Skaftouros v Dimos
[2002] VSC 198
•29 May 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 5667 of 2001
IN THE MATTER of the Will of Dimitrios Skaftouros (deceased)
AND IN THE MATTER of Section 34 of the Administration and Probate Act 1958
| LEE ANTHONY SKAFTOUROS AND ORS | Plaintiffs |
| v | |
| LEO DIMOS | Defendant |
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JUDGE: | Mandie J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 5-7, 11-15, 18-19 February 2002 | |
DATE OF JUDGMENT: | 29 May 2002 | |
CASE MAY BE CITED AS: | Skaftouros v Dimos | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 198 | |
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Administration and Probate – executors – application for removal of an executor pursuant to s. 34(1)(c) of the Administration and Probate Act 1958 – duties of an executor – whether executor was unfit to act.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C. Gunst QC with Mr M. Simon | Woodhams O’Keeffe |
| For the Defendant | Mr R. Berglund QC with Ms C. Sparke | Leo Dimos & Associates |
HIS HONOUR:
This proceeding is brought by originating motion dated 7 May 2001 seeking removal of the defendant as executor of the estate of Demetrios Skaftouros (“the deceased”), who died on 24 October 1998 at the age of 76, leaving a will dated 7 April 1994. The plaintiffs and their relationships to the deceased are Lee and Paul Skaftouros (sons), Catherine Pearce (a daughter) and Panagiotis (Peter) Skaftouros (his brother). The wife of the deceased had predeceased him. The application is made pursuant to Section 34(1)(c) of the Administration and Probate Act 1958 (Vic) which, so far as relevant, provides that “(1) …where an executor… to whom probate… has been granted – (c) after such grant… is unfit to act in such office – the Court upon application… may order the discharge or removal of such an executor… and also if the Court thinks fit the appointment of some proper person or trustee company as administrator in place of the executor… so discharged or removed… upon such terms and conditions as the Court thinks fit; and may make all necessary orders for vesting the estate in the new adminstrator and as to accounts and such orders as to costs as the Court thinks fit”.
By his will (cl. 2) the deceased appointed the defendant “LEO DIMOS barrister and Solicitor of 226 Swanston Street, Melbourne” to be the executor of his will and trustee of his estate. By cl. 4 of the will the deceased gave:
(a)the former matrimonial home and residence at 5 Alden Court, Cheltenham (“Alden Court”) to Lee and Catherine (one-half each);
(b)a total of $40,000 to named grandchildren: to the daughters of Paul (Britt ($12,000) and Jasmine ($8,000)) and to the children of Lee (Michael ($10,000) and Josie ($10,000));
(c)the residential rental property (comprising eight flats) at 40 Whitby Street, West Brunswick (“Whitby St”) – one-quarter to Peter, one-half to Lee and one-quarter to Catherine;
(d)the residue of his estate, after payment of debts and expenses, to be divided equally between Paul, Lee and Catherine.
Another daughter, Anita, was not mentioned in the will.
Reference will later be made to other relevant provisions of the will. At this stage it is only necessary to mention cl. 11 which appointed “the firm of LEO DIMOS & ASSOCIATES of 226 Swanston Street Melbourne as solicitors of my estate and also solicitors in connection with the execution of the provisions of this will… and any other matter relating to the administration of my estate…” At all relevant times the defendant was a sole practitioner carrying on his legal practice under the name “Leo Dimos & Associates” (“the Dimos firm”).
In addition to Alden Court and Whitby Street, the deceased’s real estate comprised a property (a house and two units) at Mena Avenue, Cheltenham and a unit in Queensland. His personal estate comprised a bank bill of about $100,000 and cash at bank (of about $15,000).
The plaintiffs relied upon a number of broad grounds for removal of the defendant as executor which may be shortly paraphrased as follows:
(i)serious and inexcusable delays in obtaining probate and in administration of the estate;
(ii)failure to properly administer the estate;
(iii)failure to provide accounts and information to the beneficiaries when requested and generally to communicate with the beneficiaries;
(iv)failure to pay creditors of the estate;
(v)making exaggerated or unlawful demands for commission and costs for himself;
(vi)exhibiting an offensive and adversarial attitude towards beneficiaries.
The duties of an executor and unfitness to act
Executors have been removed by the Court as being unfit to act in such office pursuant to s. 34(1)(c) of the Administration and Probate Act 1958, or its predecessor, in a number of cases. The conduct showing unfitness has included failure to pay beneficiaries their entitlements: Willis v Stephens[1]; gross and prolonged neglect of executorial duties or refusal to perform them: Hoxha v Hoxha[2]; Coote v Fysh[3]; Sharpe v Forbath[4]; failure to perform executorial duties within a reasonable time: Morgan v Morgan[5] and acting in a situation of conflict of duty and interest: Monty Financial Services Ltd v Delmo[6].
[1][1934] VLR 19.
[2]Supreme Court of Victoria, Jenkinson J, 22/9/75, unreported.
[3][1999] VSC 156.
[4][2000] VSC 282.
[5][2000] VSC 445.
[6][1996] 1 VR 65.
In Hoxha v Hoxha[7] Jenkinson J found that the proven and unexplained delay in the administration of the estate raised a strong inference of unfitness to act in the office of executor. In that case, the delay was substantial and involved fundamental matters required to be performed in the administration. His Honour said that “the word ‘unfit’ … may be satisfied by demonstrated incapacity to perform the duties of the executorial office within a reasonable time… [or] by demonstrated unwillingness to perform those duties within a reasonable time[8]”.
[7]Supreme Court of Victoria, Jenkinson J, 22/9/75, unreported.
[8]At p. 3.
In Monty Financial Services Ltd v Delmo[9], Ashley J found the meaning given to the word “unfit” by Nathan J in Old Colonists Association of Victoria v Cox[10], whilst obiter, to be persuasive. Nathan J said (and I paraphrase) that unfitness bore its ordinary common meaning as being not fit, adapted or suited to continue as an executor and that unfitness related to all matters which affected the capacity to perform the executor’s tasks. If such tasks were not performed with proper expedition or with attention to detail, unfitness might become manifest. Ashley J said[11]:
“…the few cases which have directly raised the interpretation of s. 34(1)(c) all involved misconduct or neglect of duty by the executor in the period between grant of probate and application for removal. The misconduct or neglect was constituted by matters such as unwarranted delay in administration of the estate, failure to communicate with beneficiaries, failure to account, and unreasonable delay in paying beneficiaries their entitlement. Turner apart, the authorities are consistent in holding that unfitness is demonstrated by the presence of such a factor. I find it impossible to accept that serious dereliction of duty as an executor does not make that person unfit to hold the office. It cannot matter whether the dereliction is born of intent, of carelessness, or of incompetence. In each case the actual or potential deleterious effect upon the estate and the beneficiaries is the same.”
[9][1996] 1 VR 65; the decision is referred to with approval by the Court of Appeal in Fysh v Coote [2000] VSCA 150, at [20].
[10]Supreme Court of Victoria, 30/8/91, unreported.
[11]Monty Financial Services Ltd v Delmo at p.73.
I respectfully agree with and adopt the statements of Jenkinson J, Nathan J and Ashley J to which I have referred. Given that an executor’s principal duties are to get in the assets of the deceased, to pay the liabilities of the deceased and to distribute the assets of the estate in accordance with the will, it would not be surprising if allegations of unfitness are more often than not based upon what is said to be a sufficiently serious neglect to perform one or more of those essential duties, either in whole or in part, or to perform them with due diligence and expedition. In this proceeding a number of such allegations have been made, along with others of the kind summarised by Ashley J in the passage quoted above.
In relation to the payment of liabilities of the estate, “it is the duty of executors, as a matter of due administration of the estate, to pay the debts of their testator with due diligence having regard to the assets in their hands which are properly applicable for that purpose…”.[12] The duty can be no less in relation to debts due and payable by the estate in the course of its administration. It is a duty owed to the beneficiaries as well as to creditors.[13]
[12]Re Tankard [1942] Ch 69, 72 per Uthwatt J.
[13]Re Tankard [1942] Ch 69, 72 per Uthwatt J.
In relation to the maintenance and provision of accounts, it has been rightly stated that it is fundamental to the good management of a deceased estate that proper records and accounts be maintained[14]. Indeed, it is a duty of an executor to keep proper accounts and to be ready to render such accounts when called upon to do so[15]. Good management apart, one set of reasons advanced for the existence of the duty is the need to be ready to provide such accounts within a reasonable time or to make them available for inspection or to provide information from them, upon the request of interested beneficiaries. In William v Stephens[16],Young J said:
“Accordingly, the executor should be in such a position because of his duty to keep accounts that he can let the beneficiary or her solicitor know in a short space of time what the current situation is. If the beneficiary wishes to go further and obtain a copy of documents or wishes the executor to go to special trouble to produce information then the executor is not bound to supply it unless the reasonable cost therefor is tendered and paid. As Kekewich, J held in Re Watson (1904) 49 Sol Jo 54, the duty of an executor is threefold. First, he has a duty to keep accounts, second a duty to deliver accounts and thirdly a duty to vouch accounts but the considerations which apply to each of these three is not the same. The duty of a trustee to keep accounts is an essential duty, he must keep such accounts so as to be able to deliver a proper account within a reasonable time showing what he has received and paid. As to the duty of delivering accounts, different considerations apply. In the case of a very long account, the trustee may incur considerable expense, and he cannot be called upon to deliver accounts until his expenses have been guaranteed. As to the duty of vouching accounts, that cannot arise until after the accounts have been delivered.
In the instant case there was never any suggestion by the executor that he required any payment at all for the work which he was doing.”
[14]Wills Probate and Administration Service (Victoria), Butterworths, paras. 49,000, 49,015.
[15]Freeman v Fairlie (1817) 3 Mer 24, 43; 36 ER 10, 17; Pearse v Green (1819) 1 Jac & W 135, 140; 37 ER 327, 329; Kemp v Burn (1863) 66 ER 740; Re Watson (1904) 49 Sol.Jo. 54; Strauss v Wykes [1916] VLR 200, 203-4; Re Craig (1952) 52 SR (NSW) 265, 267; Williams v Stephens (unreported, Supreme Court of New South Wales, Young J, 24/3/86, BC8601164); Re The Will of Ruthenberg (unreported, Supreme Court of Queensland, Ryan J, 27/10/93, BC9303514).
[16]Williams v Stephens (unreported, Supreme Court of New South Wales, Young J, 24/3/86,
BC 8601164).
One source contains a suggestion that accounts should be prepared on an annual basis and copies provided to beneficiaries[17]. That does not appear to be a mandatory legal requirement. However in the case of an estate containing income-producing property, such as the present, where annual income tax returns are required to be lodged, the executor will be bound to keep proper records and prepare annual accounts for taxation purposes and there would generally be no good reason why such accounts should not be made available to interested beneficiaries, upon request, for inspection, or by way of copies. The cost would normally be minimal.
[17]Wills Probate and Administration Service (Victoria), Butterworths, paras. 49,000, 49,015.
An unjustified refusal to provide accounts, necessitating an application to the Court, may result in an order for costs against the executor[18].
[18]In re Skinner [1904] 1 Ch 289, 292.
In relation to communication with beneficiaries, I see no reason why the position of a personal representative should be any different to that of a trustee. An executor, like a trustee, should provide a prompt and proper response to reasonable inquiries and requests for information by beneficiaries[19]. Even onerous, unreasonable or antagonistic inquiries or requests should, at least in the first instance, receive some appropriate response or acknowledgment.
[19]Cf Re Whitehouse [1982] Qd R 196, 201 per Macrossan J; Titterton v Oates (1998) 143 FLR 467, 478.
