Thorne v Todhunter
[2022] VSC 284
•31 May 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2021 04021
BETWEEN:
| BARBARA JANET THORNE (who sues on behalf of and for the benefit of the estate of Kay Patricia Thorne, deceased) & ANOR (according to the Schedule attached) | Plaintiffs |
| v | |
| TIMOTHY LEMPRIERE TODHUNTER | Defendant |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 March 2022 |
DATE OF JUDGMENT: | 31 May 2022 |
CASE MAY BE CITED AS: | Thorne & Anor v Todhunter |
MEDIUM NEUTRAL CITATION: | [2022] VSC 284 |
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PRACTICE AND PROCEDURE – Application for summary dismissal on the basis the plaintiffs’ lack standing and procedural irregularity – Interests of justice do not favour summary disposal of proceeding – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 22.16 – Civil Procedure Act 2010 (Vic), ss 62-64 – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158; 42 VR 27, applied – Batistatos v RTA (NSW) (2006) 226 CLR 256, applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | S T Pitt of counsel | Moores |
| For the Defendant | P Pascoe of counsel | Hicks Oakley Chessell Williams Lawyers |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background......................................................................................................................................... 2
Writ....................................................................................................................................................... 5
Relevant legal principles.................................................................................................................. 8
The defendant’s submissions........................................................................................................ 10
The plaintiffs’ submissions........................................................................................................... 12
Standing as a preliminary issue................................................................................................ 13
Standing – Sufficient personal interest to seek declaratory relief........................................ 14
Standing - Executors of unproved wills.................................................................................. 16
Standing - Beneficiaries of deceased’s estate.......................................................................... 16
Capacity of defendant................................................................................................................ 19
Section 64 of the CPA................................................................................................................. 19
The defendant’s conditional appearance.................................................................................... 21
Consideration.................................................................................................................................... 22
Conclusion......................................................................................................................................... 27
HIS HONOUR:
Introduction
Kay Patricia Thorne (deceased) died on 11 July 2019. She is survived by her husband, Timothy Todhunter, the defendant, and two children from her previous marriage, Barbara Thorne and Michael Thorne, the first and second plaintiff respectively.
On 29 October 2021, the first and second plaintiff commenced this proceeding against the defendant. The proceeding was commenced by writ and general indorsement. The general indorsement states that the first and second plaintiffs ‘sue on behalf of and for the benefit of the estate of …the deceased’. The first and second plaintiff claim that the defendant breached his fiduciary duty to the deceased in undertaking financial and property transactions on her behalf from at least 1 November 2015 until her death. They further claim that the defendant has retained proceeds of the sale of property to which the deceased was beneficially entitled. The plaintiffs say that as a result, the estate of the deceased is entitled to various declarations, including that:
(a) the defendant hold the proceeds of sale of various properties on trust for the estate; and
(b) the defendant was acting as the deceased’s agent in relation to some bank accounts from 1 November 2015.
The plaintiffs also seek orders for the defendant to provide an account in relation to the trust property.
This ruling is about whether the plaintiffs’ proceeding should be dismissed on the basis that they do not have standing to bring it.
For the reasons that follow, I have decided that the defendant’s summary judgment application should be dismissed with the proceeding stayed pending the determination of extant proceedings concerning the estate, referred to in paragraph 104 below.
Background
Before her passing, the deceased lived with the defendant at their family home in Wheeler Street, Castlemaine, in the state of Victoria (Wheeler Street property) which she owned with the defendant as tenants in common in equal shares.
The deceased left a last Will dated 14 December 2017 (2017 Will). The 2017 Will appoints the two plaintiffs and the defendant as her executors and trustees.
The 2017 Will provides, among other things:
(a) for the defendant to receive the deceased’s personal chattels;
(b) for the first plaintiff to receive the deceased’s jewellery;
(c) for the defendant to receive a life interest to reside at the Wheeler Street property or the right to income from the deceased’s share of its sale proceeds;
(d) for the defendant to receive the income from the deceased’s residuary estate during his lifetime;
(e) for the trustees to have discretion to distribute a capital amount not exceeding one quarter of the residuary estate to the defendant;
(f) upon the defendant’s death, for the trustee to divide the residuary estate into two equal shares, to be held in discretionary trusts for the first plaintiff and second plaintiff as primary beneficiaries; and
(g) for the amount of $1,000,000 (owed by the second plaintiff and his partner, Grace Sanna, to the deceased) to be adjusted against the discretionary trust of which the second plaintiff is the primary beneficiary.
The deceased left a penultimate Will dated 3 June 2015 (2015 Will) which appointed the first plaintiff and the defendant, but not the second plaintiff, as executors and trustees.
The 2015 Will provides, among other things:
(a) for the defendant to receive the deceased’s personal chattels;
(b) for the first plaintiff to receive the deceased’s jewellery;
(c) for the defendant to receive the income from the deceased’s residuary estate;
(d) for the trustees to have discretion to distribute a capital amount not exceeding one quarter of the residuary estate to the defendant; and
(e) upon the defendant’s death, for the trustee to divide the residuary estate into two equal shares, to be held on discretionary trusts for the first plaintiff and second plaintiff as primary beneficiaries.
The 2015 Will was varied by a Codicil dated 1 September 2015 (Codicil). The Codicil does not alter the appointment of executors under the 2015 Will. By the Codicil, the deceased gave one of her shares in Rignall Pty Ltd (Rignall) to each of the first and second plaintiff, and in all other respects confirmed the contents of the 2015 Will.
No grant of probate has been made to either of the plaintiffs or the defendant in respect of the 2017 Will or the 2015 Will and Codicil.
