Smith v Smith

1. [1]

   Three of the four named defendants seek orders in relation to proceedings commenced against them by the plaintiff.

The matters in dispute

1. [2]

   The orders sought are that the originating process be set aside or that the Court decline to exercise jurisdiction (see UCPR r 12.11(1)(a), (h) respectively); or that the proceedings be cross-vested to the Supreme Court of South Australia (Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), s 5(1)); or that the amended statement of claim be struck out in whole or in part (r 14.6, calling in aid also r 13.4, and the inherent jurisdiction of the Court).

2. [3]

   Further relief is sought, of which the only relevant aspect for today's purposes is an order that a notice to produce be set aside.

Background

1. [4]

   It is necessary to state some of the background. The plaintiff and the first and third defendants are the children of the late Marlene Marie Smith and the late Denby Garfield Smith. For convenience, and without either wishing or being taken to be condescending or patronising, I shall refer to those people as, respectively, Bronwyn, Jamie, Adam, Marlene and Denby.

2. [5]

   The third defendant (Mr Thiele) is a solicitor of the Supreme Court of South Australia.

3. [6]

   The fourth defendant is named as "Estate of Denby Garfield Smith". The statement of claim identifies that defendant further by the words "as per the third defendant".

4. [7]

   I note at this point that there has been no grant of representation in the estate of Denby. Specifically, although Mr Thiele was named as one of executors in Denby's will, Mr Thiele has renounced probate (and the same applies in respect of Marlene's will).

5. [8]

   Marlene and Denby made what might be called mutual or reciprocal wills on 6 July 2012. By clause 3 of Marlene's will, she left her shares in the company known as Lachmarden Pty Limited and her interest (if any) in "the DG and MM Smith Family Trust" on the following trusts:

6. [9]

   By clause 5 of her will, Marlene gave her shares in another company known as Dema Vista Pty Limited together with her interests (if any) in the "Denby Smith Family Trust" on the like trusts, so far as they are relevant.

7. [10]

   By clause 7 of her will, Marlene directed her trustees to set up a trust fund with a capital of $20,000, to be held at the discretion of the trustees as to both income and capital for Bronwyn.

8. [11]

   By clause 9 of her will, and in the events that have happened, Marlene gave her estate otherwise to Denby.

9. [12]

   Denby's will follows the same pattern, except that the residue of the estate, after the gift of the shares and the settings up of another trust fund of $20,000, is given to Adam (as to certain assets) and to Jamie and Adam (as to other assets).

10. [13]

    Marlene died on 25 October 2012. Denby died on 26 November 2013. As I have said, Mr Thiele renounced probate of each of their wills.

11. [14]

    At the time Marlene died, it was thought that her estate was very small, and indeed insolvent. Accordingly, Jamie administered her estate without proceeding to obtain a grant of probate as apparently is permitted under the relevant legislation of South Australia. (I should have mentioned that Marlene and Denby were domiciled in South Australia, that the bulk of their assets were located in South Australia, and that administration of their estates, to the extent that it is required, would be under the law of South Australia and by the Supreme Court of that State).

12. [15]

    Mr Thiele has sworn however that, at some time after Marlene died, an additional asset was discovered. That had the effect of rendering her estate solvent, to the point where it could pay not only its debts but also the capital of the trust fund of $20,000 to be set up for Bronwyn. On Mr Thiele's evidence, which was relevantly uncontroverted, the gross value of the estate was about $44,800, and its net value was about $28,000.

13. [16]

    I should note that Mr Griffin, solicitor, who appeared for Bronwyn on this application, submitted that the limit for informal administration of estates either is or at the relevant time was $30,000. There was no authority or legislation cited to justify that proposition. Nor was Mr Griffin able to say where or not it referred to a gross or a net value.

14. [17]

    In circumstances where Mr Thiele, an experienced and apparently competent solicitor, has effectively acquiesced in the informal administration of Marlene's estate, I think I should proceed upon the basis that whatever (if anything), the monetary limit may have been, the mode of administration was, on the figures that he gives, appropriate.

15. [18]

    Jamie has applied for a grant of probate of Denby's will. Because Bronwyn filed a caveat against grant, that application will proceed as a suit for probate in solemn form. As yet, no order of representation for Denby's estate has been made.

