Bruce v Bruce

These proceedings are the result of a consolidation of two proceedings in which various parties claim an interest in a residential property at Connells Point in Sydney. Without intending any disrespect, I shall refer to some of the parties by their given names.

The property was held as a tenancy in common in two shares. One share was held by the Estate of the late Mr James Harvey Bruce (Father’s Estate) and the other share by the Estate of the late Mrs Colleen Marie Bruce-Ryland (Mother’s Estate) (together the Estates). The Executors of the Estates are the plaintiff, Licia Bruce, the first defendant, Jayleen Bruce (also known as Kayde and sued both in her personal capacity and as one of the Executors), and the third defendant, Colleen Bruce (sued in her capacity as one of the Executors). They are the daughters of Mr Bruce and Mrs Bruce-Ryland. Licia is an executor of both Estates. Jayleen is only an executor of the Father’s Estate and Colleen is only an executor of the Mother’s Estate. However, they are not the only beneficiaries of the Estates. The fourth defendant, Mr Alan Mitchell, is Jayleen’s estranged partner.

The origin of the present dispute is the sale of the property to Jayleen by the Executors without the informed consent of all of the beneficiaries of the Estates. The Executors were advised by Owen Hodge solicitors. It is now common ground that the sale was a breach of fiduciary duty by the Executors. A receiver and manager has been appointed to sell the property and each of the Estates will receive half of the net proceeds of sale.

The result of consolidating two sets of proceedings, one commenced by Licia and the other by Mr Mitchell, is:

The issues actually presented for determination and the Court’s resolution of those issues may be summarised as:

Mr J O’Sullivan of Counsel appeared for Licia. Mr A Hill of Counsel with Mrs M Pringle of Counsel represented Jayleen and Colleen. Mr Mitchell represented himself. He previously had the benefit of legal representation. The Court also referred Mr Mitchell for pro bono legal assistance but he did not take up the offer. There was a brief appearance during the hearing by Mr D Yazdani of Counsel for the receiver and manager of the property.

Mrs Bruce-Ryland died on 7 July 2004 and probate was granted to Licia and Colleen on 24 December 2008. Her estate had a probate value of $1,517,262.83. There are four beneficiaries of the Mother’s Estate in addition to the Executors.

Mr Bruce died on 13 May 2008 and probate was granted to Licia and Jayleen on 10 November 2008. The probate value of his estate was $3,036,355.79. There are seven beneficiaries of the Father’s Estate in addition to the Executors.

To assist them in their administration, the Executors retained Owen Hodge. That firm had prepared each of the wills that were admitted to probate.

Jayleen assisted in the care of Mr Bruce, and following his death, Jayleen, Mr Mitchell and their children moved into the property, residing there full time from August 2010.

On 20 November 2009, Ms Bernadette Gregg made an application for further provision from the Estates which was settled by way of a Deed of Settlement made in June 2011. Under this Deed, Ms Gregg received $65,000 to be paid out in the proportion of $50,000 from the Mother’s Estate and $15,000 from the Father’s Estate.

On 14 February 2017, Mr David Butler (who had been found by Jayleen through an online search) inspected the property and valued it as at that date as having a market value of $850,000 (First Butler Valuation). It is unclear whether Mr Butler ever signed this valuation. Under general remarks, the reports states:

On 24 March 2017, Owen Hodge sent the Executors a letter which included:

On 24 April 2017, Mr James Kelly, a partner in Owen Hodge, sent an email to Jayleen and Colleen which included:

On 9 June 2017, Owen Hodge sent a letter to Licia, Jayleen and Colleen that included:

On 20 June 2017, Mr Joe Karam of MVS Valuers, on behalf of ANZ Bank, inspected the property and valued it at $950,000 (MVS Valuation). The borrower was recorded as Jayleen alone. The land was valued at $750,000, the improvements valued at $200,000 and unfurnished rental value was stated to be $600 per week. The internal and external condition of the main building was stated to be “fair”. Jayleen accepted that Mr Karam had inspected the interior of the building. The entry on the valuation form for “Essential Repairs/Allowances” was answered “No”.

On 1 August 2017, Jayleen and Mr Mitchell signed and submitted a joint loan application to ANZ Bank. It described Jayleen as the “Primary Applicant” and Mr Mitchell as the “Co-Applicant”. The application stated the value of the property was $950,000. Jayleen accepted that when she signed the document the mortgage broker told her that this was the ANZ Bank’s valuation of the property.

The loan application records that a variable rate loan had been selected: “Client’s [sic] have chosen VR as they have funds in savings which they wish to place in an offset account and reduce interest”. Under assets, a motor vehicle valued at $45,000 and savings of $220,000 were listed as being owned 50% by Jayleen and 50% by Mr Mitchell. Jayleen was stated to have a total monthly income of $4,658.08 and Mr Mitchell was stated to have a total monthly income of $8,017.08. Under living expenses, Jayleen’s total monthly expenses were stated to be $4,176 while Mr Mitchell’s were $0.

On 22 August 2017, ANZ Bank informed Jayleen and Mr Mitchell by letter of that date that they had an approved loan of $760,000.

On 25 August 2017, Mr Butler executed a valuation of the property at $850,000. The valuation report stated: “THIS REPORT MAY BE USED FOR TRANSFER/STAMP DUTY PURPOSES” and also that the improvements were in poor order (Second Butler Valuation). Colleen saw this valuation at Owen Hodge before signing the transfer for the property to Jayleen. There was no separate contract of sale.

On 28 August 2017, Jayleen and Mr Mitchell attended the office of Owen Hodge. Mr Mitchell completed an identity verification form. However, during the course of that attendance it was Jayleen who executed a mortgage over the property in favour of ANZ Bank as the sole mortgagor in the presence of Mr Mitchell. That Mr Mitchell was there is demonstrated by the email in [24] below.