As at the date of hearing, there are six related proceedings involving the parties to this proceeding. In summary, they are:
(a) Supreme Court of Victoria proceeding S PRB 2021 09468
(the 2017 Will proceeding)
The defendant has applied for a grant of probate of the 2017 Will, with leave reserved to the first and second plaintiff to prove the same Will. The plaintiffs have filed a caveat and particularised grounds of objection to the grant. The plaintiffs say first, that the deceased lacked testamentary capacity shortly before and when the 2017 Will was made and second, that the deceased did not know and approve the contents of the 2017 Will. This proceeding is extant.
(b) Supreme Court of Victoria proceeding S ECI 2021 01017
(the passing over proceeding)
The plaintiffs seek judicial advice as to whether the defendant should be passed over as executor of the deceased’s estate under either the 2017 Will or the 2015 Will and Codicil. This proceeding is extant.
(c) Supreme Court of Victoria proceeding S PRB 2021 10042
(the 2015 Will and Codicil proceeding)
The first plaintiff has applied for a grant of probate of the 2015 Will and Codicil, with leave reserved for the defendant to prove as executor. Two caveats have been filed in that application. One caveat by both the first and second plaintiffs and a second caveat by the defendant. The defendant has also filed particularised grounds of objection by which he says the first plaintiff is incapable of acting impartially and in the best interests of the beneficiaries, is therefore not a fit and proper person to act as executor and trustee and ought to be passed over in respect of either Will. This proceeding is extant.
(d) Victorian Civil and Administrative Tribunal proceeding G89388/00
The plaintiffs have sought compensation from the defendant on the basis of alleged impugned transactions. This proceeding is stayed pending resolution of the two passing over applications in the 2017 Will proceeding (S PRB 2021 09468) and in the passing over proceeding (S ECI 2021 01017). The defendant contends that the plaintiffs lack standing in this proceeding.
(e) Supreme Court of Victoria Proceeding S PRB 2021 14401
The defendant applied for orders appointing an independent person, Ms Suzanne Lyttleton, to be appointed as administrator pendente lite. On 15 November 2021, the Court made orders appointing Ms Lyttleton as administrator, however the terms of that appointment do not permit Ms Lyttleton to commence proceedings on behalf of the estate.
(f) Supreme Court of Victoria Proceeding S ECI 2021 03328
The plaintiffs have brought an application against the defendant and the trustee of the Easter Strathnoon Superannuation Fund relating to the validity of binding nominations made by the deceased and by the defendant as well as seeking other injunctive relief.
Subject to the result of the two passing over applications currently on foot, both the defendant and the first plaintiff are named executors of the deceased’s estate under the 2015 Will and Codicil and the 2017 Will. However, under the 2015 Will, the second plaintiff is not a named executor.
While almost three years have passed since the deceased’s death, there is no grant of probate and, as at the date of the hearing, none of the extant proceedings were listed for trial.
I now turn to the proceeding before this Court.
Writ
On 29 October 2021, the plaintiffs filed a writ in this proceeding seeking:
(a) a number of declarations in relation to property;
(b) orders requiring the defendant to render accounts to the Court for the properties held on trust for the estate of the deceased; and
(c) an order that the defendant account for his use of the deceased bank accounts and management of other interests held by the deceased from 1 November 2015 to the date of her death.
The writ was accompanied by a general indorsement of claim which states at paragraph [1] that:
The plaintiffs sue on behalf of and for the benefit of the estate of Kay Patricia Thorne.
Paragraph [2] states:
The plaintiffs’ claim is that on the basis of breaches of the fiduciary duty owed by the defendant to the deceased in undertaking financial and property transactions on her behalf from at least 1 November 2015 until her death on 11 July 2019, and other equitable claims arising from the retention by the defendant of proceeds of sale of properties to which the deceased was beneficially entitled, the estate of the deceased is entitled to relief.
On 5 November 2021, the defendant filed a conditional appearance.
By summons filed 19 November 2021, the defendant seeks summary dismissal of the proceeding on the basis that it has no real prospects of success because the plaintiffs lack standing and because the defendant is not sued in his capacity as executor. The defendant relies on the affidavit of his solicitor, Deborah Kliger sworn 19 November 2021 and submissions filed 18 February 2022.
Ms Kliger’s affidavit exhibits a number of documents including the 2017 Will, the 2015 Will and the Codicil, along with documents filed in the 2015 Will and Codicil proceeding, the 2017 Will proceeding and the passing over proceeding which provide context to the dispute between the parties.
The plaintiffs resist the application and rely on the affidavit of Barbara Thorne, the first plaintiff, affirmed 20 December 2021 and submissions filed 10 March 2022.
In her affidavit affirmed 20 December 2021, the first plaintiff deposes to concerns held by the plaintiffs that the deceased lacked testamentary capacity to make the 2017 Will or did not know and approve of the 2017 Will.
The first plaintiff says that she and the second plaintiff gave:
[C]areful consideration to whether to commence these proceedings, what claims we were entitled to make in these proceedings, and what relief we would be entitled to seek in these proceedings.
She also says that the plaintiffs engaged with the defendant in the months following the deceased death in 2019 and that they had ‘foreshadowed these claims to [the defendant] for an extended period of time’.
In this affidavit, the first plaintiff provides an extract of an affidavit she filed in the passing over proceeding (S ECI 2021 01017) in which she says:
In addition to the VCAT Proceeding, the Estate has a number of equitable claims against [the defendant]. The substance of those claims arise by virtue of the contributions made by [the deceased] to various property acquisitions, made together with [the defendant], but where her interest in the property is not reflected on title.
My application for [the defendant] to be passed over as Executor of [the deceased’s] estate rests on two primary grounds.
