Williams v Williams[2004] QSC 269

SUPREME COURT OF QUEENSLAND

1. WILSON J: This is an application for the removal of executors and trustees of a deceased estate, the appointment of an administrator, and consequential orders.

2. Marcus John Charles Williams ("the deceased") died on 16 February 2000 aged 29. He left a widow Nannette Jane Williams (the first applicant) and a son Sam John Williams (the second applicant) who had been born on 7 March 1997. By his will dated 17 February 1998 he appointed as his executors and trustees his father John Charles Williams and his brother Benjamin Dean Williams (the respondents). By clause 3 of his will he disposed of his estate as follows -

“I GIVE DEVISE AND BEQUEATH the whole of my estate UNTO and to the use of my trustees UPON TRUST with power of sale to pay firstly all my just debts funeral and testamentary expenses and then to hold the balance UPON TRUST for such of them my children as shall survive me and shall have attained or shall attain the age of majority and if more than one then in equal shares.”

In the circumstances, the second applicant is the sole beneficiary. The first applicant has made a family provision application pursuant to s 41 of the Succession Act 1981.

3. There has been no grant of probate or letters of administration. Pursuant to s 45 of the Succession Act, the deceased's property vested in the respondents as executors on his death. Their title to his property is not dependent on a grant of probate, but derives from the will coupled with statute. They can legally deal with that property, although in practical terms they may need to obtain a grant of probate in order to prove their title to third parties with whom they deal on behalf of the estate. See Chetty v Chetty [1916] AC 603 at 608; Ryan v Davies Bros Ltd (1921) 29 CLR 527 at 536; Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57; Crago "Executors of Unproved Wills: Status and Devolution of Title in Australia" (1993) 23 UWALR 235.

Executors and trustees

4. The respective functions of executors and trustees are explained in Meagher and Gummow, Jacobs: Law of Trusts in Australia (6th ed, 1997) at para 241 in these terms -

“The origin of the offices of trustee and executor are quite different, but in modern times, largely as the result of statute, the two offices have a greater similarity than heretofore.  An executor, like a trustee, is in a fiduciary relation with the beneficiary and the essential elements of a trust are all present in executorship.  However, although there are great similarities between the two offices, it is not possible to identify the position of an executor with that of a trustee.  Their respective powers and duties differ in important respects.  The principal duties of an executor are to get in the assets of the deceased, to pay his debts, to pay the legacies given by the will, and to distribute the assets.  If a testator appoints the same person his executor and his trustee, which is usual nowadays, then that person acts as executor when he performs executorial duties, and thereafter while he continues to hold the property he is a trustee thereof.  However, even though he thus becomes a trustee, his capacity as executor still remains, in so far as he may be called upon at any future time to deal in his capacity as executor with any assets which may subsequently be discovered in the estate.  He may thus be executor in respect of certain assets of the testator and trustee in respect of others.”

As I shall explain below, the respondents (or at least the first named respondent) have taken some steps towards getting in the deceased's assets, and at least in one case (the deceased's herd of cattle) have sold the asset and are holding the proceeds. Accordingly, it is appropriate to consider them as performing both functions.

Jurisdiction to remove executors and trustees

5. In the applicants' submission there are several sources of jurisdiction to remove executors and trustees -

(a) inherent jurisdiction;

(b) Succession Act s 6;

(c) Succession Act s 52(2);

(d) Trusts Act 1973 s 80(1).

6. At common law an executor who caused pecuniary loss to creditors or beneficiaries by breach of his duty of administration was liable in damages for devastavit. In equity where there were difficulties in the administration or allegations of default by the executor, the Court might itself take over the administration of an estate as the outcome of an administration action brought by an interested party.  In time provisions were made for various forms of summary relief: for example, Succession Act s 52; UCPR rr 643 and 644 (formerly Supreme Court Rules O 74 r 1, O 73 r 1).

7. In England an executor may be removed and another substituted by the Court under power conferred by the Administration of Justice Act 1985 s 50 or by the appointment of a judicial trustee under the Judicial Trustees Act 1896 s 1. As the authors of Tristram and Coote's Probate Practice (28th ed, 1995) observe at [41.02], there is nothing in the wording of s 50 of the Administration of Justice Act 1985 to preclude an application for the removal (or substitution) of an executor before a grant has issued.

