Sheppard v Heathcote
[2022] VSC 795
•20 December 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2021 00109 &
S ECI 2021 00946
| SUZANNE LOUISE SHEPPARD | Plaintiff |
| v | |
| BERNARD DAVID HEATHCOTE (who is sued in his capacity as the Executory and Trustee of the Will and estate of ROBERT DIGBY HALIBURTON SMITH SHEPPARD, deceased) | Defendant |
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JUDGE: | John Dixon J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5, 6 December 2022 |
DATE OF JUDGMENT: | 20 December 2022 |
CASE MAY BE CITED AS: | Sheppard v Heathcote |
MEDIUM NEUTRAL CITATION: | [2022] VSC 795 |
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WILLS & ESTATES – Plaintiff claims an accounting of the estate of her deceased father – Where plaintiff has released the right to an accounting in consideration of a settlement of a Part IV claim – Administration and Probate Act 1958 (Vic) s 28.
CONTRACT – Settlement agreement – Rescission – Misrepresentation – Where plaintiff has failed to demonstrate any material misrepresentation – Where plaintiff has failed to tender restitution.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Self-represented | |
| For the Defendant | Mr R Wells of counsel | Ellinghaus Weill |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background......................................................................................................................................... 2
What the plaintiff seeks.................................................................................................................... 5
2008 Settlement................................................................................................................................... 6
Events subsequent to the 2008 Settlement.................................................................................... 7
The 2010 Settlement........................................................................................................................... 8
Events since the 2010 Settlement.................................................................................................. 10
Conclusion......................................................................................................................................... 17
HIS HONOUR:
Introduction
Ms Sheppard initiated two proceedings by originating motion that now fall for determination. In each proceeding, relief is sought from Mr Heathcote in his capacity as executor of the Will and Estate of Robert Digby Haliburton Smith Sheppard, deceased. The deceased was the plaintiff’s father and the defendant’s father in law.
The first proceeding seeks an order for accounts relating to the administration of the estate pursuant to s 28 of the Administration and Probate Act 1958 (Vic). In the second proceeding a claim for that relief is repeated. The plaintiff also seeks orders:
(a) That the plaintiff’s 2010 terms of settlement be set aside on the grounds of misleading conduct by the executor resulting in losses for the plaintiff when making the 2010 terms of settlement with the executor;
(b) That if the defendant fails to file the account, the Registrar may apply by summons to the court and the court may remove the executor or make such order as it thinks fit.
The plaintiff gave comprehensive releases by the 2010 Settlement that preclude any entitlement against the executor for orders for accounts. The issues in the proceeding were cascading.
(a) Was the plaintiff entitled to an order setting aside the 2010 Settlement? If not, the proceedings must be dismissed.
(b) If yes, is the plaintiff entitled to an order for accounts.
I have determined, for the reasons that follow, that the plaintiff is not entitled to an order setting aside the 2010 Settlement. It is unnecessary to consider the remaining questions and the proceeding will be dismissed.
No point was taken that a proceeding to set aside a settlement agreement ought to be a writ proceeding and allowances were made to accommodate the self-representing status of the plaintiff. The two proceedings were heard together on the basis that the evidence in each proceeding was admissible in the other. The trial proceeded on the basis of affidavit evidence from each of the plaintiff and the defendant, who were each cross-examined. In addition, various documents were tendered by inclusion in a court book to which some reference was made during the trial. The documents were conditionally admitted into evidence, principally subject to issues of relevance. However, I ruled that only those documents exhibited to affidavits should remain in the court book, which became Exhibit A and, of those documents, I have only had regard to those properly proved by the affidavit or referred to in oral evidence or submissions. I have not had regard to the plaintiff’s attempts to give evidence or to the unsubstantiated allegations made from the bar table.
Background
The background circumstances may be briefly stated. The deceased died on 13 June 2004. From some years after their divorce and prior to his death, the deceased and his second wife, Suzanne Maree Sheppard, the plaintiff’s mother (the mother), resided in a property in Orrong Road, Toorak in Victoria. The defendant was granted probate of his will on 9 December 2004 and has, since that time, acted as executor and trustee of the deceased’s estate, doing so, at all times, with the assistance of solicitors, Ellinghaus Weill.
The deceased bequeathed $50,000 to the mother, leaving the residue equally to his three daughters, Beverley (the defendant’s wife), Dianne, and the plaintiff as tenants in common. As at 4 April 2005:
Monies held on deposit by solicitors
$670,487.45
Money held on trust by solicitors
$1,730.07
$672,217.52
Orrong Road property
$890,000
Punt Road property
$250,000
Shares – RD Sheppard Industries
$331,687
$1,471,687
Total current assets
$2,143,904.52
Loan to Diane McDonald
$167,726
Loan to Susie Sheppard
$61,578
Punt Road rent due from Susie Sheppard
$80,000
$309,304
Total contingent assets
$309,304
Out of pockets due to Bernard Heathcote
$173.00
Refund of funeral expenses
$600.00
Debts due to Bernard Heathcote
$10,893.00
Estimated legal fees
$60,000
$71,666
Total estimated liabilities
$71,666.00
After various assets were sold and collected by the executor, the estate comprised a property in Orrong Road, and moneys held in interest-bearing term deposits by the defendant’s solicitors, Ellinghaus Weill, and in the solicitor’s trust account.