As a fiduciary, an executor owes a duty to the beneficiaries to administer the estate in accordance with the will and, subject to the provisions of the will, to act in the best interests of the beneficiaries. In general, the exercise by an executor of a discretionary power pursuant to a will is not examinable by a court provided that the power or discretion is exercised in good faith and not for some ulterior purpose[20]. If the power or discretion is not exercised in good faith or is exercised for some ulterior purpose an executor will have acted contrary to his duty to the beneficiaries. Accordingly if an executor exercises, or threatens to exercise, a testamentary discretion or power in bad faith or for an ulterior purpose that will be relevant to the question of fitness to continue to act in the office of executor.
[20]As to trustees, see Karger v Paul [1984] VR 161.
Of course, not every mistake or neglect of duty by an executor and not every failure by an executor to exercise powers or perform duties properly or with due diligence and expedition, even if serious, will necessarily demonstrate unfitness to continue in the office of executor. Nor will the Court lightly exercise its discretion to remove a person chosen by the testator as personal representative. In the end, however, the welfare of the beneficiaries and the protection of their interests in the estate are the paramount considerations[21].
[21]See, in relation to trustees, Letterstedt v Broers (1884) 9 App Cas 371, 385-7; Miller v Cameron (1936) 54 CLR 572, 580-1 per Dixon J.
Facts
The defendant (who had drawn and was holding the will) was, on 27 October 1998, informed by Lee of the death of the deceased. A meeting was then arranged and held at the defendant’s office, at which all four plaintiffs attended, on Wednesday 4 November 1998. The defendant read and explained the will and, during the meeting, took appropriate instructions from those present on matters relevant to the administration of the estate. A number of matters were discussed which it is unnecessary to mention. During the meeting, according to Lee, Lee asked what the defendant’s fees would be and the defendant gruffly replied: “I will be putting in a bill at the end and if you don’t like it you can take me to the Supreme Court”. Catherine agreed in substance with Lee’s evidence. The defendant testified that he did not say this but rather that:
“I did explain that my firm would be rendering an account for the work it would be undertaking for the estate; I explained that if they were not happy with the bill rendered by my firm, they could have it taxed by the Supreme Court. I then explained the taxing procedure to them which would ensure that any account at the end of the work done by my firm was a proper one.”
I am satisfied that the version given by Lee and Catherine in relation to what was said by the defendant in relation to his fees or costs is in substance the truth. The defendant was probably not conscious of being terse with them and Lee and Catherine may also have over-reacted to the defendant’s manner, in the emotional circumstances engendered by their father’s death. Nevertheless, the beneficiaries were entitled to something more of an explanation than they were given. It is to be noted that nothing was said by the defendant about such matters as his right to seek executors’ commission or as to the significance of the absence of a charging clause in cl. 11, or elsewhere, in the will.
The evidence shows that most of the day-to-day administration of the estate to date has been conducted by employees of the Dimos firm under the overall supervision and control of the defendant. The defendant said that he saw incoming mail and also looked at the files and accounts on a weekly basis. In or about early November 1998, the defendant had put the task of getting in the estate and making application for probate in the hands of an employee solicitor, Ms Jenny Giavris (“Giavris”). Giavris remained in charge of the file until about 15 September 1999 when she went on leave and another solicitor, Mr Peter Johnson, took over the estate’s files. He continued handling the files until some time in March 2001 when he was injured in an accident. After a hiatus of about one month, Giavris resumed charge of the files in May 2001. It is necessary in recounting the facts to mention in some detail the activities of the defendant and the Dimos firm but it should be noted that there are a number of aspects of that activity which were covered in evidence but which are unnecessary to mention. It should also be noted that senior counsel for the defendant did not in general seek to distinguish between the conduct of the defendant in a personal capacity and the conduct of the defendant, or his employees on his behalf, as a sole practitioner. In my opinion the question of fitness must be decided by considering all of that conduct in all the circumstances.
On 24 November 1998 Giavris sent a number of letters to the Commonwealth Bank addressed to its head office and to various branches asking: “Would you please forward all monies standing to the credit of Mr Skaftouros together with details of all accounts held at your bank”.
On 8 December 1998 the defendant, who periodically reviewed such of his firm’s files as were handled by others, instructed Giavris as to a letter to be written to the deceased’s accountant, his nephew Harry Skaftouros, who carried on practice under the name “Fletcher & Associates” (but whom I will refer to as “Harry”) and who had acted as the deceased’s accountant since 1988. The defendant had earlier spoken to Harry by telephone. Giavris wrote by letter dated 10 December 1998, asking Harry to “forward all books, records, statements and financial returns for the previous 3 years held by you to our office at your earliest convenience”. Giavris and Harry also spoke by telephone that day. Harry informed Giavris that he had nearly completed the 1998 tax return and that he would speak to the Australian Taxation Office (“ATO”) about payment of provisional tax.
By letter dated 14 December 1998 Harry provided the Dimos firm with an income tax return of the deceased for the year ended 30 June 1998 and requested the defendant “[u]pon your perusal and confirmations” to sign the return and return it to him for lodgment with the ATO. Harry also provided the Dimos firm with copies of the deceased’s 1996 and 1997 tax returns, financial statements and notices of assessment. He also provided the defendant with the records relating to the 1998 tax return and, it should be noted, Harry advised the defendant that records for previous years had been returned on completion of tax returns to Catherine (the deceased’s daughter who had been looking after such matters for him). Harry stated that he was discussing the question of future provisional tax with the ATO and would advise in the next few days. Harry’s letter concluded as follows:
“There are other matters to do with the Estate on which I need some clarification, i.e.:
(i)When will the records be available to prepare the Tax Return for the period 1st July, 1998 to date of death?
(ii)Who will be applying to the Tax Office for the File Number for the Estate?
(iii)Will our Office be preparing the Estate Returns for 1998/99 (and 1999/2000 if necessary)?
Would you please clarify the above at your earliest convenience.
If you have any queries in relation to the above, please do not hesitate to contact this Office.
As the matters to date have been finalised, I wish to thank you for your instructions and I enclose herewith my Account for Costs.”
The matters raised by Harry for “clarification” were not dealt with by the defendant despite, as will be seen, several subsequent requests during the time that Harry’s retainer was still extant. The account enclosed with Harry’s letter of 14 December 1998 for the sum of $480 was not paid by the executor until 4 April 2000. Giavris testified that payment was “overlooked”. The failures to deal with the accountant’s requests and to pay his account for a lengthy period are examples of a real degree of laxity in the administration of the estate.
By a second letter of 14 December 1998 Harry wrote to the defendant, referring to a recent telephone conversation with the defendant relating to his father’s inheritance of two flats (i.e. one-quarter) at Whitby Street in which conversation they discussed (according to Harry) transferring all interests in those properties directly to the trustee of his father’s family trust. The letter noted that those instructions would have to come directly from his father but that he was “forewarning you so that the matter is handled correctly from the outset”.
On 15 December 1998 Giavris telephoned Harry acknowledging receipt of his two letters. She told Harry that they had been notified of a possible testator’s family maintenance claim and that, if this happened, it would delay finalisation. Harry said that he understood. They went on to discuss estate income tax matters. Harry told Giavris that for provisional tax purposes the ATO would take into account the earnings of the deceased to date of death and he therefore needed the books and records for the period 1 July 1998 to 24 October 1998 in order to prepare a tax return for that period. Giavris reported the foregoing to the defendant who said that he would let her know what he wanted done but it does not appear that he ever did.
On 16 December 1998 the defendant discussed with a valuer the probable value of the Queensland property. The defendant testified that the application for probate was not lodged until April 1999 because he had not been able to obtain a written valuation of this property but that, in the end, the application was lodged without such valuation. I do not accept the defendant’s evidence. There was no evidence from Giavris of any attempt to obtain a written valuation nor did she corroborate the defendant’s explanation. The plaintiffs contended that there was unreasonable delay by the defendant in applying for and obtaining the grant of probate and relied upon such delay as a ground of unfitness. I deal with that contention later below.
On 18 December 1998 the Commonwealth Bank advised the Dimos firm that its Mentone branch held $15,552 in a cash management call account of the deceased. There was no mention of another asset, a bank bill for $100,000, but the defendant had already been informed of this.
By a letter dated 7 January 1999 and signed by Lee, Lee wrote to the defendant concerning the deceased’s estate. The letter was prepared with the assistance of a friend of Lee, who was a lawyer. The letter enquired “as to what progress you have made in applying for a grant of probate which I would have expected to have been granted by now”. Lee sought “your further advice as to an estimate of your fee in the obtaining of probate and the administration of the estate” and went on to say that “[w]hen providing this advice to me (which I require in writing) I seek both an itemisation of what steps you have taken so far to carry out your duties as executor and also an estimated timetable as to how you see administration of the estate being implemented over the next few months”.
The letter concluded:
“Please also let me have your comments in relation to the will having no specific charging clause in relation to a professional executor such as yourself. Add to this the problem of conflict of interest that arises by your firm having prepared the will as well as having yourself shown as the executor and your firm as solicitors to carry out legal matters concerning administration of the estate.
Subject to receiving as adequate and prompt response to this letter from you, myself and my sister Catherine reserve our rights as to what action we may have to take to see to the proper administration of our father’s will.
I look forward to your prompt response.”
When the letter arrived the defendant considered that it was written by someone with legal training and he considered it “threatening” but neither the defendant nor his firm wrote in response to Lee’s letter. The defendant testified by affidavit that the matters raised by the letter were discussed with Lee in a telephone conversation on 25 January 1999 when Lee was told about a caveat which had been lodged on behalf of Paul with the Registrar of Probates on 11 January 1999. Lee denied the defendant’s evidence – he said that the defendant had by telephone stated that a response had been posted but that he did not ever receive a letter. I reject the defendant’s evidence and accept Lee’s evidence on this point.
It is apparent that the defendant was antagonised by the tone and content of Lee’s letter of 7 January 1999. It is not necessary to conclude that every one of the matters mentioned in the letter were reasonable or raised with justification (although many of them clearly were) in order to find that it was wrong of the defendant not to reply to the letter. The defendant’s failure to reply at all not only fell short of the standards which ought be expected of an executor (and solicitor) but was likely to be conducive of future trouble between executor and beneficiaries (which in fact happened).
On 25 January 1999 Harry wrote to the defendant as follows:
“As Executor of the Estate of the Late Demetrios Skaftouros, please find enclosed herewith Notice of Instalment of Provisional Tax for the year ending 30th June, 1999.
This is Instalment No. 3 of four instalments.
The amount of Provisional Tax Instalment is $2,055.00 due on 3rd March, 1999, however, the previous Instalment amount of $2,055.00 is also outstanding, making a total of $4,110.00 payable.
Please detach the bottom portion of the Notice and forward it, together with a cheque made out to the ‘Deputy Commissioner of Taxation”, to reach the Taxation Office by the due date.
Should you have any queries in relation to the above, please do not hesitate to contact me.
I also note that to date, I still have not received the information and records requested in the correspondence of 14th December, 1998, and I await your response.” (Emphasis added.)
Neither the defendant nor his firm replied to Harry’s letter.
By letter dated 1 February 1999, Neal Collin & Associates (“Collin”), as solicitors for Paul and Anita, wrote to the Dimos firm setting out the approximate values of each beneficiary’s interest under the deceased’s will and contending that “there is no justification for the inequal distribution to the four children” and asking that all parties consent to an equal distribution between the children. The letter concluded:
“Please obtain instructions in relation to this offer, and note our firm instructions that unless this proposal is agreed upon, we shall take proceeding in the Supreme Court in accordance with the provisions of the Administration of Probate Act.
We await your earliest response.”
The Dimos firm did not reply to Collin’s somewhat peculiar letter. Despite its peculiarities the letter should have been answered in an appropriate fashion. The Dimos firm wrote to each of Lee and Catherine enclosing a copy of Collin’s letter and recommending that “you seek independent legal advice and ask your solicitor to contact our office”.