8. In Queensland there is no provision equivalent to s 50 of the Administration of Justice Act 1985.

9. Under s 31 of the Public Trustee Act 1978, where there has been a grant of probate, the Public Trustee or any interested party may apply to the Court for the removal of the executor and the appointment of the Public Trustee to administer an estate on the ground that it is for the benefit of any person who is or may be found to be interested in the estate. That would include cases of misconduct or dereliction of duty by the executor: Re Estate of Maschke (QSC 65/1992, 18 March 1994 unreported at page 3) per Cullinane J. Executors may appoint the Public Trustee as executor with the consent of the Court unless expressly prohibited, whether or not the executor has obtained a grant of probate. Further, where there is more than one executor, the Court may, on the application of any such executor, appoint the Public Trustee as executor whether or not the executor has obtained a grant of probate. Section 31 is not applicable in the present case.

10. The provisions for summary relief against executors found in rr 643 and 644 of the UCPR do not extend to the removal of executors.

11. The better view seems to be that the Court has inherent power to remove an executor for just cause by revocation of a grant of probate to him and power to appoint an executor in substitution: Bates v Messner (1967) 67 SR (NSW) 187 at 191 - 192; Phelan v Booth (1941) 43 WALR 60 at 61; Porteous v Rinehart (1998) 19 WAR 495 at 504 – 506; contrast Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 77.  In Bates v Messner Asprey JA said at 191–192 –

“The exercise of this Court’s jurisdiction to revoke a grant of probate, unlike the Court’s power to revoke a grant of letters of administration, depends upon the inherent jurisdiction of the Court (see and cf. ss. 66(a), 81 and 90 of the Wills, Probate and Administration Act, 1898, as amended; and see also the notes to s. 66 of that Act in Hastings and Weir’s Probate Law and Practice, 2^nd ed., at p. 224).  Whilst in an appropriate case an injunction may be obtained to restrain an executor from acting and an appointment may be made of trustees to carry out the executor’s duties and whilst in some cases of neglect or refusal an order may be made against an executor pursuant to s. 84 of the Act, I am of the opinion that the essential basis of the exercise of the court’s inherent jurisdiction to revoke a grant of probate is that emphasized by Jeune P [in In The Goods of Loveday [1900] P 154] namely, that the real object which the court must always keep in view is the due and proper administration of the estate in the interests of the parties beneficially entitled thereto on the part of the person to whom and by whose oath as to the faithful performance of his duties the court has been induced to entrust the office of executor.  The terms used in some of the previously decided cases with relation to the circumstances which have given rise to the exercise of the jurisdiction of revocation, such as ‘abortive’, ‘inefficient’, ‘useless’ or ‘ineffectual’, are simply descriptive of a situation in which the court has been persuaded to the view that its grant, which was predicated on the oath of the executor named in the will that ‘he will pay all the just debts and legacies of the said deceased so far as the estate of the said deceased will extend and the law shall bind him, and that he will otherwise well and faithfully administer the said estate according to law; and that he will render a just and true account of his administration’ has been circumvented by a breach of that oath which is in effect an undertaking to the court making the grant.  I shall make no attempt to define all circumstances which may attract the exercise of the court’s jurisdiction, but where circumstances clearly appear to have arisen after a grant of probate which impel the court to the firm conclusion that the due and proper administration of an estate has either been put in jeopardy or has been prevented either by reason of acts or omissions on the part of the executor or by virtue of matters personal to him, for example, mental infirmity, ill health, or by virtue of the proof of other matters which establish that the executor is not a fit and proper person to carry out the duties which he has sworn to the court that he will perform, the court may exercise its inherent jurisdiction to revoke the grant.”

12. Section 6 of the Succession Act provides –

“6 Jurisdiction

  (1)   Subject to this Act, the court has jurisdiction in every respect as may be convenient to grant and revoke probate of the will or letters of administration of the estate of any deceased person, to hear and determine all testamentary matters and to hear and determine all matters relating to the estate and the administration of the estate of any deceased person; and has jurisdiction to make all such declarations and to make and enforce all such orders as may be necessary or convenient in every such respect.

