Re Estate Acquaro, Deceased

These proceedings relate to competing claims for relief in the course of administration of the estate of the late Francesco Acquaro (“the deceased”) who was born in Partinico, in Italy, in March 1928 and who died in Waratah in NSW, aged 85 years, on 26 May 2013, leaving a will dated 22 December 2009 which has been admitted to probate.

The will was admitted to probate by a grant of probate made on 16 May 2014 to the deceased’s son Raffaele Acquaro, described in these proceedings as “Raffaele Senior” in order to distinguish him from his own son of the same name (a grandson of the deceased) here described as “Raffaele Junior”.

Raffaele Senior failed in his duty to administer the deceased’s estate according to law, or with due dispatch, with the consequence that on 7 March 2018, on the application of his brother Sebastian, the grant of probate made in his favour was revoked, and letters of administration, with the will annexed, were issued that same day to a solicitor, Mr Jeremy Glass (“the administrator”).

The principal claims for relief made in the proceedings comprise claims for construction or rectification of the deceased’s will; an accounting for estate assets; and a family provision order sought by Sebastian.

Sebastian’s application for a family provision order is what remains to be determined in proceedings numbered 2017/00221078 after he succeeded in having Raffaele Senior’s grant of probate revoked and securing the appointment of the administrator. See order 19 of the orders made on 7 March 2018 and order 5 of the orders made on 30 April 2018. The balance of the claims for relief that require the Court’s determination were made in proceedings numbered 2018/00272913 in which the administrator is plaintiff; Raffaele Senior, Sebastian and Raffaele Senior’s company, Partinico Pty Ltd are defendants; and Raffaele Senior is a cross claimant against the administrator and Raffaele Junior. By orders made on 2 December 2020 in each set of proceedings, the two sets of proceedings were heard together.

The estate of the deceased, as disclosed in the inventory of property attached to the grant of probate made in favour of Raffaele Senior, comprised the deceased’s residence in Ford Avenue, Medowie in the State of NSW (with an estimated value of $450,000) together with $25,000 in a Building Society account, with a total estimated value of $475,000.

Upon investigation, the administrator established that the deceased’s assets as at the date of his death in fact comprised:

Raffaele Senior claims that the deceased in his lifetime gave the IAG shares to him. This claim is disputed.

Evidence establishes that, after the deceased’s death, Raffaele Senior procured his registration as owner of the shares by falsely holding himself out to be the deceased. I am not persuaded that the deceased gave the shares to Raffaele Senior or that any gift (if made) was perfected by the time of the deceased’s death. In my opinion, the shares remained part of the deceased’s estate at the time of his death, and Raffaele Senior is required to account to the deceased’s estate for the proceeds of their sale and dividends received in respect of them.

For the purpose of these proceedings, it is agreed between the parties that Raffaele Senior sold the shares for $7,320 on 8 October 2019 and applied the proceeds of sale for his own personal benefit.

During his administration of the estate, Raffaele Senior intermingled the affairs of the estate with his own, mixing estate funds and income with his own in a manner that (because of his failure to maintain proper records) renders a precise accounting beyond practical reach.

The Medowie Property was sold by the administrator (by a contract dated 23 December 2020, completed on 21 April 2021) for $680,000, realising net proceeds of sale in the sum of $667,153.30.

After payment of costs of the administrator in probate and family provision proceedings to date (in the sum of approximately $231,050.62) and income tax for the years ending 30 June 2016-2020 (in the sum of $14,100), the administrator’s evidence is that, subject to qualifications set out hereunder, he presently holds in his trust account on behalf of the estate $450,551.68 for distribution.

The qualifications identified by the administrator are as follows:

The administrator’s costs to date, to the extent they have been paid out of the estate, have been paid out of the estate of the authority of an order earlier made, on 6 August 2018. In the ordinary course, to be followed in these proceedings, he is entitled to an order that his costs be paid out of the estate on the indemnity basis.

