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Finlay v Tucker [2015] NSWSC 560 (14 May 2015)

Last Updated: 27 May 2015



Supreme Court
New South Wales

Case Name:
Finlay v Tucker
Medium Neutral Citation:
Hearing Date(s):
13 & 14 October 2014
Date of Orders:
14 May 2015
Decision Date:
14 May 2015
Jurisdiction:
Equity Division
Before:
Slattery J
Decision:
See paragraphs [122] - [124].
Catchwords:
SUCCESSION – wills, probate and administration – construction and effect of testamentary disposition – construction of will – where executor had solely occupied estate property left to beneficiary before that beneficiary’s death – whether will created a life estate or a right of residence for beneficiary – whether beneficiary was therefore responsible for expenses incurred in relation to estate property – whether payment of proceeds from sale of estate property to beneficiary authorised by will – whether alleged payments for maintenance of estate property were in fact made – whether beneficiary failed to earn income on estate property to detriment of subsequent beneficiaries – whether executor entitled to commission.
Legislation Cited:
Cases Cited:
Estate of JA Gilmore, deceased [2014] NSWSC 1263
Fell v Fell [1922] HCA 55; (1922) 31 CLR 268
Foley v Cannon (1936) 53 WN (NSW) 223
Guazzini v Pateson [1918] NSWStRp 39; (1918) 18 SR (NSW) 275
Hyde v Holland [2003] NSWSC 733
In the Will of Henry Sherringham [1901] NSWStRp 53; (1901) 1 SR (NSW) (B&P) 48
In the Will of James Greer [1911] NSWStRp 23; (1911) 11 SR (NSW) 21
In the Will of Oddie [1976] 1 NSWLR 371
James v Commonwealth Bank of Australia [1992] FCA 420; (1992) 37 FCR 445
Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439
Perpetual Trustees WA Ltd v Darvell [2001] WASC 123
Re Craig (1952) 52 SR (NSW) 265
Re Estate of Lawrence (deceased) [2003] NSWSC 914
Re Estate of Wilson, deceased (1987) 11 NSWLR 493
Re Hillier, Primrose v Kewley [1939] NSWStRp 4; (1939) 39 SR (NSW) 71
Re Keenan; Ford v Keenan (1914) 30 WN (NSW) 214
Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642
Texts Cited:
RP Meagher, JD Heydon & MJ Leeming, , (4th ed 2002, LexisNexis, Butterworths).
Category:
Principal judgment
Parties:
First plaintiff: Tamara Jodie Finlay
Second plaintiff: Andrew Ian Macdonald
Third plaintiff: Gordon William Macdonald
Fourth plaintiff: Megan Jane Magill
Fifth plaintiff: Rebecca Michelle Spears
Sixth plaintiff: Angela Leith Tucker
Defendant: Warren Frederick Tucker
Representation:
Counsel:
Plaintiffs: A. Scotting; Ms E. Arulrajah
Defendant: M Pringle

Solicitors:
Plaintiffs: Alistair Woodward Little, TressCox lawyers
Defendant: Geoffrey William Provest, Provest Law
File Number(s):
2013/129009
Publication Restriction:
No

JUDGMENT

  1. In these proceedings the six grandchildren of a testator who died more than thirty years ago seek to finalise estate accounts with the executor in relation to the executor’s administration of the estate during the lifetime of the testator’s widow.
  2. Mr A. Scotting of counsel, as his Honour then was, together with Ms E. Arulrajah appeared for the grandchildren, the plaintiffs. Ms M. Pringle of counsel appeared for the defendant, the executor.
  3. The parties agreed on many of the facts. The agreed facts are set out in the section headed Factual Background below, together with the Court’s findings on some other matters in dispute.