Firstly, by reason of the matters set out in the following paragraphs, I believe that acting as [the deceased’s] Executor would require [the defendant] to investigate claims against himself, both in his capacity as [the deceased’s] attorney during her lifetime and as against himself as resulting or constructive trustee…Were [the defendant] to act as an Executor of [the deceased’s] estate, it would require him to litigate the VCAT Proceedings on behalf of the Estate against himself as attorney and to issue proceedings against himself to enforce any equitable right the Estate may have. I believe that this would place [the defendant] in a position of having a clear and irreconcilable conflict of interest.
Secondly, by reason of his historical conduct, which gave rise to the VCAT Proceedings, I do not believe that if appointed Executor, [the defendant] would be likely to thoroughly and impartially discharge his fiduciary duty to prosecute the compensation claim against himself, or any equitable claim in which the estate would be interested to pursue.
Exhibited to the first plaintiff’s affidavit affirmed 20 December 2021 and filed in this proceeding is a bundle of correspondence in support of the concerns raised with the defendant about transactions undertaking during the deceased’s lifetime as referenced in her affidavit.
At paragraph [26] of her affidavit, the first plaintiff says that by the writ:
[W]e do not personally seek any benefit directly, although it is likely that both [the second plaintiff] and I would benefit indirectly. The extent of the benefit that either [the second plaintiff] or I would receive from such relief will depend upon whether the 2015 Will and 2015 Codicil, or the 2017 Will, is admitted to probate:
(a) if the 2015 Will and 2015 Codicil are admitted to probate, then upon [the defendant’s] passing, [the second plaintiff] and I would, in effect, each be entitled to the entirety of one equal part of [the deceased’s] residuary estate on trust; and
(b) if the 2017 Will is admitted to probate, then upon [the defendant’s] passing, [the second plaintiff] and I would, subject to who might be surviving at that time, each be entitled to act as trustees of testamentary trusts for equal share of the balance of [the deceased’s] residuary estate. The primary beneficiaries of those trusts are [the second plaintiff] and I and include other family members.
At paragraph [27] she says:
If the declarations which we have sought are made, the assets of the estate, to which we are likely to be entitled to the residuary, would increase substantially. As such, we have an interest in the claims being pursued.
The first plaintiff’s affidavit also refers to ‘potential time limitations’ and says at paragraph [29]-[30]:
In this proceeding, the relief that we seek includes relief dating back to at least 1 November 2015, relating to [the defendant’s] operation of [the deceased’s] bank accounts and their joint bank accounts, and to [the defendant’s] management of [the deceased’s] interest in certain properties.
I understand that, if these proceedings are dismissed, it is possible that the time to bring claims extending back as far as 1 November 2015 will have expired, and it will not be possible for any person to bring these claims on behalf of the estate.
The first plaintiff’s affidavit then refers to relief relating to the acquisition of certain properties and says further at paragraph [32] that:
[I]f these proceedings are dismissed, it is possible that the time to bring some of the claims relating to the properties will also have expired, and it will not be possible for any person to bring these claims on behalf of the estate.
Relevant legal principles
The parties were in agreement about the principles relevant to an application for summary dismissal under s 62 of the Civil Procedure Act 2010 (CPA) and rule 22.16 of the Supreme Court (General Civil Procedure) Rules 2015 (Rules).
Section 62 of the CPA provides that:
A defendant in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a plaintiff’s claim or part of that claim has no real prospect of success.
Section 63(1) of the CPA provides that:
Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.
Section 64 of the CPA provides that:
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.
The test for summary judgment is set out in the Court of Appeal’s decision in Lysaght Building Solutions v Blanalko Pty Ltd:[1]
(a)the test for summary judgment under s 63 of the [CPA] is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;
(b)the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in [General Steel Industries Inc v Commissioner for Railways (NSW)];
(c)it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d)at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
[1](2013) 42 VR 27. For a recent comprehensive overview of the relevant authorities and principles see, Bendigo and Adelaide Bank Ltd v Grahame [2020] VSC 86, [23]-[34] per Sloss J.
Section 7(1) of the CPA sets out its overarching purpose, which is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. Section 8 of the CPA requires that the Court must ‘seek to give effect to the overarching purpose in the exercise of any of its powers’ and s 9 provides that when making any order or giving any direction in a civil proceeding, the Court is to further the overarching purpose by having regard to the objects specified in subsection (1), being:
(a) the just determination of the civil proceeding;
(b) the public interest in the early settlement of disputes by agreement between parties;
(c) the efficient conduct of the business of the court;
(d) the efficient use of judicial and administrative resources;
(e) minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for—
(i) the fair and just determination of the real issues in dispute; and
(ii) the preparation of the case for trial;
(f) the timely determination of the civil proceeding;
(g) dealing with a civil proceeding in a manner proportionate to—
(i) the complexity or importance of the issues in dispute; and
(ii) the amount in dispute.
The defendant’s submissions
The defendant’s application for summary judgment was put on two bases. The first was that the plaintiffs lack standing to bring this proceeding. The second basis was that the plaintiffs have not joined the defendant to the proceeding in his capacity as executor of the deceased’s estate. Both bases are themselves dependent upon the defendant’s characterisation of this proceeding as a beneficiary derivative proceeding.
The defendant submitted that ordinarily, the proper plaintiff in a proceeding on behalf of a deceased estate is the executor, administrator or trustee. A beneficiary of a deceased estate ordinarily lacks standing to sue a third party in their own name i.e. to commence a beneficiary derivative proceeding, unless the executor or trustee refuses to institute proceedings against a debtor or to recover trust property and where the circumstances are exceptional.[2]
[2]See for example Ramage v Waclaw (1988) 12 NSWLR 84 and Lidden v Composite Buyers Ltd (1996) 67 FCR 560.
