Walters v Perton (No 3)
[2019] VSC 733
•12 November 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S ECI 2018 00225
IN THE MATTER of the Will and Estate of DONALD GRAME WARRING (deceased)
- and –
IN THE MATTER of the Administration and Probate Act 1958 (Vic), s 34 and the Trustee Act 1958 (Vic), s 48
| LYNNE MARGARET WALTERS | Plaintiff |
| v | |
| JANE ELIZABETH PERTON (who is sued as trustee of the Port Eagle Investment Trust and as Executrix of the Will and Trustee of the Estate of DONALD GRAEME WARRING, deceased) | Defendant |
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JUDGE: | Derham AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 September 2019 |
DATE OF JUDGMENT: | 12 November 2019 |
CASE MAY BE CITED AS: | Walters v Perton (No 3) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 733 |
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PRACTICE AND PROCEDURE – Application for trial of separate questions pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Murphy v State of Victoria & Anor [2014] VSCA 238 – Monty Financial Services Ltd v Delmo [1996] 1 VR 65 – Hoh v Ying Mui Pty Ltd [2019] VSCA 203.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr RM Garratt QC with him Mr RH Miller | Nedovic Lawyers |
| For the Defendant | Mr P Bick QC with him Mr D Farrands | Darrer Muir Fleiter Lawyers |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
The three proceedings....................................................................................................................... 2
Part IV proceeding............................................................................................................................. 2
Eviction proceeding........................................................................................................................... 5
TEP proceeding................................................................................................................................ 10
Applicable law.................................................................................................................................. 22
Submissions and consideration.................................................................................................... 26
Walters’ submissions.................................................................................................................. 26
First question...................................................................................................................... 27
Second question................................................................................................................. 30
Third question.................................................................................................................... 31
Perton’s submissions.................................................................................................................. 31
First question...................................................................................................................... 33
Second question................................................................................................................. 36
Third question.................................................................................................................... 37
Consideration.............................................................................................................................. 38
First question............................................................................................................................... 41
Second question.......................................................................................................................... 43
Third question............................................................................................................................. 44
Conclusion......................................................................................................................................... 46
HIS HONOUR:
Introduction
The plaintiff (Walters) applies for the trial of separate questions pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules). The effect of the separate questions sought to be tried is as follows:
(a) pursuant to s 34 of the Administration and Probate Act 1958 (Vic) (A&P Act) and s 48 of the Trustee Act 1958 (Vic), the defendant (Perton) be removed as executor of the Will and Trustee of the Estate of Donald Graeme Warring (deceased) and that David Hughes, Australian legal practitioner of Lawson Hughes, Peter Walsh, Solicitors, be appointed in her stead as administrator and trustee (first question);
(b) a declaration that the deceased was the beneficial owner of 53,401 ordinary shares in the capital of Mobile Communication Systems Pty Ltd (MCS), immediately before the registration on or about 29 June 2015 with the Australian Securities and Exchange Commission (ASIC) of a record showing (second question):
(i) the cancellation of all the deceased’s ordinary shares in MCS without payment; and
(ii) the cancellation of all but 100 ordinary shares in the name of Perton in MCS;
(iii) resulting in Perton being recorded as a the sole shareholder in MCS;
(c) a declaration that no liability of the deceased is secured against the property situated and known as 80 Bell Street, Heidelberg Heights, Victoria (Bell Street Property) and that the sole liability secured against that property is the liability of Perton as guarantor of the indebtedness of MCS under instrument of guarantee dated 27 April 2017 (third question).
The background to this proceeding has been described in previously published reasons for decision concerning an application by the defendant to set-aside subpoenas issued by the Court at the request of Walters[1] and in reasons for orders made in a related proceeding.[2]
[1]Walters v Perton [2019] VSC 356.
[2]Perton v Walters [2018] VSC 445.
It is, regrettably, necessary to restate some of that background in order to understand the circumstances in which the applications for the trial of separate questions is made.
The three proceedings
There are three proceedings between Walters and Perton.
(a) proceeding S CI 2017 02159 in which Walters claims further provision from the estate of the deceased pursuant to Part IV of the A&P Act (Part IV proceeding);
(b) proceeding S CI 2017 02326 in which Perton, as trustee of the Port Eagle Investment Trust (PEI Trust) sought to recover possession of the property situate and known as 17 Odenwald Road, Eaglemont (the Eaglemont property) from Walters (eviction proceeding);
(c) this proceeding in which Perton is sued in two capacities, first as trustee of the PEI Trust and second as executor of the Will and Trustee of the Estate of the deceased, issued in the Trusts Equity and Probate List of the Court (TEP proceeding).
Part IV proceeding
In the Part IV proceeding, commenced on 5 June 2017, Walters claims further provision out of the estate of the deceased pursuant to Part IV of the A&P Act. The deceased died on 4 February 2017. She claims that she was the domestic partner of the deceased for 21 years up to the date of his death, and is thereby an ‘eligible person’ within the meaning of s 90 of the A&P Act. The deceased died leaving a will dated 20 October 2015, probate of which was granted to Perton on 28 March 2017.
The will of the deceased provided, in effect, that:
(a) Perton was appointed executor of the will and trustee of the estate;
(b) In relation to the Eaglemont property, which he acknowledged was held in the PEI Trust, he expressed his wish and desire that Perton should do all things reasonably necessary to:
(iv)enable Walters to use and occupy the Eaglemont property rent free for a period of 6 months from the date of his death;
(v) vest the PEI Trust and out of its assets pay $200,000 to Walters, $25,000 to his former wife, Joy, and the balance to be divided between his daughter Carolyn and his son Graeme;
(c) the Bell Street property was devised to Perton;
(d) Out of his residuary estate, to pay to Walters all the income from his residuary estate for the period commencing on the date of his death and ending on the first to occur of 6 months from the date of his death or the date of the grant of probate and then to pay $10,000 to Walters to assist her in the costs of moving from the Eaglemont property and to pay the remainder to Perton, Carolyn and Graeme equally.
The inventory of assets and liabilities disclosed assets comprising the Bell Street property with a value of $1.75m, a bank account with about $2,202.32 and furniture, art and household contents of the Eaglemont property valued at $183,800. The liabilities disclosed were $43,140.55 due to the Australian Taxation Office and the State Revenue Office. The result was an estate value of about $1,892,861.80.
Orders were made in this proceeding on 27 June 2017 for the filing of affidavits and for the holding of a mediation, all of which was to be completed by 27 October 2017 and the matter was to return to Court on 12 December 2017.
Walters made her first affidavit on 31 July 2017 setting out the history of her relationship with the deceased and the circumstances in which the Eaglemont property was purchased, amongst other things. Perton failed to file any affidavit in accordance with the Court’s orders.
Walters made a second affidavit on 4 December 2017 in which she complained of the failure of Perton to file any affidavit (which was due by 1 September 2017) or to co‑operate in arranging a mediation (which was due to be held by 27 October 2017) as well as raising the fact that documents sought on behalf of Walters had not been provided, and that the Bell Street property had been transferred to Perton within the 6 months of the grant of probate, notwithstanding notice being given of Walters’ claim by letter dated 2 May 2017. Reference is also made to requests by Perton for documents and access to Walters’ house in Tasmania for the purposes of valuation and claims by Perton that her affidavit was delayed by reason of delays in Walters responding, claims which were alleged to be no reason for her to delay the filing of her affidavit.
Perton made two affidavits on 8 December 2017. In the first affidavit she dealt with matters surrounding the death of her father, the eviction proceeding, the importance of the Bell Street property to the operation of the business conducted by MCS both financially and physically, why it was necessary for the funding of MCS that it be transferred to Perton as soon as possible, that the process to transfer it to her commenced soon after the grant of probate, and also dealt with the deceased’s financial affairs and the terms upon which he and Walters occupied the Eaglemont property. Perton also explained that the inventory of assets and liabilities filed with the Court at the time of the grant of probate was prepared in a hurry. She exhibited an updated inventory of assets and liabilities (Updated Inventory).
The Updated Inventory disclosed the Bell Street property as an asset of the estate together with the furniture, art and contents of the Eaglemont property, but disclosed further liabilities including debts allegedly owed by the deceased to the PEI Trust in the sum of $45,072, credit card debt and funeral expenses (as well as the liabilities previously disclosed). The net result was an estate of about $1.8m.
In the second affidavit she explained her non-compliance with the orders of the Court, including delays attributable to slow replies from Walters regarding the withdrawal of minor amounts of money from the deceased’s bank account after his death, delays in valuing the contents of the Eaglemont property and the property owned by Walters in Tasmania and delay caused by evicting Walters from the Eaglemont property.
The proceeding came back to Court on 12 December 2017 and orders were then made by consent extending the times for the steps previously ordered to be taken, including a mediation. On 19 March 2018 and 22 May 2018 further directions were made by consent, including extending the time for a mediation. The matter came back to Court on 24 July 2018 at which time the TEP proceeding had been commenced and Walters had brought an application to stay proceedings in the Costs Court concerning the costs ordered in the eviction proceeding. A long adjournment of the directions hearing was made and later further adjournments ordered to enable the proceeding to be managed with the TEP proceeding.
Eviction proceeding
The Eviction Proceeding was commenced on 16 June 2017. In it Perton claimed possession of the Eaglemont property on the basis that she was the registered proprietor, as trustee of the Trust, and that Walters had no lease or agreement entitling Walters to retain possession. Walters initially defended the claim on the basis of an oral agreement between the deceased, as the putative owner of the Eaglemont property, and her son, Sean, as conferring a right of residence.[3]
[3]Perton v Walters [2018] VSC 445.
Perton applied for summary judgment for possession of the Eaglemont property. Walters applied to amend her amended defence and to raise a counterclaim. In support of the proposed counterclaim Walters deposed to an oral agreement between her and the deceased made in about July 1996 that she would move with him to Melbourne (they had been living together in a house owned by the deceased in Auckland, New Zealand) and continue to look after him for the rest of his life, and he would buy a house for them to live in together in joint names. She deposed to the sale of his New Zealand house and the purchase of the Eaglemont property as their home in 2002 where they lived until his death on 4 February 2017.