Sebastian (the only other party legally represented) has no such entitlement. When, on 7 March 2018, he succeeded in obtaining orders for revocation of Raffaele Senior’s grant of probate and the appointment the administrator (in the proceedings numbered 2017/00221078) Sebastian obtained an order that his costs, to that date, be paid by Raffaele Senior on the indemnity basis. The substantive orders he obtained on 7 March 2018 for due administration of the deceased’s estate upon an exercise of probate jurisdiction were sought, and obtained, for the benefit of the deceased’s estate. For that reason, costs were awarded to him on the indemnity basis. His conduct of proceedings after 7 March 2018 was for his own benefit and, so, any entitlement he may have for costs incurred after 7 March 2018 should be assessed on the ordinary basis.

Omitting formalities, the deceased’s will dated 22 December 2009 was in the following terms:

Clauses 2 and 3(a) of the will refer to Raffaele Senior.

Clause 3(b) refers to the deceased’s son Sebastian, the brother of Raffaele Senior.

Clause 3(c) refers to the children of Raffaele Senior: namely, Raffaele Junior and Tiffany.

Clause 3(c) is ambiguous on its face because it purports to dispose of “the entire balance and residue” of the deceased’s estate but (on one view) proceeds then to divide a “one half share between” Raffaele Junior and Tiffany, leaving a “one half share” to be dealt with on a partial intestacy according to Chapter 4 of the Succession Act 2006.

The alternative construction of clause 3(c) is that “the entire balance and reside” of the deceased’s estate passes to Raffaele Junior “as to [a] one half share” and to Tiffany “as to [a] one half share”, to the intent that “the entire balance and residue” of the estate is shared “between” them and, accordingly, passes to them as tenants in common in equal shares.

By virtue of section 32 of the Succession Act, evidence (including evidence of the deceased’s intention) is admissible to assist in the interpretation of the language used in the will.

The evidence of Raffaele Senior is that he prepared the will at the request of the deceased in order to correct clerical errors in the deceased’s last preceding will, a document prepared for the deceased by a solicitor and since destroyed. He says that, in reproducing a corrected form of the earlier will for the deceased’s execution, he did not add or omit the name of any beneficiary. He says it was the expressed intention of the deceased to give the bulk of his estate to Raffaele Junior and Tiffany, the only grandchildren with whom he had an active relationship at the time the will dated 22 December 2009 was executed.

The will was executed in the presence of a Justice of the Peace (a pharmacist by profession) and another person described as a “Pharmacy Assistant”. Neither of them gave evidence in the current proceedings.

There is no evidence that contradicts the evidence of Raffaele Senior as to the deceased’s intention.

An intention to benefit Raffaele Junior and Tiffany is consistent with the close relationship they had with the deceased at the time of execution of the will and between that time and his death.

If a “one half share” in the deceased’s residuary estate were to pass, on intestacy, in accordance with Chapter 4 of the Succession Act, then, by virtue of section 127 of the Act:

Those grandchildren (Sienna and Emilia), on the evidence of Raffaele Junior, had no active, personal relationship with the deceased at the time he executed his will or thereafter.

Their mother (Antonio’s de facto wife), Anne, died in July 2013, survived by both girls. Emilia died without issue in November 2019, survived by a de facto partner, Mark, who himself died in May 2020.

The administrator served notice of these proceedings on the deceased’s former wives, Emilia and Sylvia; Sienna; and the mother of Emilia’s de facto partner, as well as upon Raffaele Junior and Tiffany.

Raffaele Junior (a party to the proceedings) and Tiffany personally attended the hearing of the proceedings.

I am satisfied that sufficient notice has been given to persons with an interest in the outcome of these proceedings to justify a determination of them without further notice.

The evidence of Raffaele Senior about the intention of the deceased, extrinsic to the will, is consistent with (but not a necessity for) the construction of the will which, in my opinion, is the correct one. In my opinion, clause 3(c) of the will, properly construed, provides for “the entire balance and residue” of the deceased’s estate to be divided between Raffaele Junior and Tiffany as tenants in common in equal shares.

In my opinion, that is the correct construction because:

This construction is consistent with the law’s presumption that a testator does not intend property to pass on intestacy.

