative orders sought are, first, a direction as to whether the orders already enable Mr Boyle to sell or seek orders compelling the sale of Estate assets other than the excluding assets or, secondly, if they do not extend, to so order.
In the proceedings before me the position taken by Tony, Angelina, John and Filomena was that they do not consider it strictly necessary to make an order as there is already the power of sale, but that they do not object to such a direction being made.
In the circumstances, I will make an order to the effect set out in order 4 of the originating summons. That is, I will direct that Mr Boyle is empowered to sell or seek orders compelling the sale of Estate assets including but not limited to any real property, not expressly excluded by the orders made by Strk J on 16 December 2021.
I have taken that step because, in my view, it is not clear on the orders made by her Honour that such a power already existed. Unlike an administrator generally, who has statutory powers of sale under s 10(3) of the Administration Act 1903 (WA), an administrator appointed pursuant to s 35 of that Act only has such powers as are conferred by the Court. Justice Strk did not expressly confer a power of sale. If one was conferred it would have to be by implication from the other powers conferred. In my view, the better construction of her Honour's orders is that Mr Boyle's powers did not extend to the sale of the property. This is particularly given that her Honour expressly empowered Mr Boyle to lease and manage the properties, but did not expressly empower sale. It is necessary for me to confer that power now.
For those reasons I would make an order substantially in the terms of order 4 in the originating summons.
Orders
For these reasons I would make the following orders:
1.Pursuant to s 92 of the Trustees Act 1962 (WA), Shaun William Boyle (Mr Boyle) in his capacity as administrator of the personal estate and receiver of the real property of the late Raffaele Farano (also known as Raffaelo Farano), is justified in defending the counterclaim commenced by Antonio Michele Farano and Giovanni Cosimo Farano in Supreme Court of Western Australia action CIV 1189 of 2020.
2.Mr Boyle's costs incurred in the proceedings Supreme Court of Western Australia action CIV 1189 of 2020, including in respect of defending the counterclaim, be paid from the Estate of the late Raffaele Farano (also known as Raffaelo Farano) (Estate) on a solicitor-client basis, subject to the costs incurred from today being capped in the amount of $82,200 (GST exclusive).
3.Mr Boyle have liberty to apply to increase the amount referred to in order 2 for his costs and expenses.
4.There be a direction allowing Mr Boyle to sell, or seek orders compelling the sale of, the Estate assets, including but not limited to any real property, but excluding any property referred to in order 2 of the orders of her Honour Justice Strk made on 16 December 2021 in CIV 1189 of 2020.
I will hear the parties as to the costs of this application.
Conclusion
Earlier in these reasons I referred to the Bleak picture for the Estate and for some or all of the beneficiaries, if the estate proceedings are not resolved otherwise than by judicial determination.
If the parties are wondering, the allusion to Charles Dickens is deliberate. All of the parties are urged to find a way to prevent that Bleak picture from becoming a reality.
ANNEXURE
I certify that the preceding paragraphs comprise the reasons for decision of the Supreme Court of Western Australia.
SC
Principal Associate to the Honourable Chief Justice Quinlan
11 AUGUST 2023
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