Walters’ affidavit in the Eviction Proceeding, and her proposed further amended defence and counterclaim, claimed that:
(a) the deceased provided $600,000 from the proceeds of sale of the New Zealand house towards the purchase of the Eaglemont property, giving rise to a purchase money resulting trust;
(b) the deceased had represented to Walters that she would have a beneficial interest in the Eaglemont property, which was their common intention;
(c) the deceased had asked her whether she would look after him if they moved to Melbourne, which she said she would and did for the rest of his life;
(d) in about July 2002 the deceased said to Walters that they would buy a house together in joint names when they moved to Melbourne and the deceased made the same statements to Walters orally in November 2002;
(e) that in about November 2002 they agreed to buy the Eaglemont property as their home and the deceased said that he would use $600,000 from the proceeds of sale of the New Zealand property for the purpose; and
(f) that their common intention in buying the Eaglemont property was that it would be their jointly owned home where they would live together for life.
The relief claimed included that the Eaglemont property formed part of the deceased’s estate, and that Walters was entitled to live in the property until the hearing of her application in the Part IV Proceeding.
In opposition to the application for leave to serve the new pleading, and in support of her application for summary judgment for possession of the Eaglemont property, Perton swore an affidavit in which she deposed that she had disclosed all documents that could be found ‘showing the funding of the PEI Trust… for its acquisition of the Property’, that the statement by Walters ‘that the deceased provided $600,000 towards the purchase of the Property … is false’; that the ‘Trust paid in full for the purchase of the Property which was for a purchase price of $900,000’; and that the deceased ‘did not contribute to the purchase of … the Property’.[4] Perton also swore an affidavit stating that the ‘trust paid in full for the purchase of the Property’ funded as to a loan of $400,000 from the NAB and a loan of $660,880.19 from Perton.[5]
[4]Affidavit of Jane Elizabeth Perton, made 5 October 2017 in the Eviction Proceeding, [5]–[7], [11].
[5]Affidavit of Jane Elizabeth Perton, made 28 October 2017 in the Eviction Proceeding, [4].
Walters’ application for leave to file the amended defence and counterclaim and Perton’s application for summary judgment came on for hearing on 31 October 2017. Counsel for Perton contended that the evidence was ‘overwhelming that the purchase price was paid in full by the Trust’.[6] It was further submitted that Walters’ reliance on a joint endeavour or common intention constructive trust must fail, because the deceased was not the owner of the Eaglemont property, and had no interest in the Property.
[6]Plaintiff, ‘Outline of submissions in relation to application for summary judgment’, Submission in the Eviction Proceeding, 17 October 2017, [26], [41a].
I considered that a trust in favour of the deceased was no answer to the claim for possession. After some debate Counsel for Walters no longer pressed the application to file an amended defence and counterclaim, and the opposition to the application for summary judgment.[7] An order for possession was made in favour of Perton.
[7]Perton v Walters [2018] VSC 445 [14]–[18].
Walters then vacated the Eaglemont property. In the course of unpacking, she found a one page agreement between the deceased and the vendor of the Eaglemont property.[8] The agreement was between the vendor, Charnley Glen Pty Ltd, and ‘Donald Warring and/or nom’ as purchaser. It was dated 26 November 2002 and recited that the parties had entered into a contract dated 26 November 2002 for the sale by the vendor to the purchaser of the Eaglemont property for the sum of $900,000 and had agreed that at settlement the purchaser will also pay $100,000 ‘for the cost of additional works to be completed by the vendor prior to settlement’. It was plainly a ‘side agreement’ to the contract of sale. This tended to contradict Perton’s evidence that she, as trustee of the Trust, was the purchaser of the Eaglemont property.
[8]Affidavit of Lynne Walters, made 6 July 2018, exhibit LW-1.
Counsel for Perton defended her statement that the PEI Trust purchased the Eaglemont property by reference to the fact that the deceased was the purchaser with a right to nominate a substitute purchaser, which must have happened as Perton as Trustee of the PEI Trust was registered as sole proprietor in January 2003, and she shows that the moneys for the purchase all came from the bank account of the Trust[9] and a great deal of that came from her personal bank account.[10]
[9]Affidavit of Jane Elizabeth Perton, made 5 October 2017 in the Eviction Proceeding.
[10]Affidavit of Jane Elizabeth Perton, made 28 October 2017 in the Eviction Proceeding.
In the course of a taxation of Perton’s costs in the Eviction Proceeding, Walters’ costs consultant requested an inspection of Perton’s solicitor’s file.[11] After an unsuccessful mediation, Perton’s costs consultant suggested that limited inspection may be allowed if Walters were to provide a list of documents to be produced. In consequence, the costs registrar ordered a list to be produced and inspection to occur.[12] This was done. Two particular documents were revealed. First, an email which showed that a deposit of $658,000 into Perton’s bank account was the proceeds of the sale of the deceased’s New Zealand property, and which was used by Perton to fund various investments, including an investment by the PEI Trust and by MCS. Secondly, an email from Perton’s solicitor to her barrister asking him to settle an affidavit of Perton and stating, in effect, that Perton’s legal advisors do not need to be concerned with how the deceased spent the proceeds of the sale of the New Zealand house (disputed documents).[13]
[11]Affidavit of Annabel Alice Speirs, made 5 July 2018 in the Eviction Proceeding, [3].
[12]Perton v Walters [2018] VSC 445 [22].
[13]Perton v Walters [2018] VSC 445 [23].
Walter’s solicitor complained that these documents showed that the decision to give judgment to Perton for recovery of possession of the Eaglemont property involved a substantial miscarriage of justice and asked for an explanation. An explanation was given and a claim for client legal privilege was made in respect of the documents.
Application was made in the Eviction Proceeding to stay the further hearing of the taxation of costs, to permit Walters to rely on the disputed documents in this (TEP) proceeding and to require Perton to produce the disputed documents.[14] There were three matters for determination:
[14]Summons in the Eviction Proceeding filed by the Defendant on 9 July 2018.
(a) a stay of the Costs Court proceeding, or a stay of execution of the costs order made on 31 October 2017;
(b) a release of the implied undertaking (the Harman undertaking) not to use documents produced under compulsion in one proceeding for some other purpose or proceeding;
(c) production of the disputed documents, which involved a consideration of whether there had been a waiver of client legal privilege.
The application was heard on 2 August 2018 and, in reasons published on 14 August 2018 I concluded that there should be a stay of execution of the costs order made in the Eviction Proceeding against Walters, that the disputed documents are not subject to any client legal privilege, that they should be produced by Perton to Walters and the disputed documents are not subject to the implied undertaking, or if they are, the undertaking should be released and they could be used in this proceeding.[15] Orders were made to give effect to these findings on 17 August 2018.
[15]Perton v Walters [2018] VSC 445 [82].
Those orders also referred the TEP proceeding and the Part IV proceeding to mediation to be completed by 31 October 2018 and required:
Not more than 14 days and not less than 7 days before the date fixed for the Mediation the plaintiff (as executrix of the deceased estate) shall make file and serve on the defendant an affidavit setting out the financial position of the estate of the deceased as far as it is then known to her, which affidavit shall fully explain and verify all changes to the composition and value of the estate since the updated inventory.
No further steps have been taken in the eviction proceeding.
TEP proceeding
Walters commenced this proceeding on 5 July 2018. Since then the statement of claim has been amended twice. Perton is sued in two capacities, first, as trustee of the PEI Trust, and second as executor of the Will and Trustee of the Estate of the deceased.
There have been several applications already dealt with in this proceeding:
(a) An application to restrain Perton from proceeding with an application in the Federal Circuit Court of Australia for the administration of the estate of the deceased in bankruptcy (bankruptcy proceeding).[16] McMillan J restrained Perton from taking any step in the bankruptcy proceeding by order made on 18 February 2019 and specifically authorised Walters to issue subpoenas to Perton and the National Australia Bank Ltd, which were the subject of the next application. The bankruptcy proceeding was subsequently discontinued with the leave of the Federal Circuit Court;
(b) An application by Perton to set aside subpoenas issued at the request of Walters. The application was dismissed and the reasons for the dismissal are published as Walters Perton [2019] VSC 356; and
(c) An application by Perton for the removal of a caveat lodged on title to the Eaglemont property, which was ultimately not proceeded with. Costs were ordered against Perton: Walters v Perton (No 2) [2019] VSC 542.
[16]In the Matter of Donald Graeme Warring (Deceased) (Federal Circuit Court of Australia, MLG3867/2018, commenced 19 December 2018).
In this (TEP) proceeding, Walters claims the following relief:
(a) that she is the sole beneficial owner of the Eaglemont property, or that she has a one-half beneficial interest in it, and that the title to the Eaglemont property, or a one-half interest in it, be transferred to her;
(b) alternatively, that the estate of the deceased is the beneficial owner of the Eaglemont property;
(c) alternatively, an order that Perton pay to Walters an amount equal to the value of her interest in the Eaglemont property;
(d) a declaration that the deceased was the beneficial owner of 53,401 ordinary shares in the capital of MCS, immediately before the registration on or about 29 June 2015 with ASIC of a record showing:
(vi)the cancellation of all the deceased’s ordinary shares in MCS without payment; and
(vii) the cancellation of all but 100 ordinary shares in the name of Perton in MCS;
(viii) resulting in Perton being recorded as a the sole shareholder in MCS;
(e) a declaration that the estate of the deceased is the owner of the 53,401 shares in MCS;
(f) a declaration that sole liability secured against the Bell Street property is the liability of Perton as guarantor of the indebtedness of MCS under an instrument of guarantee dated 27 April 2017 and that no liability of the deceased is secured against the Bell Street property;
(g) a declaration that the estate of the deceased is the beneficial owner of the unencumbered title to the Bell Street property;
(h) that Perton be removed as executor and trustee of the deceased’s will and estate, an independent person be appointed as administrator and the property and assets of the estate be vested in that administrator;
(i) injunctions restraining Perton from encumbering the Eaglemont property and the Bell St property pending the full administration of the estate of the deceased and requiring Perton forthwith to take all necessary steps to discharge the existing encumbrances over the Bell Street property.
