Thomson v Thomson
[2022] VSC 194
•14 April 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S PRB 2021 11206
| GRAEME WALLACE THOMSON | Plaintiff |
| v | |
| CATHERINE TRACY THOMSON and KERRYN RAE THOMSON | Defendants |
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JUDGE: | Keith JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 January 2022 |
DATE OF JUDGMENT: | 14 April 2022 |
CASE MAY BE CITED AS: | Thomson v Thomson |
MEDIUM NEUTRAL CITATION: | [2022] VSC 194 |
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PRACTICE AND PROCEDURE – Application by plaintiff for grant of probate – Application by caveators for executor to be passed over – Caveators do not challenge will’s validity – When may an executor be passed over, where will is valid? – Power to pass over dependant on overall assessment of circumstances – Mere conflict of interest or duty by executor insufficient – Testator’s choice of executor not lightly put aside – Prima facie test requires caveators demonstrate grounds which justify putting aside the testator’s intention – Plaintiff evidences understanding of duties as executor and willingness to undertake these –VCAT proceedings the proper vehicle to review the plaintiff’s conduct as deceased’s power of attorney – Power to pass over is to prevent the grant of probate being: unjust; inefficacious, obstructed or abused – Deceased’s choice of executor was considered, deliberate and made with an understanding of the parties’ disputes – Grounds of passing over not made prima facie – Caveats ceasing to have effect do not deprive the beneficiaries of entitlement to seek Court’s supervision to protect their interests – Nothing to suggest the plaintiff would not duly administer the estate or its interests – The caveats filed cease to have effect – Plaintiff’s application referred to the Registrar of Probates.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms M Rozner | |
| For the Caveator | Ms A Bartfeld | KHQ Lawyers |
JUDICIAL REGISTRAR:
On 28 January 2022, I made orders in this proceeding after hearing submissions from the parties. Below are my reasons for these orders.
Background and Procedural History
Raymond James Moffat Thomson (“the deceased”) died on 25 December 2020. He is survived by two daughters, Catherine Tracy Thomson and Kerryn Rae Thomson, who are the caveators in this proceeding.
The plaintiff is a brother of the deceased and has applied for a grant of probate of the last will of the deceased, made on 25 January 2017.
The plaintiff filed his Originating Motion on 30 June 2021, accompanied by the usual supporting affidavit.
A caveat was lodged on 18 January 2021, with a further caveat lodged 25 June 2021. Additionally, Grounds of objection were filed by the caveators on 12 August 2021, with Amended grounds of objection filed 15 October 2021. The caveators have also each filed affidavits sworn 29 October 2021 (referred to as “Kerryn’s affidavit” and “Catherine’s affidavit” for ease of differentiation).
The plaintiff has filed a further affidavit, with accompanying exhibits, sworn 19 November 2021. The plaintiff also relies on an affidavit of Mr Matthew Bryan Weeks, a former employee in the business operated by the deceased, through a corporate structure, sworn 12 November 2021.
In addition, on 25 January 2022, Ms Rachel Lee Hocking filed on affidavit sworn on the same date on behalf of the caveators, exhibiting further correspondence between Kelly Hazell Quill Pty Ltd (“KHQ Lawyers”, the solicitors for the caveators) and Whiting Lawyers (the plaintiff’s solicitors) since Catherine’s affidavit sworn 29 October 2021. Furthermore, the plaintiff filed an affidavit sworn 27 January 2022, updating the assets and liabilities of the deceased as at the time of his affidavit sworn 30 June 2021.
The estate disclosed by the inventory filed for probate purposes amounts to assets of some $677,000 and liabilities of some $270,000. There is a dispute as to further assets, including a shareholding in a corporation and the proceedings of a superannuation fund. There is also a dispute as to the value of certain assets and the potential liability to be paid from the estate.
In this proceeding the plaintiff seeks a grant of probate in accordance with the last will of the deceased. The caveators object to the grant of probate and ask the plaintiff be passed over as executor.
The history shows the deceased had suffered significant health issues for several years prior to his death. He had been involved in family court proceedings following the failure of his second marriage. His first wife, and mother of the caveators, had died some years earlier. Their son, Michael James Moffat Thomson, had died in about 2017. The deceased had operated a business through a corporate structure and family trust structure. Moreover, he owned property through a corporate and family trust structure and property was owned through a corporate trust structure, not personally. The deceased had been bankrupt due to business failure in the 1990s. There is some history of conflict and disagreement between members of the family.
The Amended Grounds of Objection rely on several “Particulars” in support of the request the plaintiff be passed over. The particulars A to D concern, or arise from, the exercise of a power of attorney by the plaintiff, and VCAT proceedings and its related findings. The VCAT findings concern allegations of failure by the plaintiff in the management of the affairs of the deceased, including: non-payment of aged care fees; mortgage repayments and the mixing of funds by the plaintiff.
Particular E concerns omissions from the Inventory of Assets and Liabilities of the deceased, filed by the plaintiff alongside the originating motion seeking a grant of probate.
Particular F concerns a debt of some $25,000 claimed to be due to the plaintiff from the deceased.
Particular G concerns a complaint of delay by the plaintiff in making the application for probate.
Both caveators filed an affidavit dated 29 October 2021 in support of the grounds for passing over. Catherine’s affidavit included the common documents referred to in both affidavits. Kerryn’s affidavit included some additional documents. They both set out the basis for their view the plaintiff should be passed over.