By another peculiar letter dated 10 March 1999 Collin again wrote to the Dimos firm, noting that no response had been received to its letter of 1 February 1999 and stating:
“We understand from our client that there has recently been a family meeting to discuss the administration of this estate, however to date we have heard nothing from you in relation to your client’s attitude to claims submitted by our client.
Please ensure we have a response to our letter within seven days.”
The Dimos firm again failed to respond to Collin.
Shortly prior to 31 March 1999, the defendant sought Giavris’ advice as to whether there were any timeframes for an application for a grant of probate and for distribution of an estate and also as to the validity of a provision in a will that a beneficiary will lose his or her entitlement if they challenge the will. It is unnecessary to refer to the contents of Giavris’ memorandum in response.
On 31 March 1999, there was a meeting at the Dimos firm’s office between the defendant, Giavris and Lee. The defendant’s evidence about this meeting, which I accept, was as follows:
“On 31 March 1999… Jenny Giavris and I met with Lee Skaftouros and we held a thorough discussion of where matters stood with the estate administration, and about the claims of Anita and Paul which had been made against the estate. I reviewed what had been done, told him about the soon-to-be-made application for the grant of probate, and of what lay ahead.
I told Lee that if the foreshadowed testators’ family maintenance claims were to be brought by Anita or anybody else, I would not be able to act for him, since I would be the defendant named in that application. He would have to decide whether he was going to give in to the demands made by the plaintiffs, which I expected might be Paul and Anita, because at the end of the day it would be his money. I explained that legal costs in such cases commonly came out of the estate.
I said to him that either he would have to give in, fight or negotiate if he did not agree with the estate’s position; it would be necessary then for him to engage his own solicitors, and until the claims were sorted out it would not be possible to distribute the estate under the Will. Lee said that Catherine and he had already been discussing doing something for Anita, but he was not going to do anything for Paul. I asked him if he had any more questions, and he said no. I then left Lee with Jenny Giavris, and the conversation continued without me.”
After the defendant left, Lee had a lengthy conversation with Giavris concerning, inter alia, the merits of the proposed Part IV claims.
By letter dated 1 April 1999, Harry wrote to the Dimos firm as follows:
“Further to the lodgement of Mr Skaftouros’ Income Tax Return for 1998, I enclose herewith his Notice of Assessment, details of which are as follows:-
The Assessment is in accordance with the Return lodged and may be paid using the attached payment advice.
The Provisional Tax of $4,110.00 is seriously in arrears and must be paid immediately in order to avoid possible legal action against the Estate.
I also note that I have not received instructions regarding the preparation of the accounts covering the period 1st July, 1998 up to the date of death. (Emphasis added.) I cannot perceive how the Estate can possibly be wound up without full knowledge of possible Tax liability for the 1998/99 year, so I would imagine that this matter needs to be attended urgently.
Would you please contact this Office to discuss the above in greater detail.”
On or about 16 April 1999 the Dimos firm lodged an application for probate of the will of the deceased.
By letter dated 20 April 1999, Collin again wrote in peculiar terms to the Dimos firm as follows:
“You have not bothered to respond to our letters to you of the 1st February and the 10th March 1999.
We understand that an offer of settlement has been made to our client, however this has not been conveyed to our office. We have instructions that the offer made is inadequate and is rejected.
Please advise within seven days of any further proposals your client wishes to make.”
The Dimos firm finally responded to Collin by letter dated 26 April 1999, stating:
“We have your letter dated 20th April 1999. As we are not party to any discussions taking place between the siblings of the deceased, we are unable to comment on what is stated in the second paragraph of your letter.
Further, as your letter of 1st February 1999 fails to disclose any valid legal basis as to why our client should not distribute the estate in accordance with the deceased’s instructions as contained in the Will, we shall not recommend that he do so…”
By letters dated 26 April 1999 the Dimos firm advised Lee and Catherine that an application for grant of probate had been lodged on 19 April 1999 and also enclosed a copy of Collin’s last letter and the firm’s reply and concluded by inviting them to telephone Giavris if they wished to discuss “any aspect of this matter”.
By letter dated 27 April 1999, Harry advised the Dimos firm of provisional tax of $5,704 due on 2 June 1999 and also noted that tax of $2,945 due by that day had not been paid. The firm paid the latter sum by bank cheque enclosed with a letter to the ATO dated 18 May 1999.
On 28 April 1999 Catherine spoke to Giavris by telephone concerning a number of matters relating to the estate. On 9 June 1999 they had a further lengthy telephone discussion during which Giavris told Catherine that Paul and Anita had six months after probate to make a Part IV claim and the estate would not be distributed in that period.
Probate of the will of the deceased was granted to the defendant on 22 June 1999, after the filing of a supplementary affidavit by the defendant sworn 8 June 1999. Appropriate steps were then taken to put the real estate in the defendant’s name as executor. On 14 July 1999 Giavris had a telephone conversation with Lee in which she gave him similar advice to that given to Catherine on 9 June 1999.
By letter dated 9 August 1999, Harry wrote to the defendant as follows:
“Please find enclosed herewith Notice of Instalment of Provisional Tax for the year ending 30th June, 2000, for the Late Mr. Demetrios Skaftouros.
This is Instalment No. 1 of four instalments.
There is also an amount of $5,703.99 still outstanding for the 1998 Assessment and we urge you to attend to the payment of this amount at your earliest possible opportunity.
You have chosen to ignore all previous correspondence from this Office to date, and we request, as a matter of courtesy, that you respond to this letter by return mail or by telephone.”
Neither the defendant nor his firm responded to Harry’s letter.
On 12 November 1999 Paul and Anita instituted proceedings against the defendant under Part IV of the Administration and Probate Act 1988 (Proceeding No. 7527 of 1999). Subsequently Lee and Catherine were added as defendants.
By letter dated 6 December 1999 Peter Johnson caused the Dimos firm (at the behest of the defendant) to write to Harry as follows:
“We advise that proceedings have now been issued by a number of beneficiaries in respect of the Estate.
In the circumstances, the Executor has decided to terminate your appointment as the Estate Accountants.
In the circumstances, would you please assemble your files and advise when they are ready for collection. If there are any fees outstanding in respect of your works on the file please advise so that we may arrange for payment of same. Would you please advise when the file is ready for collection.”
By letter dated 7 December 1999, Harry replied to the Dimos firm as follows:
“We acknowledge receipt of your letter dated 6th December, 1999, (Ref: PJ.BS 99/7247) and enclose herewith the following:-
¨ Copy of 1998 Tax Return
¨ Copy of Assessment Notice for 1998 and Provisional Tax Notices for 1999 and 2000
¨ Copy of our Journal Entries for 1998
¨ Copy of our working papers for 1998.
The file belongs to this Office as it consists of working papers and copies of documents only. No original documents are held by us, however, we will assist the incoming accountant with every reasonable request made to us, however, any requests which take time to complete will result in fees being charged against the Estate.
We enclose herewith a copy of our Account, forwarded to you in December 1998, which remains unpaid. We are also enclosing our Account for various correspondence, mainly to your Office, and we would expect prompt payment.”
The Dimos firm did not respond to Harry’s letter but instead on 17 January 2000 wrote again, blandly asking “when your files will be available for collection so we may finalise this matter once and for all”. There was no explanation of what was wanted, why it was wanted and what it was that was to be finalised. Harry replied by letter dated 19 January 2000 as follows:
“● In relation to our services being terminated, we assume that the possibility of a conflict of interest may be the reason for your decision. If it is otherwise, we would appreciate an explanation.
●Normally, when an Accountant is succeeded by another, it is standard and expected practice to receive an Ethical Letter from the successor. We still require this as a matter of courtesy, as well as for our file.
●Our fees of $672.00 includes an amount of $480.00 dating back to 14th December, 1998. For reasons unknown, since my Uncle’s death and your undertaking his financial affairs, payment of his Taxes has fallen alarmingly into arrears. For the first time since I commenced to act for my Uncle, my account has not been paid in good time. I would be disappointed if the payment of my account is being withheld as a lien over his files.
●We note that, to date, we have not received back from your Office the 1998 Tax Return sent to your Office for signature on 14th December, 1998. I believe that Mr Dimos was reluctant to sign the Return because he was required to make the declaration to the effect that all information in the Return was true and correct. In accepting the role of Executor for the Estate, one of the requirements is to provide instructions for the preparation of the Returns and to sign the Tax Returns. If Mr Dimos is unwilling to sign the Return, he should examine the responsibilities that come with the role.
Lastly, the matter of our files.
We have received confirmation from our advisers that our files belong to this practice as they contain working papers and no original documents, and we are not obliged to forward them on.
However, in the interests of settling all matters relating to the Estate, we will ‘loan’ the files to you on the following provisions:-
1. Receipt of the Ethical Letter from our successor;
2. Immediate payment of our fees;
3.Immediate receipt of the signed 1998 Tax Return and attached accounts;
4.Sign and return the attached document relating to the use and subsequent return of our files.”
Again, the Dimos firm did not reply. Instead, a firm of accountants, appointed by the defendant, sought from Harry copies of the “most recent income tax returns, assessments and any other relevant documents”. Harry replied to the accountants by letter dated 11 February 2000 as follows:
“We refer to your ethical letter of 8th February, 2000, in relation to the abovenamed.
We wish to advise that there are no ethical or professional reasons why you should not act for the abovenamed.
With respect to your request for a copy of the most recent Income Tax Return and Notice of Assessment, these will be forwarded to you once we have received the following from Leo Dimos & Associates, Solicitors, acting on behalf of the Estate:
1.Copy of the signed Tax Return and Financial Statement for 1998 (Mr Dimos is in possession of the only copy of the Financial Statements produced, which is why we are so determined to have then returned to us).
2.Payment of our outstanding account of $672.00 (of which $480.00 has been outstanding since 14th December, 1998).
Should you require any further information, please do not hesitate to contact this Office.”
By letter to the Dimos firm dated 22 February 2000 from Woodhams O’Keefe & Co (“Woodhams”), the solicitors for Lee (and subsequently the solicitors for the plaintiffs in this proceeding), Woodhams requested, inter alia, “a financial statement for the estate”. The Dimos firm should have but did not reply to Woodham’s letter. However by an affidavit sworn 15 March 2000 in the Part IV proceeding, the defendant did describe the assets in the estate of the deceased and did produce a “draft” statement of account for the period 6 January 1999 to 23 February 2000, itemising the receipts and expenditure during that period.
On 7 March 2000 Lee advised his solicitors, Woodhams, that settlement of the Part IV proceeding had been reached with Paul and Anita. Woodhams wrote to Collin requesting terms of settlement.
By letter dated 20 March 2000 to the Dimos firm from Australian Property Management Co Pty Ltd (“APM”), the managing agents for Whitby Street, the subject of a vacant unit was apparently raised together with the need for works on the property.
By letter dated 28 March 2000 from the Dimos firm (Peter Johnson) to APM, the firm advised that it would seek instructions in respect of the works from the defendant upon his return from overseas. (He was overseas from 18 March to 5 April 2000.)
In response to an e-mail from Lee pressing for settlement and finalisation and asking a number of questions, by letter dated 3 May 2000 Woodhams advised Lee that the Part IV proceeding had been settled “subject to an agreement on the plaintiff’s costs” and that the matter should settle within four weeks. They informed Lee that Dimos had been advised that an agreement had been reached and the terms of settlement. This information was in fact incorrect. As at 3 May 2000, the defendant and his firm had not been advised of any settlement. By letter dated 4 May 2000 Woodhams advised the Dimos firm that the proceeding had settled “save for the level of costs to be paid out of the estate”. They did not inform the firm of the contents of the terms of settlement but merely said that they would “contact you further with a copy of the Terms of Settlement when they are to hand”.