Factual Background

  1. Frederick Ralph Tucker (“the testator”) died on 19 February 1982. He was survived by his wife Marjorie Jean Tucker, his son Warren Frederick Tucker and his daughter Jillian Elizabeth Newbold and their children, his six grandchildren.
  2. As all the parties to these proceedings come from the one family, the Court will call them by their first names in these reasons, without intending disrespect to any family member.
  3. The testator left a will dated 22 January 1982. Probate of the will was granted to his son Warren as executor on 18 April 1987.
  4. Under the will (clause 4) the testator gave his widow Marjorie the right to occupy a property in Livingstone Avenue, Pymble (“the Pymble property”) and charged the income from his estate with the payment of maintenance repairs, rates and taxes relating to the Pymble property. The will further specified that the executor could sell the Pymble property provided he found another house for Marjorie’s occupation.
  5. The testator left his residuary estate to his grandchildren living at the date of his death. These grandchildren are the six plaintiffs in these proceedings. Warren had a further child, Kathryn Elizabeth Tucker (“Kathryn”), born on 5 May 1992, for whom the will did not provide.
  6. Five years after the testator’s death the estate sold the Pymble property in June 1987 for $171,000. Simultaneously, the estate purchased a new townhouse home unit for the widow Marjorie in a new development, The Peninsula, in Yamba on the north coast of New South Wales (“the Yamba unit”) for $120,000. These two transactions settled simultaneously on 22 September 1987. Mr Paul Hargreaves, a solicitor from Paul R Hargreaves & Co, acted in relation to the sale of the Pymble property and the purchase of the Yamba unit.
  7. From the approximately $51,000 difference between the sale proceeds of the Pymble property and the purchase price of the Yamba unit, $15,785.96 remained in the estate and was invested in a term deposit as the estate’s capital. The estate also consisted of shares in Lend Lease Corporation Ltd. The balance of approximately $35,000 was applied towards Marjorie’s needs and other expenses and outgoings. Of that amount, a sum of $20,000 was the subject of contest between these parties.
  8. Warren commenced unrelated litigation against Mr Hargreaves and others in 1996 in the Federal Court of Australia about a commercial venture among them. This litigation was settled in 2001. Warren claims that as a result of this dispute Mr Hargreaves did not return all of the estate’s files to him.
  9. Warren exhausted the estate’s remaining capital (in the sum of $25,556.27) in the course of funding the outgoings for the estate realty between 1987 and 2000. He took the view that he was entitled to expend the balance of the estate’s capital this way in order to support Marjorie. For example he sold the estate’s 443 Lend Lease shares in 1997 generating net proceeds of $11,845.69.
  10. About seven years after the purchase of the Yamba unit, in late 1994, Warren advised his sister, Jillian that the monies invested on behalf of the estate had been fully expended. He requested she assist him with payments relating to the Yamba unit.
  11. That assistance was not immediately forthcoming. But in about December 2002 the plaintiffs took over payment of the outgoings relating to the Yamba unit, in particular, the payment of council rates, strata levies and gardening fees.
  12. Marjorie could not care for herself beyond the middle of 2004. On 28 September 2004 she was admitted to a nursing home, Caroona Hospice, at Yamba for respite care. From 1 January 2005 she was placed permanently at Caroona in the secure dementia unit. She never returned to reside at the Yamba unit after that date, although she did visit it on weekends for a period. It is agreed that the unit was unoccupied from the time she entered Caroona on 28 September 2004. Warren says that the Yamba unit was in a very poor state of repair when Marjorie was admitted to Caroona.
  13. On 28 October 2008, almost four years after her admission to Caroona (an agreed period of 199 weeks), Warren moved into the Yamba unit. He claims he did so at Marjorie’s request. But this is highly questionable as by then Marjorie had been in a secure dementia unit for almost four years. He did not pay rent to the estate for his occupation between 28 October 2008 and Marjorie’s death in September 2012.
  14. Warren says that upon his moving in he undertook repairs at the Yamba unit to rectify damage caused by a leaking roof and rat infestation. No doubt there was some work to be done to make habitable a unit that had been unoccupied for a long period.
  15. In 2009 the plaintiffs ceased paying the expenses and outgoings in relation to the Yamba unit. They took the view that as Warren was in occupation of the unit he could meet these expenses. Overall from the period 2002 to 2009, when the plaintiffs were paying for Yamba unit outgoings, Jillian says, and it is now agreed, that the plaintiffs met a cumulative total sum of $33,906.86 in estate outgoings on account of council rates, strata levies and repairs and maintenance to the unit.
  16. Marjorie died on 3 September 2012. Warren says that shortly after that time he offered to pay rent for his occupation. But whether that is true or not it is agreed that he did not pay at any time before he vacated the Yamba unit.
  17. The plaintiffs commenced these proceedings in April 2013 to require Warren to transfer the Yamba unit to them and to ensure he finalised the administration of the estate.
  18. Six months later, on 13 November 2013 Warren vacated the Yamba unit. He transferred the unit to the plaintiffs the same month and the plaintiffs sold it in April 2014.
  19. The parties agree that Warren’s total period of occupation from 28 October 2008 until 13 November 2013 was a period of 263 weeks. Of that 263 week period the sub-period after Marjorie’s death from 3 September 2012 to 13 November 2013 was a period of 62 weeks.
  20. The plaintiffs no longer need to press for the relief for the transfer of the Yamba unit to them. After its sale they hold the balance of the proceeds of the sale of the unit as security for the payment of executor’s commission to Warren and for the reimbursement to Warren of estate expenses properly paid by him.
  21. Throughout his administration of the estate Warren occasionally corresponded with Jillian and the plaintiffs about the estate’s financial affairs. Some of this correspondence is relevant to the issues for trial and is set out below.

Agreed Outgoings Figures

  1. The parties have also agreed on the total amount of several categories of expenses incurred in respect of the Yamba unit and the proportion of each such category of expenses that was paid respectively by Marjorie, by the plaintiffs, and by Warren.
  2. (i) Body Corporate Levies. The claim for the total amount of the body corporate levies payable for the unit is $36,319.23, of which the sum of:

(a) $16,460.40 was paid by the plaintiffs;

(b) $2,588.94 was paid by Marjorie; and

(c) $17,269.89 was paid by Warren.

  1. The sum of $17,253.56 for body corporate levies is referrable to levies made during the period of Warren’s occupation of the unit.
  2. (ii) Council Rates. The claim for the total amount of council rates payable for the unit is $25,221.88, of which the sum of:

(a) $6,798.53 was paid by the plaintiffs;

(b) $4,725.13 was paid by Marjorie; and

(c) $13,698.22 was paid by Warren.

  1. The sum of $9,463.42 for council rates is referrable to the period of Warren’s occupation of the unit.
  2. (iii) Estate Improvements. The claim for the total amount for estate improvements payable is $11,147.00 of which the sum of:

(a) $11,025 was paid by Warren; and

(b) $122.00 was paid by Marjorie.

  1. (iv) Bank Charges. The claim for the total amount of bank charges incurred by the estate and described as “miscellaneous estate expenses” is $35.85.
  2. (v) Insurance. The claim for the total amount of insurance payable is $2,536.63 of which the sum of:

(a) $2,129.04 was paid by Warren; and

(b) $407.59 was paid by Marjorie.

  1. All of the insurance premiums paid were paid during Warren’s occupation of the unit.
  2. (vi) Electricity Charges. The claim for the total amount of electricity charges is $14,776.41 of which the sum of:

(a) $12,221.00 was paid by Warren; and

(b) $2,545.41 was paid by Marjorie.

  1. The sum of $9,788.09 was incurred for electricity charges during Warren’s occupation of the unit.
  2. Warren does not press any claim for telephone charges.

The Issues for Trial

  1. The parties agreed upon six issues for trial, under which they organised their submissions. Those six issues range from the construction of the will to the application of particular monies in estate administration. As these reasons will show, issues four and five were developed in the course of oral submissions. The six issues are the following:
  2. These issues for trial are dealt with below in this order.