(j) accounts and inquiries to determine amount due to the estate of the deceased for unpaid rent under a lease of the Bell St property to (MCS), but now controlled by the defendant, and for unpaid entitlements due to the deceased as a shareholder and creditor of MCS.
The further amended statement of claim (FASOC) in support of that relief refers to uncontroversial matters (the death of the deceased on 4 February 2017 and the grant of probate of his will to Perton on 28 March 2017 – each of which is admitted), and then makes the following claims in relation to the Eaglemont property (with a summary of the further amended defence (FAD) in square brackets):
(a) Walters and the deceased first met in 1996 in Hobart, where Walters lived. The deceased was then living in New Zealand in a house he owned at 4 Dilworth Terrace, Parnell Auckland (New Zealand House)([4]). [Admitted] ([4]).
(b) Walters and the deceased lived together as husband and wife from July 1996 until his death ([5]). [Admitted lived together, otherwise not admitted] ([5]). From August 1996 Walters and the deceased made the New Zealand house their home ([6]). [Admitted] ([6]).
(c) There was a relocation agreement entered into between Walters and the deceased in July 2002 pursuant to which it was agreed that, in consideration of Walters looking after the deceased (who did not enjoy robust health) the deceased would sell the New Zealand House and buy a family home in Melbourne which would be jointly owned ([7]). [Denied, and further facts alleged that are not presently relevant] ([7]).
(d) In 2002 the New Zealand house was sold ([8]). [Admitted] ([8]). The balance of the proceeds of the sale received by the deceased was NZ$800,427.84 ([9]). [Admit deceased received a sum from the proceeds, otherwise do not admit] ([9]). On 4 September 2002 the deceased and Walters moved to Melbourne ([10]). [Admitted deceased moved back to Melbourne to work in 1999, otherwise not admit] ([10]).
(e) On 13 September 2002 the deceased deposited $658,967.50 into Perton’s ANZ joint bank account (jointly held with her then husband) from the proceeds of the sale of the NZ house ([11]). [Admitted, but paid to her as a gift] ([11]).
(f) On 16 September 2002 a further amount of $61,400 was deposited by the deceased into Perton’s ANZ joint account from the proceeds of sale of the NZ house ([12]). [Denied] ([12]).
(g) In November 2002, the deceased and Walters decided that the deceased should offer to purchase the Eaglemont property for a price of $1 million ([13]). [Denied. Perton as trustee of the PEI Trust decided to purchase the Eaglemont property after the deceased told her he would like to live in it and the offer to purchase the property by the deceased was in substance an offer to purchase on behalf of the PEI Trust, which had the means where the deceased did not] ([13]).
(h) The offer to purchase was accepted by the vendor and by two agreements in writing made on or about 26 November 2002 between the deceased and the vendor the deceased agreed to purchase the Eaglemont property for a price of $1 million ([14]). [Denied. The offer to purchase made by the deceased nominated himself (sic) or nominee as the purchaser. The deceased always intended to nominate Perton as trustee of the PEI Trust as the purchaser as she had sufficient funds and the deceased did not] (14]).
(i) The purchase of the Eaglemont property was completed on about 23 December 2002 and the purchase was funded with a loan of $400,000 from the National Australia Bank Ltd (NAB) and as to the balance by the deceased using the proceeds of sale of the NZ house which had been deposited into Perton’s joint bank account ([15]). [Admitted borrowing by the PEI Trust. Denied deceased purchased the Eaglemont property as the PEI Trust purchased it for the deceased to live in. Further, Perton lent the money not borrowed from NAB to the PEI Trust to enable the purchase] ([15]).
(j) The NAB loan was subsequently repaid by monthly instalments made by the deceased directly to NAB ([16]). [Denied, payments made to the PEI Trust as rent. The PEI Trust repaid the NAB loan] (16]).
(k) Unknown to Walters, the deceased directed the transfer of the title to the Eaglemont property into the name of Perton ([17]). [Denied, the deceased nominated the PEI Trust as purchaser and the trust became registered] ([17]).
(l) Walters looked after the deceased until his death ([18]). [Not admitted] ([18]).
(m)Perton remains registered proprietor of the Eaglemont property ([19]). [Admit registered proprietor as trustee of the PEI Trust] ([19]).
(n) By reason of the terms of the relocation agreement, Walters was an equitable joint tenant, alternatively a tenant in common, with the deceased in the Eaglemont property so that she claims the whole of the equitable estate by survivorship, or an equal half part or share with the deceased’s estate ([20]). [Denied, no standing to make, estoppel and laches, relocation agreement invalid and unenforceable, no contributions to the Property made, PEI Trust holds indefeasible title] ([20]).
(o) Wrongly, Perton denies Walters’ interest in the Eaglemont property, has encumbered the property without Walters’ consent and claims to hold the property as trustee of the PEI Trust ([21]). [Admits she holds property as trustee of the PEI Trust, otherwise denies] ([21]).
(p) Alternatively, the purchase of the Eaglemont property was wholly or substantially funded by the deceased, and it was not intended to be beneficially owned by Perton, in consequence of which Perton holds the Eaglemont property on trust for the estate of the deceased ([22]). [Denied, not standing to make, estoppel and laches and the other defences in [20]] [22]).
Walters’ claims also include the removal of Perton as executor and trustee of the deceased’s estate and claims in relation to the Bell Street Property and MCS. In summary it is alleged Perton has misconducted herself as executor because of the following matters:
(a) In her application for probate, Perton swore her affidavit on 17 March 2017. The inventory of assets of the deceased included the Bell Street property, which was valued at $1.75 million, against which were liabilities of some $43,000 ([23]). [Admitted] ([23]).
(b) By lease dated 1 January 2014, the deceased let the Bell Street property for an initial term of five years to MCS. ([24]). [Admitted] ([24]).
(c) The starting rent under that lease was $67,000 per annum ([25]). [Admitted] ([25]).
(d) MCS specialises in advanced commercial digital voice and data transmission systems with operations throughout Australia and in the USA ([26]). [Admits trades in Australia otherwise denies] ([26]. The deceased founded MCS and was active in its business until his retirement at the age of 75 in 2011 ([27]). [Admits] ([27]).
(e) The Bell Street property has been the principal place of business of MCS for over 25 years and the address of its registered office ([28]). [Admits MCS has its office there, otherwise not admitted].
(f) The deceased and Perton were the directors of MCS Digital for many years until the resignation of the deceased as a director on 3 February 2014, and since then the Mrs Perton has been the sole director ([29]). [Denied, further facts pleaded including that Perton is now the sole director, and has been a director since 1997, of MCS] ([29]).
(g) As at 28 June 2015, the ordinary shares in the capital of MCS were held as to 53,401 by the deceased and as to 35,900 by Perton ([30]). [not admitted] ([30]).
(h) On or about 29 June 2015, Perton caused to be registered with ASIC a record showing the cancellation of all the deceased’s ordinary shares in MCS without payment, and a cancellation of all but 100 ordinary shares held by Perton, as a result of which Mrs Perton has since been recorded as the sole shareholder of MCS Digital ([31]). [Not admitted and further facts pleaded including that Perton injected capital into MCS, the deceased intended her to become the sole owner of MCS and related companies, and in 2015 the deceased sought that Perton take over the ownership of MCS and related companies and that the existing capital of MCS be ‘rearranged’ so that she became the sole owner and he transferred his shares in MCS to Perton] ([31]).
(i) The shares in MCS held by the deceased in 2015 were not cancelled by the transactions referred to or by any other transaction prior to his death, in consequence of which those shares form part of the estate of the deceased ([31A]). [Denied. The allegation does not identify a basis, is vague and embarrassing and should be struck out] ([31A]).
(j) Probate of the deceased’s will was granted to Perton on 28 March 2017 ([32]). [Admitted] ([32]).
(k) On 2 May 20117 Walters gave Perton notice of her intention to apply for further provision under Part IV of the A&P Act ([33]). [Admitted] ([33]).
(l) On 3 May 2017 Perton caused to be lodged at the office of titles a transmission application of the title to the Bell Street property from the deceased to Perton as executor and a transfer of that property to herself personally, by way of a partial distribution of the estate of the deceased ([34]). [Denied, process to transfer started in March because NAB as mortgagee so demanded and was registered in circumstances where Perton had no notice of Walter intention to make a claim under Part IV] ([34]).
(m)The transmission application and transfer were registered on 3 May 2017 and thereafter Perton granted a mortgage of the Bell Street property to the NAB to secure liabilities of herself and MCS, which mortgage was registered on 16 May 2017 ([35]). [Denied and pleads further facts concerning the reason for encumbering the Bell Street property and that until his death the deceased made the property available as security for funding MCS and incurred personal obligations under the security for such loans] ([35]).
(n) By letter dated 29 May 2017 Perton’s solicitors contended to Walters’ solicitors that there was no utility in Walters making a Part IV claim because the Bell Street property was at the date of the death of the deceased encumbered by a mortgage in favour of NAB securing a liability of approximately $2.8 million of MCS ([36]). [Admitted] ([36]).
(o) In fact as at 29 May 2017 the Bell Street property was only encumbered by the mortgage granted by Perton and registered on 16 May 2017 ([36A]). [Denied. Further facts pleaded including that the property was continuously mortgaged as security for debts of MCS (inter alia) of over $2m from 2012 until the date of death of the deceased and the deceased remained liable for those debts under a personal guarantee. Upon the discharge of that liability of the deceased, Perton became liable and is entitled to contribution or indemnity in respect of that liability from the estate of the deceased] ([36A]).