Also on 28 August 2017, Owen Hodge sent this letter to the Executors:

There is no evidence that Owen Hodge was ever instructed to write to inform the other beneficiaries of the proposed transfer.

On 29 August 2017, a legal assistant at Owen Hodge emailed Jayleen with the subject “BRUCE – Family transfer of [the property]”. The email included:

On 13 September 2017, the sale of the property to Jayleen was completed, and the amount of $760,000 was drawn down from the ANZ Bank. The transfer records consideration of $731,945. Licia’s evidence is that she attended the offices of Owen Hodge “at urgent request” and signed the transfer of the property which had already been signed by her sisters.

On 20 September 2017, Owen Hodge sent a letter to Jayleen which stated:

Jayleen’s ANZ Bank home loan statement was in evidence. From 13 October 2017 it records regular deposits described as “LOAN REPAYMENT JAYLEEN AND ALAN”.

On 22 November 2017, Licia sent an email to Alice Holman of Owen Hodge, Garry Penhall (Licia’s solicitor), Jayleen and Colleen stating:

On 29 November 2017, Kohler Bird Valuers valued the property as at that date for $1,630,000 (Kohler Bird Valuation). It was stated that internal access to the property had not been granted and set out the following:

By a letter dated 29 March 2017 (but which must be 2018 given its contents), Owen Hodge wrote a letter to the Executors which included:

On 23 May 2018, Licia’s lawyers, Penhall & Co Lawyers sent a letter to Owen Hodge which stated:

On 20 December 2018, Penhall & Co sent a letter to Owen Hodge stating:

In May 2019, Jayleen and Mr Mitchell separated, and an Apprehended Domestic Violence Order was taken out by Jayleen, naming Mr Mitchell as the defendant.

On 14 August 2019, Mr Mitchell lodged a caveat over the property. The caveatable interest was described as:

On 9 September 2021, Jayleen and Colleen commenced proceedings against Licia, seeking an order that the two grants of probate to Licia be revoked (Probate Proceedings). The basis of the claim was that the Estates had not been fully administered despite probate for both estates being granted in in 2008. It was alleged that Licia had failed to carry out her duties in administering the estate.

On 16 September 2019, Jayleen’s family lawyers sent a letter to Mr Mitchell which stated:

On 2 October 2021, Licia lodged a caveat over the property and the caveatable interested was listed as:

Also on 2 October 2021, Penhall & Co sent a letter to Elliot Tuthill Solicitors, the Estates’ new solicitor, stating:

On 5 November 2021, Mr Mitchell filed a Summons for:

Also on 5 November 2021, the Court ordered the extension of Mr Mitchell’s caveat.

On 20 December 2021, Jayleen’s solicitors serve Licia with a lapsing notice of her caveat.

On 21 December 2021, Penhall & Co sent Jayleen’s solicitors a letter which stated:

The current proceedings were commenced by way of a Summons filed by Licia on 4 January 2022, for:

On 8 August 2022, the property was valued by James Doncas at $950,000 as at 14 February 2017, and $1,500,000 as at 8 August 2022 (Doncas Valuation). Under “Remarks”, it was stated:

On 11 August 2022, the property was valued by Anderson Group Valuers at $3,000,000 as at 18 September 2017, and $3,000,000 as at 11 August 2022. Under the Executive Summary, the report stated:

On 23 October 2022, Penhall & Co wrote to B Hayward & Co who were acting for Jayleen and Colleen, stating:

On 25 October 2022, B Hayward & Co replied to Penhall & Co, stating:

Licia filed a Notice of Motion on 26 October 2022 seeking a declaration that she represents the Estates in these proceedings.

On 8 March 2023, Jayleen and Colleen filed their cross-claim against Owen Hodge seeking damages, interest and costs for failing to advise the Executors of the rule against self-dealing.

On 21 September 2023, Robb J made this notation on the Court record:

On 13 December 2023, final orders were made by Robb J in the Probate Proceedings, with a Notice of Discontinuance being signed by the parties.

On 23 December 2023, the cross-claim against Owen Hodge was settled, with Owen Hodge to pay $110,000 to be split equally between the two Estates.

On 10 January 2024, Owen Hodge sent a letter to Licia, Jayleen and Colleen which stated:

On 26 Match 2024, Lindsay J ordered that Katelin Whitley be appointed as receiver and manager to sell the property and that the proceeds be paid into Court.

A Further Amended Statement of Claim was filed by Licia on 23 September 2024, with the following relief claimed:

On 3 October 2024, the defence to the further Amended Statement of Claim was filed. Relevantly, it stated:

On 3 October 2024, the matter came before me. I ordered the Mitchell Claim be consolidated into the current proceedings.

The Executors accepted that there had been a breach of fiduciary duty by the transfer of the property to Jayleen. On this point, the case was run without differentiating between the Estates or the respective capacities of the Executors in relation to the Estates. That reflects what appears to have happened as a matter of fact in relation to the sale. Nevertheless, it is a point that should not be overlooked, even if it makes no difference to the ultimate outcome given the way the case was argued.

In relation to the Father’s Estate, Jayleen as an executor engaged in impermissible self-dealing as to that estate’s 50% share in the property and Licia’s breach as an executor was to acquiesce in the transfer to Jayleen. In relation to the Mother’s Estate, Licia and Colleen permitted that estate’s 50% share in the property to be transferred to Jayleen. Apart from Jayleen’s self-dealing, the initial overarching complaint in relation to both estates of sale at an undervalue has fallen away and been overtaken by the appointment of the receiver and manager to sell the property. In circumstances where the Executors were acting in concert and with actual knowledge of what was being done to give effect to what was seen by them as a single transaction, in my respectful opinion the entire sale would in equity be tainted by Jayleen’s self-dealing, notwithstanding that as a matter of strict conveyancing that analysis applies only to the 50% share of the property in the Father’s Estate.

As a final preliminary matter, I record that there was no dispute that the various equities the subject of these proceedings were unaffected by the indefeasibility of title gained by Jayleen in the property upon registration of the transfer of the property to her.