The administration of the estate has been affected by litigation that is relevant to the present application.
The plaintiff has contested that the estate was properly administered by the defendant and has asserted at various time misappropriation of assets from the estate and denials by the estate that she was the beneficial owner of assets by way of gift from her father in his lifetime.[1] Although these matters clearly remain as grievances borne by the plaintiff against the defendant, none of these allegations has ever been proved. They are not presently relevant, save as context to the settlements later reached, having been resolved in other litigation or not alleged in these proceedings.
[1]The plaintiff initiated a proceeding, in which she claimed she was the beneficial owner of a property in South Yarra that was dismissed, with Harper J delivering an ex tempore judgement (Proceeding S CI 2005 09556). See also the summary set out by McMillan J in Re Sheppard; Heathcote v Sheppard [2020] VSC 829, [17] (‘judicial advice proceeding’).
By an action commenced in 2004, the mother sought an increased share of the estate and the plaintiff, being a residuary beneficiary, was, for a time, joined as a defendant to that proceeding, which settled.
The mother’s affairs were under administration. Initially, a litigation guardian was appointed. Then, FTL Judge and Papaleo Pty Ltd was appointed as administrator by the Victorian Civil and Administrative Tribunal (VCAT) on 30 May 2006. The plaintiff made allegations before this court about the conduct of her mother’s affairs by the administrator, but it is not a party to either proceeding. If these grievances are relevant to any extent, they are matters of background that in part explain the unfocussed allegations of improper conduct that clouded the plaintiff’s ability to identify and concentrate on the real issues raised in these proceedings.
The mother’s claim was settled in 2008 and the court approved the settlement, incorporating signed terms of settlement. I will set out the key terms of this 2008 Settlement later in these reasons.
In 2008, the plaintiff sought further provision from the estate and this claim was also resolved by terms of settlement dated 30 November 2010. At the time that she entered into these terms of settlement, the plaintiff was represented by both counsel and solicitors. It is these terms of settlement (the 2010 Settlement) that the plaintiff seeks to set aside by the present application.
Although I will come to the detail of each of these settlements in due course, their combined effect was to grant to the mother a life interest in the Orrong Road property with the remainder interest devolving to the plaintiff. Two funds were set aside for the benefit of the mother and, on her death, the remaining balance of these funds returned to the executor and fell into the residue. The residue of the estate was shared equally by Beverley and Dianne. The result appeared significantly better for the mother and the plaintiff to the detriment of the residual beneficiaries than the original terms of the will. The plaintiff did not accept this proposition because of her belief that mismanagement of the estate had enriched her sisters and diminished her one third residual share. However, putting those unproven allegations to one side, Beverley and Dianne received less than $350,000 each, while the plaintiff’s entitlement is the Orrong Road property plus $220,000 in a cash payment and a legacy of $20,000 paid to her son.
The mother died on 30 September 2018. Although the plaintiff is the executor of her mother’s will and trustee of her estate, she does not sue in that capacity.
These two settlements are central to the present proceedings.
What the plaintiff seeks
The plaintiff made it clear that what she seeks is an accounting of the defendant’s administration of her father’s estate. She seeks the estate accounts because she intends to seek damages against the estate, although no precise basis for a claim is articulated. It appears to be a ‘fishing expedition’. Notwithstanding the executor’s attempts to transfer title to the Orrong Road property to her that she declines to accept, she believes that the estate still ‘owes her funds’. The estate has now been substantially administered, and the executor only retains funds on account of anticipated legal and administrative costs.
In her own words:
… I am seeking to set aside my terms of settlement on the grounds of misleading conduct by the executor.
In 2008, my mother's legal representatives made a terms of settlement for my mother. My mother's 2008 terms of settlement were breached for the entire life of those 2008 terms by the executor, his wife, Beverley Heathcote, and Bernard Heathcote, who all held and controlled my mother's trust fund money, making it impossibly difficult for me to access any funds for my mother's escalating care needs, to keep her in her own home for as long as was possible.
On 31 March 2016, I finally learned that all my mother's trust fund moneys were wrongfully being held and controlled by the executor in breach of my mother's 2008 terms of settlement in an estate account at the CBA bank, which account I had accessed on 31 March 2016.
…
I determined at the time to fully focus on my mother's care needs, and when that had passed I would deal with the estate matter. The precontractual misleading conduct leading up to me making my 2010 terms of settlement with the executor, his wife, Beverley Heathcote, and Dianne McDonald.
In 2009, the executor's affirmed statement made by him in his affidavit of 25 June 2009, … regarding the conduct of my mother's $215,000 capital payment to her administrators was received by me as true and correct. This affirmed 2009 statement made by the executor regarding my mother's $215,000 payment was literally true but, due to omissions, gave a false picture, and the executor did not correct this.