Earlier, by a letter dated 5 April 2000 faxed by APM to the Dimos firm concerning Unit 2, Whitby Street, APM had advised that after a bond inspection the property was found neglected and lacked general upkeep and maintenance over many years. APM informed the firm that quotations had been obtained for works to upgrade the property “to a reasonable standard to enable our office to secure an appropriate tenancy on your behalf”. The quotations totalled some $4,800. APM sought prompt instructions. The defendant testified that he had not authorised the works to Unit 2 because he had been informed that the Part IV proceeding had settled (on 4 May 2000) and he considered that it was not the estate’s responsibility to pay such a large amount and he hoped the new owners would take over soon.
By letter dated 10 May 2000 from Woodhams to the Dimos firm, Woodhams enclosed an “authority” signed by Paul, Lee and Catherine which requested and directed the defendant that Alden Court, Whitby Street and all residual real estate be transferred to the beneficiaries and not sold.
Neither the defendant nor his firm responded to that letter. The defendant was again overseas from 24 June to 26 August 2000.
On 26 June 2000, Lee e-mailed Woodhams as follows:
“I had hoped that I would have heard something about the settlement of my dad’s estate by now. After I spoke to you the other day I rang the offices of Leo Dimos and asked to speak to whoever was handling my dad’s estate. I was told by the receptionist that if I wanted to say something I had to go through my solicitor. I then asked to speak to Leo and was told the same thing. What is this crap? Is this normal practice? What is holding up settlement? My concern is that we are running out of time to sell properties etc. by October or you’ve said we’ll wear the capital gains tax. Could you please find out exactly what is going on and a date that this nightmare will finally end…”
Woodhams reacted by writing to the Dimos firm on 28 June 2000 as follows:
“We refer to our letter of 10 May 2000 and note that we have not received any response.
We therefore assume that the work has been completed.
Please confirm.”
Irrespective of this somewhat unhelpful correspondence from Woodhams, the defendant made no immediate attempt to ascertain the contents of the terms of settlement nor did he attempt to deal with the question whether any or all of the properties might be transferred and, if so, when. However, the Dimos firm did write to Woodhams as follows on 19 July 2000:
“We refer to previous correspondence in respect of this matter and confirm that the action has been fixed for hearing on 6 October 2000 in the Supreme Court with a Callover at 9.30 am on 15 September 2000.
We note that there is a suggestion that this matter has been settled as amongst the Beneficiaries. We have not been provided with details of or the terms of the proposed settlement.
We point out that the matter cannot be completed without our client’s agreement. Our client’s obligation is to uphold the Will and he also has a role in protecting the interests of Panagiotis Skaftouros and the minor Beneficiaries. Any agreement to settle the matter will have to take in account our client’s position as well as the position of the other beneficiaries and they or their guardians will have to sign off on the terms of settlement.
The costs of the estate and the parties will also have to be dealt with in any settlement as will the amount of the Executor’s commission. The Executor will also require a release and indemnity.
As to costs, the firm requires the costs to be paid from the estate on a solicitor and own client basis subject to agreement or taxation. The costs of the application for probate and administration and winding up of the estate (including the distribution of the assets) and of the estate dispute will have to be paid. We presume that the parties will propose that their costs be paid from the estate and obviously details of those will be required.
Would you please take these matters into consideration in respect to your discussions and advise the position as soon as possible. The trial will come up at a very rapid rate and the matter should be resolved as quickly as possible.”
In fact, the precise terms of settlement of the Part IV proceeding had still not been resolved between the other parties, as is demonstrated by a letter dated 17 August 2000 emanating from Middletons Moore & Bevins (“Middletons”), the solicitors acting for Catherine, to Collin (with a copy to Woodhams). On or about 22 August 2000 the Dimos firm for the first time received draft terms of settlement. On 23 August 2000 Middletons faxed a letter dated 22 August 2000 to the Dimos firm stating:
“As you are aware, I act on behalf of Catherine Pearce.
I would be grateful if you would let me had details of the present financial position of the estate so that I may advise my client in respect of settlement options. At present the proposal is that my client repay a certain amount of money to Plaintiffs which my client envisages will come from the estate.
My client also proposes that the costs of the Plaintiff and all of the Defendants come out of the estate. My client needs to know what cash is available to satisfy these competing demands.”
The Dimos firm replied to Middletons by letter dated 24 August 2000 stating that the real property in the estate remained intact, the expenses in respect of those properties continued to be paid and rent collected and that the current cash position was that they held $180,000 in cash or on deposit. The letter also enclosed copies of letters sent to the solicitors for the other parties. A letter from the Dimos firm to Collin dated 24 August 2000 read, in part, as follows:
“We regard the Terms of Settlement as inappropriate, the executor requires all relevant parties to enter into a Deed of Release. He has responsibilities to protect the interest of the beneficiaries who are interested in but not necessarily parties to this action. The Deed of Release should deal with all matters affecting the Estate and the re-arrangement and distribution of the assets. The Deed would embody the Terms of Settlement that have been agreed to by the beneficiaries but also take into account and deal with the matters raised in our letter of 19 July 2000.
It is our view that if possible the amounts claimed for the costs of all the parties and the amount of executor’s commission should be agreed to and embodied in the agreement. This will save the costly exercise of taxation if agreement cannot be reached on costs after settlement.
In order that these matters may be dealt with would [you] advise the amount you will be claiming for your costs.
Would you also note the matters raised in the attached correspondence to the other parties’ representatives and let us have your comments. We have provided them with a copy of this letter.”
The Dimos firm asked all of the other solicitors to advise of the amount each claimed for costs.
By letter dated 14 September 2000 from Middletons to the Dimos firm, draft terms of settlement were forwarded for consideration. The draft terms provided for all of the parties’ costs to be paid out of the estate in amounts to be agreed, or in default of agreement to be assessed by a costing service. The terms provided for Lee to pay $50,000 to Paul and $70,000 to Anita, and for Catherine to pay $10,000 to Paul and $30,000 to Anita, in full settlement of all Part IV and any other claims against the estate by Paul and Anita. Various releases were also included.
The response from the Dimos firm, by letter dated 19 September 2000, was as follows:
“We refer to your facsimile of 14 September 2000 and your letter of 15 September 2000. The Terms of Settlement have not been agreed to as the writer indicated that they would have to be considered by our client. There were also matters to be attended to including the question of the costs of the estate and executors commission.
Initially, we are instructed that our client requires all of the costs of administration paid. Our client requires executors commission calculated as 3% of the Probated value of the Estate.
We are obtaining our client’s instructions in respect to the balance of the terms at the moment and will comment further shortly.
We have attended the Call Over in this matter and the trial date of 6 October 2000 has been confirmed. The matter can be taken out of the list upon completion of the Terms of Settlement by the parties.
It would reduce the costs if the amount claimed by each party for costs could be inserted in the Terms of Settlement in order to provide for a speedy completion of the matter. The Executor would like to wind up the Estate as soon as possible.
Another matter of concern to our client is his obligation to protect the interests of the beneficiaries who have not taken part in the proceedings and to that end we have noted the undertakings given in respect of the minor specific bequests but the executor will require the consent of Panagiotis Skaftouros to the Terms of Settlement when they are agreed.
We will provide our client’s substantive comments in respect of the terms as soon as we have instructions.”
On the same date, Middletons responded to the Dimos firm as follows:
“I have your letter of 19 September 2000. I am deeply concerned by your letter. I make the following observations and comments:
1. Executors Commission
Executors commission is not an issue in dispute in this case. It requires consideration by all of the beneficiaries. At present it seems inappropriate to consider the question of executors commission, and your client’s claim for commission should not delay the settlement of the Plaintiff’s claim.
2. Costs in the Terms of Settlement.
I am reluctant to insert the costs agreed to by each party in the Terms of Settlement. They may be agreed promptly, or they may be taxed. These are what the Terms of Settlement presently provide. Insertion of amounts at the moment, which may not be agreed, will only delay settlement not advance it, contrary to your contention.
3.Obligation of the Trustee to protect the interest of the Beneficiaries
I note that your client is concerned to carry out his obligation of protecting the interests of the beneficiaries who are not named in the proceeding. The only manner in which their interests are affected, is in relation to the legal costs of my client and Lee Skaftouros coming out of the estate. Bearing in mind that they are contributing the only amounts that are payable to the Plaintiffs in order to resolve this proceeding, and that no further payment is coming from the estate, and the likely costs to the estate if the matter is litigated further (leaving aside any payment which may be ordered in favour of the Plaintiffs or either of them out of the estate) it is inconceivable that any of the other beneficiaries would object to the Terms of Settlement.
In summary then I cannot see any reason why it would not be in the interests of the estate for your client to sign the Terms of Settlement as drafted, and I therefore can see no reason why I should prepare this case for trial.
Your client should therefore take notice that in the event that your client unreasonably delays or frustrates the settlement of this proceeding, which results in further legal expense to my client, my client reserves her rights to take separate proceedings against your client in his personal capacity for negligence in administration of the estate.
I look forward to hearing from you promptly, that the Terms of Settlement will be executed without further delay.”
By letter dated 22 September 2000, the Dimos firm provided suggested amended Terms of Settlement. The suggested amendments are not presently relevant save that a proposed clause 10 was inserted which provided for the payment of “executors commission the amount of which is to be agreed by the parties or determined by the Court” and a change to the form of the release of the executor was proposed.
Woodhams, by letter dated 26 September 2000 to the Dimos firm, objected to the reference to executor’s commission contending that the clause was unreasonable and that persistence in maintaining it was delaying settlement and adding to costs. Another version of the release of the executor was put forward.
The Dimos firm, by letter dated 27 September 2000, dropped the reference to executor’s commission and accepted terms in the form which were subsequently executed by all parties and dated 5 October 2000. The trial date was 6 October 2000. The payments to the plaintiffs under the settlement were to be made by 15 November 2000. The payments were duly made. Lee was obliged to borrow the funds necessary to make his payments and was therefore most anxious for the estate to be finalised.
By letter dated 16 November 2000, Woodhams wrote to the Dimos firm as follows:
“We note our professional fees at $5,650.00 plus out of pocket expenses of $1,110.00 (copy Counsel’s fee slip enclosed).
Our client is most anxious for the administration of the estate to be completed forthwith. We note that we wrote to you on 10 May 2000 and 28 June 2000 in relation to instructions from our client and the other beneficiaries.
Would you please now confirm that you have attended to those matters.”
On 17 November 2000, all of the beneficiaries signed and sent a long letter of complaint to the Dimos firm addressed to the defendant. The letter complained of alleged “unnecessary delays”, alleged failures to respond to letters or to keep them informed when requested and the sacking without “justification” of the deceased’s managing agent of Whitby Street and of the deceased’s accountant (Harry). The letter concluded by asking the defendant to “take action to finalise Settlement of the Estate within 7 Days, otherwise we have no other recourse than to report you to the Professional Standards Law Institute of Victoria”.
Neither the defendant nor his firm replied to the beneficiaries’ letter.
By letter dated 1 December 2000, Middletons wrote to the Dimos firm as follows:
“I enclose my account for your attention in due course in relation to the Part IV application.
You have raised with me the question of executors commission.
I am unable to advise my client further as to any entitlement you may have to executors commission, because I am unaware of what you have done in relation to the estate. I would be grateful if you would let me have copies of any bills of account that you have rendered to the estate. If there is something for which you desire to claim recompense for your pain and trouble, please let me have a note of it so that I may advise my client properly. However I note that as general proposition, you would not be entitled to commission for carrying out the work that has been done by your firm as solicitor for the estate.