(1) What is the Proper Construction of Clause 4 of the Will

  1. The first question is the proper construction of clause 4 of the will. The testator’s will was not complex. After revoking prior wills (clause 1) and appointing Warren as executor and trustee (clause 2) the testator gave the whole of his estate to “such of the children of” Warren and Jillian as shall be living at the date of the testator’s death in equal shares as tenants-in-common (clause 3). Then clause 4 provided in full as follows:
“4. PROVIDED THAT I direct that my wife shall during her lifetime have the right to occupy any house being the matrimonial home of which I am seized as at the date of my death and that during her lifetime she shall not be responsible for any payments for maintenance, repairs, rates or taxes in relation to the said property and the same shall be applied out of the income from my estate AND I FURTHER DIRECT that my trustee shall have the right to sell such home being the matrimonial home as at the date of my death PROVIDED THAT another house is bought in lieu thereof for my wife’s occupation.”
  1. The plaintiffs submit that on its proper construction clause 4 conferred on the widow a mere right of residence in the Pymble property and not a life estate. The defendant, Warren, contends that it conferred a life estate.
  2. The principles governing the construction of wills in relation to life estates and rights of residence are well settled. Isaacs J summarised the relevant principles in Fell v Fell [1922] HCA 55; (1922) 31 CLR 268 at 273-6. And see also Hyde v Holland [2003] NSWSC 733 (“Holland”) at [24] – [28].
  3. Life Estate/Right of Residence Submissions. The plaintiffs’ submissions may be shortly stated. First, they submit the formulation of clause 4 is unique and does not readily fit within any of the decided cases on the words necessary to establish a life estate or a right of residence. They contend that Marjorie’s clause 4 benefit is referrable to “the matrimonial home”, the home she shared with the deceased, over which she would have an expectation to continue to reside. The permitted clause 4 substitute for that matrimonial home, is for the trustee to provide an alternative house for her to live in as her home. In that context the provision of money to regulate outgoings was to provide her with a secure place of residence, not to provide her with a life estate.
  4. Secondly, the plaintiffs submit that the testator’s real intention was to provide Marjorie with “a residence to live in” rather than a full life estate is beyond doubt, when it is considered that those were the exact words the testator used at a time in a handwritten note he made close to the execution of his will. The plaintiffs say that handwritten note is the best evidence of what was in the deceased’s mind, when he used the words in clause 4: see Holland at [24].
  5. It is not in contest that if the Court were to decide that Marjorie only had a right of residence and not a life estate, Warren as executor was in breach of his fiduciary duty to the plaintiffs by failing to rent out the Yamba unit and must now account to the estate for rent forgone after Marjorie ceased to permanently reside in the unit from about 1 January 2005.
  6. But Warren’s argument that Marjorie had a life estate, rather than a right of residence, is the more persuasive. Warren submits that Marjorie had a life estate because clause 4 uses the expression “right to occupy” rather than conferring “a right of residence”. I accept that the testator’s use in clause 4 of “right to occupy” and “my wife’s occupation” are sufficient to confer a life interest on Marjorie. A brief survey of relevant authority supports this analysis.
  7. In Re Keenan; Ford v Keenan (1914) 30 WN (NSW) 214 (“Keenan”), Simpson CJ in Eq said at 215:
“Upon principle I should have said that the question whether [a person in the position of the present plaintiff] has only a right to occupy one of the cottages [on land the subject of those proceedings], or has a right to let it during her life, turned on the words of gift. If the words used, or anything in the Will, imply that a personal right only is given, the gift must be confined to that. A direction that a person may reside or live in a house prima facie confers a personal right for a man cannot reside by deputy. But a right to use and occupy, or to occupy only, stands on a different footing for a man can 'occupy' by himself or a tenant. ..."
  1. In Re Hillier, Primrose v Kewley [1939] NSWStRp 4; (1939) 39 SR (NSW) 71 (“Kewley”), Long Innes CJ in Eq said at 74:
“I think there is no doubt that a devise of the ‘use and occupation’ of, or a direction in a will that a person may ‘use and occupy’, a property prima facie confers a life estate and will entitle the donee not only to personally reside in the property but also to receive the rents thereof.”
  1. Later in Perpetual Trustees WA Ltd v Darvell [2001] WASC 123 (“Darvell”) Wheeler J said:
"The words "occupy" and "use" are both words tending to suggest that what is intended is not a mere right to reside but the conferral of a life interest: see Gibbons v Gibbons [1920] 1 Ch D 372, Ford v Keenan (1914) 30 NSW WN 214, Lehman v Haskard, unreported; SCt of NSW; Equity Div; 29 August 1996."
  1. More recently in Estate of JA Gilmore, deceased [2014] NSWSC 1263 (“Gilmore”) at [26] – [41] Lindsay J construed as a life estate a clause in favour of a widow in somewhat similar terms.
  2. The plaintiffs contend in reply that despite authorities such as Keenan at 215, the use of the words “right to occupy” and “wife’s occupation” in clause 4 are not determinative of whether clause 4 creates a personal right or a life estate. The plaintiffs submit that the creation of one or the other depends on the ascertainment of the deceased’s intentions, which are to be understood from reading all the words in the will in context.
  3. Life Estate Conclusion. But the wider context of the will does little to displace the ordinary legal effect of the testator’s use of the words “right to occupy” and “wife’s occupation”. The will is very short. Nothing beyond clause 4 adds to the construction of clause 4. The established principles of construction stated in Keenan, Kewley, Darvell and Gilmore are directly applicable to the words of clause 4, which twice use “occupy” and “occupation” and do not seek to trace out a lesser right such as a right of residence. Nor does the charging of “maintenance, repairs, rates or taxes in relation to the said property” on the income of the estate diminish this conclusion. Such charges would ordinarily be borne by remaindermen. Here the testator is merely expressing the preference that these charges be paid first out of any other estate income before the capital of the remaindermen is reduced.
  4. The testator’s failure to mention the charging of estate income with the payment of “maintenance, repairs, rates or taxes” with respect to any substitute property does not reduce the conclusion that a life estate was intended. It is not necessary to repeat these words for any substitute properties as such expenses will be borne by the remaindermen anyway. All that their absence means for a substitute property is that the trustee may have first resort to estate capital (rather than income) to meet the expenses of maintaining the estate’s capital.
  5. Life Estate – Consequences. The parties are also at issue about two aspects of the financial consequences of the Court’s conclusion that Marjorie had a life estate: (1) who is responsible for expenses incurred in relation to the Yamba unit as distinct from the Pymble property; and (2) for what particular outgoings over the Yamba unit is the estate liable.
  6. The parties accept that if the Court finds Marjorie had a life estate then the estate has no entitlement to the benefit of any rent that might have been forgone by the executor whilst he resided in the estate realty until 3 September 2012 but they are still at issue about outgoings.
  7. First, the plaintiffs contend that clause 4 only provided for “any payments of maintenance, repairs, rates or taxes” relating to the matrimonial home and was silent about the payment of such items in relation to “another house...bought in lieu thereof for my wife’s occupation”. The plaintiffs’ contention is that the clause 4 words describing these expenses, ”maintenance, repairs, rates and taxes” are all expenses “in relation to the said property”, that is, the matrimonial home only. The plaintiffs contend that other words cannot be inserted into clause 4, so the clause is incapable of being read to provide for the payment of such expenses at a substituted house, such as the Yamba unit: Holland at [25].
  8. This argument is not persuasive. As earlier explained on the proper construction of clause 4 Marjorie has a life estate. The failure of clause 4 to include any words of charge over the income derived from estate capital to meet the expenses of any substitute property, does not mean that Marjorie has to bear all these expenses herself. They should be allocated according to her status as a life tenant.
  9. The clause contemplates that the substitute property will be for “my wife’s occupation”. Her rights over the substitute property are therefore of the same character as those over the matrimonial home. Marjorie’s rights in relation to the substitute property, the Yamba unit are those of a life tenant.
  10. The plaintiffs’ second argument relates to the allocation of the Yamba unit outgoings as between Marjorie and them, as remaindermen. They submit that Marjorie was responsible for regular outgoings related to the Yamba unit, including rates, body corporate levies and electricity charges and insurance, but not repairs. The plaintiffs rely on authority to effect that if a life tenant chooses to rent out the property in question, rather than reside in it personally, the life tenant would still be responsible for regular outgoings relating to the unit, but not for repairs: Estate of JA Gilmore, deceased [2014] NSWSC 1263 (“Gilmore”) at [30] and Re Estate of Lawrence (deceased) [2003] NSWSC 914 at [17] (“Lawrence”),citing Foley v Cannon (1936) 53 WN (NSW) 223 (“Foley”).
  11. Cases such as Lawrence and Foley are authority for the proposition that as a life tenant is entitled to the rents and profits of the subject land the tenants is also liable to pay annual charges, for example rates and taxes. Whilst the life tenant may not be liable to pay for repairs to the freehold, if one analyses the evidence of so called “repairs” in this case undertaken by Warren, they are more in the nature of cleaning up, tidying up and handyman tasks that one would expect to be carried out by a person in occupation and should therefore be to the account of the life tenant. To the extent individual items may involve installing or repairing fixtures, they are relatively minor and it is impossible to tell from the evidence why they should not be to the account of the life tenant.