A second fund in my mother's 2008 terms was for building works urgently required for the conjoined Orrong Road home. This second fund for building works was wrongfully held and controlled by the executor's wife, Dianne McDonald and Beverley Heathcote for the duration of the life of my mother's 2008 terms of settlement in breach of my mother's 2008 terms of settlement. My mother's 2008 terms of settlement is the foundation and forms part of my 2010 terms.
As the executor, his wife, Beverley Heathcote, and Dianne McDonald all remained silent as to their breaches of my mother's 2008 terms of settlement, I made my 2010 terms of settlement with them, receiving their signatures to my 2010 terms as if they were acting in good faith. I am seeking damages, or whatever it is I'm – I'm hoping to get in the alternate, that I otherwise would not have incurred had I not been deprived of my agency by signing a terms of settlement with the executor, his wife, Beverley Heathcote, and Dianne McDonald when I did.
It will be convenient to refer to the $215,000 fund as the ‘welfare fund’ and the $100,000 fund as the ‘building fund’. This is the ‘trust fund money’ to which the plaintiff refers. These funds were created by the 2008 Settlement. The building fund represented funds set aside for the maintenance of the Orrong Road property. An Archicentre Report obtained around the time of the 2008 Settlement identified the need for significant maintenance of that property. The plaintiff claimed that although some funds were released from the building fund, these funds were not what the plaintiff needed, or requested, for her mother’s care.
2008 Settlement
The 2008 Settlement contained extensive recitals. By the settlement, the mother received a life interest in the Orrong Road property with the obligation to pay all outgoings apart from building insurance and land tax. Although the settlement terms provided for a sale of the property to finance alternative accommodation needs should the mother no longer be able to continue to reside in the property, that did not happen. After the mother moved into a nursing home in 2011, the plaintiff continued, and continues to this day, to reside in the property.
Relevantly for present purposes, the terms provided as follows:
(a) The estate will pay a total sum of $100,000 for the direct payment of such necessary repairs, improvements and maintenance for the Orrong Road property as may be requested by the plaintiff’s administrator to make the property safe, sound and of a reasonable standard of amenity. Control of this process was reposed in the executor. The balance of the fund not required for that purpose was to be paid to the administrator to be added to the [welfare] fund. The estate had no obligation to pay for any future maintenance or repairs to the property (clause 3).
(b) The estate also agreed to pay to the plaintiff’s administrator for the benefit of the plaintiff the sum of $215,000 to be held, invested and applied by the administrator for the plaintiff’s benefit during her lifetime and on her death the balance remaining was to be repaid to the estate (clause 4).
The mother accepted these entitlements in full settlement of her claim in the proceeding and in full settlement of all her rights and entitlements howsoever arising to a share in the distribution of the estate. The terms of settlement were subject to court approval, granted by Vickery J on 14 August 2008. Although legally represented when this settlement was negotiated, the plaintiff refused to sign the terms of settlement for reasons that are no longer relevant and Vickery J removed her from the proceeding.
Events subsequent to the 2008 Settlement
By mid-2009, approximately $38,000 had been expended from the building fund on repairs and maintenance to the Orrong Road property. The statement of the financial position of the estate, as attested by the executor, was then:
Assets
Remainder interest Orrong Road
$800,000
Net sale proceeds Punt Road
$422,377
Funds held in interest bearing accounts by solicitors
$552,023
Funds outstanding on costs order from Susie Sheppard
$175,000
Total
$1,949,400.00
Unpaid legal costs
$190,587.06
Uncommitted balance of building fund set aside
$61,870.69
Total liabilities
$252,457.75
On 15 October 2008, the plaintiff commenced a proceeding seeking a further provision from her father’s estate. Leave was required because the application was out of time and such leave was granted by Robson J on 6 May 2010. In this proceeding, the plaintiff was represented by solicitors and counsel.
Following negotiations, this proceeding was resolved by written terms of settlement dated 30 November 2010 between the plaintiff, the defendant and the plaintiff’s sisters, Diane and Beverley. Although the settlement concerned the plaintiff’s entitlement to a further provision out of her father’s estate, I accept that it was important to the plaintiff that the executor continued to observe the terms of the 2008 settlement which she had refused to sign. Those terms were annexed as a schedule to the 2010 Settlement terms. By this time, the plaintiff had ventilated her concerns about the manner of administration of her father’s estate by the defendant. I am satisfied that the defendants and the remaining beneficiary were well aware of the grievances being pressed against the administration of the estate by the plaintiff.
The 2010 Settlement
The substance of the agreement was that Diane and Beverley relinquished all rights to the Orrong Road property which, unless sold prior to the mother’s death, would be transferred to the plaintiff. Secondly, in return, the plaintiff relinquished all of her rights to an equal share in the unapplied balance of the welfare fund, which would pass to Diane and Beverley in equal shares. Third, the defendant and the plaintiff agreed to waive all costs orders and any other outstanding indebtedness between them. Fourth, the estate would pay $220,000 to the plaintiff. Fifth, the estate would pay $20,000 to the plaintiff’s son.