(p) The Part IV Proceeding was commenced by Mrs Walters on 5 June 2017 ([37]). [Admitted] ([37]).
(q) On 31 October 2017 this Court ordered in the Eviction Proceeding that Perton recover possession of the Eaglemont property from Walters, with costs. That judgement for possession was obtained, substantially, upon the sworn evidence of Perton denying that the deceased had provided $600,000 towards the purchase of the Eaglemont property and denying that the deceased had contributed to the purchase of that property, stating it that it was Perton who was the purchaser of that property ([38]). [Denied with qualifications including that what she said was that the statement that the deceased provided $600,000 towards the purchase of the Eaglemont property was false and that the PEI Trust paid in full for the purchase of that property] ([38]).
(r) On 8 December 2017 Perton made an affidavit in the Part IV proceeding exhibiting and updated inventory of assets and liabilities of the estate (Updated Inventory), which disclosed the Bell Street property as an asset of the estate valued at $1.75 million and liabilities of $122,898.28, and disclosed the receipt of no rent in respect of the lease of that property to MCS since the death of the deceased nor any liability of the deceased to the NAB, any interest in the Eaglemont property or shareholding in MCS ([39]). [Admitted and no rent required to be disclosed as Bell Street property was devised to Perton] ([39]).
(s) In fact, the deceased purchased the Eaglemont property and the deceased provided $600,000 towards the purchase of it, alternatively the deceased contributed substantially to the purchase price of the Eaglemont property. ([40]). [Denied and alleges the PEI Trust purchased the property with funds of the Trust and funds borrowed from the NAB, and the deceased was unable to pay for the property and always intended that the property be purchased by the PEI Trust and nominated it as purchaser] ([40]).
(t) The order made in the Eviction Proceeding on 17 August 2018, provided for a mediation of this proceeding, the Eviction Proceeding and the Part IV Proceeding by 31 October 2018. That order also required, for purpose of the mediation, that Perton, as executor of the deceased estate, file and serve an affidavit setting out the financial position of the estate as far as it was then known to her, fully explaining and verifying all changes to the composition and value of the estate since the Updated Inventory ([41]). [Admitted] ([41]).
(u) On or about 19 October 2018, the parties agreed that the mediation should take place on 30 October 2018 before an agreed mediator ([42]). [Admitted] ([42]).
(v) Perton did not provide the affidavit as to financial position of the estate as required by the 17 August 2018 order, either before or at the mediation, in consequence of which it was adjourned to a date to be fixed after Perton had provided the affidavit ([43]). [Admitted] ([43])
(w) From 30 November 2018 until 8 March 2019 Perton ceased to retain solicitors for her as executor of the estate (whilst continuing to retain solicitors for her as trustee of the PEI Trust) and provided no electronic or telephone contact details to Walters ([44]). [Not admitted and irrelevant] ([44]).
(x) On 29 January 2019, Perton caused an affidavit (the January 2019 affidavit) to be delivered to Walters’ solicitors. That affidavit purported to set out the financial position of the estate and revealed that it contained no real estate, because the Bell Street property had been fully mortgaged by Perton to NAB and transferred by Perton to herself as beneficiary under the will of the deceased and the estate was bankrupt, having liabilities of $182,467.88 and total assets of $16,962.32, including an outstanding debt of Perton of $12,500 ([45]). [Admitted] ([45]).
(y) The January 2019 affidavit did not comply with the 17 August 2018 order because it did not disclose or verify any debt of the deceased which encumbered the Bell Street property, nor any other justification for not treating the Bell Street property as an asset of the estate, it did not explain or verify any of the changes made in respect of the assets of the estate or their alleged value and did not explain or verify any of the changes in the liabilities of the estate since the updated inventory ([46]). [Denied and further facts pleaded including that at the date of the death of the deceased the Bell Street property secured $2.8 million of debt of MCS and associated companies to NAB, that the Bell Street property was gifted to Perton by the deceased’s will, and that at the request of NAB she became liable for those debts after the transfer to her] ([46]).
(z) The Bell Street property is encumbered by two mortgages to the NAB, the first granted by the deceased and registered on 3 December 2012 which secures no liability of the deceased to NAB; and the second granted by Perton on 16 May 2017 which secures only the liability of Perton as guarantor of MCS to the NAB which MCS and Perton have the means to discharge ([47]). [Admits mortgages, otherwise denies and pleads that at trial she will contend that the 2012 mortgage secured a debt of over $2.2 million owed to NAB and guaranteed by the deceased and the 2017 mortgage refinanced the liability of MCS to the NAB previously guaranteed by the deceased.] ([47]).
(aa) At the date of death of the deceased, the deceased was not indebted to the NAB ([48]). [Denied, the deceased was contingently liable at the date of his death under the 2012 mortgage to NAB] ([48]).
(bb) The Bell Street property forms part of the estate at its unencumbered market value ([49]). [Denied, it formed a part of the estate at the date of death but is no longer a part of the estate and in any event is and was at all material times encumbered in an amount exceeding its market value] ([49]).
(cc)At all material times the value of the estate exceeded $1.3 million ([50]). [Denied and at all times since the death of the deceased the liabilities exceeded the assets of the estate].
(dd) On Friday 15 February 2019, Perton caused to be served on the solicitors for Walters an application in the Federal Circuit Court of Australia for the administration of the deceased estate in bankruptcy to be heard on 19 February 2019 ([51]) (bankruptcy application). [Admitted] ([51]).
(ee) the bankruptcy application was based on a statement of affairs verified on oath by Perton premised on the liabilities of the estate substantially exceeding its assets in consequence of the deceased owing $2.8 million to NAB by reason of guarantees secured by the mortgages, which is not the case in circumstances where MCS and Perton have the means to repay, and an obligation to indemnify the estate, in respect of the indebtedness secured over the Bell Street property ([52]). [Admits statement of affairs, otherwise denied. Further no basis for indemnity to the estate] ([52]).
(ff) By order of this Court made on 18 February 2019, Perton was restrained from proceeding with the bankruptcy application and on or about 6 April 2019 it was discontinued with the leave of the Federal Circuit Court ([52A]). [Admitted] ([52A]).
(gg) by reason of the matters referred to in paragraphs (q) [38], (s) [40] and (v) [43] to (ee) [52], Perton has contravened her obligations under ss 16, 17, 18, 19, 20 and 21 of the Civil Procedure Act 2010 (Vic) (CPA) ([53]). [Denied] ([53]).
(hh) There are conflicts between Perton’s duties as executor of the will and trustee of the estate of the deceased to get in the full estate and to administer it impartially in accordance with the will, and her personal interest to maximise the financial position of MCS or herself, or the beneficiaries of the PEI Trust because ([54(a)]) [denied] ([54]):
(ix) The interests of the estate of the deceased are served by contesting the allegation that $658,967.50 deposited into her joint account (with Mr Perton) on 13 September 2002 was a gift by the deceased to Perton;
(x) The interests of the estate of the deceased are better served by admitting Walters’s allegation that $600,000 of the purchase price of the Eaglemont property were provided by the deceased, rather than contesting it;
(xi) The interests of the estate are served by admitting that the deceased was the purchaser of the Eaglemont property under a contract of sale dated on or about 26 November 2002 rather than contesting it as Perton does;
(xii) The interests of the estate of the deceased are served by contesting that the PEI Trust was in existence as at 26 November 2002 as maintained by Perton;
(xiii) The interests of the estate are better served by contesting the allegations by Perton that the Bell Street property is encumbered with liabilities of MCS to NAB, having particular regard to her inconsistent statements in that regard;
(ii) Perton is unfit to act in the office of executor of the will and trustee of the estate of the deceased and ought to be removed and another person appointed ([54(b)]). [Denied] ([54]).
Applicable law
The power to order the trial of separate questions is in r 47.04 of the Rules, which provides:
The Court may order that—
(a)any question in a proceeding be tried before, at or after the trial of the proceeding, and may state the question or give directions as to the manner in which it shall be stated;
(b)different questions be tried at different times or places or by different modes of trial.
Ordinarily, all issues of fact and law in a proceeding will be determined at the one time by the Court following a trial.[17] There are a great many decisions relating to the matters to be considered in the exercise of the discretion to order the separate trial of questions in a proceeding. Many have gathered together considerations relevant to the particular facts and issues in the particular proceeding. All recognise that much depends on the facts at hand. Nevertheless, there are principles, relevant matters and cautions identified that provide guidance in the exercise of the discretion. I set them out in Vale v Daumeke[18] at some length.
[17]Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495, 497 [7].
[18][2015] VSC 342 [31].
For present purposes, however, it is appropriate, and sufficient, to refer to the statement of principles in Murphy v State of Victoria,[19] repeated in Hoh v Ying Mui Pty Ltd,[20] in the following terms:
[19](2014) 45 VR 119 (Murphy).
[20][2019] VSCA 203 [393].
1)A separate trial should be ordered under r 47.04 only with great caution and only in a clear case.[21]
[21]Wells Fargo Bank Northwest National Association v Victoria Aircraft Leasing Ltd (No 2) [2004] VSC 341 [181].
2)The attraction of trials of issues rather than of cases in their totality, ‘are often more chimerical than real’, so that separate trials should ‘only be embarked upon when their utility, economy and fairness to the parties are beyond question’.
3)The advantages of trying separate questions for one party may unfairly disadvantage another party, including because the questions will be determined without the benefit of all the evidence relevant to the proceeding.[22]
[22]Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, 533–4.
4)There should be no trial of a separate question on the basis of assumed facts unless the facts are agreed or can readily be determined judicially. Otherwise, the parties remain free to dispute the relevant facts at any later trial.[23]
[23]Jacobson v Ross [1995] 1 VR 337, 341–2 (Brooking J).