  (2)  The court may in its discretion grant probate of the will or letters of administration of the estate of a deceased person notwithstanding that the deceased person left no estate in Queensland or elsewhere or that the person to whom the grant is made is not resident or domiciled in Queensland.

 (3)  A grant may be made to such person and subject to such provisions, including conditions or limitations, as the court may think fit.

  (4)  Without restricting the generality of subsections (1) to (3) the court has jurisdiction to make, for the more convenient administration of any property comprised in the estate of a deceased person, any order which it has jurisdiction to make in relation to the administration of trust property under the provisions of the Trusts Act 1973.

  (5)  This section applies whether the death has occurred before or after the commencement of this Act.”

13. The Court is given extremely wide powers under s 6 subsection (1) "to hear and determine all testamentary matters and to hear and determine all matters relating to the estate of any deceased person; and has jurisdiction to make all such declarations and to make and enforce all such orders as may be necessary or convenient in every respect". Those powers include powers to make any order in relation to the administration of property in a deceased estate which the Court could make in relation to the administration of trust property under the Trusts Act 1973 (Succession Act s 6(4)). Under s 80 of the Trusts Act the Court has power to appoint a new trustee in substitution for an existing trustee or trustees when it is expedient to do so  and is inexpedient, difficult or impracticable to do so without the assistance of the Court. Although s 80 does not itself confer a power to appoint an executor or administrator (subsection (4)), I consider that the Court may do so under s 6 subsection (4) of the Succession Act, as it would be an order it would have jurisdiction to make in relation to the administration of trust property under the Trusts Act. Even if that is not so, its powers under subsection (1) are, in my opinion, clearly wide enough to include the removal of an executor who has not taken out probate and the appointment of an administrator in his stead.

14. Section 52 of the Succession Act contains a list of the duties of personal representatives, and in subsection (2) it gives the Court wide powers in the case of neglect of duty -

“52  The duties of personal representatives

  …

(2)  If the personal representative neglects to perform his or her duties as aforesaid the court may, upon the application of any person aggrieved by such neglect, make such order as it thinks fit including an order for damages and an order requiring the personal representative to pay interest on such sums of money as have been in the personal representative's hands and the costs of the application.”

Because I am satisfied the Court has power to remove an executor under s 6, it is not necessary to decide whether s 52 subsection (2) is a further source of power.

15. Nor is it necessary to decide whether the Court has inherent power to remove an executor who has not obtained a grant of probate.

16. To the extent that the respondents may have passed from being executors to being trustees in respect of any of the property of the deceased, the Court has power to remove them and to appoint a substitute trustee or trustees pursuant to the Trusts Act s 80(1).

The applicants’ standing

17. The first applicant is not a beneficiary under the will. She has the custody of the second applicant, who is the sole beneficiary of the estate, and she is an applicant for family provision under s 41 of the Succession Act. Until about May 2003 the respondents were making payments to her from the income derived from a block of flats of which the deceased was one of four tenants-in-common. The basis on which those payments were made is not clear (whether on behalf of the second applicant or for her own maintenance), and they have been recorded as loans in the accounts kept by the respondents.

18. The first applicant has no right to family provision: whether an order is made in her favour and if so the extent of the provision ordered are matters in the discretion of the Court. It is the executors' duty to uphold the will and to act as contradictors to her application. In these circumstances, I do not think that she has standing to apply for the removal of the executors.

19. The second applicant (the infant Sam by his litigation guardian, who happens to be the first applicant) clearly does have the requisite standing. See generally Porteous v Rinehart at 501 - 502.

Background facts

20. At the time of his death the deceased was a commercial diver. Although there had previously been some difficulties in his marriage, he and the first applicant had reconciled. Their home was in Melbourne, where she remained with the second applicant while he went away for his work. The deceased disappeared while diving in the Gulf of Carpentaria, and his body was never recovered. On 15 February 2001 a Judge gave the respondents leave to swear his death. An inquest was held, the coroner's findings being delivered on 12 May 2003.