The defendant submitted that in beneficiary derivative proceedings, there must be a probated executor who is either unwilling or unable to take proceedings to protect or advance the estate against a third party, where the estate would be materially disadvantaged. The defendant contended that he is not a probated executor who has refused or is unable or unwilling to take action against a third party to the benefit of the deceased’s estate.
Further, the defendant argued the estate will not be materially disadvantaged if the proceeding is dismissed because some person (either a named executor or independent person) will be granted probate and will then be able to make decisions about whether to issue proceedings.
The defendant submitted that the authorities indicate the categories of special circumstances necessary for derivative proceedings are not closed. According to the defendant, the underlying question for the court in determining whether special circumstances exist is whether ‘it is just for the beneficiary to have the remedy’.[3] The defendant’s characterisation of the legal principles relevant to beneficiary derivative proceedings were not in dispute.
[3]Roberts v Gill [2010] 4 All ER 367 [69], per Lord Collins.
The defendant submitted that the plaintiffs have not demonstrated special circumstances in this case. He says his alleged conflict of interest does not constitute a special circumstance. According to the defendant, the plaintiffs have not adequately articulated how their cause of action may be lost by the expiry of the relevant limitation period such as to be considered a special circumstance. Further, the defendant says the plaintiffs bear responsibility for any delay in the bringing of proceedings and contended that the plaintiffs have not taken the opportunity to appoint an administrator ad litem to bring proceedings on behalf of the estate.
The defendant also contends that the proceeding is irregular because he has not been joined to the proceeding in his capacity as a named executor, as would be required in a beneficiary derivative proceeding. The second plaintiff is not a named executor under the 2015 Will. In this proceeding, the defendant was not named in an executor capacity, is not a ‘third party’ and is not unwilling or unable to act.
Additionally, the defendant says he is a beneficiary under both testamentary instruments pursuant to which he receives substantial benefits by way of life interest. In this sense, the greater the value of the estate, the more valuable is his life interest(s).
Lastly, he says that he is not a ‘third party’ as the phrase is known to the law in beneficiary derivative proceedings. He is the widower of the deceased who has been sued in relation to alleged actions said to have been taken by him.
By way of conclusion in his written submissions, the defendant seeks an order that pursuant to r 8.08(3) of the Rules, the defendant’s conditional appearance filed 5 November 2021 does not have effect for all purposes as an unconditional appearance.
The plaintiffs’ submissions
The plaintiffs argued that the Court should not allow the defendant’s summary dismissal application on the basis that:
(a) the issue of standing should not be determined as a preliminary issue;
(b) the test for standing to seek a declaration does not require the plaintiffs to show they have a personal cause of action but rather a material interest in the outcome, and the plaintiffs have a sufficient interest to found standing on that basis in this case;
(c) one or both the plaintiffs are named executors of the deceased’s estate under the 2017 Will and the 2015 Will and Codicil, one of which will eventually be admitted to probate. The plaintiffs derive their powers to act and bring the proceeding from those testamentary instruments, rather than a grant of probate;
(d) the defendant has a conflict of interest in the subject matter of the proceeding because he is the person who is alleged to have breached a fiduciary duty owed to the deceased. As such, he cannot be expected to bring proceedings against himself and there are no other persons who can or will bring the proceeding; and
(e) the plaintiffs are residuary beneficiaries of the deceased’s estate and special circumstances exist such that they have standing to sue on behalf of the estate.
The plaintiffs submitted, in the alternative, that if the Court were persuaded that the plaintiffs lack standing and summary dismissal is warranted, the Court should exercise its discretion under s 64 of the CPA to allow the matter to proceed to trial.
Standing as a preliminary issue
The plaintiffs argued that the Court should not allow the defendant’s summary dismissal application on the basis that the issue of standing should not be determined as a preliminary issue.
The plaintiffs submitted:
(a) first, the question of standing as a preliminary issue should not be determined on ‘scanty material’ or where the ‘absence of a sufficient interest is obvious’;
(b) second, the alleged absence of standing is not ‘obvious’ because the plaintiffs are entitled to control the whole of the deceased’s residuary estate, and the effect of the claims made in this proceeding is to increase the size of the assets that ought to form part of the deceased’s residuary estate;
(c) third, Ms Kliger’s affidavit does not address the substance of the claims made in the proceeding and the defendant’s failure to file an affidavit in his own name denying the plaintiffs’ claims means the material before the Court is ‘scanty’;
(d) fourth, the issue of standing may require consideration of the nature and extent of the defendant’s conflict between his interest in retaining the properties and proceeds the subject of the proceeding, and his duties as executor and trustee of the estate to investigate such claims; and
(e) lastly, the defendant has not shown the Court any authority in support of an application for summary judgment granted in a proceeding commenced by writ on the question of standing alone or where such relief was given without the Court being taken to, or having regard to, the underlying merits of the proceeding.
Standing – Sufficient personal interest to seek declaratory relief
The plaintiffs’ primary submission was that they have sufficient personal interest to seek declaratory relief such that it is unnecessary for them to sue on behalf of the estate.
The plaintiffs say the test for standing to seek declaratory relief is different to the test of standing to seek derivative relief as beneficiaries. To have standing to seek a declaration, a plaintiff must have a sufficient interest in the justiciable controversy that is to be resolved. Put another way, a private person approaching the Court for a declaratory order must be someone with an interest in the subject matter of the action to justify his seeking relief.