Significantly, the 2010 Settlement recited (recital R):
The Plaintiff, the Defendant, Diane and Beverley are desirous of settling:-
i) the Plaintiffs claim in this proceeding;
ii)the Plaintiff's entitlement to any legal costs and disbursements in this proceeding (or any other proceeding concerning the estate of the deceased);
iii)any and all other claims that the Plaintiff may have against the estate of the deceased;
iv)all of the Plaintiff’s rights and entitlements to share in the distribution of the deceased's estate;
v)without limiting the generality of the above, any and all other claims that the Plaintiff, may, but for these Terms of Settlement otherwise have had against any of―
a)the Defendant (both personally and in his representative capacity); and/or
b)Diane; and/or
c)Beverley;
Arising out of or in any way connected with―
d) the deceased's property or assets; and/or
e)any dealings of any type with the deceased's property or assets, whether during his lifetime, or after his death; and/or
f) the administration of the deceased's estate; and/or
g)the administration of any companies in which the deceased had an interest; and/or
h) the validity of the deceased's Will; and/or
i)any other matters touching upon or concerning the property, assets or affairs of the deceased or the Estate, whether during his life or after his death; and
vi)any claims that the Defendant (both personally and in his capacity as executor and trustee of the Estate) Diane, Beverley and the Estate of the deceased or any of them may have against the Plaintiff.
The terms of settlement specifically contemplated that all parties executing them did so in settlement of each of the matters set out in this recital.
The plaintiff agreed to accept each of these entitlements.
6. …
a)in full and final settlement of the Plaintiff's claim pursuant to the provisions of Part IV of the Administration and Probate Act 1958 for further provision to be made for her maintenance and support out of the estate of the Deceased and inclusive of all of her legal costs of and incidental to such claim, including all reserved costs;
b)in full satisfaction of all claims or rights which the Plaintiff had, now has, or may hereafter have against the estate of the Deceased or to participate in the distribution of the estate of the Deceased, or in any other way whatsoever;
c)in full satisfaction and settlement of all claims or rights which are set out in recital R. of these Terms of Settlement; and
d)in lieu of and in substitution for all of the rights that the Plaintiff had pursuant to the terms of the Will of the deceased to share in the distribution of the estate of the deceased.
7.Upon distribution of the Estate in accordance with the foregoing provisions and performance in full of the terms and conditions herein―
(a)the Plaintiff agrees that she will thereupon release and forever discharge the Defendant (both personally and in their representative capacity) and the estate of the Deceased, and each of Diane and Beverley from all actions claims and demands which the Plaintiff had, now has, or may hereafter have, in relation to the estate of the deceased, or the assets and or property of the deceased, and including but not limited to all of the matters set out in recital R. hereto; and
(b)the Defendant (both personally and in his representative capacity agrees) and each of Diane and Beverley agree that they will each thereupon release and forever discharge the Plaintiff from all actions claims and demands which any of them or the estate had, now has, or may hereafter have, against the Plaintiff, arising out of or in connexion with the assets and estate of the Deceased and including but not limited to the matters set out in recital R. hereto.
Events since the 2010 Settlement
The mother died on 30 September 2018. However, although the plaintiff then declined to participate in the process to transfer title to Orrong Road to her, she presently resides in the Orrong Road property. She has not paid, or offered to pay, rent to the estate.
In 2020, the executor instituted proceedings seeking to enforce the 2010 Settlement terms by effecting a transfer of the title to the property to the plaintiff without her participation (the judicial advice proceeding). McMillan J made orders on 9 December 2020 intended to effect the transfer of the property but the executor has not completed the process established by those orders, pending resolution of the application now before the court to set aside the 2010 Settlement.[2] In the judicial advice proceeding, the plaintiff (as defendant) alleged that the defendant, as executor of the estate, was in breach of the 2008 Settlement and that when she signed the 2010 Settlement terms, she was not aware of those purported breaches by the executor. She claimed that she had executed the 2010 Settlement terms without genuine consent.
[2]Judicial advice proceeding (n 1).
Following on the plaintiff’s refusal to take title to the Orrong Road property, this claim appears to be the first sign that the plaintiff might seek to set aside the 2010 Settlement. However, McMillan J noted in her reasons that the 2010 Settlement terms were unequivocal and there was nothing before the court to suggest that they were not valid. The parties were bound by them. Her Honour added:
The defendant raises a number of allegations in respect of the administration of the estate. These issues are not directly responsive to the plaintiff’s application and do not fall within the scope of this proceeding. The defendant does not contend she is not entitled to the property or provide any explanation as to why the property should not be transferred to her. Instead, the defendant seeks to raise a number of concerns with respect to the administration of her father’s estate. This proceeding is not the proper forum to raise such issues.[3]
It is likely that any and all of the plaintiff’s grievances against the executor were identified by recital R and released by clause 6 of the 2010 Settlement.