21. The deceased was one of four siblings. Their father (the first named respondent) lives on a property "Rushbrook" at Ubobo in central Queensland. At all material times it has been owned by a family company John C Williams Pty Ltd. It is not clear where the second named respondent (the deceased’s brother Benjamin) lives, but his work apparently necessitates absences from home.

The estate

22. The principal assets in the deceased's estate when he died were:

1. a quarter share as tenant-in-common in a block of flats at Randwick in New South Wales;

(ii) a portfolio of shares in publicly listed companies;

3. approximately 60 head of cattle;

4. shares in the family company John C Williams Pty Ltd;

5. a beneficial interest in the MJC & NJ Williams Family Trust.

It was common ground that at the time of the hearing the estate was worth between $700,000 and $1,000,000. The flats were all tenanted, and had risen in value. The cattle had been sold.

Steps in the administration of the estate

23. The first named respondent seems to have taken an active role in relation to the estate while the second named respondent has not. The first named respondent has kept some accounts of income and expenditure on behalf of the estate. He engaged the accountants formerly engaged by the deceased, BMO Accountants Group, to prepare accounts as at 30 June 2001, and income tax returns for the years ended 30 June 2000 and 30 June 2001, and subsequently engaged another firm, RM Madsen & Co to prepare accounts as at 17 March 2003 and as at 30 June 2003, and income tax returns as at 30 June 2002 and 30 June 2003. He engaged solicitors to act on behalf of the estate in the family provision application, but as I shall explain in a moment, that litigation is still in the interlocutory phase. Although he has indicated that he and the other respondents intend applying for probate, they had not done so by the time of the hearing.

Criticisms of the respondents

24. The applicants have been critical of the respondents' conduct in various respects:

1. delay of over four years in applying for probate;

2. unauthorised payments to the first named respondent and to John C Williams Pty Ltd;

3. alleged failure to make any genuine attempt to progress and resolve the family provision application together with alleged disregard of directions made by the Court;

4. general delay in the administration of the estate together with alleged wastage of or failure to protect the assets of the estate;

5. alleged incurring of unnecessary legal and administrative costs on behalf of the estate;

6. alleged conflicts of interest;

7. alleged deliberate and reckless failure properly to account to the beneficiary;

8. allegedly high handed and contemptuous attitude towards the applicants.

Delay in applying for probate

25. The first year's delay is explained by the circumstances of the deceased's death, and the fact that it was not until 15 February 2001 that the respondents were given leave to swear his death. The delay thereafter is unexplained.

26. It is not clear how the failure to obtain a grant of probate is alleged to have delayed the administration of the estate so far. For example, it has not been shown that the absence of a grant has inhibited or defeated any attempts to deal with estate assets. It may delay the determination of the family provision application, because under s 41(8) of the Succession Act the hearing and determination of the application in the absence of a grant is a matter in the discretion of the Court.

Unauthorised payments

27. A disturbing feature of the first named respondent's conduct has been his unauthorised withdrawal of funds from the estate. Broadly these can be classified as loans to him, a loan to John C Williams Pty Ltd, expenses associated with his attendance at the inquest into the deceased's death, and legal fees and travel expenses associated with this application.

28. The loans were as follows:

27.03.02First named respondent$1,240-00

29.03.02John C Williams Pty Ltd$2,770-00

16.02.04First named respondent$5,953-75

There was no justification for these withdrawals of funds. This application was returnable before Mackenzie J on 22 April 2004, when His Honour gave various directions for its further conduct. The first two withdrawals ($1,240 and $2,770) came to the attention of the applicants shortly before that hearing, and at their insistence the respondents undertook to the Court to repay those amounts together with interest at 8% pa within 28 days. The applicants and their solicitors were then unaware of the further withdrawal of $5,953-75 made on 16 February 2004, and they had not been provided with financial documents and bank account statements beyond 14 February 2004. The respondent did not disclose the withdrawal to the Court. It was only after the hearing, and after certain further documents were provided by the respondents in response to the directions given, that the applicants became aware of the withdrawal of $5,953-75.