Licia sought a declaration that she represented the Estates and could therefore be indemnified by the Estates for her costs. She relies on r 7.10 of the UCPR which states:

It was submitted the case at bar is directly analogous to Carrington v Wallace [2022] NSWSC 1078, in that the plaintiff brought these proceedings where there was a clear prima facie case that there had been a breach of the rule against self-dealing from which Jayleen profited. It was argued that the defendants had an interest in the proceedings that was adverse to the interests of the Estates within the meaning of r 7.10(1)(b) of the UCPR.

It was submitted the same logic that Licia does not have standing would also apply to Jayleen and Colleen who are also Executors. This would result in the interests of the Estates not being represented. If this were the case, it was said to be open to the Court to regularise the proceedings by making an order under r 7.10(2)(a) of the UCPR.

Jayleen and Colleen submitted that Licia should not be indemnified by the Estates. Otherwise, their submission did not address the question of Licia’s standing, other than stating that costs will be the subject of further argument.

The constitution of the proceedings insofar as it involves the Executors is not regular, given that Licia is one of the Executors who has committed a breach of duty. One outcome of this lack of regularity was that as to some permutations of the way the Executors put their cases on exoneration, there was no contradictor whose sole interest was to advance the position of the Estates against the Exoneration Claim. However, as the case developed, this was more a theoretical rather than real issue.

By the time of the hearing, the question of formal representation was moot on the central question of the property, it being accepted that the property should be sold and the proceeds returned in equal shares to each of the Estates. Insofar as Mr Mitchell’s claim was concerned, it was resisted by Jayleen in her personal interest and, to the extent necessary, by Licia insofar as it might impinge on the Estates’ right to the property (or its proceeds of sale).

Mr Hill foreshadowed, correctly in my respectful view, that the only real relevance of the argument about Licia’s capacity was likely to be on the question of costs and any claim Licia might make for indemnification from the Estates for those costs. However, how that is to be put will not be known until after delivery of these reasons. The question of exoneration (dealt with at [70] and following below) may also be relevant, not least because on one available analysis the Estates’ costs of these proceedings (or some part of them) would form part of the damages to the Estates for which the Executors would be liable as defaulting fiduciaries.

In reality (and despite their assertions otherwise) Licia and her sisters sue in their personal capacity as beneficiaries. Because, in shifting ways, the Estates’ interests have been substantially, if not completely, represented by the Executors in their personal capacities, the Court has concluded that there should be an order nunc pro tunc under UCPR Part 7 r 7.10(2)(a) that the proceedings continue in the absence of a representative of the Estates. The Estates will nevertheless be bound by these proceedings (see UCPR Part 7 r 7.10(3)).

The Court will hear the parties as to costs. Insofar as those arguments will impinge upon the Estates, practical steps can be taken to ensure the interests of the Estates are protected at that stage if there is a want of a contradictor. The Court will direct that these reasons be provided to all beneficiaries who are not the Executors and that those beneficiaries will have an opportunity to be heard insofar as any costs order is sought by any party for indemnity from or costs against the Estates unless it is clear that an existing party will be opposing that outcome. There is a real question as to whether any of the Executors (exonerated or not) should be indemnified for any of their costs from the Estates and thereby visit the cost consequences of their breach on the innocent beneficiaries.

Licia submits that she should be completely exonerated under s 85 of the Act for her breach committed as an executor in selling the property to Jayleen. The Executors all relied on the advice of Owen Hodge, which firm has admitted if failed to advise the Executors of the rule against self-dealing. It is submitted that while she is a solicitor, Licia had worked in personal injury law before working at her partner’s medical practice and that she deferred to the advice of the Estates’ solicitors and counsel. Licia did not have specialised experience in equity and the rule against self-dealing is not one that would be widely known to all lawyers. She was also living in Coffs Harbour and engaged in Family Court proceedings at the time. This had led her to disengage from the administration of the Estates, a fact about which Colleen and Jayleen complained.

The MVS Valuation was not provided to the Executors, and there was no reason for Licia to believe the property had been undervalued, until the Kohler Bird Valuation on 29 November 2017.

Upon learning of the breach, it was submitted that Licia took steps to remedy the breach, and her lawyers sent a letter on 23 May 2018 (see [31] above) informing Owen Hodge, as the Estates’ lawyers, of the breach.

Licia accepted that Jayleen and Colleen should be exonerated for the period up until they were advised of the breach, plus a two week period to account for time to obtain legal advice. From this time onwards, it was submitted that Jayleen and Colleen denied any breach of duty, refused to take steps to return the property to the Estates, failed to concede the property was held on trust for the Estates until 26 March 2024, and failed to make any formal admission until they filed their Defence on 10 October 2024. This is despite their lawyers stating on 25 October 2022 (see [47] above) that they were aware of the rule against self-dealing.

Licia lodged a caveat over the property on 2 October 2021 and commenced these proceedings on 4 January 2022. The fact that Jayleen and Colleen had failed to seek judicial advice was submitted to be a factor against exonerating them for defending the proceedings. In circumstances where Jayleen and Colleen ultimately conceded the property remained trust property, it was submitted the judicial advice would not have been in favour of defending at least the proceedings for extension of Licia’s caveat. Failing to seek judicial advice was submitted to be unreasonable.

It was therefore submitted that any exoneration should not extend to acts done during the period of 7 June 2022 and 26 March 2024, which is when the property was ordered to be sold.

In the alternative, it was submitted that the period in which Jayleen and Colleen should not be exonerated should be 7 June 2022 until 21 September 2023, being the date Robb J noted an agreement between the Executors to sell the property.

Jayleen and Colleen contended that they should be completely exonerated due to their actions being both honest and reasonable.