Catherine’s affidavit, at paragraph 33, alleges the plaintiff had failed to properly identify and disclose certain assets and liabilities, which she believes should have been included in the estate, namely:
(a) shareholding in RJMT Pty Ltd;
(b) the Thomson Superannuation fund, in which there was a binding nomination dated 26 October 2016 in favour of the estate;
(c) the value of the Timber Ridge Loan is approximately $400,000 and not $617,209;
(d) the Aged Care debt was disclosed, but not the interest and legal fees also claimed; and
(e) personal debts claimed by the plaintiff from the deceased.
Kerryn’s affidavit, at paragraph 8, includes her “estimate that the estate has suffered substantial loss as a result of Graeme’s mismanagement, including but not limited to”:
(a) needlessly accrued or inflated aged care debts (including interest and legal fees attached to this debt);
(b) the sale of shares for the sum of $99,875, which are not accounted for;
(c) no payments having been made to the deceased from the business Auscut;
(d) lost rental income in respect of the property at 41 Government Road, the Basin, Victoria 3154 (referred to as “the Basin”);
(e) repair costs of the Basin, dervied from works undertaken by Graeme; and
(f) payment of health insurance that was to be cancelled on completion of family court proceedings between the deceased and his former second wife, Theresa.
The grounds for passing over are also summarised in Catherine’s affidavit, at paragraph 35, and in the caveator’s written submissions filed 13 January 2022.
The plaintiff filed an affidavit in response on 19 November 2021. The affidavit sets out background to the family circumstances, the business and financial affairs of the deceased and addresses the several grounds relied on by the caveators. The following brief summary includes reference to paragraph numbers of the plaintiff’s affidavit.
(a) A power of attorney was executed by the deceased in March 2015 [45];
(b) The plaintiff took control of the deceased’s affairs under the power of attorney from May 2017 when the deceased was involved in a motor vehicle accident [49];
(c) In 2015, VCAT proceedings to revoke the power of attorney were commenced by Simon Denham (the first caveator’s partner) and supported by the first caveator [71] – [75]. Mr Denham’s application was struck out [75]. The Office of the Public Advocate reported to the VCAT in September 2015 [76] and the first caveator’s application was dismissed in November 2015 [79];
(d) The breakdown of marriage between the deceased and his second wife involved financial disputes from 2015 and were finalised by orders made in April 2018 and October 2018, following a settlement agreement [97] - [117]. The family home had been registered in the second wife’s sole name and was sold in 2014. The deceased did not receive any part of the proceeds [109] - [110];
(e) A further VCAT application was made by the first caveator in March 2020 [121]. This resulted in certain investigations being undertaken and the deceased being re-located to a nursing home in Gisborne [157];
(f) The plaintiff had taken steps to seek the VCAT’s approval to sell the Basin in July 2020 [158] – [160] and the application was adjourned for the VCAT to hear the application by the first caveator (joined with the second caveator) for the plaintiff to be removed [160];
(g) Another application to the VCAT was made by the caveators on 3 August 2020 [165] and orders were made on 28 August 2020 for the plaintiff’s removal [167]. The VCAT published reasons for this decision on 9 November 2020 [169][1];
[1]Note, the plaintiff’s affidavit incorrectly stated the publishing date of the judgement by the VCAT to be “9 November 2020”, when the correct date was “9 November 2021”.
(h) On 15 December 2020 a further application to the VCAT was filed, but was withdrawn due to the worsening health issues of the deceased. His health continued to deteriorate and the deceased died on 25 December 2020 [179];
(i) A fifth VCAT proceeding was commenced on 15 June 2021, seeking compensation orders [190] – [191];
(j) The Aged Care debt is dealt with in the course of the affidavit, including the need for care from 2017, after hospitalisation, following the motor vehicle accident [127] - [132]. In 2020 there were proposals to sell the Basin to raise funds to pay the debt [124] - [126]. Steps taken to pay the fees and to negotiate time to pay are explained [133] – [135]. A history of the plan for payment of the charges and the correspondence with the aged care facility’s Lawyers is set out [138] - [146]. The charges for penalty interest and legal fees had not been imposed prior to the VCAT orders in August 2020 [136];
(k) The super Fund issues include reference to the marriage break down [97] - [103];
(l) The Basin issues include reference to the deceased’s son’s death in February 2017 [105]. As the son had been living in the Basin [148] - [164], the plaintiff had taken advice about the sale [124] - [126];
(m) The allegation of income not received by the deceased concerns directors’ fees, or “drawings” from the operating business “Auscut” [108];
(n) The bank account issues arose when the deceased’s former second wife stopped his access to company accounts and super fund accounts in 2017 [112];
(o) Accounting for shares that have been sold refers to shares owned by the Super Fund and sold in accordance with Family Court orders [115] - [116];
(p) The plaintiff provides information concerning his management of the Basin and the steps taken to investigate its sale [124] - [126]
(q) The Aged Care debt is the subject of the plaintiff’s affidavit at [127] - [147]. The events concerning the aged care arrangements are set out in some detail. The plaintiff maintains no interest charge was made and no legal fees were claimed while he was acting as the attorney.