(2) The Payment of $20,000 to the Widow in September 1987

  1. The payment of $20,000 to Marjorie in September 1987 raises two sub-issues:

(a) a factual issue as to the source of the $20,000 payment, namely whether it was estate capital or merely the reimbursement of money that Marjorie or Warren had previously advanced to the estate; and

(b) an issue of an appropriate remedy, for the recovery of the $20,000, if this payment is found to have been a payment of estate capital to Marjorie.

  1. (a) The Factual Issue. The factual issue concerns events between March and September 1987 when the Pymble property was sold, the Yamba unit was purchased and the $20,000 was paid to Marjorie. The plaintiffs contend that the $20,000 was sourced from the sale proceeds of the Pymble property and paid to Marjorie to furnish the Yamba unit. Warren says that the funds came from elsewhere and were never estate capital.
  2. There is no issue that Warren paid the $20,000 to Marjorie, and that she used it with Jillian’s assistance to purchase furniture and soft furnishings for the Yamba unit. But the objective evidence and Warren’s lack of reliable evidence on this issue about what was the alternative source of these funds compel the conclusion that the $20,000 was estate capital, as this section of these reasons shows.
  3. Contracts for sale of the Pymble property were exchanged on or shortly before 27 March 1987 for a consideration of $171,000. By 27 March 1987 $5,000 of the deposit was released and paid into the estate’s solicitor’s trust account, as the estate trust account records show. That $5,000 was in turn paid out to Warren on 1 April 1987. The trust account records show that the whole of this $5,000 sum was received on 27 March 1987 and paid out on 1 April 1987 “to: W. Tucker – release pt [part] deposit.”
  4. Mr Hargreaves reported to Warren on 1 April 1987 that the purchaser of the Pymble property had agreed to the release of this $5,000 from the deposit, as follows:
“The Purchaser of the Sydney property has released part of the deposit, namely $5,000 to assist your mother with the cost of moving to Yamba. The cheque in that sum is enclosed to be held by you as Trustee of your father’s estate. The monies can be applied in accordance with the trusts set out in his will”.
  1. The estate exchanged contracts for the purchase of the Yamba unit on 31 March 1987 for a purchase consideration of $120,000. But the front page of the contract for sale was dated 25 May 1987. At the time of exchange the development incorporating the Yamba unit was being built and the strata plan had not then been lodged for registration.
  2. On 29 May 1987 the estate’s solicitor, Mr Hargreaves prepared a settlement statement for each of these sale and purchase transactions. The Court accepts this document as accurate and reliable. The settlement statement showed that from the contract proceeds from the Pymble property of $171,000, after adjustment for water rates and occupation fees, after the deduction of various professional costs and agent’s commission, after the release of the $5,000 to Marjorie, and after the amount required to settle the purchase of the Yamba unit ($124,627.05) the balance was paid into a Commonwealth Bank Investment Account. In summary, the settlement sheet showed total receipts of $172,029.09 from the sale of the Pymble property. And the total funds applied from these receipts, including the $124,627.05 payable on account of the purchase of the Yamba unit, was $138,665.45. This left a balance of $33,363.64 to be deposited with the Commonwealth Bank investment account for the benefit of the estate. This estate settlement sheet clearly shows that the proceeds of the sale of the Pymble property were the source of the estate’s funds to acquire the Yamba unit.
  3. The Pymble property sale completed on 1 June 1987, when sale proceeds of $154,103.03 were paid to Mr Hargreave’s trust account. The balance of $7,555, probably part of the deposit was received into the trust account on 16 June 1987. After other adjustments the balance of the proceeds of sale in the sum of $33,363.64, in accordance with the settlement sheet, was paid into the Commonwealth Bank and placed on fixed deposit on 30 June 1987. Mr Hargreaves confirmed to the estate on 21 August 1987 the deposit of that sum.
  4. Money was later withdrawn from the Commonwealth Bank fixed deposit account again in mid-September 1987. On 16 September 1987 the sum of $34,100.68 (no doubt the original deposited amount plus interest) was deposited back into Mr Hargreaves’ trust account. The trust account records show that the sum of $20,000 was paid out the same day to Marjorie, leaving a balance of $14,100.68. After crediting to the trust account a further $1,606.51, the remaining balance of the account in the name of the estate of $15,797.19 was paid to Warren, the executor on 22 September 1987. Some inconsequential payments from the trust account followed.
  5. As earlier indicated, it is common ground that Marjorie received this $20,000. It is also common ground that she expended that sum on expenses not authorised under clause 4 of the will. The estate fully funded the purchase of the Yamba unit out of the sale proceeds of the Pymble property. Marjorie’s bank statements and cheque books for the period June 1986 to January 1988 do not support the conclusion that she paid any part of the deposit for the Yamba unit from her own funds, such that she would be entitled to reimbursement for an interest in the unit upon its ultimate sale in 2014.
  6. But for one statement in a letter from Mr Hargreaves, nothing in Warren’s instructions to Mr Hargreaves, or in his correspondence at the time, or in the mathematics of the settlement sheets, supports the conclusion that either Marjorie or Warren contributed to the purchase of the unit from either of their own separate funds.