It was submitted the actions were honest and reasonable, based on:

It was submitted that the Executors reasonably relied upon the advice of both Owen Hodge and Licia, regardless of whether Licia understood her advice was being relied on. It was submitted she was a solicitor and was willing to assert the position advised by Owen Hodge in her email of 22 November 2017. The submission that Licia is not an expert in the requisite area of law and therefore not aware of the rule against self-dealing was challenged. It was submitted that all legal practitioners should have a finely tuned sense of what is or may constitute a conflict of interest.

It was submitted that the excuse of Licia being distracted by family court proceedings was not reasonable, when the Estates’ solicitors were writing to her in her capacity as the common executor of both Estates.

With respect to defending the proceedings, it was submitted that the letter of 23 May 2018 (see [31] above) which Licia submits would have put them on notice, was in answer to a request that Licia resign as an executor. Further, the letter did not mention a breach of the rule against self-dealing, only that an institutional trust had been impressed upon the property due to it being sold at an undervalue. The letter also alleged a fraud by Jayleen on Licia and Colleen, which Jayleen and Colleen had a right to defend due to it being a very serious claim. It was submitted Jayleen and Colleen were not required to seek judicial advice pursuant to s 63 of the Act because the claim against them raised fraud.

While it was conceded that the first formal admission of the breach of self-dealing was 21 September 2023, it was submitted that Licia was on notice of the admission in a cross-claim filed on 8 March 2022.

Considering Licia knew of the breach from May 2018, it was submitted that Licia should not be exonerated from then, because it took her until 2 January 2022, a period of four years, before she commenced the proceedings. She also took no legal action until filing her caveat on 2 October 2021. It was submitted an explanation for the delay is required if Licia seeks to be exonerated for this period.

It was submitted that Licia has not ratified the 21 December 2023 Deed of Settlement and Release between Jayleen, Colleen and Owen Hodge, nor explained this failure or joined Owen Hodge in the proceedings.

There was no dispute about the applicable principles. Section 85 of the Act provides:

Section 85 is available to the Executors because s 5 of the Act defines “trust” to include “duties incidental to the office of legal representative of a deceased person”. The requirements under s 85(2) are cumulative and the fact that the defaulting fiduciary has acted in accordance with legal advice will be a strong (but not of itself determinative) factor in favour of exoneration.

The parties placed a great deal of emphasis on what they did or did not do once it became apparent to them that the breach had occurred, especially in relation to the conduct of these proceedings. However, what a fiduciary does after discovering their wrongdoing is of little or no relevance to the question of exoneration for the actual breach. It may (and in this case will almost certainly) be relevant to arguments about costs and the extent to which these might be visited on the Estates (as to which I refer to my observations in [69] above). In my respectful opinion, the Court must look at the circumstances which attended the breach because the section provides the possibility of relief against personal liability for the breach.

Jayleen is an accounts manager and Colleen is a medical doctor. There is no suggestion that they acted dishonestly. The Court finds they acted honestly. The Court is also satisfied that they acted reasonably in relying on Owen Hodge’s advice (which apparently also involved the advice of counsel), being advice that they did not have to seek the consent of all of the beneficiaries of the Estates to the sale of assets of the Estates (see [22] above) and unqualified by any reference to limitations on the capacity of executors to purchase such assets.

Furthermore, they ought fairly be excused because:

In the case of Licia, there is also no suggestion of dishonest conduct and the Court finds that she acted honestly in relation to the transfer to Jayleen. However, she is otherwise in a quite different position to her sisters in relation to the issue of exoneration. The Court finds that Licia did not act reasonably and ought not fairly be excused because:

It is convenient to begin with some preliminary observations.

First, the Mitchell Claim was drafted at a time when Mr Mitchell was legally represented. By the time of the hearing, Mr Mitchell was appearing for himself. While he told me he had done some research, it must be observed, with no disrespect intended, that it was not always easy to follow upon which precise legal principle he was relying for some of his submissions.

Second, one aspect of Mr Mitchell’s claim was not in dispute. It is common ground that from 23 July 2019, Mr Mitchell made all of the mortgage repayments himself. The period of dispute is from the drawing down of the loan in September 2017 until 18 June 2019 (Tcpt, 12 December 2024, p 36(25)).

Third, paragraph 11 of the Mitchell Claim pleaded that the funds advanced by ANZ were applied to purchase the property. This is consistent with the fact that despite Mr Mitchell’s contentions otherwise, the evidence was clear that the purchase price was paid by Jayleen from the loan advanced to her by ANZ and secured by the mortgage on which she alone was liable. The Court finds Mr Mitchell made no contribution to the purchase price for the property. This part of the dispute turns solely on the legal consequences of his having paid the mortgage.

The Mitchell Claim sought a declaration that Jayleen held an 87.5% share (“or other proportion as found by the Court”) of the property on trust for Mr Mitchel or that Mr Mitchell has a legal interest in 87.5% of the property as a tenant in common. Further, it was pleaded that Mr Mitchell’s interest in the property was held on constructive trust for him by Jayleen. This interest was alleged to arise under an agreement between himself and Jayleen to purchase the property together, “with the view that they would hold the property as tenants in common in equal shares”. A common intention and joint endeavour were pleaded as alternatives. Given that alleged intention, the basis for the figure of 87.5% remained elusive. There were also claims for various kinds of estoppel and negligent misrepresentation, but these were not the subject of submissions by Mr Mitchell.

Mr Mitchell submitted the ANZ loan application (see [17] above) was made based on his earning capacity and assets, rather than Jayleen’s. Despite what he said was their agreement, Mr Mitchell submitted that no interest in the property was ever transferred to him.

Further, it was submitted that he had made all of the mortgage repayments and financed all of the renovations, repairs and improvements to the property: Jayleen did not make any mortgage repayments or contribute financially to works done on the property. While Jayleen gave evidence that her wages as an employee of Mr Mitchell’s company, Iramhi Services Pty Ltd, were paid directly into the mortgage, Mr Mitchell submitted Jayleen had never been a genuine employee of Iramhi and he had no knowledge of her paying any money towards the mortgage.