(r) The management of the Basin and the discussions with the bank concerning repayment of the loan prior to the date of death of the deceased are set out at [148] - [164]
(s) The affidavit also provides context that not all of the assets controlled by the deceased form part of his estate. The Basin, for example, has now been sold by the caveators [170]. The various assets, liabilities and income streams were in place for the deceased during his lifetime. However, these did not allow for streamlined management when his affairs were managed by an attorney, or after his death. This observation is supported by the affidavit generally, as well as the share dealings by the caveator [174] – [175];
(t) The operating business, Auscut, has continued, but the plaintiff has had no role in that business since August 2020 [180] - [183].
(u) The personal loan is the subject of [184], with documents provided to evidence communication with the second caveator about that arrangement.
There is some evidence to suggest the deceased, when making his last will, was aware of the history of disputation. Relevantly, the will does not appoint the caveators as executors. Rather, it appoints the plaintiff, and if the plaintiff is unable or unwilling to undertake the role, then it appoints a niece of the deceased. The niece is not a party to the proceeding.
Question of Passing over
The power of the Court to pass over an executor is well established. Relevantly, this Court exercised such power in the probate proceedings of Re Aitken (‘Aitken’)[2] and Re Warner (‘Warner’).[3]
[2][2018] VSC 817 (‘Aitken’). McMillan J at [10] refers to Rule 8.06 of the Supreme Court (Administration and Probate) Rules 2014 and the “any other ground of objection” provision in Rule 8.06(3). Then reference to Rule 5.02 “peculiar circumstance” is mentioned, as it may allow an application to pass over an executor.
[3] [2019] VSC 656 (‘Warner’).
In Aitken, the plaintiff, Ms Patricia Aitken-Welch, was one of two executors appointed by the 2012 will of her mother, Ms Mavis Aitken, who had died in April 2017. The plaintiff had been made bankrupt in 2014. The trustee in bankruptcy opposed the grant and lodged a caveat in October 2018. Ms Catherine Hearn, the daughter of the plaintiff (and grand-daughter of the deceased), also lodged a caveat. The other named executor, Ms Robyn Brown (the sister of the plaintiff and daughter of the deceased), agreed to renounce her executorship to allow an independent administrator to be appointed, once each of the named executors had been cleared off. The Court concluded the plaintiff was not a fit and proper person to administer the estate and an order for passing over was made in December 2018.
The decision in Warner concerns a caveat lodged in probate proceedings. Marjory Warner died on 18 June 2018, leaving a will made in 2013, which appointed three executors. The three named executors were the plaintiffs, who commenced an application for a grant of probate on 24 October 2018. On 29 October 2018, a caveat was lodged by the son of Marjory, who was a beneficiary under the terms of the will. The grounds of objection alleged two of the plaintiffs had a conflict of interest arising from certain inter vivos transactions to their benefit. The caveator submitted those two executors should be passed over. Relevantly, no objection was raised to the grant in favour of the third plaintiff, a friend of the deceased.
In Warner the Court found the attitude of the two plaintiffs gave little confidence that a proper investigation would be conducted. The two plaintiffs’ attitude included the view there was in reality no conflict of interest, as the executors were also the beneficiaries of relevant assets. The Court did not agree. The two plaintiffs were passed over and the third plaintiff remained entitled to a grant as an executor named by the deceased.
The power to pass over an executor has been exercised by the Court in cases where the named executor has failed or refused to make an application for a grant of probate. An example of such a case includes Mataska v Browne (‘Mataska’),[4] in which the named executor took the view the assets of the estate could be administered without a grant of probate. That view might have been correct, but for a potential claim which required investigation. The Court granted an application for representation and passed over the named executor.
[4] [2013] VSC 62 (‘Mataska’).
The reasons for decision of McMillan J in Mataska show the named executor had not applied for a grant of probate. The jurisdiction of the Court was invoked by an originating motion in which the plaintiff sought: a limited grant of representation; orders for passing over the executor; and declarations as to ownership of land. McMillan J emphasised the relevance of the fact the executor had not sought a grant and made it clear no grant would be sought.[5] Her Honour was satisfied the executor would not undertake the required investigation for the due administration of the estate.[6]
[5] Ibid [34].
[6] Ibid [31].
Other examples appear where different procedures have been used to invoke the jurisdiction of the Court to pass over an executor. Uniting Church v Millane (‘Uniting Church’)[7] is a decision of Windeyer J, subsequently cited by Daly AsJ[8] and McMillan J,[9] in which the case was pleaded by writ seeking declaration of unsuitability to be appointed executor. It was not a probate caveat proceeding.
[7] [2002] NSWSC 1070 (‘Uniting Church’).
[8] Paul Salter (in his capacity as the Executor) v Stephen William Hicks [2014] VSC 45 (‘Salter’).
[9] Mataska (n 4) [32].
The principles to be applied have been established for more than a century, but today they are usually taken from a Statement of the Supreme Court of South Australia in Crane v Crane[10] (‘Crane’).
[10] In the Estate of Keith Chandler Crane [2005] SASC 379 (‘Crane’).
A convenient restatement of these principles (within the Victorian jurisdiction) was made by Daly AsJ in Paul Salter (in his capacity as the Executor) v Stephen William Hicks (‘Salter’).[11] Before considering her Honour’s summary of the principles of Crane, it is useful to consider a chronological overview of the matter.
[11] Salter (n 8).
In that case, the validity of the will was disputed on several grounds. The separate ground to seek the executor be passed over was dismissed. The date of death was 17 June 2011 and the relevant chronology of the proceeding shows an application for probate was filed in December 2011; amended grounds of objection were filed in support of the caveat on 14 August 2013; with the decision handed down on 5 March 2014, following a hearing on 17 February 2014.