  7. In his letter to Warren of 22 September 1987 reporting on the retrieving of the balance of the sale proceeds back from the Commonwealth Bank, Mr Hargreaves says of the $20,000 the following “As instructed we have paid your Mother the sum of $20,000 to recoup the part of the purchase price of the home unit which she has paid”. He then pays to Warren after various adjustments the balance of $15,797.19. In an affidavit sworn just before trial Warren also adopts this statement in Mr Hargreaves’ letter.
  8. But neither Marjorie nor Warren paid $20,000 towards the purchase price of the Yamba unit. First, the 29 May 1987 settlement sheet says otherwise, and confirms the payment was an application of estate capital.
  9. Secondly, in an earlier affidavit of 5 August 2014 Warren deposes to the $20,000 being estate capital, “In 1987 I advanced $20,000 from the estate to Jillian to furnish the Yamba property”. This was correct: the advance was of estate funds.
  10. Thirdly, Warren’s attempts to account for how Marjorie or he could have paid this money on behalf of the estate were chaotic. Warren had no documentary evidence to support his claim. Warren could not really remember what happened. At one point he completely resiled from the statement in Mr Hargreaves’s letter and his 8 October 2014 affidavit. Warren really doubted his mother had enough money to advance towards the purchase: “I don’t think she would have had $20,000”. He speculated, without any specifics, that he or his accountants or lawyers may have arranged the payment.
  11. None of Warren’s evidence that seeks to show the $20,000 paid to Marjorie in September 1987 was not estate capital has any credibility. In contrast, I accept Jillian’s evidence generally and specifically as to her assisting her mother to use these funds to purchase furniture and furnishings.
  12. (b) The Appropriate Remedy. The $20,000 payment to Marjorie was not an authorised payment under the trusts of the will. The Court must determine the appropriate remedy for this breach of trust.
  13. The plaintiffs contend Warren knowingly advanced the sum of $20,000 of estate capital to Marjorie, in breach of the terms of the will. They contend that this act is sufficient to justify the award of compound interest against him in the exercise of the Court’s discretion: Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 (“Feldworth”) at 706-708.
  14. But despite the Court’s lack of confidence in Warren’s evidence about this payment, his breaches of trust were neither dishonest nor gross. Marjorie’s needs were urgent and required to be addressed. Warren’s contemporaneous correspondence shows he was understandably frustrated by the estate’s lack of funds to meet her current financial needs. He did not benefit personally from the application of the $20,000 – Marjorie did. An award of compound interest expresses the Court’s disapproval of dishonest or grossly inappropriate conduct: Feldworth. That is not the case here. But Warren should be liable for simple interest at 5%.
  15. The plaintiffs say the whole of the sum of $35,785.96 should have been invested as estate capital in order to fund all the expenses referred to in clause 4 of the will. But whatever may be the status of the rest, the plaintiffs contend that at least the amount presently in issue, the sum of $20,000, should be included in the final reconciliation of estate accounts and that Warren should now pay interest (or at least account for the accruing of interest on this sum) on a compound, or alternatively a simple, basis at a rate of 5 per cent for 27 years.
  16. The plaintiffs submit that they are entitled to an equitable set off for the $20,000 plus interest against Warren’s various claims against the estate and on the basis that Warren seeks equity and must therefore do equity: James v Commonwealth Bank of Australia [1992] FCA 420; (1992) 37 FCR 445 (“James”) and Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 at 465B (“Murphy”), and see also RP Meagher, JD Heydon & MJ Leeming, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies, (4th ed 2002, LexisNexis, Butterworths), at [37-035] and [37-050] (“Meagher, Gummow and Lehane”).
  17. The plaintiffs are entitled to an equitable set off for the $20,000 plus interest. Warren’s various claims all have their origins in his administration of the estate as executor. The plaintiffs’ $20,000 claim for his breach of trust arises out of his discharge of the same office at the same time. In the words of Giles JA in Murphy (at 465B) “it would be unjust to allow [Warren] to recover without taking into account [the plaintiffs’] counter claim”.
  18. But Warren says he should be excused for his breach of trust under Trustee Act 1925, s 85 on the ground that he “has acted honestly and reasonably and ought fairly to be excused”. But Warren did not act “reasonably” in relation to his payment out of the $20,000 to Marjorie. Had he chosen to do so, he may well have been able to seek judicial advice to allow him to expend some of this estate capital for the benefit of Marjorie. But he did not approach the Court for such advice. His payment of the funds to Marjorie was apt to produce the result that she would apply the funds in breach of trust to the disadvantage of the plaintiffs. Nor did Warren warn Jillian about the breaches of trust that were involved in her assisting her mother to purchase furnishings and related items for the Yamba unit.
  19. Warren faintly pressed a limitation issue with respect this claim. But it was not fully engaged. And in any event it is not clear that the plaintiffs were even aware that Warren’s application of these funds was a breach of trust until about the time these proceeding commenced.