[3]Ibid [26]-[27].
The plaintiff explained she would have been happy to have received the Orrong Road property through the process specified by McMillan J because she believed that if the Prothonotary signed the property over to her, she would not have been performing the 2010 Settlement. She would then not be shut out from seeking to set aside the 2010 Settlement and claiming an accounting of the administration of the estate and proceeding to rectify the issues that she has with the administration of the estate. This confirmed what can be inferred from the absence of any evidence to the effect that that the plaintiff has no intention, nor was she capable, of returning the cash payment she received under the 2010 Settlement or any of the other benefits she received. There was no evidence of any capacity to reimburse the estate for the rent free occupation of Orrong Street since, at least, her mother’s death. The plaintiff has no conception of the requirements for restitution as a condition of rescission.
The plaintiff stated that her mother occupied the Orrong Road property at the time of her father’s death and she continued to occupy it at the time of the 2008 Settlement. The plaintiff also resided at the property with her mother until her mother was placed in a nursing home on 19 September 2011. Since that time the plaintiff has occupied the property, asserting her entitlement to do so was based on the 2010 Settlement. The plaintiff continued:
But how can you set aside the terms of settlement when you've been taking the benefit of it for the last 12 years?---Because I didn't know about the breaches to my terms of settlement until 31 March 2016. That was when I first learned, conclusively, that my mother's terms of settlement had been breached, therefore, my terms of settlement that I accepted on the foundation of my mother's terms of settlement were breached – were wrongfully – I accepted them, believing that my mother's terms of settlement were being conducted as outlined in the terms of settlement, which forms part of my terms of settlement, and all along they were not. I feel – I – I really am aggrieved at the fact that I then lost – by accepting the terms, I lost my opportunity to deal with other matters. For example, the theft of a property by the – by Beverley Heathcote in regard – there's a lot of things that needed to be properly addressed that I lost the opportunity to address by accepting the terms of settlement. Since my mother's death, there's been no rates paid on – municipal rates paid on the Orrong Road property by the estate. Even though they do say they have, but they haven't. I – I'm hearing what you're saying but it's not my understanding of the situation. They never tried to get me out of it.
The plaintiff stated that she took no formal steps to set aside the 2010 Settlement:
I don’t recall off the top of my head whether I said I was going to seek that relief, but I told them I was not going to accept the terms, and I was going to bring an order against them.
I am satisfied that the plaintiff intends to retain all of the benefits she has received under the 2010 Settlement. She believes that by doing so, she is in part reimbursed because the maladministration of the estate by the executor has diminished its value such that her one third entitlement as a residuary beneficiary under the original terms of the will would be greater than what she agreed to accept from the estate.
On 12 October 2018, the plaintiff wrote to the estate’s solicitors stating that she will not be accepting the terms of settlement as they are and suggesting that her delay in bringing legal action should not be seen as a delay amounting to acceptance.
The plaintiff noted that the 2008 Settlement formed part of the 2010 Settlement, being referred to in the recitals and added that when she needed the funds to help her mother she couldn’t get them because they were being ‘wrongfully and in breach of my mother’s terms held and controlled by three parties who shouldn’t have had them’.
The plaintiff has not persuaded me that there was any material misrepresentation that induced her to enter into the 2010 Settlement and that had she known the true state of affairs she would never have done so. She accepted that the executor paid her mother’s $215,000 to her administrators on 23 September 2008, but stated:
It was run through the books and her administrators paid it back to the estate.
Pressed to explain this assertion, the plaintiff said:
Because that is not a fact, and I know that 100% for certain the money was held by Bernard Heathcote for the life of my mother’s terms of settlement after it was initially paid to the administrators. The administrators paid it back to the estate, not the estate’s solicitors, to the estate, where it was held and controlled by Bernard Heathcote … and that happened before 14 November 2008, not terribly long after it was initially paid to them.
The plaintiff sought to establish this proposition by reciting what she was told at the Commonwealth Bank by an employee. The deceased held seven parcels of shares that the executor sold through a broker, Commonwealth Securities Limited, which is affiliated with the Commonwealth Bank. The plaintiff produced correspondence that demonstrated that the executor instructed Commonwealth Securities Limited to sell these shares and the net proceeds of sale were provided by a cheque that was banked into the interest-bearing deposits maintained by the defendants’ solicitors, forming part of the assets of the estate referred to above. This occurred in November 2004. However, the plaintiff took this letter to a branch of the Commonwealth Bank where she made inquiries, apparently based on the deceased’s distinctive name. The plaintiff stated that an unnamed bank teller employed by the Commonwealth Bank, looked up her father’s name on the system and indicated there was a bank account in his name with the bank and told her what the account balance was. From this information she inferred that the welfare fund was returned to the executor as she alleged. The plaintiff was informed that what she related to the court was not proof of that transaction.