In addition to Salter, where a caveat was lodged but not successful, reference should be made to Re Munro (‘Munro’)[12]. In Munro, the caveat sought passing over, but was also supported by grounds of objection that the testator lacked testamentary capacity and did not know and approve the terms of the will. The decision of Derham AsJ was to dismiss the caveat summarily.[13] Derham AsJ considered each of the grounds of objection separately. With respect of the passing over ground, his Honour was satisfied the plaintiff understood the role of executor, was able to carry out that role and had been open and frank with the Court in disclosing evidence about the transactions.[14] In the same passage, his Honour expressed the question in terms of whether the plaintiff could not be trusted to do what they had sworn to do (namely complete the due administration of the estate). In that case, the Court was prepared to trust the plaintiff and dismissed the caveat summarily.
[12]Re Munro [2018] VSC 747, [35] (Derham AsJ) (‘Munro’). I observe the judgment in Munro shows “Common Law Division” and a proceeding number, as if it was in the civil jurisdiction of the court. In fact, the decision is in the Probate Jurisdiction of the Court and the proceeding number should be “PRB” not “CI”. Additionally, the caveator is named as “caveator” rather than “defendant”.
[13] Ibid [138].
[14] Ibid [108].
With an understanding of the above, the principles of the Court’s power to pass over an executor (as derived from Crane and summarised by Daly AsJ in Salter[15]) is generally stated as follows:
[15] Salter (n 8) [14].
(a) the jurisdiction is to be exercised only in special circumstances;
(b) generally a person named in a will as executor is entitled to a grant of probate;
(c) the jurisdiction is exercised having regard to the due and proper administration of the estate and the interests of the parties beneficially entitled;
(d) mere conflict of interest does not justify passing over an executor;
(e) if an estate has claims requiring careful investigation, they should be investigated; and
(f) if the Court is satisfied a potential claim will not be properly investigated, it may be in the interests of the administration of the estate to pass over the executor.
Facts
The cases mentioned above indicate the jurisdiction is exercised in limited circumstances – see Salter at [9] and [14], per Daly AsJ. Additionally, in Munro, Derham AsJ goes on to identify as examples of the exercise of the jurisdiction the following, based on the conduct, or circumstances, of the executor. His Honour does so however without suggesting the class is closed, or excluding that other circumstances might justify the exercise in other cases:
(a) Bad character;
(b) Neglected the duties of office;
(c) Intermeddled, but refused to take a grant;
(d) Absent abroad;
(e) Ill health;
(f) Unsound mind;
(g) Not competent;
(h) Could not be found; and
(i) Estate was insolvent.[16]
[16] Munro (n 12) [38].
The following general statements of Windeyer J in Uniting church are relevant to this discussion and are reflected in the general principles above:
It would be highly undesirable if the administration of estate were delayed by having to determine in prior proceedings or perhaps in the same proceedings, disputed claims of unconscionable conduct as would be the position here[17]
…
The fact that there could be some conflict of interest does not in itself justify passing over a named executor who wishes to take a grant. Many executors named and appointed have some conflict such as being a debtor to the estate. That does not justify them being passed over[18]
…
The proper course in ordinary circumstances is to assume that a person named by a deceased person as his or her executor will act properly and that the testator expects that person will do so. The proper course is not to have some prior determination of proceedings which will properly arise in the administration of the estate of the deceased person.[19]
[17] Uniting Church (n 7) [7].
[18]Ibid [8].
[19] Ibid [9].
The ”Interest” of the caveators
The caveators are beneficiaries under the terms of the will. As the deceased’s son did not survive him, 75% of the residuary estate falls to be distributed in accordance with the alternate provisions of the will. That is to say, to the caveators and the grandchildren. The caveators have an interest in the due administration of the estate.[20]
[20]Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306; Commissioner of Stamp Duties (Q.) v. Livingston (1964) 112 CLR 12, being the Privy Council on appeal from the High Court of Australia in Livingston v. Commissioner of Stamp Duties (Q.) (1960) 107 CLR 411.
In the decision of Re Przychodski (‘Przychodski’),[21] McMillan J was dealing with a caveat disputing the validity of the will on grounds as to due execution, testamentary capacity and undue influence. The caveat included an objection the plaintiff was not a fit and proper person to administer the estate. However, at the hearing the caveator conceded such allegation could not be relied on for the purposes of challenging the will.[22] Accordingly, the caveat was struck out and the Court ruled the caveator had failed to establish a prima facie case.
[21] [2016] VSC 781 (‘Przychodski’).
[22] Ibid [26].
In the context of that decision, McMillan J commented in relation to standing to lodge the caveat as follows:
In order to establish standing in a proceeding relating to a deceased estate, a person must be able to show that his or her rights will, or may, be affected by the outcome of the proceeding. Standing is usually established by the caveator having a beneficial interest in the deceased’s final will or under the penultimate will or the intestacy provisions where there is no penultimate will.[23]
[23] Ibid [17].