5)As a general rule, it is inappropriate to order that a preliminary issue be isolated for determination unless the determination of the issue in favour of the plaintiff or the defendant will put an end to the action, or where there is a clear line of demarcation between issues and the determination of one issue in isolation from the other issues in the case is likely to save inconvenience and expense.[24]
6)Factors which tell against making order under r 47.04 include that the separate determination of the question:
a)may give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of trial;
b)may result in significant overlap between the evidence adduced on the hearing of the separate question and at trial; possibly involving the calling of the same witnesses at both stages of the hearing of the proceeding; and
c) may prolong rather than shorten the litigation.[25]
[24]Dunstan v Simmie & Co Pty Ltd [1978] VR 669, 671.
[25]Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718 [8], cited in Village Building Company Limited v Canberra International Airport Pty Limited [2003] FCA 1195 [8].
In the course of argument in the hearing of the application, I raised with Counsel the decision of Vickery J in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (Ruling No 1),[26] in which his Honour discussed and decided apply a sequencing of trials of issues in a group of proceedings. After the conclusion of argument in this matter, the Court of Appeal handed down its reasons for judgment in Hoh v Ying Mui Pty Ltd.[27]I notified the parties of the decision and sought their comments.
[26][2016] VSC 519 (Ying Mui).
[27][2019] VSCA 203 (Beach, Hargrave JJA and Sifris AJA) (Hoh v Ying Mui).
In Hoh v Ying Mui the Court of Appeal was concerned with a mode of trial that was devised by Vickery J as a ‘sequential trial’ in complex proceedings involving many issue between many parties. No ground of appeal challenged the adoption of the sequential trial model. However, the Court felt that some comment was necessary, as guidance for any other judge who may be considering implementing such an approach.[28] In the decision below that resulted in the orders for a sequential trial, Vickery J said:[29]
[28]Hoh v Ying Mui [2019] VSCA 203 [389].
[29]Ying Mui [2016] VSC 519, [46].
Although r 47.04, when it is used by the Court, is most commonly used to state a preliminary question prior to the trial of the principal proceeding, the rule specifically contemplates that any question in a proceeding may be stated for trial ‘at or after’ the trial of the proceeding. One possible use of the rule which is open according to its text, is for the trial Judge to take the following steps, with a view to conducting a ‘sequential trial’:
The trial Judge may:
(a) conduct the trial by first taking in all of the evidence;
(b)at an appropriate time during the trial, if appropriate to do so, state questions to be addressed in final address in tranches;
(c)hear the first tranche of final addresses which are confined to addressing the first tranche of questions stated; and
(d)then deliver judgment on the first tranche of questions stated, before proceeding to the next tranche, and so on, until the case is complete.
The primary judge then set out the principles from Murphy quoted above and said:[30]
[30]Ying Mui [2016] VSC 519, [48]–[52].
However, Murphy,[31] both at first instance and on appeal, was decided in a different context to the present. In that case the preliminary questions were stated for determination prior to the trial of the evidence in the principal proceeding.
Where, on the other hand the evidence is heard in full prior to the hearing and determination of the stated questions, a number of the concerns with the separate question process fall away. In particular, principle 3 (absence of the benefit of all the evidence relevant to the proceeding); principle 4 (proceeding on the basis of assumed facts); 6a. (significant contested factual issues both at the time of the hearing of the preliminary question and at the time of trial); and 6b (significant overlap between the evidence adduced on the hearing of the separate question and at trial), will not apply in the ‘sequential trial’ model. This happens because all of the evidence is heard first, prior to the hearing of submissions on stated tranches of questions, and prior to the Court delivering judgment on those questions.
Further, conducting a trial using the ‘sequential trial’ model is not the trial of a ‘preliminary question’. It is a mode of trial for the conduct of the principal proceeding, and is a tool for the management of a trial in the appropriate case. The power to employ a trial model such as this resides principally in the provisions of the CPA. In this context, r 47.04 may be employed as a useful vehicle to give effect to the objects of the CPA, however is not the sole repository of the power.
For these reasons, the case law relating to the statement of separate questions pursuant to r 47.04, which have hitherto been confined to considering cases where a true ‘preliminary question’ has been under scrutiny, needs to be viewed in a significantly different context, when a ‘sequential trial’ model of trial management is under consideration.
In my opinion, in this case, significant advantages will be achieved if the ‘sequential trial’ model is adopted in this case. The advantages are:
(a)The hearing of submissions and delivery of judgment on three significant issues in the case at the earliest possible time in the sequence will narrow the issues for addresses and the judgment in the balance of the proceeding by the elimination of a number of alternative ways in which the balance of the case is advanced;
(b)Consistently with the CPA, in particular s 7(2)(c), the adoption of the sequential trial model will give to the parties the maximum opportunity to resolve the proceeding by any appropriate dispute resolution process;
(c)The sequential trial model will also enable the Court to hear and determine important issues in the case in a focussed fashion, and thereby promote the objective of efficiency and timely resolution of those issues in accordance with the overarching purpose of the CPA.
[31]Murphy v State of Victoria & Anor [2014] VSCA 238.
The Court of Appeal did not accept the judge’s rationale for imposing the sequential trial model on a party which opposed it. They said:[32]
We accept, of course, that the trial judge decided to implement the approach with the best of intentions, to further the overarching purpose under the Civil Procedure Act 2010 (Vic). We also accept that complex civil litigation poses a drain on Court resources, and sometimes novel approaches to the resolution of a proceeding are called for; but here, the sequential trial model served only to reduce the burden on the trial judge in determining all the issues in one judgment, in the hope that the reasons for judgment on the first tranche questions may yield a settlement.
…
In the event, the sequential trial model ran contrary to the efficient conduct of the business of the Court;[33] the efficient use of judicial and administrative resources;[34] prolonged the timely determination of the proceeding;[35] and increased the complexity of the case by resulting in a multiplicity of judgments —thus causing increased cost to the parties and the disproportionate use of Court resources by both the trial judge and this Court on appeal.[36]
Indeed, given the credit issues involved in causation and loss, this was a case where all the issues, including causation, loss and the form of relief should have been tried at the one time and resulted in one judgment.
Further, the sequential trial model increased the likelihood of error or, at least, inconsistency between the judgments resulting from the various tranche hearings. It also gave the parties the opportunity to re-argue matters decided adversely to them on earlier tranches of the hearings, as in fact occurred.
It will rarely — if ever — be appropriate over the opposition of one or more parties to take the approach adopted in this case. And, even if all parties urge such a course on a court, the court should exercise great caution before adopting such an approach.
[32]Hoh v Ying Mui Pty Ltd [2019] VSCA 203 [397], [399]–[402].
[33]CPA s 9(1)(c).
[34]CPA s 9(1)(d).
[35]CPA s 9(1)(f).
[36]CPA s 9(1)(g).
Submissions and consideration
Walters’ submissions
It is important to observe that although the parties addressed their submissions by reference to the separate questions, Walters’ application was for the trial of all three separate questions prior to the trial of the balance of the proceeding, which mostly concerns Walters’ claims for a constructive trust of the Eaglemont property. It was not explicitly argued that, for example, the application for the removal of Perton as executor and trustee of the deceased estate should or could be hived off and tried before everything else. That was no doubt because the very basis of the removal application was the conflict between duty and interest arising out of the two other proposed preliminary questions.
Nevertheless, the parties addressed their arguments in relation to each proposed separate question, and I give an account of those arguments under the separate headings.
First question
Walters submits that a trial of the TEP proceeding will involve the trial of claims that Perton is unfit to be the executor of the deceased estate at the same time as the trial of questions in which she has a personal interest and which conflict with her duty as executor, that is:
(a) Whether the proceeds of the sale of the deceased’s New Zealand house, of about $600,000, were used to purchase the Eaglemont property in 2002, or were those funds a gift to Perton as she claims.
(b) Whether the Bell Street property forms or formed a part of the deceased’s estate. According to Perton’s most recent affidavit as executor, sworn 29 January 2019, it is now not a part of the estate;
(c) If the Bell Street property forms a part of the deceased’s estate, was it encumbered, as Perton maintains, with a guarantee mortgage to secure the debts of MCS?
(d) If the Bell Street property forms a part of the deceased’s estate and was encumbered, as Perton maintains, does the estate have a an equitable right of exoneration in respect of that liability against MCS and Perton?
(e) If the Bell Street property forms a part of the deceased’s estate, what rent is due to the estate under the lease to MCS?
(f) Was there a valid ‘cancellation’ of the shares in MCS held by the deceased in 2015 and is Perton the sole shareholder of MCS?
(g) does the estate of the deceased hold the shares in MCS he held before the purported ‘cancellation’ in 2015?
Walters submits that the beneficiaries of the deceased’s estate, including Walters and the deceased’s children, Graeme and Carolyn, have an interest that the proper extent of the deceased estate be ascertained, and that it be larger rather than smaller. Perton has an opposing interest, namely:
(a) that neither the Eaglemont property nor money of the deceased which funded its purchase should form part of the estate;
(b) that the Bell Street property, to any unencumbered extent, forms part of the estate nor the rent payable by MCS under the lease to MCS;
(c) that the shares of the deceased in MCS were validly ‘cancelled’ and that she is the sole shareholder in MCS.
It is also clear, Walters submits, that Perton’s credit is in issue. She has sworn inconsistent affidavits, and endeavoured by the bankruptcy application to frustrate this proceeding and the Part IV proceeding and to take their resolution out of the hands of this Court, and to have the estate finalised as if it were insolvent.
Walters submits that the issues which she raises for separate determination (the removal application, the shareholding in MCS and the Bell Street property issues) are identified clearly and precisely. They do not overlap with the remaining issues to any significant extent, if at all. If the issues are resolved in favour of Walters and an independent administrator is appointed (such as Mr Hughes), the Court may have confidence that proper discovery will be made, that the extent of the estate will be properly determined, and that negotiations for the resolution of the Part IV proceeding will be conducted on a footing uncompromised by personal interest, thus making a settlement of the balance of the claims much more likely.