The plaintiffs distinguish an interest in the outcome of the litigation with a legal right or cause of action. They rely on the recent decision in Hobart International Airport Pty Ltd v Clarence City Council[4] where Gageler and Gleeson JJ said at [65]:
Though the expression of standing has been variously in terms of a “sufficient interest”, a “sufficient material interest”, a “special interest” or a “real interest”, the conception of standing developed through that body of case law has been consistent. That conception of standing has involved recognition that a person who does not claim to have a legal right or equitable interest to be vindicated by a declaration or other order that would resolve a controversy about a right or obligation may yet have a material interest in seeking the order.
In this context, an interest will be “material” if the person “is likely to gain some advantage, other than the satisfaction of righting a wrong, upholding a principle or winning a contest, if [the order is made] or to suffer some disadvantage, other than a sense of grievance or a debt for costs, if [the order is not made]”. Depending on the totality of the circumstances, the material interest that the person has in seeking the order may be sufficient to justify a court entertaining the proceeding in which the order is sought.
[plaintiffs’ emphasis]
[4](2022) 399 ALR 21.
The plaintiffs say, applying that test here, they have a personal sufficient interest to found standing.
The plaintiffs’ submitted they have sufficient personal interest to seek declaratory relief, for the following reasons:
(a) the declarations sought by the plaintiffs relate to whether the defendant holds properties and the proceeds of sale of certain properties on trust for the deceased’s estate. The plaintiffs only seek declarations at this stage and do not seek the transfer of those properties or the proceeds to the estate;
(b) the defendant has not given any evidence denying that he holds the properties or the proceeds of sale on trust. In the circumstances of the summary dismissal application, the Court should proceed on the basis that the defendant holds those properties and proceeds on trust as alleged;
(c) if the defendant does hold those properties and proceeds on trust, the effect will be to increase the size of the residuary of the deceased’s estate;
(d) the plaintiffs are entitled to control the whole of the deceased’s residuary estate under either the 2015 Will and Codicil or under the 2017 Will. If the declarations are granted, the properties and proceeds for which declarations are sought will fall within the residuary; and
(e) if the declaratory relief sought is granted, the residuary estate controlled by the plaintiffs will increase and they will gain some advantage. The plaintiffs have a material interest in that outcome, which gives the plaintiff a sufficient interest in the justiciable controversy to be resolved.
Standing - Executors of unproved wills
Alternatively, the plaintiffs said they have standing to commence the proceeding as executors of the unproved wills. The plaintiffs submitted they derive their powers to act and bring the proceeding from those testamentary instruments, rather than a grant of probate and a grant is not essential to the existence of the office.[5]
[5]N Crago, Executors of Unproved wills: Status and devolution of title in Australia (1993) 23 Western
Australian Law Review 235, 237.
The plaintiffs conceded that it may be necessary to obtain a grant of probate by the time the proceeding goes to trial and before final orders are pronounced, so that the entitlement of the executors to the relief can be proved. But it is tolerably clear, the plaintiffs said, that the absence of a grant is no barrier to the litigation being commenced in Victoria.
The plaintiffs also conceded that while the first plaintiff is an executor under both the 2015 Will and Codicil and the 2017 Will, the second plaintiff is an executor only under the 2017 Will. The plaintiffs also noted in proceeding S PRB 2021 09468 the defendant has sought to pass over the first plaintiff as executor. That being the case, the plaintiffs say, unless she is passed over, at the very least, the first plaintiff has standing in her capacity as executor to bring these proceedings.
In response to the defendant’s contention that the plaintiffs are non-proving executors, the plaintiffs say that their challenge to the 2017 Will does not mean that the first plaintiff will not be a proving executor under that Will if it is upheld by the Court – there is no suggestion either plaintiff will renounce executorship or somehow be non-proving executors.
Standing - Beneficiaries of deceased’s estate
In the plaintiffs’ written submissions, the plaintiffs said they had standing on a third alternative basis, namely as beneficiaries of the deceased estate, but conceded that special circumstances were required in order to sue on behalf of the estate. So much is clear from their written submissions at [48] –[49] which said:
If the plaintiff’s submissions that: (a) they have standing to seek declaratory relief personally, or (b) they have standing to seek relief as executors of the unproved wills are not accepted, the plaintiffs submit, in the alternative, that they have standing as beneficiaries of the deceased’s estate.
The plaintiffs accept that, in their capacity as beneficiaries, they must establish special circumstances in order to be given leave to sue on behalf of the estate…
[emphasis added]
However, this was, variously, at odds with both the plaintiffs’ written and oral submissions, including:
(a) the plaintiffs’ written submissions which said at [33]:
Although the defendant has sought to characterise this proceeding as a “beneficiary derivative proceeding”, the relief sought in the indorsement of claim is predominantly declaratory. It does not make claims in a derivative capacity, on behalf of the estate, but instead claims the Court should make certain declarations. Standing to seek declaratory relief raises different considerations to the question of standing to seek derivative relief.
[emphasis added]
(b) oral submissions made by the plaintiffs’ counsel during the hearing, for example:
[M]y clients are executors of the testamentary instruments along with Mr Todhunter. They have that capacity, so much cannot be ignored or denied. And they have brought proceedings on behalf of and in the interests of the Estate of the deceased, not in their interests as beneficiaries.[6]
[6]Transcript of hearing on 17 March 2022, page 25, lines 9 to 14.
[emphasis added]
(c) and:
And, Your Honour, feeding into that is the question of the defendant’s - with respect - misapprehension that this is an action by beneficiaries in that capacity to bring a proceeding for relief. As is plain enough from the writ itself, and the indorsement on the writ, the plaintiffs bring this proceeding in two different capacities. And one of those is in their capacities as executors of the estate of the deceased. Whichever way those other proceedings go, Your Honour, it is tolerably clear that one or other of Barbara and Michael Thorne will be an executor, or jointly will be executors of this estate. [7]
[7]Ibid, page 3, line 26 continuing to page 4, line 11.