McMillan J, at [17], referred to a passage from the NSW decision in Re Kouvakas; Lucas v Konakas (‘Kouvakas’)[24]. This passage contains supporting authorities and principles for the general statement that probate litigation is “interest litigation”. Lindsay J, at paragraph [214] of the judgment of Kouvakas, refers to the decision in Osborne v Smith (‘Osborne’)[25] to emphasise the central importance of the interest aspect to the practice of the Court binding a non-party. At [215], Lindsay J, describes probate litigation in terms of rights to property.[26] Usually the “interest” issue is whether property forming part of the estate of the deceased will pass to interested person A or to interested person B, depending on the outcome of the litigation. Does A take under one will, or intestacy, or does B take under a different will?
[24] [2014] NSWSC 786 [212] – [216] (‘Kouvakas’).
[25] 105 CLR 153, 158-9 (‘Osborne’).
[26] Kouvakas (n 24) [215].
A further observation of Lindsay J in Kouvakas is important. At [217], his Honour comments on the need for an appreciation of the role of a grant of probate or administration as an instrument of title to estate property.
Another statement of principle appears in the matter of Poulos v Pellicer In the Estate of Culina (‘Culina’)[27] (being a decision also Cited by McMillan J in Mataska), at [15]:
The sufficiency of interest is usually stated to depend upon whether the person seeking to challenge the document propounded will take a different, meaning greater or even lesser, benefit in the estate if that document is not admitted to probate.[28]
[27] Poulos v Pellicer In the Estate of Culina [2004] NSWSC 504 (‘Culina’).
[28] Ibid [15].
The decision of Daly AsJ in Salter commented on principles of standing, although in that case the issue of standing was conceded. Comments by Daly AsJ at [8] are not part of her Honour’s decision, but may illustrate arguments against standing where there is no doubt as to the capacity of the estate to satisfy the caveator’s “interest” under the will.
As already mentioned, the caveators have an interest as beneficiaries under the will. The entitlements of each of the beneficiaries is described in and determined by the will. There is, in this case, no challenge to the validity of the will. Nor is there a dispute as to whether the estate should be distributed according to the terms of the final valid will. The caveat seeks to pass over the named executor. The caveat also objects to a grant on the grounds the caveators seek to pass over the named executor. The caveators do not seek to disturb the distribution of the estate in accordance with the will. It is with regard to these circumstances the statement by Derham AsJ in Munro[29] is appropriate. The power to pass over an executor may be exercised to protect the due administration of the estate. The comment by Derham AsJ in this context was the power to pass over an executor may be exercised if the Court is satisfied the plaintiff, as the named executor, cannot be trusted to do what they have sworn to do. Namely, to ensure the due administration of the estate.[30]
[29] Munro (n 12) [108].
[30] Ibid.
The interest held by the beneficiaries of the un-administered estate is an entitlement to the due administration and distribution of the estate. There is no competing distribution and no contest between potential beneficiaries as to who is entitled. The caveators dispute the suitability of the named executor, relying on allegations of misconduct, failure to duly administer the affairs of the deceased and a conflict of interest.
The plaintiff disputes the allegations and has undertaken to duly administer the estate according to law.[31]
[31] Affidavit of Graeme Wallace Thomsom affirmed 30 June 2021.
Prima facie case
Gardiner v Hughes [No 2] (‘Gardiner’)[32] is a decision on the revocation of a grant of probate, but has been accepted as a statement of principle for caveat proceedings. The submissions for the caveators rely on the statement:
The task for the party seeking to have a grant of probate revoked is therefore to show that there is a ‘case for investigation’ or ‘something to go on.’ Such a case will, by definition, not be frivolous or vexatious. However mere speculation will not suffice.[33]
[32] [2019] VSCA 198 (‘Gardiner’).
[33] Ibid [41].
The test is, of course, not applied in a vacuum. It is not a case for investigation at large, or an issue the caveator would like to have investigated. The prima facie case must be directed to the relief sought. In Gardiner, the context was the revocation of probate on grounds of testamentary incapacity. The particulars in support of the ground were directed to the terms of the “well-known test in Banks v Goodfellow”[34] for testamentary capacity. The trial judge had expressed the prima facie case test in terms of requiring a sufficient factual basis for the grounds of revocation and said mere assertion of facts was insufficient.[35] Moreover, from the context, it is clear the grounds for revocation must be such as could support a finding of want of testamentary capacity.
[34] Ibid [7], citing Banks v Goodfellow (1870) LR 5 QB 549.
[35] Ibid [11].
The Court of Appeal reviewed the trial judge’s decision at [9] - [13] and commented on some preliminary legal issues at [38] – [44], including the applicability of discretionary matters and questions of utility to the determination of a prima facie case. The context of the discussion in Gardiner was directed to finding a prima facie case of a want of testamentary capacity. The Court of Appeal said (at [48]):
the purpose of inquiring into the state of the testator’s mind is to ensure that the testator properly understood the matters necessary to exercise the will aiming power.[36]
[36] Ibid [48].
The application of the prima facie case test requires identification of the context. That is to say, what is the “something” to be investigated, or what is the “something” to go on, that makes out the prima facie case.
The statements of principle are, in the main part, directed to cases where the grounds of objection in support of the caveat raise a doubt as to the validity of the will. The terms of Rule 8.06 of the Supreme Court (Administration and Probate) Rules 2014 set out some of the common grounds for a challenge to the validity of a will. In such a situation, the prima facie case is directed to the relevant ground on which the challenge to the will is founded. How is it to be applied to a caveat that does not challenge the validity of the will, but seeks to have the court pass over the executor?