Mr Heathcote denied that the deceased ever had any accounts with the Commonwealth Bank or that he ever opened any accounts with that bank on behalf of the estate. All of the financial transactions for the estate were, he said, executed by his solicitors. Further, Mr Heathcote, by reference to the ledgers maintained by his solicitors on behalf of the estate, demonstrated that the amount of $215,000 was paid by his solicitors to the administrators on 23 September 2008. The balance of those funds were not returned by the administrators until after the mother had died.
On 19 September 2019, a balance of $184,026.40 was received by the estate’s solicitors. In consideration of that sum being returned to the estate, Mr Heathcote executed a deed of acknowledgement and release in favour of the administrator, now Australian Unity. A statement of income and expenditure for the period 30 September 2018 to 19 September 2019 that finalises the administration of the mother’s affairs recorded that payment as ‘trust distribution capital’ and noted that no further funds are held on trust for the estate. I am satisfied that this sum was the return of the unspent portion of the welfare fund. Without any evidence to support the allegation, the plaintiff suggested the deed was a falsified document and that the administrators were ‘underhanded and dishonest’. She relied on her beliefs based on what the unidentified Commonwealth Bank employee had told her. I reject these allegations as unfounded and inappropriate.
The plaintiff then stated that a letter from the administrator dated 18 April 2016 demonstrated the administrator could not provide funds from the welfare fund for her mother’s benefit. I pause to note that this letter provided an explanation that reimbursement for the cost of a fridge came from the building fund and was paid, as the 2008 Settlement provided, by the executor. It did not support the proposition being advanced by the plaintiff that the administrator could not provide funds because it had returned the welfare fund to the executor.
Next, the plaintiff pointed to a statement of assets and liabilities that had been prepared by the administrator. This document stated that, as at 25 March 2016, the administrator held funds of $213,000 in a ‘CBA cash deposit’ for the estate of the deceased. The plaintiff asserted that the administrator was not holding the welfare fund in the Commonwealth Bank account, rather it was the executor who was holding it in the estate’s account at the Commonwealth Bank.
I pause to note that no bank statements were produced. When this issue was raised and the possibility of production by subpoena mentioned, the plaintiff sought an adjournment in order to serve a subpoena upon the Commonwealth Bank for the production of relevant bank records. I refused this request because the evidence, as I have noted, only supported a conclusion that neither the deceased nor the estate ever held accounts at the Commonwealth Bank. There was no reason to expect that an adjournment to serve a subpoena would be anything other than an expensive and futile exercise.
Next, the plaintiff referred to annual statements of accounts submitted to VCAT by the administrators. It appeared from the statement in one of those accounts that the administrator described the trustees of the building fund to be Dianne McDonald and Beverley Heathcote when, according to the plaintiff, the administrator should have been holding the funds.
I pause to note that the administrator’s annual statement of accounts cannot be regarded as conclusive evidence of a breach of the 2008 Settlement by the executor. This evidence was confused because there was no Commonwealth Bank account in the name of the estate although, as the executor conceded, the balance of the building fund ought to have been paid to the administrator and added to the welfare fund. Even if the plaintiff had not released the executor from any claim to accounts by the 2010 Settlement, it is clear how these two funds have been dealt with.
The plaintiff then took the court to a letter of 13 January 2011 that sought funds for renovation of a powder room at the Orrong Road property. The plaintiff contended that her mother would have been able to reside in her own home for longer than she did had she received assistance from the administrator but none was forthcoming. Again, I pause to note that this incident appears to have been treated as an application for payment out of the building fund, which was controlled by the executor pursuant to the 2008 Settlement. This was not evidence of breach by the executor of the terms of the 2008 Settlement and any complaint that the plaintiff may have against the administrator was not a matter that was before the court.
The plaintiff stated that she entered into the 2010 Settlement ‘very, very reluctantly’. She believed that the welfare fund and building fund provided under the 2008 Settlement would have enabled her to provide for her mother in her own home for the rest of her life. At the time she signed the 2010 Settlement her mother had broken her leg. She was ‘tired and exhausted’. She believed those funds were with the administrator for that purpose and she didn’t know that that was not the case adding, ‘because if I had known my mother’s money wasn’t where it was, I never, ever would have made a terms of settlement. I would have continued to fight and fix up the issues …’.
Invited again to explain why her attitude to the 2010 Settlement was affected by what she now believes about the dealings with the welfare fund and the building fund, the following exchange occurred:
Explain to me – explain that to me? --- Oh, right – there's no way in the world I would have made it if I hadn't believed – because I then would have understood I wouldn't have been able to get the money. If I'd understood where the money really was and who was managing it I would have known that I wasn't going to be able to access it to keep my mother in her house.
But you knew that there had been a settlement in which the money had gone to the administrators?--- I believed that had been the case but I had ---
That's what you'd legally agreed to?---Yes.
Yes, and you had lawyers there advising you and Mr Isles –-- no, Mr Isles was in 2010.
