Profilio v Profilio [1999] NSWSC 657 (28 June 1999)

Last Updated: 6 July 1999

NEW SOUTH WALES SUPREME COURT

CITATION: Profilio v Profilio [1999] NSWSC 657

CURRENT JURISDICTION: Equity

FILE NUMBER(S): 4902/98

HEARING DATE{S): 28/06/99

JUDGMENT DATE: 28/06/1999

PARTIES:

Lorraine Profilio & 2 Ors (Plaintiffs)

Antonio Profilio (Defendant)

JUDGMENT OF: Bryson J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

M. Willmott for Plaintiffs

R. Darke for Defendant

SOLICITORS:

Messrs Eric Butler for Plaintiffs

Messrs John R. De Mattia & Co. for Defendant

CATCHWORDS:

Probate - revocation of grant - where there was conflict between two executors and the defendant did not wish to contend with the claim for his removal, the Order removed him from office as executor without prejudice to the continuing executorship of the other: the existing grant was not revoked. Consideration of the inherent power to remove an executor.

ACTS CITED:

DECISION:

See para 38

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

BRYSON J.

MONDAY 28 JUNE 1999

4902/98 LORRAINE PROFILIO & 2 ORS v

ANTONIO PROFILIO

JUDGMENT

1 HIS HONOUR: These proceedings relate to the estate of the late Christopher Profilio who died on 26 March 1997. His last Will dated 9 May 1968 appointed as executors his wife Mrs Lorraine Profilio, who is the first plaintiff, and his brother Mr Antonio Profilio, who is the defendant. They obtained probate of the Will from this Court on 9 March 1998.

2 The Will left the property of the testator on trust for payment of duties and debts, and the balance of the estate on trust to pay the net income to Mrs Profilio during her lifetime, or until she should remarry (and that has not happened), and after her death or remarriage for the testator's children in equal shares.

3 There was an alternative provision which was to operate in favour of the children if Mrs Profilio predeceased the testator, but that did not happen.

4 The Will also conferred powers on the trustees.

5 In their probate application the executors filed an inventory of property, the total value of which they gave at $1,956,174.50. The principal assets owned by the testator were commercial buildings in High Street, Penrith, in which he owned a half share as tenant in common, and Mr Antonio Profilio owned the other half share. He owned several other investment properties also as tenant in common in equal shares with Mr Antonio Profilio, and he owned a house in Stafford Street Penrith outright.

6 The testator had a number of other assets, including undivided half shares in the estates of three deceased relatives whose assets were situated at Lipari in Italy, and he owned a quarter share in the estate of another relative which was situated in Australia; the estate owns a house in Coles Street, Concord. He had several bank accounts, one in his own name, and two which he conducted jointly with Mr Antonio Profilio, in which he owned half shares.

7 There were no duties, having regard to the time of his death, and debts, if there were any, were attended to readily. The administration of the estate consists largely in management of the investment properties and the monies arising from the income on them, and those investments are joint ventures with Mr Antonio Profilio, who is both an executor and also their co-owner. That is to say, he has two different interests to bring to bear on management and investment decisions.

8 Administration of the estate did not proceed on a basis which was satisfactory in the view of the first plaintiff.

9 In the course of 1998 she and the second and third plaintiffs, who are the children and the only children of Mrs Profilio and the testator, came to some arrangement in which they proposed to resettle the beneficial interest in the estate assets on some basis which was less restrictive of Mrs Profilio. She sought to obtain Mr Antonio Profilio's concurrence in these arrangements, but his concurrence was not forthcoming.

10 On 4 December 1998 the plaintiffs issued the summons in these proceedings, and made claim (1) for an order requiring Mr Antonio Profilio to execute documents and do other things necessary to give effect to the resettlement arrangement, and claim (2) for an order that he be removed as the executor and trustee of the estate.

11 The plaintiffs asked at the outset of the proceedings for urgent interlocutory relief and that application came before me on 16 December 1998. The application only went a little distance when an arrangement was made between the parties, and I was informed that Mr Antonio Profilio's counsel had handed the plaintiff's counsel a signed withdrawal form enabling her to withdraw a sum of about $120,000 from an estate account. I was also told that some arrangements had been made for the preparation of estate accounts, probably in January 1998, and for their submission for examination. It is the plaintiff's evidence that until then only very small sums were actually available to her out of the estate. The payment made put an end to the urgency of the application.

12 The summons came before me for directions on 19 March 1999 when there was some discussion, not at all conclusive, about the state of progress in the preparation of accounts. Then, on 18 June the plaintiffs applied for expedition, and I made the appointment for hearing today.