The exercise of the jurisdiction to pass over an executor recognises a conflict of interest will not of itself suffice. The circumstances of each case will differ, but the Court will exercise its power to ensure the due administration of the estate. Ashley J in Monty Financial Services Ltd v Delmo (‘Monty Financial’)[37] expressed the principle as it is not every conflict of duty and interest that will result in passing over[38] and the determinative factor is the risk, or the undesirable suspicion, the interest of the estate might not prevail.[39] The observations by Ashley J were accepted by the Court of Appeal in Fysh v Coote (‘Fysh’)[40] (at [20]) in the context of s 34 and the power to remove an executor. The context of the discussion concerned the “unfitness” of the executor and provides a link to the power to pass over an executor. In that passage, the Court of Appeal recognised the principles stated in Miller v Cameron[41] would apply to an executor “as long as one took account of the fact that the jurisdiction is being invoked to deny an executor the right to perform his or her duties as such.”[42] The Court of Appeal also expressly referred to Ashley J’s comments that “not every conflict of duty and interest … should result in the removal of an executor”[43], and the Court accepted it “should not lightly set aside the intention of the testator that a particular person be that person’s executor.”[44]
[37] [1996] 1 VR 65 (‘Monty Financial’).
[38] Ibid 83.
[39] Ibid 81.
[40] [2000] VSCA 150 (‘Fysh’).
[41] (1936) 54 CLR 572, 580-581.
[42] Fysh (n 40) [20].
[43] Ibid quoting Monty Financial (n 37) 83.
[44] Ibid quoting Monty Financial (n 37) 83.
A recent statement of principle in the context of a removal application appears in the decision of Re Vasiliades; Pappas v Vasiliades (‘Re Vasiliades’)[45] at [22]:
An executor or trustee will not necessarily be removed where there is a conflict between duty and interest, but in some cases such conflict may be sufficient. Whether this is so depends on the facts of each case and a determination to be made at the discretion of the Court after consideration of the interests of the beneficiaries, the security of estate property, the efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers held by an executor or trustee. Ultimately each case depends on the facts of the matter and what is best for the welfare of the trust or estate as a whole.
[45] [2021] VSC 720 (‘Re Vasiliades’).
The caveat seeking passing over must be supported by more than the identification of a conflict of interest, or a potential conflict of interest. Clearly, speculation as to a conflict, or an “apprehension” an executor might face a conflict, of interest will not suffice. Indeed, the factual circumstances might go beyond speculation and establish a conflict, but may still not suffice to support grounds for passing over. The above statement of principle shows the Court will look to the wider context and take into account additional matters, in deciding whether the facts warrant the exercise of the jurisdiction.
The “case for investigation”[46] or the “something to go on”[47] is not satisfied merely by the existence of a conflict, or the investigation of whether there is a conflict. This follows from the decided cases that not all conflicts of interest support an order for passing over an executor. As cases on passing over applications show, the testator’s choice is not lightly put aside. The caveators must show grounds for the Court to put aside the intention of the testator. Moreover, the nature of the assets of the estate and the administration are matters to be taken into account, when considering this.
[46] Gardiner (n 32) [10], citing Re Egan [1963] VR 318, 320.
[47] Ibid [37].
Passing over applications by caveat
It is pertinent to note the current application is considered by the Court before probate has been granted. As the Court of Appeal said in Gardiner, the prima facie case test applies in recognition of the serious consequences that flow from impeaching the validity of a will of which probate has been granted.[48]
[48] Ibid [39].
In this proceeding, there is no ground of objection impeaching the validity of the will. The caveators object to the grant of probate to the executor named in the will, but do not object to the validity of the will itself. The caveators had filed grounds of objection in which allegations of lack of capacity were made, but amended grounds then withdrew these allegations.
The prima facie case test requires the caveators establish a case for investigation – mere speculation will not suffice.[49] The role of inference in the application of the test is discussed in Gardiner at [42] and also [12]. Relevantly, the Court of Appeal at [12] clarified the passage quoted from the trial Judge in relation to inference.
[49] Ibid [41].
The application of the prima facie case test to grounds of objection seeking to pass over an executor involves a particular consideration of the place for inference. In the case of objection on grounds of want of testamentary capacity, the facts relied on and the inference sought to be drawn are as to a state of affairs in the past. To quote the Court of Appeal, the “parties proceeded on the basis that the applicants for revocation would show a prima facie case if they particularised facts which justified an inference that the deceased lacked testamentary capacity.”[50] The passage at [42] (being an elaboration on the role of inference) is to the same effect, namely the facts relied upon must, if shown to be correct at trial, justify revoking probate.
[50] Ibid [12].
In the case of an objection to pass over an executor without grounds to find the will invalid, the state of affairs or conclusion to be drawn from the facts relied on may not be limited to past events. The caveators’ ground for passing over, namely their fear, or expectation, the executor will not, or might not, duly administer the estate is of such a character. There is an element of future inference, or speculation, in such an application, even if the inference is in part based on past events.
There are grounds of passing over that may be described as involving a state of affairs in the past, such as the bad character of the named executor, bankruptcy and so on. An example is the decision of Aitken, in which the plaintiff seeking a grant of probate was found to not be a fit and proper person to whom probate should be granted.