Who was there in 2008? Mr Cook, was it? --- Mr Cook – Mr Isles never represented me. Mr Isles represented my mother. Mr Gillies representing me at the 2005 – no, the – yeah, the 6 April 2005 ---
It's really the 2010 that I'm asking you about? --- Right. I was represented by Mr Richard Cook and Jim Stavros as a solicitor. Now, they didn't know my mother's terms of settlement had been breached. They didn't know. They kept saying to me –you know what they kept saying to me all day because it was so hard?
The plaintiff also related her concerns about observance of the 2008 Settlement to her grievances about the administration of her father’s estate. She said:
This is what it’s got to do with; because of the knowledge I was gaining about the mismanagement of my father’s estate. If I had the knowledge that they had also breached my mother’s 2008 terms of settlement, there’s no way I would have made any terms with them. Because I understand, by making terms, I was shutting myself out of being able to help my mother or help myself in regards to fixing the situation up, the surrounding circumstances.
The plaintiff accepted that she would have remained a residual beneficiary of the estate in conflict with the other residual beneficiaries in order to pursue claims against the executors for mismanagement of the estate.
The plaintiff stated she initially became concerned by the correspondence over the renovations to the powder room, stating it was the administrators who were supposed to make those assessments in regard to the care and arrangements for her mother, rather than the executor because she couldn’t get what she needed from her mother’s administrator, she:
started to wonder why was that, and I finally learned that was because they weren’t even holding or controlling her funds. They were all held and controlled by the executor or Diane McDonald and Beverley Heathcote, in direct breach of my mother’s terms of settlement.
Conclusion
The fund of $215,000 was paid by the estate to the administrators and was received by them. Although no bank statements were produced, I am satisfied that the principal sum (less some minor adjustments) when paid over to the administrator was transferred into an interest-bearing deposit at the Commonwealth Bank held by the administrators but named in financial statements as belonging to the estate. Possibly, the interest bearing deposit also bore the deceased’s name.
Critical to the plaintiff’s case was her allegation that these funds were promptly repaid by the administrator back to the estate in breach of the 2008 Settlement. However, the plaintiff could not prove this allegation. It was, at its highest, a belief engendered by a conversation with an unidentified bank clerk at an unidentified branch of the Commonwealth Bank from whom the plaintiff made some enquiries.
I accept the executor’s evidence. It was consistent with such documents as had been produced to the court and was unshaken in cross-examination when I insisted that the plaintiff put to the executor her allegations of impropriety. I pause to note that none of the plaintiff’s allegations were established, either by documents or evidence, and no proper basis appeared for any of them.
The plaintiff was wrongly assuming that there was a Commonwealth Bank account in her father’s name but under the control of the executor into which the welfare fund had been paid. The plaintiff believed this to be so from what she was told by the unidentified bank clerk, and that the money turned up in the name of the estate shortly after it was paid by the estate to the administrator. It was by reference to that information that the plaintiff believed that the 2008 Settlement was breached by the executor because the welfare fund was returned to him. In turn, the plaintiff believed that she was unable to obtain access to the welfare fund to assist her mother during the last years of her life in her dealings with the administrator.
Two further observations may be noted. Firstly, it is clear that the administrator separately accounted for the welfare fund as a fund to which the estate was ultimately entitled. This approach was consistent with the provisions of the 2008 Settlement that provided for the unapplied balance of the fund to be returned to the estate. Secondly, the accounting records are consistent with the funds being held by the administrator in an interest-bearing account at the Commonwealth Bank in the name of the estate.
In the absence of any records from the Commonwealth Bank, or bank statements from the administrator, or evidence from the unidentified bank teller, the plaintiff has not established that there was any breach of the 2008 Settlement in this respect.
I am satisfied that when the plaintiff entered into the 2010 Settlement, consistently with the terms of the 2008 Settlement, the welfare fund was being held by the administrator and not, as the plaintiff now believes, by the executor. It follows that the plaintiff was not, and could not have been misled about the management of the welfare fund as she claimed.
The executor conceded that the balance of the building fund was not paid to the administrator to be added to the welfare fund following the completion of the repairs and maintenance work at Orrong Road as clause 3 of the settlement required. However the executor contended, and I accept, that his failure to pay that balance over as required could not constitute a material misrepresentation inducing the plaintiff to enter into the 2010 Settlement for the following reasons.
(a) There was no evidence that the plaintiff sought any representation about the management of those funds prior to entering into the 2010 Settlement. Neither was there evidence that the defendant or anyone on his behalf made any representation about those funds to induce the plaintiff to settle her claim. She was legally represented. Extensive recitals were, plainly, negotiated.
(b) The executor separately accounted for the building fund within the financial records of the estate such that the appropriate balance of it was at all times readily identifiable and capable of being paid to the administrator had it been called for. The admitted breach was not substantive.
(c) The administrator did not exhaust the welfare fund in payments towards the mother’s welfare during her lifetime and as a result had no reason to call upon the balance of the building fund. Under the terms of the 2008 Settlement, the balance remaining of the welfare fund upon the mother’s death returned to the estate. I reject the plaintiff’s suggestion that the administrator did not call for the balance of the building fund because they had already returned the welfare fund to the executor.