29. The withdrawals for expenses associated with the first named respondent's attendance at the inquest came to light when certain accounts were produced in response to Mackenzie J's directions. They were as follows:^[1]

30.12.02First named respondent - advance against expenses $ 500-00

25.07.02Airfares$ 638-22

30.12.02Airfares$ 699-11.

It is not for me finally to determine on this application whether these amounts were properly payable to the first named respondent as an executor in all the circumstances. This is not a proceeding for an account.

30. The amounts withdrawn for legal and travel expenses associated with this application were as follows:^[2]

14.04.04Travel expenses$ 174-90

06.05.04Travel expenses$ 169-95

15.04.04Legal fees$ 5,000-00

20.04.04Legal fees$ 4,000-00

13.05.04Legal fees$ 6,500-00

13.05.04Legal fees$ 4,518-33

None of these withdrawals was disclosed until after the hearing before Mackenzie J, although some were made before that hearing. It was premature to withdraw these funds before the determination of the application for the respondents' removal as executors and the Court's consideration of the costs of the application. See Skaftouros v Dimos [2002] VSC 198 at [211]-[212] per Mandie J.

31. The following repayments were made:

After a considerable exchange of correspondence between the solicitors for the applicants and the solicitors for the respondents, and after the dishonour of a cheque proffered by the first named respondent, the first named respondent repaid a further sum of $22,501-00 to the estate bank account on 15 June 2004.

32. The circumstances in which these various moneys were withdrawn, their non-disclosure and the belated and piecemeal way in which they were repaid are all matters which reflect very badly on the respondents' conduct as executors and on their fitness to remain such.

The family provision application

33. The family provision proceeding was commenced on 13 November 2000. Directions were given on 25 January 2001. The respondents failed to comply with the directions in that they did not file material in response to the application and failed to provide a statement of the income and expenditure of the estate. After about eight communications urging compliance, the solicitors for the applicant (the first applicant in the proceeding before me) filed a further application for directions. Further directions were given on 5 February 2003. The respondents complied only partially with the further directions. They were uncooperative in making arrangements for the mediation in which they were directed to participate.

34. The present application for removal of the respondents as executors was filed on 15 March 2004. As I have said, it came on before Mackenzie J on 22 April 2004. His Honour took the view that the issue of the removal of the executors should be resolved before the family provision application, and that there should be no mediation in the family provision application until after the resolution of that issue. At the request of the parties, he gave detailed directions for disclosure and accounting, which strictly relate to the family provision application, in order to keep it moving in the meantime.

35. The respondents' delays and partial or non-compliance with directions in the family provision application reflect poorly on their stewardship of the estate, and display a high-handed, defiant attitude to their legal responsibilities.

Protection of assets of the estate

36. At all material times the first named respondent has controlled the affairs of John C Williams Pty Ltd by holding all the shares to which voting rights attach. The other shares have been held equally by his four children (including the deceased and the second named respondent). The deceased had a 15% shareholding in the company. The company owns "Rushbrook" which is a grazing property. The first named respondent appears to run the property. The materials before the Court include a valuation of it as at 26 January 1996 in the sum of $400,000. The company's balance sheet as at the date of the deceased's death shows total non-current assets of $403,377. Included in this total are “Property, plant & equipment” assets of $403,127: I assume that is a reference to "Rushbrook". The net assets of the company as at the date of the deceased's death were $236,652.

37. The applicants have raised two concerns in relation to the first named respondent's conduct of the affairs of the company.

38. The first relates to the company's having been de-registered by ASIC on 25 August 2003. In August 2000 the first named respondent’s solicitors warned him that a search of the company had shown "strike-off action in progress". They advised him-^[3]

“It is essential that the company structure is maintained as it is and we would be pleased if you would advise as to whether you have received any notices from the ASIC as to why the strike-off action is in progress. 

You will recall that we have previously had to reinstate the company to the company register and we think it unlikely that the ASIC would allow such an application to go unopposed again. 

If it is impractical or you are unable to maintain the company as a registered company then serious consideration ought be given to winding up the company and distributing the assets in specie to the shareholders. 

