Supreme Court New South Wales

• Medium Neutral Citation: Estate of John Gordon Ross, late of Annangrove [2011] NSWSC 896
• Hearing dates: 27 June 2011; 4 July 2011; and 6 July 2011
• Decision date: 06 July 2011
• Jurisdiction: Equity Division
• Before: White J

Decision

Refer to paras [22]-[26] of judgment.

• Catchwords: SUCCESSION - executors and administrators - administration - administrator pendente lite - application for orders pursuant Trustee Act 1925, s 81 that plaintiff have certain powers as administrator pendente lite of estate - where prudent for plaintiff to seek to refinance of mortgage debt to avoid the possibility of mortgagees exercising their power of sale - orders made giving plaintiff powers conferred on executor by will to sell, mortgage, lease, exchange or otherwise dispose of whole or part of the estate as necessary or expedient and the power to borrow
• Legislation Cited: Trustee Act 1925; Real Property Act 1900
• Category: Principal judgment
• Parties: Stuart John Latham (Applicant); Joel Hubbard (Respondent)
• Representation: M B Evans (Applicant); T Hale SC with J S Tobin (Respondent); Lathams Lawyers (Applicant); Diamond Conway (Respondent)
• File Number(s): 2010/284489

Judgment

1 HIS HONOUR: By notice of motion filed on 7 June 2011 the plaintiff sought an order pursuant to s 81 of the Trustee Act 1925 that he have the following powers as administrator pendente lite of the estate of the late John Gordon Ross, namely, the powers conferred on the trustee for the time being of the estate of the late Mr Ross pursuant to clause 8(b) of a will dated 27 February 2004 and the power to borrow.

2 The plaintiff was appointed as administrator of the personal estate and receiver of the real estate of the late Mr Ross pendente lite by an order of Palmer J on 13 December 2010.

3 The plaintiff has filed an amended statement of claim in which he seeks a grant of probate of a will of the late Mr Ross of 27 February 2004.

4 The defendant to those proceedings is a Mr Hubbard. Mr Hubbard is named as executor of what, on the face of it, is a later will dated 2 October 2009. Both the plaintiff and Mr Hubbard are solicitors. Neither is named as a beneficiary under either of the instruments in question.

5 Orders were made for the filing of a defence and cross-claim by Mr Hubbard if he were to propound a later will. No defence and cross-claim has yet been filed. This is apparently because of steps Mr Hubbard took unsuccessfully either to obtain an indemnity in respect of costs from the Attorney General or to obtain judicial advice under the Trustee Act . The background to those applications is explained in the judgment of Windeyer AJ dated 21 June 2011. However, I am informed by counsel appearing for Mr Hubbard that he will be filing a defence and cross-claim and will be propounding the later will.

6 It is clear from the affidavits filed in support of the application for the appointment of the plaintiff as administrator pendente lite that the purpose of the appointment was primarily to refinance an existing mortgage debt secured over the deceased's land. It is perhaps unfortunate that the parties did not turn their attention in December 2010 to whether specific powers should have been conferred on the plaintiff to bring that about. Be that as it may, there is no dispute that the court has power to confer the powers now sought. The question is whether it is expedient to do so.

7 When the matter initially was called on for hearing the grounds upon which counsel appearing for Mr Hubbard objected to the relief sought being granted, were essentially that there was a serious question to be investigated as to whether the existing mortgage sought to be refinanced was enforceable, and whether the purported mortgage debt of $1.23 million was recoverable from the estate. The reasons it was said that there was such an issue to be investigated was that the deceased's former solicitor, a Mr Sheather, acted for both mortgagor and mortgagee. It was said that members of Mr Sheather's family were some of the mortgagees. Other facts were pointed to which suggested that there was a serious question to be tried as to whether Mr Sheather had taken unconscionable advantage of the position of the deceased. It was said, correctly, that if the existing mortgage debt were discharged it would be extremely difficult for the executor of the estate later to unscramble the position. Accordingly, it was submitted that unless the Court was satisfied as to the bone fides of the existing mortgage arrangement, powers should not be conferred on the plaintiff which would enable him to refinance.

8 I made orders directing the plaintiff to provide further evidence in relation to the circumstances in which the loans secured by the mortgage were obtained, what moneys were advanced and what repayments had been made. Further evidence as to those matters has been obtained by the plaintiff. Counsel appearing for the defendant accepts that many of the concerns that had been raised have now been allayed.

9 It is clear that prior to March 2005 the deceased had borrowed $1.25 million under a mortgage managed by a company called Eclipse Prudent Mortgage Corporation Pty Ltd. Whilst the material read on this application indicates that there were concerns as to the deceased's cognitive capacity in 2008 or 2009, there was no material to suggest that in 2005 the deceased would not have understood what he was doing in relation to the obtaining of such loans. The evidence is that whilst the deceased owned valuable real estate he had no access to cash and was not entitled to a full pension by reason of his extensive assets. After 2005 the mortgage was increased from time to time. In 2008, the deceased sold land to the water board for approximately $2.2 million. Part of the funds were used to reduce debts owed under a mortgage managed by Eclipse Prudent Mortgage Corporation Pty Ltd. Substantial sums were then held in cash by Mr Sheather on trust for the deceased and by Eclipse Prudent Mortgage Corporation Pty Ltd.