Dispute as to value of Marlene’s estate

1. [19]

   I referred a little while ago to what was said to be the value of Marlene's estate. Mr Griffin submitted, and it is Bronwyn's case, that in fact the estate was of substantially greater value. That is because, Mr Griffin submitted, the share that Marlene held in each of Lachmarden and Dema Vista was worth far more than the one dollar notional value ascribed to it.

2. [20]

   Mr Thiele has sworn, without controversion, that each of Lachmarden and Dema Vista was a trustee company. Lachmarden held certain grazing or family lands on trust, I assume for one or other of the trusts mentioned in the wills. Dema Vista appears to have conducted the primary production business that was carried on upon those (and perhaps other) lands. However, Mr Thiele swore, it did so as trustee for another trust.

3. [21]

   In those circumstances, the obvious inference from Mr Thiele's evidence is that neither Lachmarden nor Dema Vista had any beneficial interest in the assets in its name. On that basis, it is inappropriate to do, as Mr Griffin said should be done: namely, value the shares by reference to their supposed net asset backing.

4. [22]

   There is simply no evidence to suggest that the shares in question had any value other than nominal value. Thus, there is no evidence to support the submission that the value of Marlene's estate was anything other than the figure ascribed to it by Mr Thiele.

The notice to produce

1. [23]

   I pass over the orders sought pursuant to r 12.11(1), and the orders pursuant to the Cross-Vesting Act. It is convenient to start with the application to set aside a notice to produce.

2. [24]

   The notice to produce was dated 28 November 2014, and presumably was served at some time shortly thereafter. It required Mr Thiele, upon whom it was served, to produce various records of Lachmarden and Dema Vista, of the two trusts, and of each of Marlene and Denby.

3. [25]

   The pleadings have not closed. Indeed, if the order for striking out the amended statement of claim is made, there will be no pleadings to close. There has been no evidence served. Thus, as it seems to me, the notice to produce is in substance if not in form an attempt to get around the command of Practice Note SC Eq 11. By that Practice Note, the Court should not make an order for disclosure of documents until the parties have served their evidence, unless there are exceptional circumstances that necessitate disclosure (see para 4).

4. [26]

   It is clear that the provisions of the Practice Note should be applied by analogy where documents are sought not pursuant to an order for disclosure but pursuant to some process for production such as that employed in the present case.

5. [27]

   There was nothing to suggest that there are exceptional circumstances necessitating disclosure. Indeed, when questioned about the Practice Note, Mr Griffin said that he was not aware of it. The Court expects its practitioners to be aware of relevant matters, including not only the content of relevant legislation but also the content and application of relevant Practice Notes. The Practice Note was promulgated on 22 March 2012. One would have hoped that, more than three years later, a practitioner would be aware of its terms.

6. [28]

   There being no suggestion of any exceptional circumstances, it is plain that the notice to produce must be set aside.

The application to strike out

1. [29]

   I turn to the application to strike out the amended statement of claim. I start by observing that the statement of claim is a lengthy, prolix and repetitive document. It includes, over some four pages, 24 different prayers for relief. To enable some flavour to be given, I set out those prayers for relief:

2. [30]

   I should note, in relation to prayer 24(g), two things. The first is that, in the course of submissions, Mr Griffin said that his client's claim was one for equitable compensation. Although there are some 24 separate claims asserted, one of which has seven subclaims, equitable compensation finds no mention among them.

3. [31]

   The other matter is that, in disregard of r 14.13, the statement of claim claims an amount for unliquidated damages. If that were the only disregard of the rules relating to the pleading, it could perhaps be overlooked. But as I shall show, it is not.

4. [32]

   The "pleading" (for want of a better word) commences by identifying the parties. It then turns its attention to what are called "material facts". It sets out, although not entirely clearly, facts relating to the death of Marlene and (as Bronwyn sees them) the assets of Marlene's estate and certain of the provisions of Marlene's will.