(3) Work Done at the Yamba Unit by Villanueva Home Care

  1. Warren alleges he made payments to Villanueva Home Care for cleaning and maintenance services at the Yamba unit on various dates in November and December 2008 and in October 2013. The total amount in question is $23,243.25. To support his case he produced six documents, five of which are receipts for payments of cash made to an entity described as “Villanueva Home Care” and one invoice. But he relies upon seven payments altogether. The last is a cash payment for which there is no documentary support. Warren propounds the following documents all of which are receipts except the last one, which is an invoice: (1) 3 November 2008 for $7,284.50; (2) 20 November 2008 for $7,288.75; (3) 30 November 2008 for $4,207.50; (4) 11 December 2008 for $1,147.50; (5) 18 December 2008 for $1,360; and (6) 25 October 2013 for $1,530.00 (invoice). The cash payment relied upon is for $425.00, which was said to have been made on the same date as the invoice, 25 October 2013.
  2. Warren’s case is that the payments to Villanueva Home Care were for cleaning and maintenance services performed at the unit on the relevant dates. The plaintiffs dispute the authenticity of the receipts and the invoice and do not accept that any of this work was performed.
  3. The receipts relied upon were produced to the plaintiffs following the service of a notice to produce. No invoices corresponding to these receipts have been produced. Warren has not produced any bank statement or other record supporting the payment of the sums the subject of these receipts. The plaintiffs submit that the Villanueva Home Care receipts are suspicious.
  4. They are suspicious. “Villanueva Home Care” is neither a registered business name nor a company name, as might ordinarily be expected with a supplier of such services.
  5. The five receipts (four in 2008 and one in 2013) contain the barest information as to what the receipted expenditure represents, “repairs and maintenance”, “cleaning and maintenance”, “clean and repair” and “home maintenance”. In each case a box marked “cash” is ticked. The name or initials of the person giving the receipt are in all cases indecipherable, and the person could not be identified from the document.
  6. The address used on the receipts is odd. The address is shown as unit and street number 1/28 [on a street] in Yamba NSW 2464, which street will for security reasons be called by the pseudonym “Adelaide Street” in these reasons. A title search of that address discloses its registered proprietors are Michael Robert and Wendy Ann Shepherd-Harrison, as tenants in common in equal shares and that the property is not subdivided under strata titles legislation, such as might give rise to use of the stated address “1/28 Adelaide Street Yamba”. And the title search reveals the property has been registered in the names of the Harrisons since July 1998.
  7. The Harrisons do not obviously have anything to do with the Villanueva Home Care. Rather a company search of Harrison Shepherd Pty Ltd shows its registered office at 28 Adelaide Street Yamba (and not unit 1 or unit 2 at that address). The current company directors of that company appear as Michael Robert Harrison and Wendy Ann Shepherd-Harrison, the registered proprietors of 28 Adelaide Street. Both of these directors disclose their personal address as being at 28 Adelaide Street.
  8. An internet search at www.harrisonshepherd.com.au indicates that Harrison Shepherd Pty Limited operates as a surveying development consultancy in Yamba. Warren was not able to give a satisfactory account of how the Villanueva Home Care services could have been provided from this address. I have generally found his evidence unsatisfactory. On this issue it was particularly unsatisfactory. Why would anyone give what appears to be a fictitious address on an invoice genuinely seeking payment for the supply of services actually rendered?
  9. Moreover, the only invoice issued for Villanueva, as distinct from a receipt, is invoice B.289 issued on 25 October 2013. That invoice quotes neither an ABN nor any additional charge for GST. The invoice does not call itself a tax invoice. The services rendered would ordinarily attract GST liability and any such business would need to be ABN-compliant. The services are described in that invoice as “exit clean of property”. The fuller description of the services is “total clean of unit 10 The Peninsula, including:...vacuum, wash walls, wash curtains and blinds, wash all cupboards, bathrooms, kitchen, oven, ceilings, light fittings, fly screens, toilets, laundry, doors & handles, garage, paths, patio areas, remove rubbish” and the time the services were provided is described as “Start Oct 23rd – Finish Oct 25th – 3 workers, 6 hour days”. And in the invoice “Hours” column the number “18” is recorded. In the “Rate” column “$85” is recorded. In the “Total” column “$1,530” is recorded. Below the $1,530 entry one would expect GST to be recorded. But the total amount charged was $1,530.00, without any addition of GST.
  10. The invoice does not indicate it is inclusive of GST. The absence of an ABN and any GST reference are sufficiently irregular to conclude that this may not be an authentic invoice. Moreover, it is not signed by an individual who could be contacted in respect of the services, should there be any dispute about the services rendered under the invoice. The invoice contains no telephone number for contacting anyone at Villanueva for any purpose.
  11. Warren says the explanation for this is that the service providers were a loose group of people who came together informally to provide these services. But I do not accept his evidence on this. But even if some people did informally assist Warren in cleaning up the unit, the cumulative absence of ordinary features of an invoice, including those identified below is too great to give the Court any confidence in the authenticity of this document and the associated receipts as recording genuine liabilities to pay or payments for such services. Nor do I accept that Warren made the October 2008 cash payment that he alleges.
  12. Also missing from the invoice is any statement or requirement as to when the services supplier, Villanueva, expected payment. Modern invoices commonly contain statements such as “net 7 days”, and give BSB and bank account details identifying the bank account into which for convenience the invoiced amount can be paid. The absence of so many of these ordinary indicia of a genuine invoice further undermines the Court’s confidence in this document. And I do not accept it as an authentic invoice or that any money was paid pursuant to it. I do not accept that Warren believed it was authentic or that any money was paid pursuant to it.
  13. Further doubt is added to the authenticity of the Villeneuva receipts and invoice in the way Warren propounded them. He alleges he made the most of the Villeneuva payments in October 2008 (totalling $21,288.25 representing the total of Villeneuva receipts (1) to (5) above). He could hardly have forgotten the making of these payments to Villeneuva in March 2009. But on 2 March 2009 Warren wrote to some of the plaintiffs setting out at length (including 21 separate items of activity) the work he then claimed to have done at the Yamba unit, concluding “The cost to date of the work I’ve undertaken on behalf of the Estate for this long overdue maintenance and remedial work totalled $9,107.20.” This was less than half the amount that he now says was actually due at that time.
  14. The deficiencies of the 25 October 2013 invoice in particular undermine the other receipts, and damage Warren’s credibility generally. If Warren is prepared to propound non-genuine invoices to justify the payments to Villenueva Home Care, his vouching for the other receipts and all his evidence must be treated with caution.
  15. Although Warren’s correspondence given the impression at times that he was only putting forward his full claims in once he knew the matter was going to Court, a grave suspicion of recent invention lies over the whole Villeneuva claim. A mist of unease envelops this claim, and the more so, once it is appreciated that the first time Warren propounded it was only when he advanced the estate’s accounts in March 2014.