Mr Mitchell further submitted that his equity in the property of 87.5% should be compensated as a result of there being a resulting trust. It is unclear if Mr Mitchell was using constructive trust and resulting trust interchangeably.

In his final submissions, Mr Mitchell submitted that as a result of securing and servicing the mortgage, he was the bona fide purchaser of the property.

Licia took the main burden of responding to Mr Mitchell’s claim. The forensic reason for this was, given the potential for a priority dispute between the Estates and Mr Mitchell in relation to the property, the need to demonstrate that Mr Mitchell either had no, or a lesser or subsequent, equity in the property as opposed to the Estates.

Mr O’Sullivan submitted that if Mr Mitchell has any interest in the property, it could only be an equitable one, and this interest is held on constructive trust by Jayleen, rather than a resulting trust. Mr O’Sullivan submitted that it was contemplated by Jayleen and Mr Mitchell that Mr Mitchell would not have an interest in the property, but rather that he would contribute to the mortgage and the property’s upkeep. In turn, he would be entitled to an interest commensurate with his contributions to the property. Such an agreement would give rise to a constructive trust.

If the Court did, however, find a resulting trust existed, Mr O’Sullivan submitted there were several matters which rebutted the presumption of a resulting trust.

First, Mr Mitchell did not like the property. In his affidavit of 16 July 2022, he referred to the property as “an immobilising force in our lives. The condition of the Property was very poor. Living there was uncomfortable. The quality of our life was negatively affected.”

Second, Mr Mitchell knew of the structural defects of the property and thought even with the reduction in sale price, the price was still too high considering the work that would be required. In cross-examination, Mr Mitchell’s evidence was:

Third, Mr Mitchell agreed that he had asked Jayleen sometime in June or July 2017 to “tell me how you’re going to pay to buy it?”. However, when asked about this, Mr Mitchell gave the following evidence:

Fourth, Mr Mitchell was not wedded to the property in particular, but was happy to purchase any property. He had considered buying the property next door at one point. It was Jayleen, not Mr Mitchell who wanted to buy the property:

Fifth, Mr Mitchell was wholly disinterested in the purchase of the property. His evidence was that only Jayleen and the accountant worked on the loan application. Mr Mitchell denied knowing the amount the loan application was for or that he had applied for a loan to the ANZ Bank, as opposed to any bank. He further denied knowing that the ANZ Bank valued the property at $950,000. It was submitted that if Mr Mitchell's evidence on these matters were to be accepted, there was a clear indication he was entirely unconcerned at the time the property was purchased with acquiring a share in it, rebutting any presumption of a resulting trust. However, if his evidence was rejected, it was submitted Mr Mitchell either knew or was wilfully blind to acquiring the property at an undervalued amount.

Sixth, it would be unlikely for Owen Hodge to only put Jayleen’s name on the transfer contrary to instructions and neither Mr Mitchell nor Jayleen alleged negligence on the part of Owen Hodge in failing to record Mr Mitchell’s interest on the title.

Seventh, at the time the transfer was signed, Mr Mitchell deposed in his 16 July 2022 affidavit that:

Despite Jayleen’s evidence that Mr Mitchell saw her sign the transfer, Mr Mitchell’s evidence was that he did not see the transfer paperwork after it was signed at the office of Owen Hodge. Mr Mitchell’s evidence as to why he did not insist on having his name on the transfer at the time was as follows:

Eighth, it was submitted that if such a conversation did in fact occur, it would be inherently implausible for Mr Mitchell to have relied upon it. Instead, it was submitted there was no agreement for Mr Mitchell to acquire a share in the property and as such he was not concerned about ensuring his alleged interest was recorded on the title at the time of purchase.

Ninth, following the transfer, Mr Mitchell put between $200,000 and $330,000 into the offset account rather than paying off the principal, which it was submitted, would allow him to withdraw the funds at will. This was supported by Jayleen deposing in her 31 August 2022 affidavit that Mr Mitchell said to her:

Mr Mitchell also gave the following evidence:

Tenth, it was also submitted that while Mr Mitchell’s evidence was that he asked Jayleen on various occasions to amend the title, he failed to take any steps towards having this done. Mr Mitchell failed to take any legal action to have the title amended until he lodged his caveat on 14 August 2019 (see [34] above).

The caveatable interest described was a constructive trust, not a resulting trust, and it was not until the Mitchell Claim was filed on 14 June 2022 that the agreement or common intention to purchase the property was claimed.

It was submitted that all of the foregoing rebutted the presumption of a resulting trust.

Mr Mitchell’s interest in the property was denied by Jayleen, who submitted that the property was purchased with her share of the Estates in the sum of $137,000 and the loan of $750,000 from ANZ. The loan was submitted to have been serviced from Jayleen’s wages.

Mr Hill drew the case of Singh v Singh [2004] NSWSC 109 at [20] to the attention of the Court:

Mr Hill submitted this supports the contention that payments of a mortgage are not payments of the purchase price and, insofar as Mr Mitchell paid the mortgage, it did not give Mr Mitchell an interest in the property.

In circumstances where it is clear Mr Mitchell made no contribution to the purchase price for the property, no question of a purchase resulting trust arises.

Insofar as any of the bases alleged by Mr Mitchell for an interest in the property are concerned, the evidence is far from satisfactory. There is no evidence from anyone of a specific conversation between Jayleen and Mr Mitchell as to what he would receive in return for his contribution to the mortgage payments. Mr Mitchell’s affidavit evidence of 15 July 2022 (at paragraph 42) was “I believed and relied on Jayleen’s various statements and representations [the Court interpolates, all unspecified] to me that we would both purchase the property”. Jayleen’s evidence was equally vague, including not having any real explanation as to why she was the sole purchaser other than that was the paperwork Owen Hodge presented her to sign, which she assumed was because she was the executor purchasing the property (Tcpt, 22 October 2024, p 110(1)).