In the meantime, it seems appropriate that the real estate be transferred to the beneficiaries in specie as directed by the will, and that an interim distribution of the cash in the estate take place, save of course for retention of an amount to cover legal fees any taxation liability of the estate and commission. I note that my client and the other beneficiaries have already written to you and that you had previously indicated that a transfer of the real estate was only a matter of days away. Would you please attend to this most urgently and confirm with me when you have forwarded transfers to the beneficiaries.
I look forward to hearing from you most urgently.”
Neither the defendant nor his firm replied to Middletons’ letter or provided any of the information requested.
On 7 December 2000, on the defendant’s instructions, Johnson requisitioned a cheque for $9,010.65 drawn on the Dimos firm’s trust account for the estate in order to pay Collin’s agreed costs of the Part IV proceeding. At that time the firm held in its trust account for the estate the sum of $14,933.36. Again on the defendant’s instructions, five days later, the cheque for Collin was cancelled because, so the defendant testified, he “wanted Mr Johnson to prepare separate accounts for each of the properties and show them to me before the cheque was sent out” and also, perhaps, because the trust account balance was too low to pay the three solicitors’ costs. I reject these explanations for three reasons. First, the preparation of separate accounts was irrelevant to the question of paying the parties’ costs of the Part IV proceeding. Second, the trust account was at all times in receipt of regular rent payments which, as the accounts show, continued to increase the level of the estate’s trust account balance such that (as will be seen) $20,000 was able to be paid out in legacies on 27 February 2001. Third, as later events demonstrate, the defendant was able to draw on the estate’s large term deposit (at worst on 30 days’ notice) if the balance in the trust account was inadequate to cover disbursements.
By letter dated 10 December 2000 Lee complained to Professional Standards, Victorian Lawyers RPA Ltd (“the Law Institute”). The defendant received a copy of the complaint on 19 December 2000.
Lee’s letter enclosed a copy of the beneficiaries’ letter to the Dimos firm dated 17 November 2000. Lee’s letter stated:
“… My father passed away in October 1998 and his estate has not yet been settled. This was in part due to a legal challenge on the will by Paul & Anita Skaftouros.
My concern is with the executor Leo Dimos who, as my dad’s solicitor, drew the will and is the Executor and Trustee and also appointed his own company to deal with any legal problems. During this period he has
(a) Refused to give his costing charges when asked.
(b) Failed to give beneficiaries any information on the estate.
(c) Refused to take phone calls from the beneficiary’s.
(d)Failed to expedite the settlement of the will. Family members had agreed in April 1999 (sic) to a settlement. Nothing was signed until October 1999 (sic).
(e)Tried to include an ‘Executors commission’ of 3% as part of terms of settlement. After charging a substantial amount in legal and management fees.
(f)Sacked my dad’s accountant and real estate agent without justification or explanations. It has since come to light that one of these flats has been vacant for over 12 months. I would call that mismanagement given the flats are in the highly sort (sic) Brunswick area.
(g)Mr Dimos went back to Greece in October and his office wouldn’t say when he would be back.
(h)Refused to answer several letters from other solicitor’s and beneficiaries.
I believe that the will was drawn incompetently, and that the legal challenges were, I would have thought were less than unexpected. I list my concerns below.
(a)The seemingly ‘conflict of interest’ in being Executor/Solicitor who drew the will and appointing his own company for any legal work.
(b)I worry that $20,000 is to be held in ‘Trust’ by him for my two children until they are 21. Is there anything I can do without more expense to get it held in trust by someone else?
(c)The fact he says he was a friend of my dad’s since 1953, so he knew the family yet he drew the will without one mention of my sister Anita Skaftouros. Did he advise the legal ramifications?
(d)The fact that I have had to mortgage my house to settle with Paul & Anita Skaftouros, wrongly assuming that terms of settlement meant that the will would be finalized on the day I settled the $120,000 and I am currently paying $800 in interest a month. My sister also faces monthly interest charges on a $40,000 loan for her part in the settlement.
(e)The concern that the will finalization is being held up only for more unwanted legal and management fees.
(f)Not one statement has been seen by any of the beneficiary’s.
I have enclosed the last letter I sent Mr Dimos, which as of this date has met with no reply. Again I notify you to ask, “Is this common practice?” and am I worrying needlessly? I await your swift response.”
By letter dated Friday 22 December 2000 (the last working day before Christmas) the Dimos firm wrote to Woodhams and Middletons enclosing an invoice for its costs of the Part IV proceeding “for approval” and stating that if “we do not hear from you within fourteen (14) days the Tax Invoice will be deemed to be approved and paid”. In my opinion it was quite inappropriate for the defendant to set a 14 day time limit in those terms at that time of the year. The invoice was for the sum of $20,163.92, comprising professional costs prior to 30 June 2000 of $9,150, professional costs from 1 July 2000 onwards of $8,525, and $2,488.92 in disbursements and GST. The total costs claimed by the other solicitors were $9,010 (Collin), $9,502 (Middleton) and $6,760 (Woodhams).
By a further letter of Friday 22 December 2000, the Dimos firm forwarded to Lee transfers of land in relation to Alden Court and Whitby Street, for signing by Lee and to be returned for the firm to obtain the signatures of all other relevant parties.
In early January 2001, Catherine and Lee’s wife (Leanne) saw the defendant at his office. They asked him when the estate would finally be settled and whether he was going to sell any of the residual properties. Apart from evidence that the defendant said in relation to the latter request that he would think about it, Catherine’s evidence was unclear as to what the defendant said. Leanne was not called as a witness. It was put to Catherine in cross-examination, no doubt on instructions, that at the meeting between the defendant, Catherine and Leanne in January 2001, the defendant said to them words to the effect that the testator’s family maintenance proceedings had not been finalised all that long, that he had sent his bill in about December 2000 and that that had not been sorted out yet and that he did not yet have time to complete the estate. Catherine did not remember the defendant saying those things but she did not deny what was put to her.
By letter dated 8 January 2001 Woodhams wrote to the Dimos firm as follows:
“We refer to your letters of 22 December 2000 which we only received today.
Our client is currently interstate and it is inconvenient are to get his instructions until he returns. The invoice is not therefore to be deemed to be paid unless and until accepted by our client. Our client returns next week.
Our client is also disturbed about two other matters arising from his wife’s appointment with you. We are instructed that you advised our client’s wife that:
¨No money would be paid to the beneficiaries until they agree to the payment of your costs as rendered and payment of commission. As previously advised our client does not agree to the payment of any commission. If you are making such a claim please advise by return why you claim to be so entitled.
¨That you were still considering the sale of the properties despite the beneficiaries contrary advice.
Our client is extremely concerned about your demands especially in the context of our client wanting to settle the estate promptly.
Please advise why the estate cannot be finalised immediately subject to the amount of your claim being retained.
In order to give prompt attention to your claim for costs please also forward a set of up to date trust accounts.”
Neither the defendant nor his firm replied to Woodhams’ letter or responded to the requests made nor did the defendant deny the allegations therein. The defendants said that he had instructed Johnson to reply to Woodhams’ letter but that Johnson had failed to do so.
On 17 January 2001 the defendant considered his response to the Law Institute and also gave instructions to transfer the properties covered by returned transfers. The defendant considered (as noted) that they “can’t work out estate until the costs and expenses are solved” and “can’t transfer in specie until we work out the portion re specific funds”.
By letter dated 22 January 2001 Woodhams advised the Dimos firm that the costs “of the Defendants” had been agreed and asked for payment within seven days. Neither the defendant nor his firm replied to this letter.
By letter dated 29 January 2001 the Dimos firm responded in detail to the Law Institute stating, inter alia, that any delay had been caused by the Part IV proceedings and was not the fault of the executor and concluded:
“…The costs details in relation to the Part IV application have been submitted to the parties’ solicitors in accordance with the Terms of Settlement and an offer has been made which is not acceptable.
The transfers of land in respect to the specified bequests were returned to us on 8 January 2001 and we are proceeding to stamp and register them.
The beneficiaries have requested the Executor to transfer the balance of the properties in specie rather than selling them and the Executor is considering this.
3.In an attempt to save time and costs the Executor has claimed commission as he is entitled to under the Administrative and Probate Act. The percentage claimed is not unreasonable and is within the range allowed in the Courts. The claim was made via the solicitors acting for the parties. As no favourable response or proposal has been forthcoming the Executor proposes in due course to make application to the Court for the Master to assess the appropriate commission.”
On or about 6 February 2001 the defendant instructed Johnson that he would not distribute the estate until separate accounts for each property were set up allocating the rental; that he should “write about the transfer of the Qld property – he would rather sell the Victorian properties [ie Mena Avenue]”.
On 12 February 2001 Woodhams wrote to their client, Lee, as follows:
“Despite letters of the 18 and 22 January 2001 to the estates solicitors, Dimos still has not paid the costs. We have now written to that firm advising that we will seek to have the matter re-instated should the costs not be paid within the next seven (7) days. We will seek the costs from that firm.
The executor has been requested to transfer the properties in specie. That request was first made in writing by this office on 4 May 2000. It is clear from Dimos’ response that he still has not made up his mind (deliberately it would seem to us). In our opinion serious consideration should be given to commencing action to have him removed. We await your instructions.
As you are aware, the executor’s claim for commission was rejected. No application has been made to the court for commission and as presently instructed a claim for commission will be resisted. The executor has refused and failed to account to the beneficiaries for capital or income. How much has Dimos’ firm charged the estate? At the very least you should have that information.
The continuing complaints in relation to the solicitor’s conduct is:
¨ They have failed and refused to pay your agreed costs. This will result in a claim for interest and extra costs.
¨ The solicitors seem to be holding matters up deliberately in an effort to force a concession on commission and;
¨ They have failed to have their client ‘consider’ a request that was made last May for the properties to be transferred in specie.”
By letter dated 12 February 2001 Woodhams wrote again to the Dimos firm as follows:
“We note that you have deliberately failed to pay the costs, which were agreed in January 2001.
Unless we receive payment within seven (7) days from the date hereof, we intend to have this matter re-listed and will seek costs against your firm. We trust that that would not be necessary.”
The defendant saw the letter but again neither he nor his firm replied to it.
On 14 February 2001 Middletons wrote to the Dimos firm as follows:
“I refer you to the Terms of Settlement of the Supreme Court proceeding number 7257 of 1999, which you signed on behalf of the estate.
I refer you in particular to term 1B which requires payment out of the estate of my clients and Lee’s costs of the proceeding.
I note that on 1 December 2000 I forwarded by fax a copy of my account for your attention. That bill remains unpaid, despite the fact that none of the parties have indicated that they disagree with the account.
I therefore require on behalf of my client that the account be paid by no later than 4.00 pm Thursday 15 February 2001. In the event that it is not so paid, my instructions are to apply to the Court for the proceeding to be reinstated, and for orders against Mr Dimos for payment of the account forthwith, and for an order that Mr Dimos personally pay the cost of the application.
I note that in my letter of 1 December 2000 I requested that you immediately let me have copies of any bills of account that you have tendered to the estate. The only response that I had to that request was your letter of 22 December 2000 which enclosed a copy of a tax invoice dated 22 December 2000.
I referred your tax invoice to my client for consideration, and my client requests that in accordance with the Terms of Settlement, you submit your files to the Law Institute of Victoria’s costing service and be bound by their assessment of fees and disbursements.
I understand that Lee’s solicitor has already written to you and told you that Lee’s instructions are that the costs of the executor should be taxed. I understand that no response has been received to that request. I have spoken to Mr Woodhams, Lee’s solicitor today, and have been told by him that he would agree to the executor’s solicitor’s files being submitted to the Law Institute of Victoria’s costing service, and that he would agree to be bound by that determination.
Accordingly, I request that you take this action forthwith.
