Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Shannessy v Beattie & Ors [2012] NSWCA 88
• Hearing dates: 2 April 2012
• Decision date: 17 April 2012
• Before: Basten JA at 1; Sackville AJA at 1

Decision

(1) Dismiss the application for leave to appeal.

(2) Applicant to pay the costs of the first respondent in this Court.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: APPEAL - civil - where matter in issue amounting to $100,000 or less - amount in issue, excluding costs, approximately $17,000 - arguable case for appeal against primary judge's conclusions of law - leave to appeal not ordinarily granted merely for arguable case - no question of principle
• Legislation Cited: Civil Procedure Act 2005
• Cases Cited: Beattie v Daly [2011] NSWSC 1023; Bushby v Dixon Holmes du Pont Pty Ltd [2012] NSWCA 90
• Category: Principal judgment
• Parties: Michael Dennis Shannessy (Applicant); Janelle Dianne Beattie (First Respondent); Peter David Shannessy (Second Respondent); Garry John Daly (Third Respondent)
• Representation: N M H Kirby - Applicant; L J Ellison SC - Respondents; Clamenz Corporate Lawyers - Applicant; M Trevillion - Respondents
• File Number(s): 2008/310031

Decision under appeal

• Citation: Beattie v Daly [2011] NSWSC 1023
• Date of Decision: 2011-09-01 00:00:00
• Before: Gzell J
• File Number(s): 2008/310031

Judgment

1 THE COURT: This application for leave to appeal involves a very small amount of money, although there is a rather larger amount in dispute by reason of the cost orders made by the primary Judge. We set out below the background to the application.

2 The applicant, Michael Shannessy, is one of four nephews, of the late Isabel Maud (Betty) Webb. The first respondent, Janelle Beattie, was Ms Webb's only niece.

3 Ms Webb died on 26 December 2007, leaving the bulk of her estate to be distributed among Mr Michael Shannessy, Ms Beattie and Ms Webb's three other nephews. The executors of Ms Webb's estate were two of the nephews, Michael Shannessy (the applicant) and Garry Daly (the third respondent).

4 The primary asset in the estate was a home unit, which was ultimately sold for approximately $450,000. At her death, Ms Webb also held an account with the Uniting Church (NSW) Trust Association Ltd, also referred to as Uniting Financial Services ("UFS"), which had a credit balance of $28,180.

5 On 15 December 2007, Ms Webb signed a paper authorising UFS to terminate the account and pay the balance to Ms Beattie. On the findings made by the primary Judge (Gzell J), a letter containing the authorisation was posted on 16 December 2007, although it was not received by UFS until 24 December 2007.

6 On 27 December 2007, UFS, without notice of Ms Webb's death the previous day, drew a cheque in favour of Ms Beattie and posted the cheque to Ms Webb at her (Ms Webb's) address. On about 31 December 2007, Ms Beattie went to Ms Webb's letterbox, removed the envelope and collected the cheque, which she subsequently negotiated.

7 The Application Book did not include all materials before the primary Judge. However, it appears that in 2008 Ms Beattie and the fourth of Ms Webb's nephews, Peter Shannessy, commenced proceedings in the Supreme Court seeking orders for the removal of the executors by reason of their alleged failure to administer the estate. The plaintiffs sought orders appointing them as executors in place of Michael Shannessy and Garry Daly.

8 At some stage, a dispute arose as to the sum of $28,180 that Ms Beattie had obtained by negotiating the UFS cheque. This dispute was crystallised in the proceedings by the filing of a cross-claim by the executors against Ms Beattie. The executors sought:

• an order setting aside the transaction constituted by the letter of 15 December 2007;
• a declaration that Ms Beattie held the sum of $28,180 in trust for the executors; and
• an order for payment of that amount to them in their capacity as executors.

9 The matter came before Gzell J on 5 August 2011. On 1 September 2011, his Honour delivered a judgment dealing with the cross-claim. The primary Judge, in effect, made two findings of fact and determined one point of law in favour of Ms Beattie: Beattie v Daly [2011] NSWSC 1023.

10 The primary Judge found that when Ms Webb signed the letter of 15 December 2007 authorising transfer of the funds from her UFS account, the details of the intended beneficiary (Ms Beattie) were included. His Honour rejected (at [33]) the executors' allegation that the letter had been signed in blank. His Honour also rejected (at [35]) the executors' contention that Ms Webb was not of sound mind when she signed the letter of 15 December 2007.