5. [33]

   The first matter of which complaint is made is the way in which Marlene's shares in Lachmarden and Dema Vista were dealt with. The pleading alleges, from paras 13 onward, that the shares in those two companies were wrongly transferred by Jamie to Denby. It alleges further, that thereafter those shares were wrongly transferred by Denby back to Jamie.

6. [34]

   The basis of the allegation that the shares were wrongly transferred must be the (unstated) proposition that they had real rather than notional value, so that they could not be transferred as part of the informal administration of Marlene's estate. For the reasons I have given, that unspoken basis is incorrect. It must follow, on the assumption that it was open to Jamie to administer the estate in the way that he did, that:

   1. (1)

      there was no impropriety in his transferring the estate's shares to his father Denby; and

   2. (2)

      nor was there any impropriety in Denby's act thereafter, as owner of the shares, transferring them back to Jamie.

7. [35]

   Thus, the complaint that is made is entirely unsustainable, on the assumption as to value of the estate. Nonetheless, to give some indication of the repetitive, prolix, embarrassing, and vexatious way in which the whole of the statement of claim is pleaded, I shall set out, in extenso, paras 13 to 49 of the amended statement of claim:

8. [36]

   It will be observed immediately that the drafter of the pleading either did not know, or did not propose to pay attention to, the requirements of Div 3 of UCPR Part 14. I set out rules 14.6, 14.7 and 14.8:

9. [37]

   It simply cannot be said that each of the "several matters" with which the pleading deals are alleged in separate paragraphs. It cannot be said that the pleading contains only a summary of material facts rather than evidence. Nor can it be said that this aspect of the pleading is as brief as the nature of the case allows.

10. [38]

    On the contrary:

    1. (1)

       the paragraphs that I have set out on many occasions contain multiple allegations of fact (and multiple allegations of evidence);

    2. (2)

       the paragraphs do not confine themselves to material facts, but on the other hand do not allege with adequate particularity some of those facts;

    3. (3)

       many of the paragraphs allege matters that are evidentiary;

    4. (4)

       the constant repetition, with slight variations, of the same allegations offends the rule against repetition that follows from r 14.8; and

    5. (5)

       overall, the pleading is structured in such a way that it is almost impossible to see how a sensible defence could be pleaded to it.

11. [39]

    As to the last point: anyone seeking to plead a defence would have to take each of the paragraphs, disentangle the multiple allegations made, admit them, deny them, traverse them in some way, or otherwise deal with them individually and serially. It is simply not possible for a pleading by way of defence to do no more than admit or deny a particular paragraph. That is why in my view the way in which those paragraphs are pleaded is not only vexatious but also embarrassing

12. [40]

    The next section of the pleading refers to "The rule in Saunders v Vautier". The essence of that pleading is that that Bronwyn, as she is entitled to do (it now being clear that Marlene's estate is solvent), has called for payment to her of the trust fund set up for her benefit. It is common ground by now that the amount of $20,000 has been paid and received.

13. [41]

    Mr Griffin submitted that there was also a claim for interest because of the delay in payment. Quite why interest should be payable in circumstances where, until the other asset to which I have referred was discovered, the estate was insolvent, I do not know. However, regardless, Jamie has offered what is in effect an ex gratia payment on account of interest in the sum of $1,000. Bronwyn has accepted that offer. She was wise to do so. It is clear that interest (even if allowed) at the usual rate would be far less.

14. [42]

    The sum of $1,000 has not been paid, but I have no reason to think it will not be paid.

15. [43]

    The pleading then turns its attention to a life insurance policy which Marlene effected on Bronwyn's life. It seems that Bronwyn wishes to have the benefit of that policy transferred to her. Jamie is prepared to do so. Indeed, Jamie has helped Bronwyn out by paying, out of his own pocket, premiums on that policy for a period of time. All that needs to be done is that Bronwyn needs to arrange for the necessary formalities with the insurer. The policy will then be transferred.

16. [44]

    I should however note in this context that the amended statement of claim makes a scandalous and irresponsible allegation that Mr Thiele cashed out the policy and paid the cash value of it to himself. That allegation was made, so Mr Griffin said, because Mr Thiele gave Mr Griffin an incorrect policy number; and when Mr Griffin made inquiries of the insurer, he was told that those things had happened.