These statements stood in contrast with later oral submissions made by counsel for the plaintiffs:[8]
And our primary submission, Your Honour, is that we don’t even get there. You don’t need to embark upon a journey dealing with beneficiary derivative proceedings, because you’ve got a far more important and prominent basis to bring the proceedings in their executorships. But if you do get that far, then, Your Honour, in our submission what constitutes special circumstances can’t be properly analysed at this point in time.
It’s clear that these proceedings raise serious issues about inter vivos transactions and, Your Honour, in our submission there is a lot more that’s yet to play out, such that the proper analysis of special circumstances can’t really be meaningfully engaged with. And that’s why seeking to dismiss these proceedings on the basis of standing at the moment with these proceedings in their infancy is inappropriate. Even if that was the case, we do fall back to s 64.
[emphasis added]
[8]Ibid, page 48, lines 15 to 31.
The plaintiffs’ written submissions said that special circumstances have been held to arise where an executor has failed to bring the claim and the claim is meritorious.
In the context of this case, the plaintiffs contended that special circumstances exist because:
(a) their interests, as the persons who control the whole of the residuary estate, are most materially affected by the claims made in this proceeding and they ultimately stand to benefit from the enforcement of those claims;
(b) the defendant is the only other person in a position to institute proceedings but is also the person against whom the claim is made. They say the defendant has a conflict of interest in the subject matter of the proceeding because he is the person who is alleged to have breached a fiduciary duty owed to the deceased. As such, he cannot be expected to bring proceedings against himself and there are no other persons who can or will bring the proceeding; and
(c) the delay in commencing the proceeding is due to the ongoing probate litigation and some claims made in this proceeding may be lost to the estate through the expiry of limitation periods, if the proceeding is not allowed to continue.
Capacity of defendant
In relation to the defendant’s contention that the proceeding was irregular, the plaintiffs disagreed that it was necessary to join the defendant in his capacity as named executor. The plaintiffs submitted that the defendant was sued in his capacity as a person who owed fiduciary duties to the deceased in undertaking financial and property transactions on her behalf, and who now holds property and proceeds of sale on trust for the deceased’s estate. The plaintiffs further submitted that if it was necessary to join the defendant in his named executor capacity, this can be corrected by amendment and thus is not a basis upon which the Court should dismiss the proceeding.
The amendment of the capacity in which the defendant has been sued, and the title to the proceeding, as well as the joinder of the limited administrator or any independent administrator, are matters which the plaintiffs say, cannot prejudice the defendant, and ought to be permitted, if ‘absolutely necessary’. The plaintiffs submitted that it is premature to decide such questions until pleadings have been exchanged.
Lastly, the plaintiffs say that pursuant to r 16.03 of the Rules, questions relating to the administration of the estate may be determined in the absence of a person representing the estate.
Section 64 of the CPA
The plaintiffs submitted, in the alternative, that if the Court were persuaded that the plaintiffs lack standing and summary dismissal is warranted, the Court should exercise its discretion under s 64 of the CPA to allow the matter to proceed to trial.
They said this is an appropriate case to be allowed to proceed to trial pursuant to the discretion afforded under s 64 of the CPA which provides that the Court may decline to summarily dispose of a proceeding because it is not in the interests of justice to do so, or because the dispute is of such a nature that only a full hearing on the merits is appropriate. The plaintiffs say that both limbs of s 64 apply.
The Court has a broad discretion, to be exercised judicially, to allow a matter to proceed to trial under this provision, having regard to the circumstances of the case. In that regard, the plaintiffs relied on the decision in Wickstead v Browne[9] where Kirby P (as he then was) said at [5]-[6]:
Common experience teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence. Testimony gives colour and content to the application and development of legal principle.
[9](1992) 30 NSWLR 1, cited with approval in Towercom Pty Ltd v Fahour (No 3) [2013] VSC 529, [89].
The plaintiffs contended the following are matters in favour of it being in the interests of justice not to dispose of the proceeding summarily:
(a) the Court’s power to authorise the commencement of the proceeding at a later stage nunc po tunc;
(b) the possibility that before trial, either the plaintiffs will obtain a grant of probate or an independent administrator will be appointed with either the 2015 Will and Codicil or the 2017 Will annexed. If the plaintiffs obtain a grant of probate, their standing to continue the proceeding will be clear. Alternatively, if the administrator declines to pursue the claim, then the plaintiffs - as beneficiaries where the administrator has declined to act - will have clear standing; and
(c) it would not be in the interests of justice to determine the issue of standing at this early stage where the issues raised may be affected by later events.
The power to terminate proceedings summarily should be exercised with caution and should not be exercised unless it is clear that there is no real question to be tried. The plaintiffs say these proceedings raise contested issues of fact and law.
The plaintiffs submitted that because the issue of standing may require consideration of the defendant’s conflict of interest and duty, being matters which overlap with the issues to be determined at trial, a full hearing on the merits is appropriate.
The defendant’s conditional appearance
The plaintiffs contended that the defendant’s conditional appearance dated 5 November 2021 should stand as unconditional.
They relied on r 8.08(3) of the Rules which provides that a conditional appearance shall have effect for all purposes as an unconditional appearance, unless, on application by the defendant, the Court otherwise orders. Under r 8.08(4), an application under r 8.08(3) must be made by summons within 14 days after the day that the conditional appearance is filed.
The plaintiffs said that the defendant’s application made by summons dated 19 November 2021 seeks orders, pursuant to s 62 of the CPA and r 22.16 of the Rules, that the proceeding be summarily dismissed, but does not seek that the conditional appearance continue. On this basis, the plaintiffs say that the conditional appearance should stand and have effect for all purposes as his unconditional appearance.