Both Mr Mitchell and Jayleen were argumentative witnesses. There was no love lost between them, and I formed the view that Jayleen, in particular, was unprepared to make any concession that she thought might be to Mr Mitchell’s advantage. I am not prepared to accept the contentious evidence of either of them unless it is inherently probable or corroborated by independent documentary or other reliable, contemporaneous testimony.

The Court is left with the objective facts:

Mr Mitchell’s attempted explanation as to why he did not press the issue of his name not being on the transfer (see [110] above) was incredible. Mr Mitchell did not strike me as unintelligent. If he genuinely believed that he was entitled to be on the transfer as a purchaser, I have no doubt he would have been quite capable of taking that issue up with Owen Hodge when he and Jayleen attended their offices. On the other hand, it would be completely unrealistic to conclude that he was paying the mortgage without any expectation of obtaining an interest in the property.

Mr Mitchell bears the onus on this aspect of the matter. The evidence does not permit me to find (directly or by inference) an agreement of the kind alleged in the Mitchell Claim or a common intention to the effect pleaded. However, based upon an inference drawn from the objective facts, such as they are, the Court is satisfied that Mr Mitchell and Jayleen were parties to a joint endeavour (being to acquire the property for their mutual benefit as their home) which has failed without attributable blame. It is not possible to conceive that what they were doing in relation to the property did not have the requisite joint character.

As between Jayleen and Mr Mitchell, it would be unconscionable conduct by Jayleen to have the benefit of the property (or its proceeds) without giving Mr Mitchell the benefit of the contribution he has made. Jayleen holds the property on constructive trust for Mr Mitchell to the extent of his contribution, secured by an equitable charge. This conclusion (even if incorrect) makes no difference to the actual outcome as between Jayleen and Mr Mitchell. Because the Court has determined (see [142] below) that by reason of priority, the Estates take the property free of any interest Mr Mitchell may have, Mr Mitchell is only entitled to a judgment against Jayleen personally as equitable compensation or damages for the amount he has paid towards the mortgage over the property.

As I have already noted, the area of dispute was confined to the period between the purchase of the property and 18 June 2019.

In terms of the amount Mr Mitchell argued he was entitled to, it was submitted that he had paid all mortgage payments through Iramhi, without any contribution from Jayleen. It was submitted that Jayleen was never a genuine employee of Iramhi and Mr Mitchell had no knowledge of the monies Jayleen claims were her wages that were applied to the mortgage. Mr Mitchell submitted Jayleen’s only contribution was her share of the inheritance which reduced the purchase price.

Given the benefit of an adjournment, Mr Mitchell provided bank statements from Iramhi which he submitted showed regular payments being made from it towards the mortgage.

Jayleen submitted that Mr Mitchell cannot prove that he paid the mortgage payments prior to 18 June 2019. Jayleen’s evidence was that the payments came from her wages while she was working at Iramhi. Jayleen deposed in her affidavit dated 31 August 2022 that Mr Mitchell directed her that all wages were to be paid into the offset account, and that all household expenses should be paid out of the Iramhi account which he monitored daily. While Mr Mitchell denies this claim, he did state:

Beyond the Court being provided with various bank statements, the parties did not descend into the detail of what they showed other than Mr Mitchell providing a marked up set of Iramhi’s bank statements.

A convenient starting point is that Jayleen provided no documentary evidence in support of her contentions that she made any contributions to the mortgage repayments. Further, no one produced the mortgage offset account statements. The Court has been left to do the best it can.

Mr Mitchell produced the Iramhi bank statements which he had marked up to show expenses he attributed to Jayleen and, more relevantly, regular payments (generally of $1,250) to an account ending in 404 described as “home offset loan”. Jayleen’s ANZ Home Loan statement identifies the account ending in 404 as the relevant offset account. I have been able to trace the earliest repayments to the home loan account to payments made by Iramhi on the same day into the offset account.

Jayleen has provided no evidence as to how much (if anything) of what may have been in the offset account came from her rather than Mr Mitchell or Iramhi. As a basic cross-check, I have reviewed the ANZ Home Loan statement for 13 March to 13 September 2018. This records regular credits of $1,250 with the entry “LOAN PAYMENT JAYLEEN AND ALAN”. The total payment in for the period is recorded as $32,500. The Iramhi bank statements show corresponding payments to the offset account of $1,250 for that period totalling $31,250. I am prepared to assume the difference is a timing issue and a reflection of there being a credit balance in the offset account of an amount I cannot determine.

Based on the analysis referred to in the preceding paragraphs, the Court accepts that Mr Mitchell, through Iramhi, made all repayments on the mortgage from its inception. Mr Mitchell produced a summary of the home loan statements which showed total payments up to 11 September 2024 of $295,443.03. This figure can be updated to the extent necessary. Mr Mitchell is entitled to judgment against Jayleen in that amount. Subject to any further submissions, the costs of the Mitchell claim should follow the event such that Jayleen should pay Mr Mitchell’s costs of his claim in relation to the property (noting that he was originally legally represented).

The Executors, primarily through Mr O’Sullivan on behalf of Licia, submitted that they were entitled to the property (or its proceeds of sale) free of any interest Mr Mitchell may have because they had a prior, and better, equity than anything Mr Mitchell might have. I shall give attention to the arguments advanced by the Executors because, with respect, Mr Mitchell’s submissions going to his ownership of the property on various bases were of little direct assistance on this point.

The Estates were submitted to have the better equity due to Mr Mitchell’s conduct being unconscionable. The basis of the unconscionability was the victim of the breach were the beneficiaries who are innocent volunteers, Mr Mitchell being on notice that the property formed part of the Estates, and Mr Mitchell taking advantage of a “special deal” obtained by his de facto partner, Jayleen, by virtue of her being an executor of the Father’s Estate. Mr Mitchell was submitted to have been aware that:

In the light of this knowledge, it was submitted Mr Mitchell was either indifferent or wilfully blind to any detriment or potential detriment to the beneficiaries.