(4) Failure to earn income from the Yamba Unit from 1 January 2005 to 28 October 2008

  1. If clause 4 conferred a mere right of residence in the matrimonial property and then the substitute property, the Yamba unit, that right would have determined on or about 1 January 2005 when Marjorie entered Caroona as a permanent resident. It is common ground that if clause 4 confers a right of residence Warren should account to the estate for the rent forgone due to his failure to let the Yamba unit. But the Court has found that Marjorie had the benefit of a life estate. And it is accepted that Marjorie is entitled to the rents and profits from the use of the Yamba unit during her life estate. There cannot be any criticism of Warren as executor for failing to rent out the Yamba unit for the benefit of the estate between January 2005 and October 2008. Marjorie was entitled to these rents, not the estate.

(5) Failure to Earn Income from the Yamba Unit from 28 October 2008

  1. Marjorie had a life estate. She was entitled to occupy the Yamba unit herself or to let it out. She seems to have chosen to allow Warren to occupy it rent free until her death. The adequacy of that bargain between Warren and Marjorie was not in issue in these proceedings. It can be accepted as the arrangement between them.
  2. Warren entered into occupation of the Yamba unit on 28 October 2008. He never paid rent or an occupation fee. He vacated the unit on 13 November 2013. He had occupied it for 62 weeks after Marjorie died on 3 September 2012.
  3. The plaintiffs contend that Warren should be held to account for the benefits he received by occupying the unit for that five year period between 28 October 2008 and 13 November 2013 (263 weeks).
  4. The parties have agreed on some basic rental figures for this period: $200 per week from 28 October 2008 to 3 September 2008; and $250 per week from 18 December 2008 to 3 September 2012. The parties have agreed that from the date of Marjorie’s death on 3 September 2012 a fair and reasonable market rent for the Yamba unit would have been $265 per week for a residential tenancy. So any mesne profits to which the plaintiffs are entitled after Marjorie’s death may be paid at this rate.
  5. The plaintiffs accept that the Court’s life estate finding means Marjorie would have been entitled to the rents and profits of the unit from October 2008 but was correspondingly liable for the regular annual outgoings on the unit, such as rates, body corporate levies and electricity charges and insurance but not necessarily repairs.
  6. Given the Court’s life estate conclusion the plaintiffs accept that they would not be entitled to equitable compensation by reference to the rent forgone. But they submit in these circumstances that all these regular outgoings should have been paid by the widow and the plaintiffs would have been liable only for repairs.
  7. The plaintiffs submit therefore that they have overpaid the plaintiff by meeting these regular outgoings that amount to the sum of $33,906.86 between 2003 and 2009. Although issue 5 deals with the period from October 2008, it is appropriate to recast this issue and issue 4 to a degree (as the parties’ oral submissions at the conclusion of the case contemplated) in light of the Court’s conclusion that Marjorie held a life estate. Issues 4 and 5 are now really concerned with the plaintiff’s entitlement to any reimbursement for the agreed $33,906.86 in outgoings they paid for the Yamba unit. Even though their meeting of these 2003-2009 outgoings extends beyond the period covered by issues 4 and 5. The parties accepted in oral argument that this issue would really be the remaining issue instead of issue 4 and 5, if the Court were to find Marjorie had a life estate, as it has.
  8. But the plaintiffs do not claim this sum of $33,906.86 back. Instead they propound a case that they are entitled to an equitable set off in any claim made by Warren against them on the basis that when seeking equity he must do equity and give credit to the plaintiffs for the sums they have contributed to defray the outgoings on the Yamba unit. The plaintiffs submit they should be protected from his demands in those circumstances. They again cite James, Murphy, and Meagher, Gummow and Lehane.
  9. In my view the plaintiffs are entitled to set off this full amount. It directly arises out of Warren’s administration of the estate and it would not be just to deny them credit for this amount.

(6) Is Warren Disentitled to Commission

  1. The plaintiffs contend that Warren’s conduct has disentitled him from claiming commission as an executor. If Warren’s conduct does not displace the merits of his claim to commission, then the parties agree that a reasonable amount for his commission would be $5,000.
  2. The grant of commission under Probate and Administration Act 1898, s 86 is subject to the passing of accounts. The Court’s findings in this judgment should permit the passing of accounts, as all matters in dispute will then be resolved.
  3. The applicable legal principles are clear. The granting of commission is discretionary and may be refused for any proper reason: In the Will of Oddie [1976] 1 NSWLR 371 at 374B; Re Estate of Wilson, deceased (1987) 11 NSWLR 493 at 495B; Re Craig (1952) 52 SR (NSW) 265 at 267-278. An executor may be denied commission if guilty of a breach of trust, neglect or a disregard of fiduciary obligations: In the Will of Henry Sherringham [1901] NSWStRp 53; (1901) 1 SR (NSW) (B&P) 48; In the Will of James Greer [1911] NSWStRp 23; (1911) 11 SR (NSW) 21 at 23; Guazzini v Pateson [1918] NSWStRp 39; (1918) 18 SR (NSW) 275 at 285-286.
  4. Warren has been found to have committed a breach of trust. The claims he made in his accounts with respect to Villanueva Home Care and the $20,000 payment to Marjorie were not supported by proper and adequate documentation. Those claims occupied a great deal of the Court’s time in these proceedings, time that would not have been expended if Warren had kept proper records of those transactions or abandoned dubious claims. And Warren trespassed upon estate property for 62 weeks after Marjorie’s death to the disadvantage of the estate’s beneficiaries.
  5. The lengthy correspondence between Warren and Jillian and others shows that Warren did make genuine efforts over many years to grapple with the difficulties generated by a cash-poor estate with a life tenant with ongoing personal needs. And there is no doubt that he voluntarily gave much of his time to the administration of the estate. But despite such factors weighing in favour of an award of commission, on balance his conduct was in important respects unreasonable and in the result costly to the estate. Warren is not entitled to an award of commission as an executor.