Further, she submits, some staging of the proceedings is necessary as issues concerning the size of the estate must be resolved before the Part IV proceeding is tried. The Eaglemont property issues could be tried concurrently with, or before, but not after the Part IV proceedings, because the result of their determination may affect the size of the estate and the extent of further provision to be made in the Part IV proceeding.
Walters relies on the decision of Ashley J in Monty Financial Services Ltd v Delmo[37] (an application under s 34 of the A & P Act to remove an executor to whom a grant had been made). That was a case based on an alleged conflict in the executor between his duty as executor and his interest as a creditor of the estate of the deceased. Ashley J reviewed the authorities relevant to the construction of s 34 of the A & P Act, and the powers of the court, statutory and inherent, to remove trustees, and concluded that unfitness to act as executor within the meaning of s 34 comprehends a situation in which an executor has a conflict of duty and interest in carrying out his executorial duties.[38]
[37][1996] 1 VR 65 (Monty v Delmo).
[38]Monto v Delmo [1996] 1 VR 65, 82.
Since the decision in Monty v Delmo, the principles expounded by Ashley J have been followed or referred to with approval by other single judges in the Supreme Court[39] and by the Court of Appeal.[40] In Fysh v Coote Ormiston JA said of the reasons of Ashley J in Monty v Delmo:[41]
…Ashley, J describes in careful and well-reasoned terms the nature of the Court's jurisdiction and the factors which are relevant to the exercise of its discretion under the section. His Honour gives compelling reasons why an executor's conflict of duty and interest of a kind likely to affect the efficient and satisfactory administration of the estate is a proper basis for removing an executor and substituting another.
[39]Morgan v Morgan [2000] VSC 445, (Beach J) [21]; Tuohey v Tuohey [2002] VSC 180 (McDonald J), particularly at paragraph [56].
[40]Fysh v Coote [2000] VSCA 150 (particularly Ormiston JA); Dimos v Skaftouros (2004) 9 VR 584.
[41][2000] VSCA 150, [20] (Ormiston JA, Batt and Chernov JJA agreeing).
Ashley J, and the Court of Appeal in Fysh v Coote, cited the observations of Dixon J in Miller v Cameron,[42] with respect to the removal of a trustee, as relevant:
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised.
[42](1936) 54 CLR 572, 580–1.
The point, Walters submits, is that the law requires of an executor (or trustee) that the interests of the beneficiaries (and not self-interest) prevail, that the estate is securely got in, and that executorial powers are faithfully and soundly exercised.
As a corollary, where, because of matters raised before it, the Court cannot be satisfied that an executor is conducting herself in accordance with the standards required by the law, it is necessary that a removal application be resolved before the administration of the estate continues further in relation to proceedings in the Court. Were it otherwise, neither the Court nor the reasonable observer could be satisfied that disputes concerning the estate were being properly conducted and resolved.
Walters therefore submitted that the conflicts of interest and duty identified earlier require that the removal application be addressed before the Part IV proceeding and before the other issues in the TEP proceeding, save for those relating to the Bell Street property and the MCS shareholding. The Bell Street property issues concern the liabilities of MCS secured over that property and whether MCS and its related companies, as the primary obligors, are good for the accommodation that NAB has extended to them.
Second question
The second question, the MCS shareholding issue, concerns the purported cancellation of the shares held by the deceased in 2015. Perton was the sole director of MCS when MCS purported to cancel the majority parcel of 53,401 ordinary shares in the capital of MCS beneficially owned by the deceased. Ordinary shares then (and now) could be extinguished pursuant to a buyback scheme or a scheme of arrangement under the Corporations Act, but neither procedure was followed. A share is an item of incorporeal personal property which cannot be cancelled simply by filing a paper with ASIC. The determination of the second question does not entail the determination of a credit issue and bears directly on the contents and size of the estate of the deceased.
Third question
In relation to the third question, the documents produced on subpoena by NAB confirm that the debt secured over the Bell Street property before and after the death of the deceased concerned only facilities extended by NAB to MCS, of which the deceased was a guarantor (along with Perton) prior to his death, but not following the transfer of the Bell Street property into the registered ownership of Perton in May 2017.
What debt is secured over the Bell Street property calls for the construction of NAB documents, and does not entail the determination of a credit issue. The determination of the third question bears directly on the contents and size of the estate of the deceased and is thus an important matter for preliminary determination.
Accordingly, these issues will in all likelihood be resolved by reference to documents They are unlikely to involve the truth of oral evidence, or be compromised by inadequate discovery or inadequate efforts efficiently and faithfully to get in the estate.
Perton’s submissions
Perton submitted that the separate questions should be heard together as part of the trial of the proceeding in the ordinary way. Their resolution depends on resolution of the contested issues in the proceeding concerning ownership of the Eaglemont property, the granting of security by the deceased and Perton over the Bell Street property, ownership of MCS and replacement of the defendant as executor. All these matters are or involve contested questions of fact.
If the separate questions were determined, there would be little or nothing left to try in this proceeding. The application, therefore, for these separate preliminary questions to be heard prior to the trial would substantially render the trial largely otiose. The application for separate preliminary questions to be determined is therefore unjustifiable.
Perton also submitted that:
(a) Walters brought her application for removal of the executor by pleadings requiring a trial with extensive discovery and affidavit evidence which would be tested at trial, along with determinations of the other issues in the proceeding. It is clear that the proceedings raise substantial disputes of fact.
(b) There is no basis for displacing the ordinary position. The question of whether Perton is a suitable executor is inextricably mixed into the central questions at trial including her conduct in relation to assets and liabilities associated with the claims Walters makes.[43] It would be artificial, and result in duplication of work for the Court and the parties, to split out the facts relating to the assets and liabilities for the assets Walters claims an interest from Perton’s conduct as an executor.
(c) The trial of separate questions is contrary to the statutory provisions in the Civil Procedure Act 2010 (Vic) that the proceeding be conducted so as to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute (s 7), and specifically that the proceeding be conducted so as to ensure the costs of the proceeding are reasonable and proportionate (s 24), and so as to ensure that delay is minimised (s 25). Single-issue trials should only be embarked upon when their utility, economy and fairness to the parties are beyond question.[44] Here numerous questions are sought to be tried first. The trial of the separate questions will prolong the litigation, which tends against it being enlivened as a means of quelling the dispute between the parties.[45] The ideals of the separate trial are often illusory.[46]
[43]Vale v Daumeke [2015] VSC 342 [31(l)].
[44]Tepko Pty Ltd v Water Board [2001] 206 CLR 1, 55, per Kirby and Callinan JJ, with whom Gaudron J agreed on these points); see also Murphy v Victoria [2014] VSCA 238 [28.2].
[45]Vale v Daumeke [2015] VSC 342 [31(l(iii))].
[46]Vale v Daumeke [2015] VSC 342 [32(a)]; Tepko Pty Ltd v Water Board [2001] 206 CLR 1, 55, per Kirby and Callinan JJ, with whom Gaudron J agreed on these points); see also Murphy v Victoria [2014] VSCA 238 [28.2].
First question
In respect of the first question, the removal of Perton as executor and trustee of the estate, the existence of a conflict of duty and interest by itself is not enough. In Monty v Delmo Ashley J indicated that it is not every conflict of duty and interest which should result in removal of an executor:[47]
The intention of the testator that the executor be a particular person should not lightly be set aside – whether before or after grant. Again, the will itself may show that the testator was aware that his or her executor would face a potential conflict of duty and interest. In such a case – as may arise, for example, where an executor is also one of the beneficiaries – it would not be right without more, to remove the executor.
[47]Monty v Delmo [1996] 1 VR 65, 83.
Similarly, in Tsaknis v Lilburne[48] where one of the issues was whether there should be a trial of the question of the making of a double grant of probate to a co-executor to whom leave had been reserved, Heenan J said:[49]
All of the discussions of this principle emphasise that it is a serious matter to pass over an applicant for a grant who is an executor named by the deceased because, presumably, the deceased has made his or her choice of executors with knowledge of the person concerned and such a person is generally entitled to a grant of probate… so that exclusion of such a person requires special or stringent grounds…[citations omitted]
[48]Tsaknis as Executor and Trustee of the Estate of Geoffrey Douglas Roland Lilburne (dec) v Lilburne [2010] WASC 152 (Tsaknis v Lilburne).
[49]Ibid, [60].
In this case, the testator's choice of a designated person to be executor implies that the deceased reposed trust in that person and considered her to have been suitable and capable of performing the duties required:[50]
Especially in relation to family affairs where it might be suggested that there is, or might be, a conflict of interest between the executor named and the due administration of the estate, it is necessary to bear in mind that the deceased can be expected to have known of relationships and circumstances existing during his lifetime which might create or lead to any expectation of any such conflict of interest and, to have made the choice of appointee in the light of that knowledge. However, this approach cannot be taken in relation to conduct or circumstances which have arisen since the death of the testator or about matters which the testator could not have been expected to have had knowledge.
[50]Tsaknis v Lilburne [2010] WASC 152 [61]; Monty v Delmo [1996] 1 VR 65; Estate of Rogers v Rogers [2009] WASC 358 [32]; Uniting Church in Australia Property Trust (NSW) v Millane [2002] NSWSC 1070 [9].
The deceased appointed Perton to be his sole executor of his will and trustee of his estate. In his will the deceased ‘directed and declared’ that the defendant was the trustee of the PEI Trust as constituted by deed dated 25 November 2012 and that it was the owner of the Eaglemont property. The deceased expressed the desire that Walters be permitted to use and occupy the Eaglemont property rent free for six months and that PEI Trust vest and that from the vesting of the Eaglemont property and other assets of that trust $200,000 be paid to Walters, $25,000 be given to the deceased’s former wife, Joy Warring, and balance be held in favour of Carolyn (the deceased’s daughter) and Graeme Warring (the deceased’s son), equally. He devised the Bell Street property to Perton, gave a further $10,000 to Walters from the residuary estate to assist her to meet the costs of moving out of the Eaglemont property and distributed the balance of his residuary estate equally to Perton, Carolyn, and Graeme.