17. [45]

    I think that what happened is that the policy that was cashed out and paid (to Mr Thiele’s trust account, not to himself personally) was another small policy that Marlene held on the life of Denby.

18. [46]

    In the course of submissions, Mr Griffin accepted facts which show quite clearly that Mr Thiele has not acted in the wrongful way attributed to him. Nonetheless, Mr Griffin did not submit that he should have leave to replead so as to delete those entirely inappropriate allegations.

19. [47]

    The amended statement of claim then alleges matters said to show breach of trust by the trustees of Marlene's estate, and matters said to show breach of duties owed by the defendants to the estate and indeed by the defendants to Bronwyn. It then turns to allege various aspects of what are said to be maladministration and intermeddling.

20. [48]

    The starting point is that Bronwyn is not an executor or trustee named in either of the wills. She is a beneficiary. Her interest has been paid or will be paid. It is difficult to understand how she has any standing to seek the relief that she does seek in relation to the matters alleged. And if she does wish to interfere in the administration of Marlene’s estate, there are statutory mechanisms available under The Probate Rules 2004 (SA) of the Supreme Court of South Australia.

21. [49]

    Mr Griffin sought to justify the orders sought, and the problem of standing, by referring to the claim for “loss of opportunity to make a family provision claim”. I shall return to that topic.

22. [50]

    Passing over numerous other matters that are "pleaded" but go nowhere, it is convenient to point out another aspect of the deficiency of the "pleading". Paragraph 80 alleges breaches of duty against one or other or more of the defendants. For present purposes, it is necessary to refer only to subparas (d) and (e):

23. [51]

    There is simply no pleading of any material fact by which those allegations are said to be demonstrated. The pleading is conclusionary in the extreme. It gives Mr Thiele no knowledge whatsoever of the case that he might have to meet.

24. [52]

    The next section of the pleading deals with "Damage caused to the plaintiff by the defendants". The first two items relate to the $20,000 trust fund and the policy on Bronwyn's life. I have dealt with those. The next section refers to a (supposed) lost opportunity to bring family provision claims. I set out paragraph 81 (c), (d):

25. [53]

    At this point, I note that "family provision claims" are governed, in South Australia, by the Inheritance (Family Provision) Act 1972 (SA) (the IFP Act). Under s 8 of the IFP Act, an application is not to be heard unless it is made within six months after the date of grant of probate:

26. [54]

    There has been no grant of probate in either estate. Accordingly, the time to make an application under the IFP Act has not commenced to run. It cannot be said, in any temporal sense at least, that Bronwyn has lost the opportunity to bring a claim. The only thing holding up her claim, at least in respect of Denby's estate, is the necessity for probate to be granted in solemn form, because of the caveat that she herself lodged.

27. [55]

    Mr Griffin sought to support this aspect of the case by saying that the claim was not based on loss of any temporal opportunity but, rather, on the way that the defendants had administered the two estates. That, he submitted, had the effect of making it impossible, in a practical sense, for his client to bring a claim.

28. [56]

    The starting point is that, on the evidence, Marlene's estate, after allowing for payment of the trust amount of $20,000 to Bronwyn, has only a few thousand dollars left in it. It is simply inconceivable that any order for provision, or further provision, would be sought or made out of so small an estate.

29. [57]

    To the extent that this aspect of the claim depends on the proposition that Marlene's estate is more valuable than Mr Thiele has said, it is unsustainable, for the reasons I have given.

30. [58]

    It may very well be that Denby's estate is more substantial. However, until probate is granted, there can be no family provision claim made in respect of it.

31. [59]

    In my view, the claim for lost opportunity is utterly misconceived.

32. [60]

    The next section of the pleading deals with what is said to be a Barnes v Addy case. I pass over that, although it should not be thought that, in doing so, I am expressing a view that it is properly pleaded or has any appearance of merit.

33. [61]

    The next section of the case alleges a conspiracy between Jamie and Denby (presumably, during Denby's lifetime). I set out the relevant part of the pleading (paras 93 to 98):

34. [62]

    It is to be noted that the allegations of the conspiracy in paras 93 and 94 (and, perhaps, 95 and 96 also) are utterly devoid of any material facts from which the conspiracy is said to be proved. More specifically, there is no pleading of any overt act from which the existence of the conspiracy could be inferred.