A different case is Warner[51], where the conclusion of the Court was (at [31] – [33]) no confidence could be held that certain transactions would be the subject of scrutiny by the named executors. In that case, the passing over order was made on the basis the first plaintiff had, during the deceased’s lifetime, exercised the power of attorney to transfer assets away from the deceased and to the benefit of herself and the second plaintiff. In addition, the Court held the plaintiffs opposed the passing over application on the ground any conflict was “technical”, in that the properties in question were to pass to them by the terms of the will in any event.
[51] Warner (n 3).
The Court determined the past conduct of the plaintiffs, together with the expressed view as to the manner in which the estate would be administered, supported the passing over of them as executors. The Court expressed the view “while many executors have some conflict of interest, in the ordinary case, those conflicts will not always justify their being passed over.”[52] As to the facts of the application, McMillan J said of “the many issues relied on by the caveator in his grounds of objection and written submissions, most do not justify the conclusion that the first and second plaintiff should be passed over.”[53]
[52] Ibid [30], citing Uniting Church (n 7) [8] (Windeyer J); Crane (n 10) [24].
[53] Ibid [31].
The facts before the Court in the present application do not show the plaintiff had transferred property away from the deceased, or to his own benefit. The attitude of the plaintiff to the administration of the estate is without reservation that he intends to administer it in accordance with his obligations. The affidavit in support of the originating motion includes the usual undertaking. Furthermore, counsel for the plaintiff informed the Court the importance of the undertaking was understood by the plaintiff and he intended to perform his duties. The plaintiff has committed to affidavit evidence his view of the conduct of the affairs of the deceased prior to August 2020, when the plaintiff was the attorney for the deceased. The plaintiff has not expressed any view as to the administration of the estate such as found by the Court in Warner.
The cases of Salter and Munro are decisions where the Court declined to pass over the executors. The facts of the present application include particular matters that are against the caveators and support the conclusion the plaintiff’s application for probate should proceed.
The VCAT proceedings are on foot and remain the proper vehicle for the conduct of the attorney to be investigated. The daughters of the deceased have exercised their statutory entitlement to seek such relief. The VCAT remains seized of the proceeding and is the tribunal with jurisdiction to conduct such matters. The conclusion of those proceedings may be for payment of compensation to the estate. Contingent liability is not a reason to exclude the plaintiff from obtaining a grant of probate in accordance with the wishes of the testator.
The respondent to the VCAT proceeding is Mr Graeme Thomson, in his personal capacity, called on to account for his conduct as attorney for the deceased prior to August 2020. The executor of the estate has no involvement in the VCAT proceedings and the estate of the deceased does not need to be represented at these. This is not a situation where the cause of action is available to the estate and cannot be recovered (for whatever it is worth) by any other person except the executor of the estate.
The VCAT proceedings involve: the aged care facility fees; delay in payment thereof; and the issue of whether the attorney should be held to account for the penalty interest and legal fees by reason of his conduct prior to August 2020. The administration of the estate can proceed independently of the VCAT investigation of these affairs. The plaintiff has filed an affidavit in this proceeding and provided documents setting out his records of the circumstances in which the aged care fees were not paid.
The VCAT proceedings also involve questions about: the Basin property; the mortgage payments on this property; and the alleged absence of rental income from the property. In relation to this asset, the facts show the property was not an asset of the deceased, but rather an asset of the company RJMT Pty Ltd. It is not clear, but if the company holds the property as a corporate trustee of the RJMT Trust, other questions might be relevant. In that regard, it is not correct to say the deceased lost income, except to the extent he might have been a beneficiary of the trust and thus might have been entitled to some distribution of income from the trust, if it had collected the income. The liabilities of the trust; the need to service the bank loan; matters of income taxation; and general financial advice might all be relevant to the investigation. What is important for this decision is the income might not be an entitlement of the deceased personally. However, to the extent the actions of the attorney need to be investigated, they are the subject of investigation in the VCAT proceeding.
The caveators also raise questions about the need for repairs to the Basin. The fact the property was held by the corporate trustee, and not by the deceased personally, indicates any such claim (if it has merit) would be brought by the corporate trustee and not the executor. The caveators were apparently appointed as directors of the corporate trustee during the time after August 2020, when they held office as attorneys. The property was apparently sold in March 2021[54] and the question of costs of repairs is presumably now moot, unless it can be shown the value was diminished in some way.
[54] Affidavit of Graeme Wallace Thomson affirmed 19 November 2021, [170].
Similarly, any question of mixing of funds by the attorney is an issue before the VCAT. It is not the case the executor of the estate must inquire into such issues. The plaintiff has filed an affidavit in this proceeding and has provided documents to explain the transactions. The allegation the attorney failed to cancel health insurance, which was not required after the family court proceedings, would also appear to be within the scope of any investigation by the VCAT.
The plaintiff was the deceased’s attorney for several years, until his removal by order of the VCAT in 2020, several months prior to the death of the deceased. The choice of executor made by a testator is not lightly cast aside and the Courts have traditionally recognised and given weight to this choice. Derham AsJ in Munro observed “in general, a person named as executor is entitled to a grant of probate”[55] and “the testators [sic] selection of an executor should not ‘lightly’ be set aside and should not be disregarded except for serious reason.”[56]
[55] Munro (n 12) [38].
[56] Ibid [46], citing Monty Financial (n 37) 75 & 83 (Ashley J).
Expanding on the above, his Honour outlined the aim of the Court exercising its power to pass over:
Where an application for a grant of probate is made to an executor appointed by a deceased’s will and the circumstances show that the executor is liable to be removed, passing over that executor will prevent the grant leading to injustice or being rendered inefficacious, obstructed or abused.[57]
[57] Ibid [35].