Both Monty v Delmo and Tsaknis v Lilburne show that conflicts of interest and duty do not necessarily disqualify an executor who is a beneficiary and that when assessing conflicts it must be taken into account that the deceased can be expected (as here) to have known of relationship and circumstances which might give rise to a conflict. All three of the conflicts alleged by Walters fall into this category, and all of the circumstances arose prior to the testator’s death.
In so far as the applicable principles overlap with the principles associated with replacing trustees, McMillan J recently observed in Re Marsella; Marsella v Wareham (No 2):[51]
In determining whether a trustee should be removed the chief consideration is the welfare of the beneficiaries.[52] The Court will have regard to the security of the trust property, the efficient and satisfactory execution of the trust and the faithful and sound exercise of powers conferred upon the trustee.[53] A breach of trust will not necessarily lead to the removal of a trustee,[54] nor will the existence of a conflict between duty and interest.[55] At times, however, such factors may be sufficient to justify the trustee’s removal.[56] Ultimately, whether the Court exercises its discretion turns upon the circumstances of each case.
[51][2019] VSC 65 [72].
[52]Letterstedt v Broers (1884) 9 AC 371, 385–6; Miller v Cameron (1936) 54 CLR 572, 575.
[53]Miller v Cameron (1936) 54 CLR 572, 580–1.
[54]Re Wrightson [1908] 1 Ch 789.
[55]Porteous v Rinehart (1998) 19 WAR 495, 514.
[56]Monty Financial Services Ltd v Delmo [1996] 1 VR 65, 83.
The first conflict is alleged to arise from the contest as to whether the deceased gifted $658,967.50 to the defendant or whether $600,000 of those monies were advanced to Perton by the deceased to form part of the consideration for the purchase price for the Eaglemont property. There is in fact no real conflict arising here. Perton is the trustee of the PEI Trust and a mere discretionary object (potential beneficiary only) of it. Perton is not a beneficiary of the proceeds of sale of the Eaglemont property under the will of the deceased. In order to show the exercise of powers are outside her discretion under the PEI Trust it would need to be shown that the exercise of power was in bad faith and moreover ‘grotesquely unreasonable’ in nature, not merely unfair or unreasonable.[57] If the Court is satisfied on this, there is no foundation for replacing the trustee. Here, there is no evidence that Perton as trustee of PEI Trust will exercise her discretion in a way which is in conflict with her duty as an executor to consider and if thought fit carry out the direction given by the deceased in the Will in respect of the Eaglemont property.
[57]Re Marsella; Marsella v Wareham (No 2) [2019] VSC 65 [51].
Even if the $600,000 was part of the consideration for the purchase of the Eaglemont property, there is no conflict because Perton has no entitlement to any part of the Eaglemont property under the Will. Further, the interest of the estate (and Perton as trustee) in the Eaglemont property (if any) must be resolved before any final order in the Part IV proceeding. If the property does form part of the estate, then there might be a conflict but that will only be found to exist after the determination of Walters standing to contend that the deceased was entitled to a purchase money resulting trust and whether such a trust arose in his favour. That must occur prior to the Part IV proceeding commencing, or perhaps being finally determined.
The second conflict alleged is that there will be a contest as to whether the PEI Trust or the deceased was the purchaser of the Eaglemont property. The deceased himself declared in his will that the property was owned by PEI Trust. Walters says that the interests of the estate are served by admitting Walter’s allegation that the deceased was the purchaser.
Even if the deceased were the purchaser as alleged, Perton’s role as executor would be to get in the proceeds of sale of the Eaglemont property and distribute them in accordance with the directions in the Will. Perton is not a beneficiary of those proceeds (otherwise than as a discretionary object of the PEI Trust).
The third conflict alleged is that Perton claims the Bell Street property is encumbered with liability for the debt of MCS to NAB, when Walters says it is not. The Bell Street property was bequeathed to Perton so there is therefore no conflict.
Second question
In respect of the second question, namely whether certain shares in MCS form part of the estate, the pleading at present contains a mere assertion that the shares were not validly cancelled in consequence of which they form part of the estate, without any other pleaded basis for that contention. Thus the second question is premature as there is no pleaded basis for it. If the basis is as contended by Walters in submissions (as to which see above at [55]), this should be properly and fully pleaded so that it can be responded to.
If the FASOC is further amended or re-drawn to identify (it currently does not) a basis for contending that the cancellation was not effective, it is likely that the defendant will rely on s 1322(4)(a) of the Corporations Act 2001 (Cth). Under s 1322(6) the pre-conditions for validation of an impugned transaction are not cumulative but rather are several, including “honest error”.
Section 1322(4)(a) of the Corporations Act 2001 permits a person to seek an order from the Court declaring any act, matter or thing purporting to have been done or any proceeding to have instituted or taken (a proceeding does not have to be a legal proceeding) under the Act, or in relation to a corporation is not invalid by reason of any contravention of a provision of the Act or a provision of the constitution of the corporation. Under s 1322(6), such an order can only be made if the act, matter or thing is procedural in nature, or the party acted honestly, or it is just and equitable to make the order.
If necessary therefore, depending on the basis of the allegation, Perton will explain in detail by affidavit what was intended by the transaction and its context. Contrary to Walters’s submissions, it is unlikely therefore that the second question would not entail a determination of a credit issue. This therefore makes this issue unsuitable for a preliminary determination.
Third question
In respect of the third question, Perton submits that to the extent to which the Bell Street property is encumbered, it would be necessary for Walters to plead the basis upon which she contends (implicitly at present) that the guarantor is entitled in equity to be indemnified in respect of a liability under the guarantee. Because there is another guarantor, Perton, this would need to be dealt with in the pleading (in relation to standing issues). The current pleading in [52] of the FASOC should be struck, as Perton pleads. The third question is therefore also premature and the question cannot be answered.
Furthermore, the issue requires resolution of the matters pleaded in paragraphs 47-49 of the Further Amended Statement of Claim and the responding paragraphs in the Further Amended Defence. It concerns the validity of or liability under the registered mortgage to NAB on the Bell St Property securing $2.8m, the mortgage replacing, on a change of registered proprietor in accordance with the deceased’s Will, a mortgage in a similar amount granted by the deceased over the property to NAB during his lifetime.
Consideration
In considering whether any question should be tried separately it needs to be appreciated that:
(a) the usual and preferred course is that all issues of fact and law in a proceeding should be determined at the one time by the Court following a trial;
(b) that to order any of the three questions to be tried separately must be approached with caution;
(c) it is inappropriate to order the trial of a preliminary issue unless its determination will put an end to the proceeding, or where there is a clear line of demarcation between issues and the determination of one issue in isolation from the other issues is likely to save inconvenience and expense.
In this case, Perton’s role in the TEP proceeding is twofold: she is sued as the trustee of the PEI Trust and separately as the executor and trustee of the will and estate of the deceased.[58] The claim against Perton as trustee of the PEI Trust concerns the claim that Walters is the beneficiary of a constructive trust as to either the whole or a part of the Eaglemont property. However, those claims are mixed with a claim that Perton contends Walters has no standing to make, that there is a purchase money resulting trust to which the estate of the deceased is entitled.
[58]In relation to the claims against Perton as executor and trustee, neither party addressed the question of whether the administration of the estate has finished. It seems reasonably clear that the administration has not finished, and I proceed on that basis.
On the face of it, without having heard argument on the question, the contention that Walters has no standing to make a claim, in effect, on behalf of the deceased estate would appear to be correct. However, that remains to be decided. The presence of the claim to a trust over the Eaglemont property in favour of the deceased estate, and the ‘no standing’ defence to it, muddies the demarcation between the constructive trust claims against Perton as trustee of the PEI Trust and the claims against her as executor.
If all three of the proposed questions are ordered to be tried separately, the only causes of action remaining will concern Walters’ claim to the benefit of a constructive trust, or that the deceased estate is entitled to a resulting trust, over the Eaglemont property, and any consequential relief. In short, almost three quarters of this proceeding will be the subject of the separate questions.
The evidence to be given in relation to the proposed separate questions, and the balance of the proceeding (the constructive trust claim) is at present likely to be confined to the main participants, Walters and Perton. It is not known whether there will be any supporting witnesses on either side. There will be a significant number of documents tendered or subpoenaed relating to the removal of Perton, the Bell Street property and the MCS shareholding.
The credit of Perton will undoubtedly be in issue. This is because of the matters raised in my two earlier judgments and the conflicting affidavits sworn by her, the receipt by her of part of the proceeds of the New Zealand house and her claim that those moneys were a gift, her contention that the Bell Street property had to be transferred out of the estate because the NAB required it as security, and no doubt other matters.
But, having regard to how hard these proceedings have been fought, there is little doubt that Walters’ credit will be put in issue as well. That emerges from the affidavits filed by Perton as to the history of the relationship between Walters and the deceased.
Although Walters’ claim for a constructive trust over the Eaglemont property may appear to be factually discrete from the other issues, the evidence in support, so far as the affidavits in evidence indicate, will be given by Walters. The evidence against recognition of such a trust will be given, it presently seems, by Perton. The evidence relating to the Bell Street property and the MCS shareholding will be documentary from Walters perspective. But from Perton’s perspective, her evidence will be vital.
At present, therefore, there is no clear demarcation between the proposed separate questions and the balance of the proceeding. Perton will be giving evidence on all issues and it is undesirable to split that evidence into parts. It seems unlikely that Walters will give evidence with respect to the MCS shareholding and the Bell Street property, but that is unclear.
At this stage, however, I am not in a position to be confident about the facts needed to be determined or proved to decide the separate questions. Because the Court cannot see, on the basis of the material presently before it, that the facts can be properly determined, it is inappropriate to order the trial of the separate question or questions.[59]
[59]Deutsch v Deutsch [2011] VSC 345 [43]; Vale v Daumeke & Ors [2015] VSC 342 [31(i)].