10 It does not appear that there is any reason to doubt that the existing mortgage debt represents a genuine debt that the deceased owed. Even if the mortgage were liable to be set aside, the debt would be repayable. The possibility of proceedings being successfully brought against some or all of the mortgagees is speculative.

11 The debt has become repayable. I have been advised that notice under s 57(2)(b) of the Real Property Act 1900 was served on 1 July 2011. It is clearly desirable that the mortgage debt be refinanced to avoid the possibility of the mortgagees exercising their power of sale.

12 In final submissions this morning I did not understand counsel now appearing for Mr Hubbard to dispute that. Rather, counsel's submissions focused upon the amounts sought to be refinanced. In his letter of 23 May 2011 to the beneficiaries interested in the estate and to Mr Hubbard the plaintiff foreshadowed requesting a loan of $650,000 to go with the cash currently held with Eclipse Prudent Mortgage Corporation and the cash held in the estate. Such an advance would permit the payment out of the existing mortgage debt, include funds to cover interest on the advance, and make provision of $200,000, described as " Provision for legal costs and administration of the estate. " There would also be some smaller amounts to deal with other expenses and a small provision for unforeseen liabilities. Counsel for Mr Hubbard submitted that it would not be appropriate for the plaintiff to be funded out of the estate for the costs of his claim in which probate was sought for the 2004 will, when Mr Hubbard did not have the protection of judicial advice that he is justified in defending the probate proceedings and in propounding the 2009 will. In his reasons of 21 June 2011 Windeyer J said that Mr Hubbard had to make a choice either of bringing proceedings to propound the 2009 will because he considered that it is his duty in the public interest to do so, or to renounce probate and leave it to the beneficiaries named in the 2009 will and the Attorney General to apply for letters of administration with the 2009 will annexed.

13 Counsel submitted that it would be inequitable for Mr Hubbard to be compelled to litigate, where he has no personal interest in the outcome, and at his own risk as to costs, where the plaintiff was similarly circumstanced, but could litigate with funds obtained from the refinancing. In response, counsel for the plaintiff said that the provision of $200,000 dollars to be obtained from the refinancing was not proposed to be used to pay costs from time to time of the litigation, but was to provide a fund from which costs could ultimately be paid once the court made orders for the probate of one or other of the wills.

14 In my view, these questions do not really go to the merits of conferring the powers now sought to be conferred on the plaintiff. I think it is prudent for the plaintiff to seek to refinance in the amount proposed and it is prudent that such a fund be set aside as a fund from which the costs of the inevitable litigation can ultimately be paid in such manner as the court might ultimately direct.

15 The plaintiff has communicated his proposal to the individuals named as beneficiaries in both wills and none has objected to the orders sought.

16 It is clearly desirable to avoid the circumstance that the mortgagees might exercise their power of sale. That could be to the real detriment of the beneficiaries.

17 As I have said, there is no dispute that the court has the power to confer the necessary powers on the plaintiff. The 2004 will conferred power on the executor named in that will in clause 8(b) to sell, mortgage, lease, exchange or otherwise dispose of the whole or such part of the estate as the executor might consider necessary or expedient as though he were the absolute beneficial owner of the estate. The power to mortgage probably impliedly included the power to borrow, but it is desirable that that power be expressly conferred.

18 No submissions were made that the powers now sought as expressed in clause 8(b) of the 2004 will were too widely expressed. In the exercise of the powers the plaintiff will be subject to directions that might be made from time to time by the court, if anyone interested in the estate takes issue with the way the powers are proposed to be exercised.

19 In my view, it is appropriate to make the orders substantially as sought. It is clear that the court in its inherent jurisdiction has the power to confer the necessary powers on the plaintiff.

20 For these reasons I order that Stuart John Latham as administrator pendente lite of the estate of John Gordon Ross has the following powers, namely:

a) the powers conferred on the trustee for the time being of the estate of John Gordon Ross, pursuant to clause 8(b) of the will dated 27 February 2004; and

b) the power to borrow.

[The parties addressed on costs.]

21 The matters raised for Mr Hubbard when the matter was before the court on 27 June 2011 resulted in my seeking further material, (which was subsequently provided), so as to be satisfied that it was in the interests of the estate to make the orders I have made. I think there is substance to the submission made for Mr Hubbard that his role in responding to the application has been beneficial to the estate. He has properly advanced material it was desirable be provided to the court, so that the court could be comfortably satisfied that it was in the interests of the estate to make the orders I have made. On the materials before me, neither the plaintiff nor the defendant has a personal interest in the matter. Both appear to be acting honestly and reasonably in the interests of the estate to give effect to the wishes of the deceased.

22 In the circumstances I think it is appropriate to order that the defendant's costs of the notice of motion also be paid out of the estate, but on the ordinary basis. I so order.

23 I order that the defendant file and serve his defence and cross claim by 20 July 2011.

24 I give access to all parties to documents produced on subpoena by the NSW Trustee and Guardian.

25 I stand over the proceedings to the Registrar's probate list on 25 July 2011.

26 I order that the plaintiff is entitled to be paid his costs of this application out of the funds of the estate of the late John Gordon Ross.

Decision last updated: 17 August 2011