Reconciliation of Estate Accounts and Parties’ Claims

  1. The parties conveniently reduced their net claims in relation to the estate to agreed tables (Exhibit 5) which was tendered at the conclusion of argument. The tables of Exhibit 5 present in parts. Exhibit 5 first shows the various estate outgoings, totalling $94,713.11, that Warren says he has been responsible for meeting and for which he now seeks reimbursement from the plaintiffs. Deducted from that figure of $94,713.11 is the amount paid by the plaintiffs on account of the outgoings for the Yamba unit in the sum of $33,906.86, together with the amount of estate capital, $56,816.45, part of which was spent allegedly in breach of trust. This first part of Exhibit 5 is as follows:-
Estate Reconciliation
Amount
Body Corporate Levies
36,319.23
Council Rates
25,221.88
Estate Improvements
11,947.00
Misc Expenses
35.85
Electricity Expenses
14,776.41
Insurance
2,536.63
Maintenance
2,494.07
Legal costs
1,382.04
Total
$94,713.11
Less amount paid by the plaintiffs
33,906.86
Less estate capital and income
56,816.45
Amount owing to the defendant
$3,989.80
  1. The other reconciliation figure in Exhibit 5 is $56,816.45 which is made up of $44,589.33 in estate capital and $12,227.12 in estate income, a calculation that assumes that the $20,000 paid to Marjorie on 16 September 1987 was estate capital. If the Court were to have found that the $20,000 was not estate capital, the amount owing to Warren would increase by $20,000.
  2. But Exhibit 5 then lists various claims which the plaintiffs seek to set off against Warren’s claims against the estate. The claims are first for interest (simple or compound) on the $20,000 paid in breach of trust. The second segment of these claims is for the failure to rent the Yamba unit out from 1 January 1995 until Marjorie’s death on 3 September 2012. But for the reasons given these claims have failed.
  3. So the remaining set off is in relation to interest on the $20,000. For the reasons previously given an award of simple interest on the $20,000 is appropriate. Up to the date of trial that was $27,000. But the parties may need to recalculate the correct amount up to the date of judgment.
Matters to be considered by way of equitable set-off and/or limitation of relief pursuant to s 85 Trustee Act 1925
Interest on $20,000 paid in breach of trust to the widow on 16/9/87 – 5% simple 5% compound
27,000.00
54,669
Failure to rent the unit from 1 January 2005 – 28 October 2008 (199 weeks at $150 per week)
29,850.00
Failure to pay an occupation fee from 28 October 2008 – 3 September 2012 ($200 per week from 28/10/08 – 18/12/08 (7 weeks) and $250 per week from 18/12/08 to 3/9/12 (193 weeks)
1,400.00
48,250.00
Total equitable set-off claims (range)
$106,230.00
$133,899.00
  1. In addition to these set off amounts Exhibit 5 also shows the plaintiffs are entitled to mesne profits for the period of Warren’s occupation of the Yamba unit after Marjorie’s death as follows.
Mesne profits (which the plaintiffs are entitled to be paid 3/9/12 to 13/11/13 – 62 weeks at $265 per week)
$16,430.00
  1. Warren’s best case can be summarised by reference to Exhibit 5. If he were to succeed on the Villanueva Home Care claim and to reduce the estate’s capital by $20,000, his claim, excluding commission, would increase from $3,659.80 as follows.
Amount owing
3,659.80
Villanueva Home Care
23,243.25
Adjust estate capital
20,000.00
Total
$47,233.05
  1. It is accepted that the plaintiffs’ $16,430 claim for mesne profits must succeed as there was no basis for Warren’s occupation of the Yamba unit after Marjorie’s death. Apart from any other offsetting entitlements the plaintiffs would have judgment for $16,430.00.
  2. In the result therefore Warren’s final calculations can be made of what is due between the parties more or less in accordance with Exhibit 5. But the parties are in the best position to agree on the final calculations of principal and interest in the light of these reasons. So the Court will give the parties an opportunity to bring in final orders by agreement.

Conclusions and Orders

  1. The plaintiffs and the defendant, Warren, have each been successful on different issues in these proceedings. The Court has found that Marjorie had a life estate under clause 4 of the testator’s will. But the Court has found that the disputed $20,000 was, contrary to Warren’s case, estate capital and was paid out by Warren to Marjorie in breach of trust. The circumstances of the payment do not warrant Warren being excused from his breach of trust. Warren’s claim against the estate in respect of alleged payments to Villanueva Home Care fails. Because Marjorie held a life estate under the will Warren is not liable to the estate for failure to rent out the Yamba unit between 1 January 2005 (when Marjorie became a permanent resident at Caroona) and 3 September 2012 (when Marjorie died). The plaintiffs should be credited with the whole of the $33,906.86 they paid on the estate’s behalf on account of the outgoings for the Yamba unit between 2003 and 2009. But Warren is liable to pay the plaintiffs’ mesne profits for the 62 weeks between 3 September 2012 and 13 November 2013, when he finally vacated the Yamba unit. Warren is not entitled to commission as an executor.
  2. This result may lead to arguments as to costs. One or other party may seek a special costs order. But given the small amounts in issue in these proceedings the parties are encouraged to attempt to resolve any remaining costs issues between them.
  3. The Court’s orders are:-

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