11 The point of law decided by the primary Judge, which is the subject of the present application, involved two sub-issues. First, his Honour concluded (at [43]) that the gift to Ms Beattie was effectively perfected when she was given authority to require UFS to transfer the balance of the account to her. Secondly, his Honour concluded (at [45]-[46]) that Ms Beattie had not acted illegally in removing the cheque from Ms Webb's letterbox after the latter's death and therefore she did not require the assistance of equity in order to complete the gift.

12 The applicant seeks to challenge the primary Judge's conclusions of law on two bases. First, he contends that the authority granted to UFS by Ms Webb to pay the proceeds of the account to Ms Beattie terminated on Ms Webb's death. Thus, so it was argued, UFS's act in drawing the cheque on the day after Ms Webb's death was done without authority. Secondly, the applicant submitted that, in any event, Ms Beattie's authority to collect the cheque terminated on the death of Ms Webb. Accordingly, by collecting the cheque and presenting it, Ms Beattie had converted property that formed part of Ms Webb's estate. Implicit in this submission was the proposition that the gift by Ms Webb had never been completed and that further action was required by her, or (after her death) by her executors, to complete the gift.

13 The primary Judge dismissed the cross-claim, but granted declarations in favour of Ms Beattie. (It is not entirely clear whether she sought declaratory relief, but nothing turns on this for present purposes.) The declarations and orders made by the primary Judge were as follows:

"8. Declaration: Janelle Dian[n]e Beattie is the owner of the proceeds of cheque 148300 drawn in her favour by [UFS] in the sum of $28,180.48.

9. Declaration: The sum of $28,180.48 being the proceeds of the cheque noted in Order 8 herein, does not form part of the Estate of the Deceased.

10. Amended Cross-Claim otherwise dismissed.

11. Cross-Claimant to pay the costs of the cross-defendant without recourse to the estate.

12. No order as to the cost of the cross-claimants to the intent that they bear their own costs without recourse to the estate."

14 The judgment did not deal with the application by Ms Beattie and Peter Shannessy to remove the executors. However, apparently as the result of discussions between the primary Judge and the legal representatives, his Honour made the following orders on the day he delivered the judgment:

"In respect of the Statement of Claim:

1. The defendants within fourteen (14) days of this order being made verify file and pass accounts for the estate of the late Isabel Maud Webb pursuant to s.85 of the Probate and Administration Act 1898.

2. Pursuant to s.89 of the Probate and Administration Act, the Executor of the Estate of the late Isabel Maud Webb distribute the balance of the residue of the estate ... in accordance with the Will of [Ms Webb] dated 28 February 2005.

3. Note the undertaking to the Court of the second defendant [Michael Shannessy] that within 21 days he will provide to the plaintiffs [details] of all transactions entered into by the executors since 3 November 2010.

...

5. Stay order 1 herein whilst ever the undertakings in 3 and 4 are complied with.

6. No order as to the cost of the parties to the intent the parties bear their own costs, and in respect of the costs of the defendants without recourse to the Estate of the Deceased ..."

15 It will be seen that the effect of the costs orders made by the primary Judge was to require the executors (the defendants and cross claimants in the proceedings) to pay:

• their own costs of the principal claim and the cross-claim, without recourse to the estate; and
• Ms Beattie's costs of the cross-claim, also without recourse to the estate.

16 The submissions to this Court indicate that the estate has now been distributed in full, although the precise circumstances in which the distribution occurred are not clear. If, therefore, the costs orders were varied to allow the applicant, as executor, to recover his costs from the estate, no assets would be available for that purpose, other than any moneys recovered from Ms Beattie (should leave be granted and the appeal allowed). No party addressed the possible significance of the fact that the second executor, who was no doubt jointly liable for the costs, claimed no relief.

17 The five beneficiaries nominated in Ms Webb's will were entitled to share in the estate equally. Thus, if Ms Beattie were required to repay the sum of $28,180 to the estate, subject to any claim on the estate for costs, she would be entitled to 1/5th of that amount. In addition, we were told that Peter Shannessy does not wish the claim against his sister to be pursued. On that basis, the amount in issue (independently of costs) is only $16,908. (Mr Daly, the third respondent and the other executor, has taken no active part in the proceedings in this Court.)