13 The plaintiffs proceeded today with claim (2), the claim that the defendant be removed as executor and trustee.

14 For good order it would have been as well that there be two applications, one made in the probate proceedings relating to the executorship, and one made in these proceedings and relating to the trusteeship. However, since the proceedings were commenced there have been changes in the divisional arrangements, and the need to separate probate applications from other business related to administration of estates has less force than formerly.

15 The case as set out in the affidavits which have been read is, to summarise it severely, to the effect that there has not been ready cooperation between the executors and trustees in the administration of the estate, so that the administration of the estate and the realisation of Mrs Profilio's interest in it have been stultified. The case was not put by her counsel on any basis of active misconduct by the defendant. However the plaintiffs' evidence shows very lengthy correspondence between solicitors and also accountants representing the parties with very little result. Although Mrs Profilio has incurred liability for income tax on estate income she had not, by 4 December 1998, received anything except $2,000 from the defendant about the end of 1997 and $4,320, which an estate agent had paid her directly as rent on one of the investment properties on one occasion. She had little other income and was living in what were, in the light of her entitlements, very poor circumstances. Her evidence was that she had suffered enormous emotional stress as a result of her attempts to settle estate matters; that she could not go on any longer, felt sick thinking about the matter, and was depressed.

16 In later evidence Mrs Profilio said that she no longer had faith in the defendant because in many situations he appeared to her to be looking after his own interests rather than the estate. She said she was totally stressed and frustrated by the lack of input she had had in the decision making process

17 I have accepted this evidence as establishing her own perceptions rather than proceeding to any finding on the objective facts which may underlie her perceptions.

18 At the outset of the proceedings the defendant's counsel made an opening statement establishing that the defendant does not wish to contend with the plaintiffs on the question of his holding office. His counsel told me that the defendant had made open offers to take various steps, including conveying the estate interest in the properties to others. His counsel told me that he had undertaken the office of executor seriously and had endeavoured to carry out his duties properly. Counsel told me that the defendant does not accept the criticisms to which he has been subjected and does not accept that he has done anything improper, but accepts that the first plaintiff no longer wishes to proceed with the administration of the estate in a joint endeavour with him.

19 The defendant proposed that rather than contesting the hearing on factual matters he would consent to the revocation of the grant of probate, which would not, of course, solve all problems relating to the estate, and he would then attend to any consequential questions relating to the administration of assets up to the present.

20 The defendant's counsel pointed out that the course which he outlined would lead to the court being required to consider appointing other representatives and attending to accounting for monies in the estate, including income up to the present.

21 In a general way the position outlined by the defendant's counsel was accepted by the plaintiffs' counsel.

22 This appears to me to represent what courts have long regarded as the appropriate outcome for disputes about office-holding by trustees. This is shown by the judgment in Letterstedt v Broers (1884) 9 App Cas 371, in which the Privy Council, in expressions which have often been repeated by later judges, urged compromise rather than conflict.

23 An outcome which does not involve a contested decision appears to me to be appropriate and welcome.

24 The Court's powers to remove one of several trustees and to appoint others is well established. It is not, however, so clear that a court can remove one of two executors where there has been a grant of probate to them both.

25 There clearly is a power in a Court of probate to revoke a grant of probate where conflict or other circumstances have made it inoperative. The existence of this power is well established by the decisions of the Court of Appeal of New South Wales in Bates v Messner (1967) 67 SR(NSW) 187 and Mavrideros v Mack (1998) 45 NSWLR 18.

26 Although there was some basis in well-regarded textbooks for another view, the view adopted in New South Wales has been based on observations of Jeune P in In the Goods of Loveday [1900] P 154 at 156, in a passage which is set out in Mavrideros v Mack by Sheller JA at pages 101 and 102, in these words:

"After all, the real object which the court must always keep in view is the due and proper administration of the estate and the interests of the parties beneficially entitled thereto; and I can see no good reason why the court should not take fresh action in regard to an estate where it is made clear that its previous grant has turned out abortive or inefficient. If the court has in certain circumstances made a grant in the belief and hope that the person appointed will properly and fully administer the estate, and if it turns out that the persons who are appointed will not or cannot administer, I do not see why the court should not revoke an inoperative grant and make a fresh grant".

27 This passage was adopted and commented on by Asprey JA in Bates v Messner at 191-192 and the Court of Appeal acted on it in its recent decision. Asprey JA referred to the Court's power as an inherent jurisdiction to revoke a grant.

28 Of this passage and the later exposition I would make these observations. The object of the power is the leading consideration in its exercise: that is, the due and proper administration of the estate and the interests of parties beneficially entitled. An order which attains that object is authorised by the inherent power, and there is nothing in the nature of the inherent power which limits the form which such an order may take. There is no expression of any limit on the power of the Court to remove an executor, and the Court's attention is not restricted to cases where the executor himself is in some way impeached or shown to have misconducted himself, although in the nature of things most instances which occur involve some such element.