I note that I have had no response to the third matter that I raised in my letter of 1 December last, which was that the real estate transferred to the beneficiaries in specie, as directed by the will, and that an interim distribution of cash in the estate take place. My instructions are that none of this has happened. This is unsatisfactory, and my client demands that this occur forthwith. In the event that the executor is not prepared to carry out his duties and comply with the Terms of Settlement and transfer the property to the beneficiaries, then my client will make application to the Court for removal of the executor without further notice to you.
Please respond immediately.”
The defendant saw the letter but neither the defendant nor his firm replied to Middletons’ letter; nor were the costs paid; nor was the Dimos firm’s file submitted for costing as requested.
According to the defendant, he instructed Johnson to prepare an itemised account and to have the file costed but subsequently Johnson did not have time to prepare the itemised account. The defendant did not explain why an itemised account was necessary (even if it was desirable) in order that the file be costed, as requested by the beneficiaries’ solicitors. In addition, it does not appear that Giavris (when Johnson dropped out of the picture) was ever instructed either to prepare an itemised bill or to submit the file for costing. I am satisfied that the failure to have the file costed at any time from February 2001 until the defendant substantially reduced the quantum of costs claimed in August 2001 was deliberate conduct by the defendant calculated to put pressure upon the plaintiffs (who were anxious to have the estate finalised) to accept or perhaps compromise those costs (and his commission) without risking the embarrassment of submitting his file to an independent costing assessment. I am fortified in reaching that conclusion by reference to what Johnson said to Mr Woodhams on 2 March 2001 – see para [106] below. The consequence was that finalisation of the estate was substantially delayed solely due to the fault of the defendant.
On 15 February 2001 the Dimos firm advised Woodhams that stamped transfers of land had been lodged with the Titles Office and that: “We shall advise once the Titles have issued”.
In February 2001 a handwritten note was made in the Dimos file of matters remaining to be done in the administration of the estate, including advising the beneficiaries and the managing agents of the transfer of Alden Court and Whitby Street, advising the agents to make separate distributions of property rentals, distributing the specific bequests and paying the uncontested costs of Part IV parties.
At some point the beneficiaries became registered on title (as at 14 February 2001) in respect of Alden Court and Whitby Street and the defendant received the duplicate certificates of title but neither the defendant nor the Dimos firm wrote advising Woodhams of the same.
On 16 February 2001 Britt Skaftouros made application to the Dimos firm for immediate payment of her $12,000 legacy due to her precarious financial circumstances. As a result, the defendant paid the legacy to her on 27 February 2001 and also paid the legacy of $8000 to her sister, Jasmine Skaftouros. The defendant was unable to offer any explanation as to why these legacies had not been paid until then, given that the Part IV proceeding had settled by 5 October 2000.
By letter dated 21 February 2001 Woodhams wrote to the Dimos firm threatening proceedings, in the following terms:
“We acknowledge receipt of your letters of 15 February 2001. We note that you have failed to respond to our letter of 12 February. We have been instructed to commence proceedings to have the executor removed by the court.
Middletons Moore & Bevins are arranging solicitors in Queensland to prepare the necessary documents to transfer Beddina Court.
We note that the transfers in relation to Whitby Street, East Brunswick and Alden Court, Cheltenham properties have been stamped and lodged. However our client is concerned that there has been no transfer of Mena Avenue. Please advise by return why these properties have not been dealt with in specie as requested on numerous occasions.”
Neither the defendant nor his firm replied to Woodham’s letter.
On 22 February 2001 the Law Institute advised the defendant that it would take no further action concerning the complaint on the ground that there was no likelihood of a finding of unsatisfactory conduct. [I note that the Law Institute’s decision to take no further action was subsequently reviewed by the Legal Ombudsman who agreed with the decision, although pointing out that the defendant’s conduct as executor and trustee did not as such fall within her jurisdiction.]
On 2 March 2001 Mr Woodhams telephoned the Dimos firm and spoke to Johnson. According to Mr Woodhams, Johnson told him that Lee and Catherine would not be getting paid their costs (relating to the Part IV proceeding) unless the defendant’s costs and commission were paid or agreed to. Mr Woodhams swore that he asked Johnson whether that was on instructions, did he have those instructions, and that Johnson said that it was and that he would not act without such instructions. Mr Woodhams’ evidence was uncontradicted and I accept it. Johnson was not called by the defendant. However the defendant swore that if Johnson had said what was alleged, he had no instructions from the defendant to do so; moreover he had instructed Johnson to pay the beneficiaries’ costs (see exhibit 25 for a note of such instructions in February 2001). Without positively finding that Johnson was expressly instructed by the defendant to make the statement about costs which he made to Woodhams, I infer from the firm’s conduct by oral statement and omission to act, through Johnson, that it was the defendant’s deliberate stance by March 2001 not to pay the beneficiaries’ costs or to finalise the estate unless and until his costs and commission were agreed and paid.
By letter dated 22 March 2001 from APM to the Dimos firm, APM advised of notices of rent increases given to tenants of Units 1 and 3-8, Whitby Street and, in relation to Unit 2, went on to state:
“Furthermore, we refer to our previous correspondence and numerous conversations in respect to Unit 2 that still remains vacant due to required upgrade works.
As you are aware, we are still seeking your permission and or instructions in this matter but respectfully point out that the previous recommended works totalling $4,790.00 would have been easily recovered by the estate upon securing a tenancy at the average rate of $125.00 per week, representing a gross rent of $6,500.00 per annum.
Your earliest consideration of the above would be greatly appreciated and look forward to receiving your instructions in respect to same.”
Neither the defendant nor his firm replied to APM’s letter. The defendant described APM’s letter as “self-serving” but I am satisfied that he had no satisfactory explanation for his deliberate and continuing failure to authorise repairs to enable Unit 2 to be let and no satisfactory explanation for his failure to take alternative action, namely to notify the future owners and seek their instructions.
Towards the end of March 2001, Peter Johnson was involved in an accident and was absent for the rest of March and all of April. The defendant was overseas from 14 to 28 March 2001. Apparently nothing further was done in the administration of the estate before Giavris resumed responsibility for the file in or about early May 2001.
Our letter of 10 October 2001 is in response to your facsimile of the same date. Clearly it advises why the Alden Court property was different. Further, your allegation that the letter affects the proper, objective and efficient administration of the deceased estate is laughable to say the least. This has nothing to do with the estate. This is property which belongs to our clients and you have refused to account for monies and property legally belonging to them.
The solicitors then acting on behalf of Catherine Pearce are preparing the transfer.
Your comments in relation to the Mena Avenue property are noted and, should your client not transfer the property as requested he will do so at his own peril.
It may also have escaped your attention but all the beneficiaries are now of the one mind and have been since the TFM application was settled.
Finally we note that you have breached your undertaking to provide us with full accounting and documentation for 5 Alden Court. Unless that is to hand by 12 noon on Monday 22 October 2001 we have been instructed by our clients to commence further proceedings. If it is necessary to institute such further proceedings we will seek indemnity costs on behalf of our clients.”
On 16 October 2001 the Dimos firm provided relevant information and remitted to Woodhams the sum of $5,912.12 being the net rental in respect of Alden Court for the period from 14 February 2001 to the date of the letter. There was no satisfactory explanation for the long delay in remitting this rental to those entitled to it.
In the afternoon of 16 October 2001 Mr Wain of Ernst & Young telephoned Giavris and informed her that he might need more time to complete the task assigned to him but that he would let Giavris know.
By letter dated 23 October 2001 the Dimos firm informed Woodhams that they would not be able to comply with paragraph 3 of the Order of Balmford J. The letter enclosed a copy of a letter from Ernst & Young dated 22 October 2001 requiring “a further two weeks to complete the accounting and income tax returns for the above estate, giving a new completion date of 7 November 2001”.
By letter dated 24 October 2001 the Dimos firm, on the specific instructions of the defendant, wrote in the following terms to Woodhams advising of the defendant’s intention to sell Mena Avenue:
“The executor and trustee does not propose to transfer the Mena Avenue, Cheltenham, property to the beneficiaries in specie as the estate does not have sufficient funds to meet its liabilities. Therefore he proposes to sell the property by public auction on Friday 30 November 2001 and for that purpose has appointed the local managing agent Beaches in conjunction with a city real estate agency Alexander Robertson to conduct the auction.
The trustee is of the opinion that now is the best time to maximise the return to the estate from the sale of the property.
Furthermore the executor and trustee wishes to set up a trust fund for the benefit of the two infant beneficiaries over and above the specific gifts. He believes that such power is vested in him by the provisions of the Will and the Trustee Act 1958.
If however your clients’ disagree with such proposal for the infants, the executor and trustee would be willing if requested by them to apply to the court for Directions in respect thereof.”
Woodhams responded as follows by letter dated 25 October 2001:
“We refer to your facsimile of 23 & 24 October 2001.
Our client does not consent to extending the date beyond 4.00 pm, Friday 26 October, particularly in view of your latest facsimile.
Unless by 4.00 pm this Friday 26 October.
¨We receive client’s unequivocal undertaking that he will not sell the property, and;
¨Your client complies with the orders of Balford J (sic).
then we have been instructed by our client to seek further Orders in the Supreme Court.”
By letter dated 26 October 2001 the Dimos firm replied to Woodhams’ letter:
“We have used our best endeavours to comply with the order of Balmford J.
We sent to you a copy of the letter from Ernst & Young advising that they required a further two weeks from 24 October 2001 to complete the report. A completion date of 7 November 2001 is given. If the report is received by us prior to that date if will be provided to you.
We do not consider a two week extension as being unreasonable under the circumstances. Accordingly, we see no reason for any further application to the court regarding this matter. However, if you do make such application we shall produce this letter on the question of costs.
Finally, we advise that the executor will not give the undertaking sought by your clients.”
Clearly the defendant should have sought an extension of time for compliance with the Court’s order but he failed to do so.
This correspondence continued with a further letter from Woodhams dated 30 October 2001:
“We refer to your letter of 24 October 2001 and confirm that you are currently in contempt of court in that you have failed to either comply with the injunction or sought to have the time limited for complying with it extended.
Our clients are extremely concerned that you alleged that there are insufficient funds to meet liabilities. This is even more astounding having regard to the fact that you have been unable to produce any accounts to date.
You have stated that there was cash and investments of approximately $100,000.00 back in March 2000. On top of that, you admit depositing a further $52,000.00 in a separate National Australia Bank account. Since that time you have collected approximately $80,000.00 in rental.
As against the above there was specific bequests of $40,000.00 and agreed costs of approximately a further $40,000.00. It is noted by Lee Skaftouros that he has seen no evidence to date that his children’s bequests have been taken care of.
Obviously a substantial amount of interest would have accrued to the estate, so there should be in a vicinity of $150,000.00 cash. You have offered no explanation as to where the money has gone. You are not entitled to take costs relating to our client’s action to have the executor removed.
Our clients do not agree that now is the best time to maximise a return not only do they not want the property sold, they have in the past expressed a desire that the property be subdivided in order that it reach its maximum potential.
There is no power in the will allowing for a trust fund to be set up out of the residue. Payment of the residue is clearly defined in the will. If you maintain otherwise then you must apply to the court.”
There was an exchange of testy correspondence in November 2001 between Middletons and the Dimos firm relating to the appropriate mode of transferring the Queensland property to the beneficiaries but it is unnecessary to refer to the details.
By letter dated 2 November 2001 the Dimos firm wrote to Lee’s wife, Mrs Leanne Skaftouros, as follows:
“We advise that we act for Mr Leo Dimos the Executor and Trustee of the Estate of the late Dimitrios Skaftouros (‘the Trustee’).
In accordance with the terms of the Will the Trustee believes that he may have the power to make provision for the infant beneficiaries namely your two children Michael James and Jasie. This will be in addition to the specific bequest of $10,000.00 each, left to them by the deceased.