In my opinion, it is not necessary for the Court to make an order under section 27 of the Succession Act for rectification of the deceased’s will. If necessary, I would make orders under that section to give effect to the deceased’s intention as I have found it to be.

However, it is sufficient for the day that a declaration be made to the effect that, upon the proper construction of clause 3(c) of the will, the residuary estate of the deceased passes to Raffaele Junior and Tiffany as tenants in common in equal shares.

The deceased was twice married. Both marriages ended in divorce. The first marriage (to Emilia) in December 1954 was dissolved in August 1989. The second marriage (to Silvia) in December 1989 was dissolved in July 2002.

There were four children (all sons) of the deceased’s first marriage. There were no children of his second marriage.

The deceased’s only children were:

The deceased, his then wife Emilia and their sons Raffaele Senior and Sebastian migrated to Australia in 1966.

Raffaele Senior has two children, by his then wife Jennifer:

Sebastian, formerly married to Andrea, is currently married to Noppamas. He has no children.

It is unnecessary to dwell at length on Raffaele Senior’s maladministration of the deceased’s estate. Having initially resisted engagement with the proceedings against him (at cost to Sebastian and the deceased’s estate), he came to realise that he had conducted himself in breach of fiduciary obligations he owed to the estate as the deceased’s executor.

Nevertheless, the following general observations inform an assessment of the course of administration of the deceased’s estate and Sebastian’s application for a family provision order against the estate:

There is no necessity to examine at length Sebastian’s receipt and application of the sum of $101,021 (particularised in a statement of claim he filed on 3 November 2017 in support of his family provision summons) because he admits that he received that money with notice of the terms of the deceased’s will, and without any entitlement to receive or retain it, and he admits that he is obliged to restore it to the estate of the deceased, subject only to the Court’s determination of his family provision application.

The administrator no longer presses his claim for an order (pursuant to section 85 of the Probate and Administration Act 1898 NSW) that Raffaele Senior verify, file and pass accounts for his administration of the estate of the deceased between the date of the deceased’s death (on 26 May 2013) and the date of revocation of his grant of probate (on 7 March 2018).

He invites the Court, instead, to order that Raffaele Senior pay to the deceased’s estate equitable compensation in the sum of $170,512.44, representing the sum of:

The administrator concedes that Raffaele Senior should be allowed a credit for $18,000 against the sum of $170,512.44 as an allowance for legitimate estate expenses, resulting in a net sum sought against Raffaele Senior in the sum of $152,512.44, subject to what follows.

I proceed on the basis that the sum of $101,021 paid by Raffaele Senior to Sebastian was funded by Raffaele Senior’s appropriation to himself of the sum of $170,512.44. If, as is proposed hereunder, the sum of $101,021 given to Sebastian is forgiven by the estate (as a grant to Sebastian of family provision relief) that has the effect of reducing Raffaele Senior’s indebtedness to the estate to $51,491.44, plus whatever award of interest may be made against him in favour of the deceased’s estate.

I propose to dismiss Raffaele Senior’s cross claim relating to work undertaken by him (directly or through his company, Partinico Pty Ltd) in relation to (partial) construction of a secondary dwelling on the Medowie Property. That work was undertaken without authority on the part of Raffaele Senior and in breach of fiduciary obligations owed by him to the deceased’s estate. There is no evidence that it enhanced the value of the property upon sale.

Dismissal of Raffaele Senior’s cross claim carries with it dismissal of any claim for compensation for work undertaken before the death of the deceased, performed without expectation of recompense.

As a son of the deceased, Sebastian is an “eligible person” within the meaning of section 57(1)(c) of the Succession Act and, accordingly, he has standing (under section 59(1)(a)) to make an application for a family provision order under Chapter 3 of the Act.

His application for a family provision order was made more than 3 years after the expiry of the limitation period (of 12 months after the date of death of the deceased) prescribed by section 58(2) of the Succession Act.

Accordingly, he needs an order of the Court under section 58(2) permitting his application to be made “on sufficient cause being shown.”