A compounding problem with the company and in particular if it is allowed to be struck off is that given Marcus’ death the shares which he holds in the company are held by you as trustee for Sam.  As he is a minor any actions in the administration of the company which are to his detriment, which would include it being struck-off, would render you liable to an action by Sam and/or Nanette [sic] on his behalf. 

We would therefore be pleased if you would advise immediately as to why the strike-off action is in progress and if it is for a reason capable of remedy immediately would you please attend to that and provide us with confirmation.”

The immediate problem was apparently overcome. However, on 23 May 2003 ASIC wrote to the first named respondent at Ubobo drawing attention to default in lodging an annual return and other documents, and threatening to deregister the company. The first named respondent replied on 17 June 2003, asserting that documents had been sent to an old address, and undertaking to complete certain forms when received. On 25 August 2003 ASIC deregistered the company. The registration was reinstated on 9 March 2004. The first named respondent's sworn statement that he did not receive any correspondence from ASIC about failure to lodge a return until he received the letter of 23 August 2003 is inconsistent with the correspondence in May and June 2003.

39. The second concern is an alleged conflict of duty and interest said to arise in this way: the other shareholders (who include the two respondents) have a pre-emptive right to acquire the deceased's shares in the company, and it is asserted that it is in their interest to acquire the shares at the lowest possible price whilst their duty to the estate is to obtain the highest price. The first named respondent has sworn that the respondents have decided not to realise this asset because the deceased informed him that he wanted Sam (the second applicant) to be involved in the property when he was older. On 21 April 2004 the first named respondent swore that the respondents remained of that view, but, of course, they may change that view, whereupon the potential conflict of duty and interest would materialise.

40. These are indeed matters for substantial concern.

Flats at Randwick

41. The deceased and his siblings inherited the flats at Randwick from an uncle. The first applicant is critical of the respondents for ceasing the payments from the income of the flats which they made to her for about three years after the deceased's death, and for recording those payments in the estate accounts as loans to her. While I can appreciate the distress and sense of financial insecurity these actions may have caused her, I do not think the respondents have been shown to have erred in their duty as executors in so acting.

42. The value of the flats has increased in a buoyant real estate market, and the applicants concede that the respondents' decision not to sell them has been the right one. However, they raise the possibility of conflict of duty and interest in the future, given that the second named respondent is one of the other tenants-in-common.

43. The letting of the flats is conducted by a partnership of the four tenants-in-common (one of whom is the deceased's estate). The first named respondent seems to be running the affairs of the partnership, and it is prima facie of concern that the partnership has been paying him a management fee of $500-00 per month in recent times. 

Cattle

44. The cattle have been sold. The first named respondent has sworn to having asked the estate's accountants to provide information about the cattle. At present, there is no more than suspicion on the part of the applicants that there has been some mishandling of the realisation of this asset.

Removal of respondents as executors and trustees

45. A Court will not lightly interfere with a testator's appointment of executors and trustees. Its ultimate concern must be with the due administration of the estate in the interests of creditors and beneficiaries. Where the sole beneficiary is a child and the estate's assets include interests in assets held with and managed by other members of the deceased's extended family including the executors and trustees, careful consideration needs to be given to actual and potential conflicts of duty and interest, as well as to the extra expense that might be expected from bringing in an independent third party to administer the estate.

46. There is no evidence that the second named respondent is mindful of his obligations as an executor and trustee, and I conclude from the material before the Court and his not taking any active part in this application that he has effectively left the administration of the estate to his father (the first named respondent).

47. The first named respondent has behaved in an arrogant and high-handed manner. His unauthorised withdrawals of estate funds and his failure to disclose those withdrawals are particularly reprehensible. They demonstrate a lack of understanding of his obligations as executor and trustee, and an unwillingness to accept criticism and mend his ways.

48. In all the circumstances, I have concluded that the respondents should be removed as executors and trustees. An independent solicitor, Steven John Grant, is prepared to act as administrator of the estate, and orders should be made appointing him administrator and trustee, subject to the formal requirements of the Registrar.

49. The application of the first applicant should be dismissed.

50. I will hear counsel on the form of the order and on costs.