29 Attaining the real object referred to appears to me to mean that the power can be exercised in cases where a grant of probate and the responsibility conferred on the executors are not effectual for a reason such as exists in this case, where there is simply an incapacity to achieve cooperation, and long continuance of discussion about what course should be taken without effectual outcomes. The unsatisfactory nature of the events in this case is to my mind well illustrated by the circumstances which occurred on 16 December 1998, when after hardly any money had been available to the life tenant for about 20 months, a large sum became available when the parties faced each other in the courtroom. In my judgment that kind of ineffectuality of administration cannot be allowed to continue.

30 The correspondence in Exhibit A is a full demonstration of the difficulties of administering the estate and the lack of practical reality about any expectation of efficiency. The correspondence shows complaints on both sides. Each believes that he or she is caught up in a stalemate. The defendant cannot get large sums to which he believes himself entitled out of bank accounts which hold proceeds of the shared investments, while the first plaintiff is under a similar difficulty. Cooperation is needed to unlock the keys of the bank accounts, and cooperation is not forthcoming.

31 There was lengthy correspondence between solicitors and also between accountants, and at times there were some testy expressions in that correspondence. However in recent days some common ground appears to have been established between the two firms of accountants. This can be understood from their correspondence including the last three items: letter from Woodward Scarfidi Anderson to Lawrence Witt Atkins, 24 June 1999, and the reply of 25 June 1999 (being the last documents in Exhibit A) and a further letter of Lawrence Witt Atkins of 18 June 1999 produced with the first plaintiff's affidavit sworn today. The accountants have reached and recorded common ground with respect to entitlements to monies up to 31 January 1999. Then I have been told in Court by counsel that there is common ground covering a further period to 22 February 1999.

32 I have been asked to make, and I feel I should make, directions which will be based on the agreed position presented to me and will establish entitlements at least as far as the directions go, that is up to 22 February 1999 much.

33 It is not known to me that there has ever been a case in which the Court's power to remove an executor has been applied to a grant of probate which was first made to two executors, so that one of them is to be removed while the other is to continue under the earlier grant of probate. Counsel have not been able to refer to any case in which that has been done. Discussion in texts and judgments tends to fall into dealing with the matter in hand as the revocation of the grant of probate, and revocation of the grant has been the outcome in the case law which I have seen. It seems to me however that revocation of the grant of probate is not the essential subject matter. The essential subject matter is the removal of an executor. Where the Court's inherent power is brought to bear on a grant which was originally made to more than one executor there is no departure from the real object of the inherent power, but rather a fulfilment of it if one executor is removed while the other is left to act under the earlier grant.

34 There is some practical convenience in doing this, as it would obviate any need for the continuing executrix to make a fresh application, which would not be contentious and would only establish matters again which she earlier established.

35 It is significant for my decision to proceed in this way that the present proceedings, while they are not based on consent of the parties to the order which I propose to make, are not now contentious. The defendant does not wish to contend against the plaintiffs' claim for his removal.

36 The orders which I make will not, in my understanding, have any effect on the validity of any step which has been taken by both executors in the executorship up to the present time. The order will not be in any sense retrospective and will not form a basis for questioning the validity of anything they have done.

37 The orders are: In probate proceedings 103116 of 1998 I order that Antonio Profilio, the second named executor be removed from the grant of probate dated 9 March 1998 with effect on and from 28 June 1999, and without prejudice to the continuing executorship of Lorraine Profilio.

38 In proceedings 4902 of 1998

1. I order that the defendant be removed from office as trustee of the trusts of the Will dated 9 May 1968 of the late Christopher Profilio who died 26 March 1997.

2. I order that Lorraine Profilio continue in office as trustee of those trusts.

3. I order that Christine Profilio and Glenn Profilio be appointed new trustees of those trusts to hold office with the continuing trustee.

4. I direct that the following monies be paid out of the joint bank accounts in which the estate of the testator is interested, namely, National Australia Bank accounts 45-447-7575, 33-987-6087, 02-787-5683 and Term Deposit 680851-7410,

To the defendant $487,367.46.

To the continuing new trustees $320,901.96.

5. I direct that the balance of the monies remain in those accounts and be applied in accordance with the entitlements thereto to be established by agreement among the parties or by further order of the court.

6. I order that the costs of each party of these proceedings be paid out of the assets of the trust.

7. Each party has liberty to apply on 5 days notice.

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LAST UPDATED: 02/07/1999