I have set out at some length above the reasoning of the Court of Appeal in Hoh v Ying Mui.[60] The views expressed in that decision on the sequencing of issues for trial is compelling. In this case the separate trial of the three questions proposed is likely to be contrary to furtherance of the overarching purpose under the CPA by –
[60][2019] VSCA 203.
(a) prolonging the timely determination of the proceeding;[61]
(b) increasing the complexity of the case, resulting in a multiplicity of judgments and causing increased cost to the parties; and
(c) causing the disproportionate use of Court resources by both the trial judge and the Court of Appeal should there be an intermediate appeal.[62]
[61]CPA s 9(1)(f).
[62]CPA s 9(1)(g).
The application is for all three ‘separate’ questions to be heard together and before the balance of the proceeding, which mostly concerns the constructive trust claim over the Eaglemont property. It has not been suggested that one or other of the three questions might be heard without the others. And there is good reason for that. They are inextricably intertwined. Nevertheless, some matters are appropriately dealt with under discrete headings concerning each question.
First question
The application for removal of Perton as executor of the will of the deceased is made under s 34 of the A&P Act on the ground that she is unfit to act in the office. The application for Perton to be removed as trustee of the estate of the deceased is made under s 48 of the Trustee Act 1958 (Vic) on the ground, I assume, that it is expedient to appoint a new trustee where Perton has been removed as executor.
It is not unusual for applications under s 34 of the A&P Act and s 48 of the Trustee Act to be combined with the other claims. Here there are also claims relating to the existence of a constructive trust over land that is not presently a part of the deceased estate and claims as to what assets are properly a part of the deceased estate.
The issues relating to what assets are properly a part of the deceased estate will turn on Perton as executor giving evidence in support of her own interest as the beneficiary of the MCS shareholding, that she maintains is hers, and in relation to the Bell Street property. She faces a likely conflict between her duty as an executor and her personal interests in respect of both these issues. In the circumstances of this case, whether that is case a ground for removal as executor on the ground of unfitness is not the issue before me. The issue is whether that question should be separately tried with the two other questions.
The alleged conflicts concerning the MCS shares and the Bell Street property make it important those issues are tried at the same time as the removal application. That is because the grounds for removal as presently advanced are inextricably intertwined with those two questions as the conflicts arise out of them, as well as out of her role as trustee of the PEI Trust in relation to the purchase of the Eaglemont property. This intertwining of the threads that make up all of the claims in the proceeding means there will be no advantage from a separate trial of the issues in this proceeding, putting the Part IV claim to one side.
It seems reasonably clear that in relation to ownership and control of the deceased’s assets, both during his life and by his will, the deceased made his choice of Perton as the director and probably the owner of MCS, which had been his creation, as executor and trustee of his will and estate and, indirectly, as trustee of the PEI Trust. He no doubt did so with knowledge of her strengths and weaknesses. That does not mean that Perton is entitled to ignore or override the interests of others entitled to or interested in the assets. But it does imply that the deceased reposed trust in her and considered her to be suitable and capable of performing the duties required.
There have already been two considered reasons for decision in this and the eviction proceeding. For the TEP proceeding to be divided into the discrete questions and the balance of the proceeding will unduly, and in my view unjustifiably, prolong the proceedings. It may be true that a determination of the separate questions may advance the prospects of settlement of the balance of the proceeding, but having regard to the history of these proceedings generally that prospect may not be great. That is especially because one of the important question from both parties’ perspective is the ownership of the Eaglemont property which will be left aside for an indeterminate time.
At the heart of the reasoning advanced by Walters is the proposition that the size of the estate ought to be determined before the Part IV proceeding is conducted. That can be done in this proceeding in advance of the trial of the Part IV proceeding and orders can be made that to the extent relevant the evidence given in this proceeding also be evidence in that proceeding.
Walters contends that if the removal of Perton is tried as a separate issue and resolved in favour of Walters, and an independent administrator is appointed, then proper discovery will be made. It is unclear that the discovery by Perton is at present unsatisfactory. There were certainly claims earlier this year about the failure of Perton to make proper discovery and that fact, plus the fact that she made the bankruptcy application, were in part the reason that McMillan J gave specific leave to Walters to issue subpoenas directed to Perton and the NAB.
In Perton’s application to set aside those subpoenas, the subject of reasons given earlier this year,[63] a ground raised by Perton was that the subpoena to her was being used as a substitute for discovery. I rejected that submission in the particular circumstances of the case, for the reasons given at the time.[64] The result of that earlier decision was that Walters’ legal advisors were able to inspect a range of documents produced both by Perton but also by the NAB that relate to the Bell Street property and the assets and liabilities of MCS. If there is still discovery to be sought from Perton, then these issues are not ripe for determination.
[63]Walters v Perton [2019] VSC 356.
[64]Ibid, [49]–[64].
It is also submitted by Walters that if the other two questions are tried, the extent of the assets in the deceased estate will be known, and negotiations for the resolution of the constructive trust claims and the Part IV proceeding will be conducted on a footing uncompromised by personal interest, thus making a settlement of the balance of the claims much more likely. The desirability that Perton and Walters give their evidence at the one time in relation to all issues, including the constructive trust over the Eaglemont property, cuts across this proposition to the extent it seeks to leave the constructive trust issue to be determined later. As I have said, the Part IV claim may be appropriately heard and determined (or compromised) at a later time when the assets of the estate are better known.
Second question
Perton raises by the FAD a pleading issue in respect of this question. It concerns the allegation by Walters that the MCS held by the deceased in 2015 were not cancelled by the transactions previously referred to or by any other transaction prior to his death, in consequence of which those shares form part of the estate of the deceased. It is pleaded in response that the allegation does not identify a basis and is vague and embarrassing and should be struck out. In submissions Counsel for Walters identified the limited circumstances arising under the Corporations Act in which shares may, in effect, be cancelled. Walters contention is there is no evidence that the correct mode of achieving the reduction of capital or cancellation of the shares was adopted by or on behalf of Perton.
To make things worse, so far as bedding down this issue for separate determination, Perton gives notice that if the FASOC is further amended to correct the alleged pleading defect, it is likely she will rely on s 1322(4)(a) of the Corporations Act 2001 (Cth) to validate the transaction.
It is also unclear on the pleadings how Walters claims to have standing to make a claim that in substance is one that resides in the deceased estate. It may turn out that before the trial of this proceeding that question is more clearly focussed.
There are therefore good reasons to conclude that the issue is not ripe for separate determination.
Third question
It is common ground that Perton has transferred the Bell Street property to herself pursuant to the devise of that property to her in the will of the deceased. Although she contends, and the affidavit material tends to confirm, that the process of distributing the property started soon after the grant of probate, the fact is that the property was transferred within 6 months after the grant of probate and registration of the transfer took place after notice of Walter’s claim was given.
Under s 99 of the A&P Act an application to the Court for a family provision order must be made within 6 months after the date of the grant of probate of the will, or of letters of administration, as the case may be. The law is clear that the executor should not distribute any part of the deceased estate until at least 6 months has expired since the grant of probate. The consequence in equity of an executor distributing an estate before the 6 month period has expired is twofold:
(a) It does not defeat the power of the Court to make an order that provision be made for the applicant out of the estate which the executor has purported to distribute.[65]
(b) The executor may be personally liable to a successful applicant who suffers loss as a result. In other words, the executor is at risk if she makes the distribution.[66]
[65]Re Jones; Noonan v Jones [1978] VR 272, 273.
[66]In re Simson, Deceased;Simson v National Provisional Bank Ltd [1950] 1 Ch 38, 43; Blunden v Blunden [2008] SASC 286 [24]; Curran v McGrath [2010] QCA 308 [48]; Public Trustee v Bebich (as executor of the estate of Yanja Bebich (Dec) [2014] WASC 340 [15] (Bebich); Younan v Younan [2015] VSC 549 [9].
However, the executor is not prevented from doing so. Le Miere J described the position in Bebich as follows:[67]
[T]he executor is under no legal prohibition not to distribute the estate even if the executor has notice of a pending claim under the Family Provision Act. The grant of probate is the executor's authority to deal with the property of the estate in accordance with the will. The application for provision under the Family Provision Act may be unsuccessful. In that event the executor will not be liable for having distributed the estate in accordance with the will. However, the effect of the authorities to which I have referred is that an executor who distributes with notice of an application under the Family Provision Act may be personally liable to a successful applicant for family provision who suffers loss as a result. It is in that sense that an executor who makes the distribution in these circumstances is ‘at risk’.
[67]Bebich [2014] WASC 340 [16].
The pleading that the Bell Street property is an asset of the estate must proceed on the basis that the jurisdiction of the Court to make further provision under Part IV of the A&P Act, in a case commenced within 6 months after the grant of probate, extends to the assets that the deceased might at his death have disposed of by his will and which came, or could have come, into the hands of the executor by reason of the grant of probate, even if, at the time the order is made, the assets have been distributed to the intended beneficiaries. The Court’s power to make an order, operative as a codicil, extends to all property of which the testator had to dispose, notwithstanding that it has been handed over or transferred to the intended beneficiary. Whether the Court should disturb a distribution rests in the Court’s discretion.[68]
[68]Easterbrook v Young (1977) 136 CLR 308, 318; Re Jones; Noonan v Jones [1978] VR 272, 273–4.
There is also a question that is not agitated presently on the pleadings as to the standing of Walters to make a claim that the Bell Street property is or is not a part of the estate. Such questions arise from time to time in the context of Part IV proceedings, where the issue may or may not be determined depending on the circumstances. Whether that issue is ripe for determination in this proceeding is unclear.
Conclusion
For the above reasons, this is not a case where it is appropriate to order the trial of the proposed separate questions in this proceeding.
After the parties have had an opportunity to consider these reasons, I will hear their submissions as to the appropriate orders to be made and make directions for the future conduct of the proceedings.
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