In any event, that was not the plaintiff’s expressed concern; her complaint, as it pertained to the building fund, was that her sisters were wrongfully holding and controlling the building fund and making all of the decisions in respect of it. The plaintiff could not establish this contention either. I find that the building fund was held and controlled by the executor and that payments were made after being requested by the administrator. On 20 October 2009, the administrator reported to the plaintiff that, as at that date, $43,719 had been expended from the building fund and a further expense of $6,765 had been authorised but not yet paid. There was no evidence that the plaintiff’s sisters played any role in this process.
The plaintiff and the defendant are parties to a binding legal contract constituted by the 2010 Settlement. When the plaintiff entered into that contract she was legally represented. Her legal representatives have not been called to give evidence in support of her claim. While her barrister, Mr Richard Cook, has died, her solicitor Mr Stavros is now a practising barrister and his absence from the witness box is unexplained. In the ordinary course, I may infer that his evidence would not have assisted the plaintiff. However, because the plaintiff is not legally represented, she may not have been aware that it was desirable to call evidence from her former solicitor. She was also unaware of the process of issuing a subpoena to produce documents and of the operation of the hearsay rule precluding her from giving evidence about statements made by an unidentified bank employee.
I need not draw any such inference because the question of inducement or reliance and the role of legal representation need not be resolved because there was no misrepresentation of the state of affairs concerning the funds. The circumstances were not as the plaintiff believes them to have been. The plaintiff’s claim falls at the first hurdle. There was no misrepresentation by or on behalf of the executor in the terms asserted by the plaintiff.
The principle of law which the plaintiff seeks to invoke is that a person who is induced into a contract by a misrepresentation may escape the contract by rescinding it. The misled party has a choice and may elect whether to continue with the contract or to avoid it. The contract is not automatically voided, but is voidable at the option of the misled party.
When the misled party elects to avoid the contract and seeks rescission, it is necessary that each of the parties to the contract be restored to the status quo that existed prior to the contract being entered into. If this is not substantially possible, the remedy is not available. It is not possible to disavow the obligations created by a contract while retaining the benefits.
Even if I assume, without deciding, that the plaintiff’s letter of 12 October 2018 constituted an election to rescind the 2010 Settlement, it is plain that restitution was not offered by the plaintiff, cannot now be made, and is not available. There is no evidence that the plaintiff has the means or the intention to return to the estate the financial benefits paid under the 2010 Settlement. Further, the plaintiff continues to take the substantive benefit of residing in the Orrong Road property. She has done so for more than 4 years and has not since 12 October 2018 made an offer to pay rent to the estate for that occupation. It must be presumed that she regards her occupation as being justified as the benefit she received by the 2010 Settlement, notwithstanding that she refuses to voluntarily accept transfer of title to her.
While the unavailability of restitution is a sufficient basis to deny the plaintiff’s claimed entitlement to rescission of the 2010 Settlement,[4] a more fundamental reason for doing so is that I have not been persuaded that there was any actionable misrepresentation by the executor that induced the plaintiff to enter into the 2010 Settlement. The plaintiff bears the onus of satisfying the court of this fact and she has failed to discharge it.
[4]See, eg, AH McDonald & Co Pty Ltd v Wells (1931) 45 CLR 506, 512-13; Gutnick v Indian Farmers Fertiliser Cooperative Ltd (2016) 49 VR 732, 742 [24].
As I have explained, I am satisfied that the plaintiff’s expectation when entering into the 2010 Settlement, that the executor would honour the terms of the 2008 Settlement, particularly clauses 3 and 4 establishing the welfare fund and the building fund, and would administer those funds in accordance with the terms of that settlement, was not misplaced. I am satisfied that the executor discharged his obligation. I was not persuaded that the executor’s failure to pay to the administrator the balance of the building fund after the completion of the work identified by the Archicentre report was in any relevant way influential in inducing the plaintiff to enter into the 2010 Settlement.
Lying at the heart of the plaintiff’s complaints are two mistaken assumptions. The first is her belief that the welfare fund was not substantially applied for the benefit of her mother to enable her to remain in her own home for the balance of her life. It is clear that in all of the circumstances this was an obligation that fell upon the administrator, not the executor. The second is that there has been maladministration of the estate by the executor that can be proved by access to the financial records of the estate administration. The plaintiff did not demonstrate any basis for this belief that is based on events that post-dated the 2010 Settlement.
For these reasons, the plaintiff is not entitled to an order setting aside the 2010 Settlement. She remains bound by its terms. Those terms, particularly clauses 6 and 7, carry the consequence that she has released and forever discharged any obligation on the part of the executor to provide to her any accounting about his administration of the deceased’s estate.
It is also likely that the grievances that the plaintiff wishes to further pursue against the executor, which she believes will be proved upon examination of an accounting of the administration of the estate, have also been released and discharged by the terms of the 2010 Settlement. However, it is not necessary that I make any finding in that context as such claims are not before the court.
The proceedings will be dismissed. Costs are reserved.
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