The unconscionability of Mr Mitchell’s conduct was said to be compounded if the Court found Mr Mitchell knew or suspected the property had been purchased for an undervalued amount. It was submitted that knowledge could be found on the basis of the loan application signed by Mr Mitchell (see [17] above) which represented the value of the property to be $950,000. In cross-examination, Mr Mitchell denied reading the loan application before signing it, and it was put to him that this was a lie (Tcpt, 23 October 2024, p 208(48)). Mr Mitchell also denied seeing the MVS Valuation (Tcpt, 23 October 2024, p 211(50)).

In the alternative, it was submitted that even if the equities are equal, the Estates’ interest was first in time. This is due to the institutional constructive trust being impressed upon the property from the breach, namely the Executors consenting to the transfer. If this position was not accepted by the Court, it was submitted that the institutional constructive trust arose upon the signing of the transfer which, according to the letter of Owen Hodge dated 9 June 2017 (see [15] above), occurred prior to the settlement of the property. Both of these were submitted to have taken place prior to Mr Mitchell gaining an interest in the property, and therefore his interest is later in time than that of the Estates.

The final alternative position was that if the interests arose simultaneously upon completion, the Estates have a better equity.

I accept Licia’s submission that the Estates (strictly their beneficiaries) have the prior and better interest in the property when compared to Mr Mitchell’s interest. However, I do so on a basis that does not require an examination of any alleged unconscionability on the part of Mr Mitchell. The Court’s primary conclusion is that the beneficiaries of the Estates have the better and prior equity in the property, prevailing over Mr Mitchell’s later equitable interest.

The Court’s reasoning may be summarised as:

In these reasons, I have referred to the “Estates” as a convenient shorthand. Greater precision is required in relation to this part of the analysis. An estate is not a legal person, but is property controlled by a legal person (in this case an executor) who has obligations to deal with that property in accordance with a will (assuming testate succession), which includes obligations to the beneficiaries of the will.

Beneficiaries only have a right to a due administration of the estate until such time as the legal personal representative of the deceased (an executor or administrator) completes executorial duties and, thereafter, holds estate property on trust for the beneficiaries: Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694. In the present case, the property was part of the residue of the Estates, which were unadministered. The property had been transmitted to the Executors, who (in non-Torrens terms) held it as the absolute owners of the fee simple, but subject to their fiduciary obligations as executors to the beneficiaries.

There can be no doubt that the Executors owed fiduciary duties to all of the beneficiaries of the Estates. Those duties included the no conflict duty. That duty underpins the rule against self-dealing by trustees and executors, which has historically been one of the most fundamental rules of equity. Absent very limited exceptions including express authority in the will, the informed consent of all beneficiaries or the permission of the Court, a transfer by an executor to themselves of an interest from the estate is voidable by a beneficiary ex debito justitiae, no matter how apparently advantageous the transaction may have been to the estate: see the summary of principles set out by Ward P (sitting at first instance) in Carrington at [191] – [197].

A less explored question, but central to the present case, is what is the interest of the estate (or, more precisely, the beneficiaries) in what has been transferred to the self-dealing executor pending an application for the transfer to be set aside. In the case of an unadministered estate and Torrens title land, the answer is that in equity the defaulting executor continues to hold the property upon an institutional constructive trust in favour of the beneficiaries and still subject to the executor’s fiduciary obligations to administer the estate. An analogy is available with trustees (although it can only be an analogy because in an unadministered estate the property is held absolutely by the executors). The position in relation to trustees is aptly summarised by McPherson J of the Supreme Court of Queensland writing extrajudicially in Trends in Contemporary Trust Law (1996, Clarendon Press) 142:

I observe in passing that, although it does not represent the law in Australia, there is in my respectful opinion much to be said as a matter of principle for the analysis of Edelman J (then of the Supreme Court of Western Australia) writing extrajudicially in Fault Lines in Equity (2012, Hart Publishing) at p 109:

In equity, any property acquired by the fiduciary in breach of duty is held by the delinquent fiduciary from the time of breach on constructive trust for the wronged beneficiaries: Canehire Pty Ltd v Themis Holdings Pty Ltd [2016] 1 Qd R 296; [2014] QCA 296. It is an institutional trust because it arises on breach, and by reason of the breach, and so is not dependent on a court order for its existence. Canehire is also authority for the proposition that the beneficiary’s right or title to the property which the fiduciary has obtained in breach of duty will not be displaced by the presumption of a purchase monies resulting trust. The policy of equity must be to protect an innocent beneficiary wronged by a defaulting fiduciary to the fullest extent possible. That is why the wronged beneficiary’s interest, even if (unlike this case) arising simultaneously with a remedial constructive trust of the kind benefitting Mr Mitchell, will still be the better equity.

The propositions set out in [143](3) and (4) require no further explication.

Licia seeks an order for equitable compensation against Jayleen and Mr Mitchell for an occupation fee, because they lived at the property rent free. The claim was made on the basis that the Estates lost the opportunity to rent out the property and collect rent, which was to the detriment of the beneficiaries.

For Jayleen, the period she occupied the property on the evidence was from April or May 2010 until 26 May 2019. For Mr Mitchell, the period was July 2010 until 16 or 17 September 2024. Both Jayleen and Mr Mitchell admit to not paying rent to the Estates for their occupation of the property (Tcpt, 22 October 2024, p 76(8); Tcpt, 23 October 2024, p 196(19)). Licia submits the calculations should be from the period of 1 May 2010 until 17 September 2024, being a period of 14 years and 140 days.

The MVS Valuation provided an unfurnished rental value of $600 in June 2017 (see [16] above). It was submitted this figure is the best evidence for an averaged occupation fee because this time point is roughly in the middle of the occupation period.