Defendant’s reply submissions
The defendant argued that his application is not premature because an application challenging standing can be made at any stage of the proceeding, relying upon Russo v Russo[10] and Daicos v Daicos[11].
[10][2009] VSC 491.
[11][2018] VSC 18.
In response to the plaintiffs’ contention that this proceeding is not a derivative proceeding because only declaratory relief is sought, the defendant said the proceeding necessarily takes on the character of a beneficiary derivative proceeding from the terms of the generally endorsed writ and pleaded facts. According to the defendant, the nature of relief sought by the plaintiffs is irrelevant.
In relation to the plaintiffs’ first alternative basis for standing, the defendant argued there was no basis in the language in the writ to justify the plaintiffs’ claim they are suing as executors. Even if suing in this capacity, the second plaintiff is a named executor only under the 2017 Will, a will that is challenged by both the plaintiffs. The first plaintiff is subject to a passing over application and neither the first nor second plaintiff have sought to assume office in respect of the 2017 Will; they both challenge it. In those circumstances, the defendant contends that both plaintiffs are non-proving executors.
The defendant also noted the plaintiffs have made no application to amend to correct any mistake or misdescription in either the title of the proceeding or the general indorsement.
Lastly, with respect to the issue of the defendant’s conditional appearance, the defendant sought an order that he be permitted to amend his summons nunc pro tunc to include an order that the defendant’s conditional appearance does not have effect for all purposes as an unconditional appearance.
Consideration
In order to determine if the plaintiffs have standing to bring the proceeding, it is necessary to ascertain the nature of the plaintiffs’ cause of action. In this case, the plaintiffs have commenced their proceeding by writ and a general indorsement of claim.
In their writ, the plaintiffs have named ‘Barbara Janet Thorne (who sues on behalf of and for the benefit of the estate of Kay Patricia Thorne, deceased) as the first plaintiff and ‘Michael John Thorne (who sues on behalf of and for the benefit of the estate of Kay Patricia Thorne, deceased)’ as the second plaintiff.
Rule 5.04 of the Rules requires that an indorsement of claim shall be:
[A] statement sufficient to give with reasonable particularity notice of the claim and the cause thereof and of the relief or remedy sought in the proceeding.
The Rules thus require the indorsement to give sufficient notice of, first, the nature of the claim, second, the cause of action relied upon, and third, the relief or remedy sought.
The plaintiffs’ general indorsement on the writ explicitly states that the ‘plaintiffs sue on behalf of and for the benefit of the estate of [the deceased]’. The general indorsement proceeds to state that the estate of the deceased is entitled to relief on the basis of the defendant’s alleged breaches of his fiduciary duty to the deceased in undertaking financial and property transactions on her behalf, and other equitable claims arising from the defendant’s retention of the proceeds of the sale of properties to which the deceased was beneficially entitled.
On the face of the plaintiffs’ writ and general indorsement, the plaintiffs sue the defendant on behalf of the deceased’s estate for alleged breaches of fiduciary duty the plaintiffs say he owed to the deceased. Those breaches relate to financial and property transactions he undertook within a specified period in the final years of the deceased’s life. The plaintiffs, in the same capacity, also bring ‘other equitable claims’ in relation to the proceeds of sale of property that have been retained by the defendant. The relief sought by the plaintiffs includes various declarations and an order that the defendant account for the transactions.
In light of the terms of the writ and general indorsement alone, the plaintiff’s primary submission that they sue in their personal capacity cannot be accepted.
It is no answer to the plain and explicit terms of the writ and general indorsement for the plaintiffs to submit that because they seek declaratory relief, it would be possible for them to sue in their personal capacities because they have a material interest in the outcome of the proceeding and so the writ and general indorsement could be amended, if necessary.
It is for the plaintiffs to indicate, with reasonable particularity, the cause of action they rely upon. Absent any amendment application before the Court, the parties are entitled to rely upon the terms of writ and general indorsement as filed.
In any event, my view is that there is a degree of artificiality in the plaintiffs’ submission that they have standing to seek declarations in their personal capacities because they are materially interested in the outcome. The plaintiffs’ personal interests in the outcome are said to be based on their entitlement to control the whole of the residuary estate, which if the declarations sought are made, may include the properties and proceeds the subject of those declarations. It seems to me that, considered in this way, the plaintiffs’ personal interests cannot be distinguished from their interests as beneficiaries under the deceased’s testamentary instruments. Absent their status as beneficiaries, the plaintiffs would be unable to identify a material interest in the outcome of the proceeding. I also note that the plaintiffs’ capacity as named trustees in relation to the residuary estate is not mentioned in the title to the proceeding nor in the indorsement on the writ.
I do not agree that the plaintiffs merely have to establish a material interest in the outcome of the litigation for standing to be enlivened. Their reliance on the High Court’s recent decision in Hobart International Airport Pty Ltd v Clarence City Council[12] is misconceived. That decision was in relation to the principles of privity of contract and the standing of a third party who sought declaratory relief about the interpretation or effect of a contract to which they were not a party but held a material interest. Those circumstances are quite different from the present factual matrix where the beneficiaries of a deceased estate have brought proceedings against a co-named executor before a grant of probate in relation to allegations of misuse of alleged estate assets.
[12](2022) 399 ALR 21.
I have also found it difficult to accept the plaintiffs’ argument that they have standing as executors of the unproved wills to commence the proceeding. Both plaintiffs, along with the defendant, are named executors in the 2017 Will. That is the Will, however, against which they have filed a caveat and grounds of opposition to the grant of probate sought by the defendant in S PRB 2021 09468. It is incongruous that the plaintiffs in one proceeding oppose the grant of probate of the 2017 Will while, in another, specifically rely on their status as executors named under that Will to found their standing. The plaintiffs presently dispute the validity of the 2017 Will while also seeking to derive standing under that same will. Their suggestion that they may well prove as executors under the 2017 Will if probate is granted does not address the present conflict.