It would assist the Trustee to determine whether to seek directions from the court and the amount to be set aside for the benefit of your children if you met with the Trustee to discuss this matter. Accordingly, would you kindly contact our office to arrange a mutually convenient appointment with Mr Dimos.
We would have no objection to you having an independent solicitor present to advise you in the interest of the children. You may also care to discuss this matter with your oldest child.
As the Executor may wish to apply to the Supreme Court for the Directions shortly, could you please attend to this as soon as possible.”
In the morning of 8 November 2001 Giavris telephoned Mr Wain of Ernst & Young and asked where the report was. He said that it was with one Peterson and that they would have it in the next couple of days. Giavris told him that it was due on 7 November 2001 and mentioned the urgency of the matter. Wain told Giavris that he would ensure that they had the report in the next couple of days. Later that day Giavris received a letter from Ernst & Young dated 7 November 2001 stating that “[f]urther to our recent discussion, we confirm that we will require a further 5 days to complete the accounting and income tax returns for the above estate, giving a new completion date of 12 November 2001.” The letter was signed by Graeme Still, for David Peterson.
By summons dated 8 November 2001, the plaintiffs sought an order that the defendant be committed to prison for his alleged contempt of court in failing to comply with the order of Justice Balmford “in that he failed to deliver up to the plaintiffs’ solicitor the report of Messrs Ernst & Young, Chartered Accountants” within the 30 day period required by the order. The summons also sought an injunction restraining the defendant from selling Mena Avenue. A number of affidavits were filed in support of and in opposition to the summons. In relation to the sale of Mena Avenue, the defendant deposed that the cash balance held in the estate was $170,412.69 and that the liabilities of the estate included “tax liabilities which are not yet ascertained, fees to Ernst & Young, the costs of these proceedings the outcome of which is yet unknown, executors fees and commission” and his firm’s costs of obtaining probate and the transmission application ($2,520.26). The defendant deposed that it was the best time to sell Mena Avenue and that the auction date had been set for 30 November 2001.
On 12 November 2001 Ernst & Young provided to the defendant a “report” as to the financial position of the estate to 30 June 2001. This comprised a summary only of receipts and payments for the periods ended 30 June 1999, 2000 and 2001. The accountants provided a further such summary covering the period 1 July 2001 to 30 September 2001.
The defendant swore an affidavit on 14 November 2001 which exhibited the Ernst & Young reports and which listed a number of payments by the estate since 1 October 2001 and which estimated the total tax liability of the estate as $34,226, the fees of Ernst & Young as $10,000 and the parties’ costs of this proceeding as being $80,000 -$90,000 to the then date. The defendant further referred to his intention to seek directions from the Court as to his power to establish a trust fund for the infant beneficiaries over and above their specific bequest of $20,000 under cl. 6 of the will. The defendant made estimates of the further costs of this proceeding and the costs of a proceeding to obtain directions. The defendant concluded by saying that, in view of the matters he had referred to, he believed that “considerable doubt exists as to whether sufficient liquid funds would be available in the Estate from which to meet the current and contingent liabilities”. This material was of course provided as being relevant to whether Mena Avenue should be sold, as the defendant had decided.
On 15 November 2001 Beach J made orders restraining the defendant from selling or dealing with Mena Avenue until determination of the proceeding or further order and adjourned the committal application to 5 February 2002 (the trial date).
I am satisfied that the defendant’s decision to sell Mena Avenue, which he clearly had the power to do, in his discretion, was not a bona fide decision but intended in spite to thwart the repeated requests of the residuary beneficiaries to receive the property in specie. There was clearly no necessity whatever to sell Mena Avenue, given the cash held by the defendant, until major items such as the costs of this proceeding and the defendant’s claims for costs and/or commission were resolved. The defendant out of the blue suggested, as part of his purported justification for selling Mena Avenue, that he intended to seek directions from the Court as to his power to establish a trust fund for Lee’s infant children, over and above their specific bequests. Assuming (without deciding) that the will gave the executor such a power and it was still exercisable, there was no evidence explaining why the defendant should suddenly consider that this power might be exercised. I have noted that a letter on the subject was sent to Lee’s wife, but only one week later. In addition to putting this forward as part justification for selling Mena Avenue, it is to be noted that it also provided a reason for not finalising the estate and posed a threat to the financial interests of the residuary beneficiaries on the eve of this litigation.
At some time around or shortly after 14 November 2001, Ernst & Young pursuant to its retainer provided to the defendant tax returns for the estate. Until that time no tax returns at all had been prepared for the estate in any year. The defendant blamed Harry’s failure to provide source or other documents or information for this failure. I am satisfied that this explanation is spurious. The evidence does not show that Harry held any relevant material at all for these tax returns or that the defendant or Giavris had any reasonable grounds for believing that he did. On the contrary, I am satisfied on the evidence that the defendant had the relevant records himself not only for the period since he began acting but also for periods prior thereto.
On or about 16 November 2001 the defendant authorised payment of the sum of $45,440 from his firm’s trust account for this estate representing senior and junior counsel’s fees incurred by him in this proceeding for the period from May 2001 to November 2001 and covering a number of appearances, preparation and reading, conferences and advices, settling of affidavits and the like. The plaintiffs submitted that it was improper conduct for the defendant to recoup these expenses from the estate at that stage. I will deal with that question later below.
On 5 December 2001 the Dimos firm paid to Ernst & Young out of its trust account for the estate the sum of $11,165 for accountancy work. The relevant invoice charged an “interim fee” of $6,875 for four tax returns and $4,290 for the summaries of receipts and payments.
On 18 January 2002 the defendant, as executor, commenced a new proceeding by originating motion (a proceeding which I adjourned) in which he sought directions, in substance, on the following questions:
(i)if the plaintiffs fail to obtain removal of the executor, do they forfeit all their benefits under the will, as a result of cl. 10 of the will?
(ii)does the executor have power under cl. 6 of the will to retain all or any part of the income and capital of the estate including the “specific bequest of any beneficiary”, for the purpose of the maintenance benefit and support of infant beneficiaries?
Clause 10 of the will provides:
“If any person having or claiming to have any interest whether vested, contingent or expectant under this my will shall, without the prior consent in writing of my executor or trustee (which consent shall be in the absolute discretion of my trustee and executor to give or refuse) unsuccessfully dispute the validity of this my will or unsuccessfully dispute the exercise of any of the discretions given to my executor or trustee by this my will, or if any such person shall without the consent as aforesaid institute any action or other legal proceedings for determining any question as to the construction of this my will and fail to obtain judgment in his or her favour or if any such person(s) shall without the consent aforesaid institute proceedings against my executor or trustee and fail to obtain judgment in his or her favour, then and in any of the said events, he or she shall forfeit all benefits given to or claimed by him or her under this my will or by reason of the exercise of any of the discretions aforesaid and the same not being residuary shall fall into and devolve as part of my residuary estate, or being residuary shall (together with any addition which may accrue thereto by virtue of this provision) go to the other person(s) entitled to my residuary estate as if the person(s) incurring such forfeiture had not been included in the residuary gift and if more than one proportionately between them according to their respective interests.”
Clause 6 of the will provides:
“I empower my trustee in his absolute discretion to apply the whole or any part of the income and if necessary the capital of the expected contingent or vested share or any part of my estate both real and personal under this my will, in or towards the maintenance, support, and advancement or benefit in life of any beneficiary taking under this my will and for such purpose to pay the same to the guardian (if any) for the time being of any infant beneficiary without being bound to see to the application thereof.”
On Wednesday morning, 6 February 2002 (the second day of the trial) the Court ordered that the defendant file a true and just account in Form 3-6AA verified by affidavit of the administration of the estate, the account to contain full particulars of receipts, disbursements, all assets and liabilities, including assets and liabilities not known at the date of application for probate and particulars of distribution of all assets and the Court directed that the account and affidavit be filed and served by 4.30 pm on Thursday 7 February 2002. The account and affidavit were duly provided.
The accounts so provided disclosed that on 7 November 2001 the defendant had invested the sum of $20,000.00 on a term deposit with the Bank of Cyprus, in a separate account, for the “specific bequest to infant beneficiaries”. It was not clear whether the defendant held this deposit (plus interest) as trustee for the infant beneficiaries – arguably that is the case. The accounts also disclosed that the defendant held moneys as part of the residuary estate, namely $61,353.39 in a Bank of Cyprus term deposit and $37,601.37 in his firm’s trust account. These accounts also showed a number of disbursements by the estate, in particular, the payment of $45,440 for various counsels’ fees in relation to this proceeding on 16 November 2001, the payment of $11,165 to Ernst & Young on 29 November 2001, and the payment of $1,584.70 for advertising costs for the aborted auction of Mena Avenue on 23 January 2002.
Conduct up to 7 May 2001 when this proceeding commenced
It is convenient to deal first with the conduct of the defendant in relation to the administration of the estate up to 7 May 2001 when this proceeding commenced. I will deal with it under the various headings suggested by the plaintiffs.
Delay in making application for grant of probate
The plaintiffs submitted that the defendant delayed unreasonably in making his application for probate of the will in that the application was not made until 16 April 1999, a period of nearly six months from the testator’s death. The plaintiffs pointed to s. 15 of the Administration and Probate Act 1958 which empowered the Court to summon any person named as an executor in a will to prove or renounce probate in any case where the executor has neglected to bring the will into Court within six weeks. The plaintiffs referred to Sharpe v Forbath[22] in which Beach J said that the fact that the legislature had seen fit to fix the period at six weeks was some indication of the view which it took as to the speed with which such applications should be made[23]. The plaintiffs submitted (and I agree) that the defendant had all the information necessary to make an application for probate in December 1998 and that the lack of a written valuation for the Queensland property was not the true reason (or a good reason) for the delay. The plaintiffs further submitted that a mistaken belief about the effect of the caveat lodged by Paul on 11 January 1999 may have caused or contributed to the delay in lodging the application.
[22][2000] VSC 282 at [10].
[23]See, too, Williams v Stephens (unreported, Supreme Court of New South Wales, 24/3/86) in which Young J said at p.3 that “the Court and the public expect routine probate work will be handled speedily”.
In my opinion there was no good reason for failing to lodge what was a routine application for probate, at the latest, by January 1999.
The defendant, in addition to contending that the time taken was reasonable or that there was no delay of any consequence in the obtaining of probate, submitted that s. 34(1)(c) of the Administration and Probate Act 1958 was in terms concerned only with unfitness of an executor “after such grant” of probate. The plaintiffs did not seek to contest that interpretation but submitted that delay in obtaining probate could provide some evidence of the capacity of an executor and was therefore relevant to the question of unfitness. Taking that approach, I simply note the defendant’s delay as an early indication of the laxity with which some aspects of the administration of the estate were later attended.
Conduct in relation to the Part IV Proceeding
The plaintiffs seem personally to have been of the view that the substantial delay in the administration of the estate caused by the Part IV proceeding was in some way the fault of the defendant. This clearly was not the case. The period of delay from 22 June 1999, when probate was granted and the Part IV proceeding was anticipated, and 5 October 2000, when the Part IV proceeding was settled, is not a period of delay which can in any large part be attributed to conduct of the defendant. Some criticism might justifiably be levelled at the defendant for failing to ascertain the details of the settlement, when he was not promptly informed of them by the other parties’ solicitors, and for failing to make any attempt to facilitate terms of settlement in order to save time and the costs of preparation for trial but I do not, in all the circumstances, perceive any serious dereliction of duty in these respects. Further, the plaintiffs sought to criticise the defendant for failing to distribute the cash bequests under the will during this period. Indeed, as the correspondence shows, the plaintiffs were pressing for the real estate also to be distributed. It is clear and obvious that the defendant was fully justified in making no distribution of the estate, without the consent of all parties to the Part IV proceeding, until the proceeding was actually completed by judgment or settlement. The main focus of the plaintiffs’ submissions under this heading was the defendant’s demand for executor’s commission. The plaintiffs submitted that it was improper of the defendant to require his executor’s commission to be included in the terms of settlement and that, in addition, his claim for 3% on the value of the estate was excessive.