While it was accepted that the property was in a state of disrepair, the fact that Jayleen, Mr Mitchell and their children did inhabit the property was the best evidence that it was habitable. It was further submitted that even if parts of the property were uninhabitable, they were capable of being used for storage.

The amount claimed for the occupation fee is $448,767.12. It was submitted Mr Mitchell’s portion of the occupation fee should be set off against his claim.

In the alternative, Licia submits the occupation fee should be claimed from the date of the settlement, being 13 September 2017. It was noted it may be argued that prior to the settlement, Jayleen, Mr Mitchell and their children occupied the property with the consent of the Executors. However, the Executors’ acquiescence becomes irrelevant from the date of the breach of the rule against self-dealing. The figure claimed for the occupation fee if assessed from the date of settlement is $216,858.08.

Jayleen’s primary submission was that the property was not in a fit and proper condition to be let for market rent. The evidence relied upon was the photographs attached to the Doncas Valuation, Licia’s description of the property as “a house of horrors”, Licia’s email of 22 November 2017 (see [28] above), and various problems on the property that Mr Mitchell gave evidence about.

It was submitted that the figure of $600 per week was unrealistic given the condition of the property. An Occupation Certificate would have been required prior to being able to rent out the property, and considering the poor condition of the property, it was submitted no evidence had been called as to what a reasonable occupation fee would have been for any point during the occupation. The lack of evidence was submitted to be a sufficient basis for refusing to order the payment of an occupation fee in the amount put forward by Licia.

It was further submitted that Jayleen and Mr Mitchell did not have sole use and occupation of the property because it was used to store property from both of the Estates. It was also noted that they carried out renovations on the property.

However, this concession was ultimately made:

It was submitted that any occupation fee should be confined to the outgoing expenses of the property which were paid by Jayleen and Mr Mitchell. It was also submitted that if any amount is ordered, account should be taken of the fact that Jayleen left the premises in May 2019 and should not be required to pay an occupation fee following that date.

Mr Mitchell submitted that he lived in the property without interference and had fully paid the purchase price. Therefore, the Estates had no interest in the property, particularly where they had made no contributions to the property. It was further submitted that to order any occupation fee would be unfair and unjust because the claim had only been raised towards the end of the proceedings.

For the following reasons, the Court finds that because she is a defaulting fiduciary, Jayleen is liable to provide compensation for her breach of duty to the Estates in the form of an occupation fee for the property from the date of settlement (13 September 2017) until she left the property in May 2019 in the sum of $600 per week. The case for an occupation fee against Mr Mitchell fails.

The law in this area is summarised in P Finn, Fiduciary Obligations (2016, Federation Press) at [441]:

An occupation fee is a form of equitable compensation or damages from the defaulting fiduciary. There is no doubt Jayleen was a defaulting fiduciary. She has no liability to the Estates prior to her default, which occurred on 13 September 2017. No basis for liability before that date has been pleaded against her, with prayer 3 of Licia’s 2FASC being for an order (underlining showing amendments): “…that [Jayleen] and [Mr Mitchell] pay equitable compensation to each of the said estates…including but not limited to an occupation fee of [the property]”.

As Mr Hill ultimately conceded (see [160] above), objection to an occupation fee based on the alleged condition of the property was unsustainable when Jayleen had actually occupied the property. Furthermore, it was ultimately accepted that the MVS Valuation had been based on an internal inspection. Based on that valuation, the Court finds that a fair market rent for the property was $600 per week. Jayleen is liable to the Estates for an occupation fee calculated at that rate from 13 September 2017 until she vacated the property in May 2019. Because the Court does not know enough about the detail of the Estates, I have not taken into account (but do not exclude, if all beneficiaries agree) the possibility of a reduction in the amount to reflect Jayleen’s interest as a beneficiary to avoid in practical terms her paying to the Estates a sum to which she is in part entitled.

There is merit in Mr Mitchell’s submission about the lateness of the claim for an occupation fee against him, being raised for the first time in an amended pleading filed the month before the hearing (23 September 2024 in the predecessor to Licia’s 2FASC – see [55] above). A symptom of that lateness is that the basis for the claim against Mr Mitchell does not appear to have been the subject of much attention by those propounding it.

Mr Mitchell is not a defaulting fiduciary. Some alternative liability to the Estates in equity would need to be established. Licia’s 2FASC against Mr Mitchell is primarily directed to challenging Mr Mitchell’s claim to an interest in the property. The pleading also included a non-disclosure and unconscionable conduct claim against Mr Mitchell that was not pressed at the hearing beyond the submissions in [137] to [139] above. However, paragraph 50 of her claim contains the somewhat opaque averment “As the de-facto husband of [Jayleen], [Mr Mitchell’s] knowledge of the matters pleaded in paragraphs 1 to 25 is to be inferred”. Paragraphs 1 to 25 are a mixture of factual and legal assertions, many of which it is not obvious how Mr Mitchell would have had actual knowledge, let alone knowledge that the Court would infer he had because of his relationship to Jayleen.

As the case was run, the only way Mr Mitchell might have had a liability to the Estates in equity for an occupation fee was as an accessory to Jayleen’s admitted breach of fiduciary duty. No such accessorial claim was pleaded. The first limb of Barnes v Addy (1874) LR 9 CH App 244 would in any event not be available because he did not receive the property: Jayleen did. The second limb would have required a proper pleading of a dishonest and fraudulent design on the part of Jayleen (which is a description far removed from the case anyone advanced) and his knowledge of such a design.

Returning to Mr Mitchells’ submission, the Court accepts that it would be quite unfair to fix him with liability for an occupation fee as equitable compensation to the Estates. That is because while the claim was asserted against him in submissions, no legally recognisable basis for such a claim was either pleaded or advanced in argument at the hearing. This part of Licia’s claim against Mr Mitchell fails accordingly.

The parties will be directed to bring in short minutes to give effect to these reasons. They (and, to the extent necessary, any beneficiary of the Estates) will be given an opportunity to make submissions as to costs.