18 The applicant undoubtedly has an arguable case on the points of law he wishes to raise. It is, however, necessary to bear in mind the principles relating to the grant of leave to appeal where the amount at stake is very small. Those principles were referred to in Bushby v Dixon Holmes du Pont Pty Ltd [2012] NSWCA 90, and there is no need to repeat those observations here. It is sufficient to observe that if the amount in dispute is small, leave to appeal will not ordinarily be granted merely because an applicant has an arguable case. Having regard to the very small amount in issue, neither the public interest nor the interests of justice require that leave to appeal be granted against the substantive orders made on the cross-claim. We bear in mind that the total costs of the appeal would be likely to exceed the amount in dispute. In some circumstances it may be possible to limit the disproportion between the likely costs and the amount in issue by imposing appropriate conditions on the grant of leave: Civil Procedure Act 2005, s 60. However, no party suggested that this could be achieved in the present case. Indeed, in a practical sense the purpose of the application is not to improve the position of the beneficiaries of the estate, but to relieve the executors (or one of them) of the burden of the costs order made below.

19 It may be accepted that if the applicant were to succeed on the questions of law he has identified, the costs orders made by the primary Judge on the cross-claim would probably be set aside. Ms Beattie might also be ordered to pay some or all of the applicant's costs of the cross-claim, although the precise proportion could well take into account that she succeeded on the disputed factual questions at the trial. But the fact that a successful appeal might relieve the applicant from a costs burden is not a reason for granting leave in a case involving such a small amount of money. One purpose of the leave requirement is to discourage appeals when the dispute, in substance, relates mainly to costs.

20 The applicant also sought leave to appeal against the costs orders made by the primary Judge, insofar as the orders denied the executors (or at least the applicant) the right to be indemnified from Ms Webb's estate. Mr Kirby, who appeared for the applicant, pointed out that the primary Judge had given no reasons for making the costs orders and had made no findings that the executors had acted unreasonably in pursuing the cross-claim or in defending the principal proceedings.

21 At first blush, these submissions seem to have force. But there are two difficulties facing the applicant.

22 First, once it is accepted that the applicant should not be granted leave to appeal against the dismissal of the executors' cross-claim, it is difficult to see any utility in an appeal against the orders denying the executors a right of indemnity against the estate, which has been wholly distributed. As matters stand, no funds are available in the estate to satisfy any indemnity upon which the executors are entitled to rely.

23 It was suggested that the executors (or at least the applicant) might be able to reclaim some of the moneys that had been distributed to the beneficiaries. The practicalities of reclaiming moneys were not explored in argument. However, Mr Ellison SC, who appeared for Ms Beattie, pointed out that the beneficiaries might well have a defence of change of position to any such claim. It is enough to say that the material before the Court does not demonstrate that the executors' right of indemnity, if it was to be upheld on appeal, is of any practical value, except to the extent to which the executors succeed in recovering the proceeds of the cheque from Ms Beattie.

24 Secondly, even if the estate retained or acquired funds against which an indemnity could be exercised, this Court was not given sufficient information to assess whether his Honour might have erred in his approach to the question of indemnity.

25 Mr Kirby acknowledged that the primary Judge made the orders after the parties made reasonably extensive submissions on costs. Mr Kirby also acknowledged that, as counsel for the executors, he had not asked the primary Judge to give reasons for his decision on costs. We were not taken to the transcript of the argument. We therefore do not know whether interchanges between his Honour and counsel might have revealed the reasons for his decision not to permit the executors to enforce the indemnity otherwise available to them, although caution would have been required in any event in treating such remarks as a substitute for a reasoned judgment. Nor were we taken to the evidence bearing on the issue of whether the executors' conduct had been reasonable or otherwise.

26 In these circumstances, the Court not having the benefit of reasons from the primary Judge, we cannot conclude that the applicant has an arguable case on the costs issue. It may not have taken a great deal to make out such a case, but leave applications must be determined on the basis of material before the Court, not assertions from the bar table.

27 For these reasons, the application for leave to appeal should be dismissed.

28 There remains an issue as to the costs of the application in this Court. If both executors, acting reasonably, had sought leave in the interests of the estate it might not have been appropriate to make any order as to costs in circumstances where they had no recourse to the estate in practical terms. However, in this case the applicant is one executor seeking to recover costs payable by him personally. Having failed, he must pay the costs of the active respondent in this Court, being Ms Beattie.

29 Accordingly the Court makes the following orders:

(1) Dismiss the application for leave to appeal.

(2) Applicant to pay the costs of the first respondent in this Court.

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Decision last updated: 17 April 2012