There was evidence, which I accept, that it is not unusual for an executor to seek to settle the extraneous question of executor’s commission as part of a settlement of Part IV proceedings. No harm can be done by seeking to resolve the question of commission provided that all interested parties are represented and such attempted resolution does not unreasonably delay the settlement. Clearly it would be wrong for an executor to delay a settlement by withholding his consent unless and until his commission was agreed – that would be to put his financial interest ahead of his duty to the beneficiaries. It was incorrect, in my opinion, for the defendant to suggest that the amount of executor’s commission “will… have to be dealt with in any settlement” (see the firm’s letter of 19 July 2000) but it was not inappropriate to suggest that “if possible… the amounts of executor’s commission should be agreed” (see the firm’s letter of 24 August 2000). It was wrong, in my view, for the defendant to “require” executor’s commission at 3% of the probated value of the estate as a condition of accepting the terms of settlement (see the firm’s letter of 19 September 2000). I do not decide whether the amount claimed was excessive but I do consider that the terminology adopted in the letter was inappropriate.
However, once opposition to the settlement of his claim for commission was expressed on 19 September 2000, the defendant did not long delay in dropping his attempt to settle the matter at that stage[24].
[24]See paragraphs [72] to [75] above.
What this episode shows, in my opinion, is a tendency for the defendant to put his own interests first in his conduct of the administration which, while it can be criticised, did not demonstrate, of itself, any unfitness to act. However, the defendant’s conduct must be viewed as a whole and this episode should be taken into account.
Failure to pay costs
The defendant without justification delayed in payment of the legal costs of all other parties to the Part IV proceeding. These costs had been agreed by December 2000 but had not been paid, despite a number of demands, prior to the commencement of this proceeding[25]. The defendant submitted that he was unable to pay these costs until he had ascertained the precise extent of the residue and all other liabilities (such as income tax) but this submission is not supported by any evidence that it was a real consideration, having regard to the value of the residuary estate. Furthermore, as I have concluded above, the defendant’s failure to perform his duty to discharge these liabilities of the estate was motivated by his own interest in seeking to obtain agreement upon and payment of his claims for costs and executor’s commission.
[25]See paragraphs [91], [90], [94] to [98] and [106].
Conduct in relation to the accountants
I have dealt elsewhere with what I consider to be the defendant’s spurious contention that Harry had some documents, records or information the withholding of which was delaying the finalisation of the estate’s tax returns and accounts. Another issue touched upon in the proceeding was whether the defendant’s “termination” of Harry as estate accountant on 6 December 1999 was justified. I was not persuaded that the reasons advanced in evidence by the defendant for this termination were the true reasons (or, if true, were good reasons). It might be suspected that the animus displayed by the defendant to Harry stemmed from the content and tone of Harry’s correspondence to him but I make no finding about the matter which, in the end, I regard as irrelevant.
Failure to communicate and provide requested information
There was a very serious and persistent failure by the defendant to respond to correspondence from beneficiaries, their solicitors and others and to provide any or any sufficient information to beneficiaries upon request[26].
[26]See paragraphs [17], [18], [23], [28] to [37], [49], [50], [54] to [56], [62], [63], [65], [66], [77], [78], [80], [87], [88], [90], [94] to [97], [107], [108].
Failure to account
It is convenient to deal with this topic in the course of considering the defendant’s conduct after the commencement of this proceeding, although it also overlaps with the preceding heading of failure to provide information.
Other conduct and neglect in relation to the administration of the estate
The plaintiffs relied upon a number of other matters. Among them, I consider these to be material and of substance:
¨ failure to lodge income tax returns for the estate;
¨ failure to authorise works in relation to vacant Unit 2, Whitby Street or to inform or obtain instructions from the beneficiaries in relation to the works needed to make the unit lettable;
¨ failure to pay the pecuniary legacies to Britt and Jasmine Skaftouros within a reasonable time after 5 October 2000 and not until 27 February 2001;
¨ failure to invest and set aside the pecuniary legacies for Michael and Josie Skaftouros (until 7 November 2001); and
¨ failure to pay interest on the said pecuniary legacies.
Unfitness as at the commencement of this proceeding
In my opinion the plaintiffs have established that the defendant was, as at the commencement of this proceeding on 7 May 2001, unfit to act in the office of executor of this estate. I reach that conclusion upon a consideration of the whole of the defendant’s abovementioned conduct, by both act and omission. That conduct may be broadly characterised as serious neglect and laxity in the proper performance of his duties, a gross failure to respond to communications or to provide information, and a tendency to prefer his own interests over his duty to beneficiaries. The court is entitled, in considering the question of unfitness, to examine the executor’s continuing conduct up to trial and senior counsel for the defendant did not contend otherwise. In a given case, an executor might conceivably redeem his position before trial. However, in this case, the conduct of the defendant since the institution of this application for his removal has in my view exacerbated the situation and further demonstrated his unfitness to act as executor of the estate. I turn to that conduct.
Defendant’s conduct from 7 May 2001 to 19 September 2001
In light of the evidence as a whole, and having had a good opportunity to observe the defendant give his evidence, I am of the view that the plaintiffs’ application for his removal excited in the defendant a strongly antagonistic attitude towards the plaintiffs and a recalcitrant approach to their attempts to pressure him to perform what they considered to be his obligations as executor.
The defendant’s seriously unsatisfactory conduct during the above period included the following relevant features:
¨ the attempts to blame Harry for the delays in finalisation of the estate;
¨ a continuing failure to reply to correspondence or to provide information;[27]
¨ the failure until 6 September 2001 to pay the parties’ costs of the Part IV proceedings;
¨ the failure to pay to the relevant beneficiaries the net rental from Whitby Street and Alden Court for the period from 14 February 2001 onwards;
¨ the failure to provide access to the books and accounts or to permit inspection of the trust account records or to provide copies thereof at the plaintiffs’ cost; and
¨ the continuing failure to lodge income tax returns (and the other matters referred to in para [199] above which extended beyond 7 May 2001).
[27]see paras [115], [116], [134] and [140].
Conduct necessitating the summons of 19 September 2001
It was submitted on behalf of the defendant that he was under no absolute obligation to account at any particular time other than at the end of the administration. However in my opinion it was unreasonable of the defendant, in the light of the various requests made and certainly by the time of Woodhams’ letter of 6 September 2001, to refuse to provide proper accounts to the plaintiffs. In any event, it was wrong of the defendant to ignore their requests to inspect the accounting records and obtain copies at their cost. It should not have been necessary for the plaintiffs to apply to the Court for this purpose. What the Court application revealed was that the defendant was not ready, as he should have been, to provide such accounts when ordered to do so.
Nor should it have been necessary for the plaintiffs to seek a court order in order to obtain rental moneys and the relevant tenancy agreements, bond authorities, keys, tenancy details and insurance policies or certificates.
Conduct in relation to the order of 24 September 2001
The court order required the report of Ernst & Young to be delivered within 30 days. It was not. The failure of the defendant to obtain an extension of time from the Court for the delivery of the report, given that he was unable to ensure that this court-ordered time limit would be met, was in my view another relevant failure by the defendant to perform his duties as executor.
Use of estate’s funds for legal costs
The plaintiffs submitted that the defendant had no right prior to the determination of the case to reimburse himself from the estate for counsel’s fees and other expenses incurred in his defence of this proceeding. The plaintiffs referred to Yunghanns v Candoora No. 19 Pty Ltd (No. 2)[28] and, in the context of corporate oppression proceedings, to cases where directors sought to defend their conduct using the funds of the company[29].
[28][2000] VSC 300 at [88] per Warren J.
[29]See Re D.G. Brims & Sons Pty Ltd (1995) 15 ACSR 559, 592; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688, 733-4 and Marks v Roe (unreported, Supreme Court of Victoria, Mandie J. 28/5/96, BC 9602061 at p. 39).
It was submitted on behalf of the defendant that he was entitled to reimburse himself or pay these fees and expenses by reason of s. 36(2) of the Trustee Act 1958.
Senior counsel for the defendant cited National Trustees Executors and Agency Company of Australasia Ltd v Barnes[30] as authority for the proposition that costs incurred in proceedings by executors in defending their conduct were, within the meaning of the relevant section of the Trustee Act, “incurred in or about the execution of the trusts or powers”. Although the decision supports that proposition (at least if those costs were properly incurred) I do not think that it directly or indirectly supports the further proposition that executors are entitled as of right to take such costs from the estate in anticipation of success in the proceeding or in anticipation of obtaining such an order in the proceeding, even if unsuccessful. Although the High Court allowed the executor’s appeal, I do not think that the Court acceded to the submission put on the executor’s behalf that the executor was entitled to his costs and it was “not a matter of discretion for the court”.
[30](1941) 64 CLR 268.
The position as to administration proceedings is set out in the leading English text[31] as follows:
“… the court will itself decide at the conclusion of [administration] proceedings whether the representative is to get his costs out of the estate. If he has acted reasonably the representative is not to be deprived of his costs out of the estate.”
[31]Williams, Mortimer & Sunnucks: Executors, Administrators and Probate (Sweet & Maxwell, 2000 ed), para. 66-02.
In my opinion a proceeding pursuant to statute seeking removal of an executor stands in a similar position to an administration proceeding: it is for the Court to decide at the conclusion of the proceeding (or other appropriate time) whether the executor is to get his costs out of the estate[32].
[32]See s. 24(1) Supreme Court Act 1958.
In my opinion it was improper for the defendant to take his costs from the funds of the estate before this proceeding was concluded and any appropriate orders as to costs were made in his favour.
Further, the relative speed with which the defendant’s costs were paid or reimbursed out of the estate might significantly be contrasted with his lengthy delays in the payment of other parties’ costs and of the pecuniary legacies and with his failure to pay a relatively small amount to put Unit 2, Whitby Street in a lettable condition.
Exercise or threatened exercise of discretionary powers under the will
As I have already stated[33], I consider that the defendant’s attempted exercise of discretion to sell Mena Avenue was made in bad faith and for an ulterior purpose. Further, the defendant has power (if his interpretation of cl. 6 of the will is correct) in his absolute discretion to apply any part of the estate not already distributed for the maintenance, support or advancement of any beneficiary. In my view there is a serious risk that the defendant is not capable of exercising any such power in a proper and objective manner, unaffected by the evident antagonism which he now bears to the plaintiffs. His sudden discovery of a need to consider the children of Lee as objects of this power, for whatever motives, does not engender confidence.
[33]See para [178].
Conclusion
I am satisfied in all the circumstances to which I have referred that the defendant is unfit to act in the office of executor of this estate. Insofar as there remains a discretion to permit the defendant, despite his unfitness, to complete the administration of the estate rather than remove him, I am firmly of the view that an order for removal should be made so as to ensure that all outstanding matters are dealt with objectively and fairly to all beneficiaries. I have referred to some of these matters but others were also mentioned in the course of argument. I accede to the defendant’s submission that the replacement administrator should be a trustee company.
I will hear the parties upon the precise form of the orders and as to costs.
Contempt of Court
I am not satisfied beyond a reasonable doubt that the defendant is in contempt of court as a result of the failure to deliver the Ernst & Young report within the time provided by the Court’s order. I am not satisfied that such failure was caused by the fault of the defendant nor am I satisfied that the cause of failure to deliver the report was not simply and solely the failure of Ernst & Young to produce the report in time. Nor am I satisfied, if it be relevant (which I doubt), that the defendant failed to use his best endeavours to obtain such report within the time ordered. The application for committal for contempt of court should be dismissed.
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