In relation to the 2015 Will, only the first plaintiff is named an executor, along with the defendant. The second plaintiff cannot rely on that status under the 2015 Will as the basis of his standing to bring this proceeding.
While I accept the first plaintiff is a named executor under the 2015 Will, in proceeding S PRB 2021 10042, the defendant has filed grounds of opposition to the first plaintiff’s application for a grant of probate of the 2015 Will and Codicil in which he also seeks that the first plaintiff be passed over as executor of both the 2017 Will or the 2015 Will and Codicil.
Given the various extant applications before the Court seeking and opposing grants of probate of the two wills and including passing over applications, the plaintiffs’ assertion of standing on the basis of their status as named executors of the 2017 Will and, at least in relation to the first plaintiff, the 2015 Will and Codicil, must be viewed with considerable caution.
The question of the plaintiffs’ standing is muddied further by the plaintiffs’ confusing submissions referred to in paragraphs 62 - 65 above. Both the defendant and the Court are left to reconcile the plaintiffs’ inconsistent submissions in an attempt to distil the capacity in which their standing is said to arise. I am not persuaded that the plaintiffs’ standing is ascertained by only reference to the type of relief claimed (i.e. declaratory relief) without regard to the cause of action and character of the proceedings.
Even if the plaintiffs had contended that the proceeding was brought as a beneficiary derivative proceeding, the plaintiffs have not demonstrated the presence of special circumstances.
First, the significant uncertainty around whether probate will be granted in relation to the 2017 Will or 2015 Will and Codicil as well as the various undetermined passing over applications mean it is currently not possible to find that the ‘executor’ is unable or unwilling to bring the proceeding.
Second, while I accept the plaintiffs have a material interest in the outcome of the proceeding and that it is fanciful to suggest the defendant will prosecute claims against himself if he obtains a grant of probate of the 2017 Will, I cannot accept that the plaintiffs have established that the limitation period has expired in relation to some impugned transactions. In this regard, the plaintiffs’ submissions about the expiry of limitation periods were so vague as to provide no assistance to the Court.
If I am wrong and the plaintiffs have established standing, I agree with the plaintiffs that the irregularity in not joining the defendant in his capacity as named executor is capable of being remedied by amendment.
The Court has a broad discretion under s 64 of the CPA to allow a matter to proceed to trial despite there being no real prospect of success. I have decided to exercise that discretion in this case. In my view, this proceeding should not have been commenced until the probate proceedings[13] have been determined. Only then, once the competing applications for grants and the various applications for passing over have been resolved, will the status of the parties to this proceeding be clear. Once that is clear, one or both of the plaintiffs may have standing as the executor of the probated will to pursue this proceeding.
[13]Being those proceedings referred to in paragraph 13 above, namely proceedings S ECI 2021 01017,
S PRB 2021 10042 and S PRB 2021 09468.
A plaintiff should not be deprived of the opportunity to place his or her case before the Court in the ordinary way except in the clearest of cases.[14] This requires ‘a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way’.[15] Currently, the allegations made by the plaintiffs are only articulated in the general indorsement on the writ. In my view, it is difficult to form a view that the plaintiffs’ case has no prospect of success in the absence of pleadings. There is a complexity to the factual arguments raised by both parties which would benefit greatly from clear articulation in pleadings, in due course.
[14]Batistatos v RTA (NSW) (2006) 226 CLR 256, [44]-[46].
[15]Ibid, [46].
However, I have also decided that I should stay this proceeding until the extant probate proceedings are determined and the probated executor or executors are identified. The question of whether this proceeding should be stayed pending the outcome of the probate proceedings was raised with counsel at the hearing. The plaintiffs’ counsel disagreed that the proceeding ought to be stayed because the plaintiffs do not require a grant of probate until the issues are determined at trial.
It is not appropriate, in my view, for this proceeding to continue alongside the other extant proceedings with the intention that whenever a grant is made, the writ in this proceeding is amended. The plaintiffs’ standing as executor is contingent upon the outcome of those proceedings. These questions need to be fully ventilated prior to the parties being put to further cost and expense in this proceeding.
It will then be a matter for the plaintiffs to articulate, with particularity, their standing in the proceedings and issue any amendment application they wish to agitate. It is not for the Court to determine the capacity in which the plaintiffs may hold standing and for the plaintiffs to amend their proceeding accordingly.
With respect to the defendant’s conditional appearance, this is a matter that ought to be given consideration once the extant probate proceedings have been determined and the matter no longer subject to a stay. Until that time, the status quo (i.e. the defendant’s conditional appearance) should remain in place. To avoid any doubt, I will grant leave to the defendant to amend his summons accordingly.
Conclusion
For the reasons provided above, I will dismiss the defendant’s application for summary judgment but stay the proceeding until a grant of probate is made in respect of the deceased’s estate and the identity of the executors is clear.
I will hear from the parties on the question of costs.
SCHEDULE OF PARTIES
| S ECI 2021 04021 | |
| BETWEEN: | |
| BARBARA JANET THORNE (who sues on behalf of and for the benefit of the estate of Kay Patricia Thorne, deceased) | First Plaintiff |
| MICHAEL JOHN THORNE (who sues on behalf of and for the benefit of the estate of Kay Patricia Thorne, deceased) | Second Plaintiff |
| - v - | |
| TIMOTHY LEMPRIERE TODHUNTER | Defendant |
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