Finally, with regard to the effect of passing over, his Honour noted the “consequence of passing over would be that either the other named executors will receive a grant of representation or letters of administration with the will annexed will be granted to someone else.”[58]
[58] Ibid [36].
Relevantly, in this matter, the will also appoints the plaintiff as appointor for the trust. The caveators’ do not address this clause of the will.
It must be born in mind that Derham AsJ in Munro reviewed the transactions and found no further investigation warranted. In this case, it is not possible to conduct such a review, or to reach that conclusion. The ongoing VCAT proceedings will require explanation by the attorney of his conduct of the affairs prior to April 2020. If any order is made by the VCAT for payment to the estate, that payment is expected to be made. There is no evidence to suggest otherwise.
A detailed review of the transactions at this stage of the administration of the estate would not be appropriate. In concluding this, I rely upon the remarks of Windeyer J in Uniting Church[59] in that it is not appropriate to have some prior determination and it would be undesirable if the administration were delayed. I further refer to the comments of Derham AsJ in Munro, with his Honour observing it “depends on whether there is a case that the plaintiff cannot be trusted to do what he has sworn to do.”[60]
[59] Uniting Church (n 7) [7].
[60] Munro (n 12) [108].
While accepting the principle stated in cases that if there are circumstances to show the executor would be liable to be removed there may be grounds to pass over the executor, that risk must be balanced with the choice made by the testator. The testator was aware the plaintiff, his brother, was acting as attorney. There is evidence of an independent person who interviewed the deceased to conclude the choice of the plaintiff was a considered one and suited the circumstances of the deceased at the time. The appointments made in the will are consistent with that view.
While the risk of removal cannot be excluded, the plaintiff has undertaken to perform the duties of office as executor. He has opposed the passing over application and advanced on oath his explanation in response to issues raised by the caveators. The obligations to duly administer the estate and account as required by law appear to be understood by the plaintiff.
In my view, the proper course in the circumstances is to assume the person named by the deceased as his executor will act properly and that the testator expected the same.
The interest of the beneficiaries in the due administration of the estate are not lost by an order that the caveat cease to have effect. They remain entitled to the due administration and have the same powers to seek supervision by the Court. For reasons already expressed, the Court expects no such supervision will be required, but the beneficiaries remain entitled to the protection of the Court if it is.
The nomination of an appointor to the trust by the will is relevant to the application. The testator not only chose his executor but also his appointor.
In addition, the testator chose an alternate executor should the plaintiff not be willing or able to act. There is no ground to pass over the alternate executor and so the caveat does not clear off the executors named in the will, so as to allow for an application of letters of administration with the will annexed.
The investigation by the VCAT of the conduct of affairs by the plaintiff will continue – the former attorney remains accountable to the process of the Tribunal proceedings in accordance with ss 77 and 78 of the Powers of Attorney Act 2014. If any compensation is payable to the estate, it will be paid. This is not a case where a cause of action will not be investigated, or pursued, as a result of the self-interest of the executor.
In the longer term, once the administration of the estate has been completed, a new trustee can be appointed to hold the trust asserts on behalf of the infant beneficiaries. I consider the distinction between the role of executor and the role of trustee to be significant. The nomination of the executor is often subject to a new appointment as trustee, once the administration has been concluded.
In my view, the due administration of the estate is not prejudiced, or at risk, by the appointment of the plaintiff as executor. Grounds for passing over are not made out as a prima facie case and it is appropriate to dismiss the caveats. In the terms of the statement of principles provided in Salter and based on Crane, the due and proper administration of the estate, and the interests of the parties beneficially entitled, do not support the maintenance of the caveat. The plaintiff as executor has engaged with the VCAT and the Court processes and has been frank in disclosing the circumstances underlying the administration of the estate. There is no lack of candour or statement of attitude to suggest the estate will not be properly administered by the plaintiff with the interests of the beneficiaries in mind. There is, in my view, nothing to suggest the interests of the estate and its due administration would not prevail with the plaintiff as executor.
The proposition that generally a person named in the will is entitled to a grant has not been displaced. The evidence shows a history of disputes or disagreements concerning the affairs of the deceased and by the terms of his will he made a choice of executor. The testator had knowledge of events which occurred up to the time of making the will. In the terms expressed by Ashley J in Monty Financial, and cited by Derham AsJ in Munro (mentioned above), the selection of executor should not be disregarded, except for serious reason.
The evidence of the plaintiff and of the caveators shows there are differences of opinion and there have been disagreements in the management of the affairs of the deceased. Those matters cannot be resolved or reconciled in this proceeding. They do not, in my view, satisfy the grounds for a caveat to prevent the grant of probate in the terms expressed by the testator in his last valid will.
The principles require that if an estate has claims requiring careful investigation, they should be investigated. In this matter, the continuing VCAT proceedings provide for the issues to be carefully investigated. There is nothing to suggest the issues and concerns raised by the caveators will not be properly investigated and explained. The plaintiff, as executor, will be required to account for his administration and has appeared before the Court, by his counsel, to acknowledge his obligations of office and his capacity and intent to fulfil them.
ORDERS
The caveats filed on 18 January 2021 and 25 June 2021 cease to have effect.
The costs of the plaintiff be paid by the caveators.
The plaintiff’s application is referred to the Registrar of Probates for determination.
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