35. [63]

    The allegation made is a very serious one. The persons against whom it is made (now, after Denby's death, only Jamie) are entitled to have it fully and properly pleaded and, to the extent necessary, particularised. This the pleading conspicuously fails to do.

36. [64]

    The next section of the pleading alleges a case in fraud. The fraud is said on occasions to involve one or other of Jamie, Denby and Mr Thiele. As an example of the confusion of the pleading, it is alleged on two occasions that Mr Thiele acted under instructions given by, among others, Denby at a date well after Denby's date of death.

37. [65]

    More significantly, although the pleading of fraud is a serious matter and one that requires full pleading of material facts and provision of particulars, the pleading that is given is utterly inadequate.

38. [66]

    There are then pleaded claims in conversion and detinue, unjust enrichment, and unconscionability. Again, I pass over those claims. Again, it should not be thought that in doing so I am to be taken as suggesting that they have any merit whatsoever or that they are properly pleaded.

39. [67]

    The case is clearly one where it would be unjust to put the defendants to the difficulty and expense of pleading to the allegations made against them. In terms of r 13.4, the pleading is frivolous and vexatious. More generally, the pleading is embarrassing. It is frivolous and vexatious because it does not give any proper notice of the case to be met, and because (as I have said) it is cast in such a way that it is impossible to plead in a considered way in defence. It is embarrassing for the same reasons. As a consequence of all those matters, it is in my view an abuse of the Court's processes.

40. [68]

    Accordingly, in my view, the applicants have made good their claim to have the amended statement of claim struck out.

41. [69]

    That would leave the question of whether Bronwyn should be given an opportunity to replead. It may be - I do not know - that it might be possible for a case to be constructed that complies with the rules as to pleading, is put in an intelligible way, and makes out a cause of action that, arguably, could be sustained. In those circumstances, subject to hearing further argument, I would be inclined to allow a time for repleading, but to order in addition that if a further amended statement of claim not be filed within whatever time might be allowed, then the proceedings should stand dismissed.

42. [70]

    There is also the question of costs. Plainly, the applicants should have their costs. In the circumstances of this case, and having regard to the manifest and obvious deficiencies in the pleading, I think those costs should be payable on the indemnity basis and that there should be an order for assessment forthwith.

43. [71]

    However, before making orders, I will hear from the parties.

44. [72]

    (For costs argument see transcript.)

45. [73]

    The only controversy in relation to the orders is one as to repleading. Mr Griffin has sought that the defendants should be required to produce documents before his client repleads. That is because he wishes to show that the shares in Lachmarden and Dema Vista were worth more than the value assigned to them by Mr Thiele.

46. [74]

    As I have said, the only evidence is that the assets held by those two companies were held by them as trustees not beneficially.

47. [75]

    Mr Griffin's response was to say that that was not his argument; his argument was that Marlene held the shares beneficially. That may be so. There is nothing to controvert it. But it does not follow, simply because Marlene owned beneficially shares in two trustee companies, that those shares could have any value greater than the value of the underlying company.

48. [76]

    This aspect of the case seems to me to be utterly misconceived. However, the only thing that I can do is to say that in my view the defendant should not be required to produce the documents referred to.

Orders

1. [77]

   I make the following orders:

2. [78]

   1. Set aside the notice to produce served by the plaintiff and dated 28 November 2014;

3. [79]

   2. Order that the amended statement of claim be struck out;

4. [80]

   3. Direct that any further amended statement of claim be filed and served no later than 31 July 2015;

5. [81]

   4. Order that if a further amended statement of claim be not so filed and served then these proceedings are to stand dismissed with no further order of the Court necessary;

6. [82]

   5. Order the respondent/plaintiff to pay the costs of the applicants/first, second and third defendants of the notice of motion filed on 9 December 2014;

7. [83]

   6. Order that those costs be assessed on the indemnity basis;

8. [84]

   7. Grant leave for those costs to be assessed forthwith;

9. [85]

   8. Reserve liberty to apply on five days' notice.