As explained in Warren v McKnight (1996) 40 NSWLR 390 at 394E, factors commonly regarded as relevant to an exercise of the Court’s discretion are: (a) the sufficiency of any explanation for the plaintiff’s delay in making an application for family provision relief; (b) the existence of prejudice to beneficiaries; (c) the existence of any unconscionable conduct on the part of the plaintiff; and (d) the strength of the plaintiff’s case.

In my opinion, an order should be made under section 58(2) permitting Sebastian’s application for a family provision order to be made out of time because:

In my opinion, Sebastian has been left without “adequate provision for [his] proper maintenance, education [and] advancement in life” within the meaning of section 59(1)(c) by a will which provided for him to have no more than a legacy of $1,000.

I find that to be so because:

In my opinion, upon an exercise of the power for which section 59(2) of the Succession Act provides, an order ought to be made for the maintenance, education and advancement in life of Sebastian out of the estate of the deceased. In lieu of the provision made for him in the deceased’s will, that provision should take the form of:

In my opinion, no greater provision should be made under section 59(2) in favour of Sebastian because to make greater provision for him would be to impinge unduly upon the testamentary provision made for Raffaele Junior and Tiffany. They are both young people without substantial means. Raffaele Junior is trying to pursue a career as a commercial pilot in Europe, not an easy path to follow. Tiffany is married with a young child. They had a close and loving relationship with the deceased. Respect must be shown for his intention to benefit them. With the benefit of the Court’s award in his favour, Sebastian will have received in excess of $150,000 from what is a small estate. His need for assistance does not rank over the needs of Raffaele Junior and Tiffany.

Sebastian submits that he should have the benefit of an order that his costs (estimated to be $185,000 assessed on a solicitor and client basis) be paid out of the estate of the deceased because of his success in obtaining a family provision order.

I do not accept that submission because:

I propose to make an order that Sebastian’s costs of the proceedings (not distinguishing between the “probate” accounting proceedings and the family provision proceedings, heard together), assessed on the ordinary basis, be paid by Raffaele Senior. Sebastian and Raffaele Senior are both parties to both sets of proceedings before the Court. Sebastian’s primary adversary in the proceedings, viewed as a whole, has been Raffaele Senior because of the way the deceased’s estate was administered in the four years immediately following the deceased’s death.

A final figure for the net distributable estate of the deceased cannot be calculated with precision until: (a) the outcome of the administrator’s application to the Australian Tax Office for a private ruling is known; (b) the administrator discovers whether Raffaele Senior will satisfy the Court’s judgment that he pay equitable compensation to the deceased’s estate; and (c) the administrator’s entitlement for ongoing costs crystallises upon completion of administration of the estate.

Upon assumptions that:

If (as I have found) Sebastian is to receive from that amount a legacy of $50,000 but no charge against the estate for his costs, the amount available for an equal distribution between Raphael Junior and Tiffany as residuary beneficiaries of the deceased can be estimated at $327,907.30 or about $163,953.65 each.

That amount will increase to the extent that the administrator’s application to the ATO is successful and Raffaele Senior satisfies that estate’s judgment for equitable compensation.

Although, as a matter of form, no costs orders are to be made for or against Raffaele Junior and Tiffany (neither of whom appeared in the proceedings by a lawyer), their inheritance will have been implicitly diminished by the entitlement of the administrator to be indemnified for his costs out of the estate to the extent that they are not recovered from Raffaele Senior.

Raffaele Senior was largely responsible for the complexity and duration of both sets of proceedings before the Court, and for the necessity for an investigation by the administrator of his dealings with estate property. Having suffered judgment against him on the administrator’s claim for equitable compensation, and having failed on his cross claim, he should be ordered to indemnify the estate of the deceased for the administrator’s costs.

Subject to allowing the parties an opportunity to check my arithmetical calculations, and to make submissions about the form of orders to be made in disposition of these proceedings, I propose to make orders to the following effect:

Unless the parties earlier bring in draft short minutes of orders to which they all agree, the proceedings will be listed at 9:00am on 16 September 2021 for final orders to be made.