Everts v Liepins

HIS HONOUR: By notice of motion filed on 12 April 2022, the applicant, Bernt Everts, seeks orders that the respondent, Juris Liepins, the executor of the Will, and trustee of the estate, of Asja Everts ("the deceased"), to whom Probate was granted, verify and file accounts in respect of his administration of the estate of the deceased from the date of death, until the date of the filing of the accounts; that the respondent, thereafter, take all such steps as may be necessary to vouch and to pass the accounts; that the respondent pay to the estate, all monies found to be due to the estate upon the taking of such accounts, together with interest thereon; that the respondent not be allowed any costs related to resisting the motion, without prejudice to any rights the respondent may have in relation to the costs of complying with the orders; and an order that the applicant’s costs be paid out of the estate of the deceased.

The notice of motion was returnable, first on 26 April 2022 for directions. The respondent did not appear, and the Court directed the applicant to serve the notice of motion and any affidavits upon which reliance was to be placed upon him by 4:00 p.m. on 16 May 2022. The matter was stood over to 30 May 2022 for further directions.

On 30 May 2022, again, there was no appearance, by, or on behalf of, the respondent. Having read an affidavit sworn on 2 May 2022, by Joseph Khoury, a licensed process server, I was satisfied that the notice of motion, a copy of a letter dated 29 April 2022 from the applicant’s solicitors, and the affidavit sworn 16 February 2022, of Mr G J Moloney, solicitor, together with the exhibit to that affidavit, had been served, personally, upon the respondent on 2 May 2022.

On this occasion, Mr T Maltz, counsel for the applicant, informed the Court that the applicant wished to consider whether to file and serve a Statement of Claim seeking revocation of the grant of probate made to the respondent or whether that could be done by filing and serving an amended notice of motion seeking additional prayers for relief. The Court granted leave to the applicant to file and serve an amended notice of motion by 4:00 p.m. on Friday, 10 June 2022 and adjourned the proceedings until 27 June 2022.

On 27 June 2022, again, there was no appearance, by, or on behalf of, the respondent. Having read an affidavit affirmed on 23 June 2022 by Mr Moloney, I was satisfied that the respondent had been informed that the notice of motion was before the Court on 27 June 2022.

As no amended notice of motion had been filed, or served by, or on behalf of, the applicant, the notice of motion was listed, for hearing before me, on 14 July 2022, with directions made for written submissions, including an index of affidavits to be delivered in hard and soft copy, to my Chambers by 4:00 p.m. on 7 July 2022. I considered that the matter be dealt with in stages, with the first question to be determined relating to the filing and verification of estate accounts.

The applicant’s counsel provided written submissions dated 6 July 2022 and an index of affidavits.

At the commencement of the hearing of the notice of motion, counsel for the applicant read an affidavit of service, of Joseph Khoury, sworn on 11 July 2022, which revealed that the respondent had been served, personally, on 6 July 2022 with a copy of the documents that had previously been served on him, with a copy of the affidavits of service to which I have referred, as well as a copy of the affidavits of Mr Moloney, filed on 30 May 2022, another on 24 June 2022 and a third, on 5 July 2022.

At 10:00 a.m., the matter was called three times outside the Court. It was called, again, at about 10:15 a.m., again, at 11:20 a.m., and once more, at 2:00 p.m., on none of which occasions, was there an appearance by, or on behalf of, the respondent to answer the application.

Rule 18.7 of the Uniform Civil Procedure Rules 2005 (NSW) (‘UCPR’) provides that if service of a notice of motion on any party is required by the Rules, and if the notice of motion has been duly served on that party, the court may hear, and dispose of, the motion in the absence of that party.

In Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365, Barrett J explained the role that the Court should play when dealing with a hearing where a party has not attended. The Court should be satisfied that there has been full and proper notice of the hearing date, and give careful regard to the evidence, so that the relevant issues are considered in a manner that is fair and just.

Subsequently, I have written that a party is relevantly absent only if he, or she, had knowledge, or notice, of the hearing date, and is neither present, nor represented, when the matter is to be heard: NSW Trustee and Guardian as Executor of the Will of Michael Robert Walsh (Dec’d) v Gregory (2012) 18 BPR 35,153; [2012] NSWSC 681. I refer to what I wrote in that case, at [17]-[22].

One purpose of UCPR r 18.7 is the efficient dispatch of court business. More recently, in Lezaja v Hannover Life Re of Australasia Ltd (No 2) [2016] NSWSC 167 (a case in which a plaintiff had failed to appear at the hearing), after referring to some of the passages cited above, I added, at [37] and at [40]:

In addition to those comments, it should also be noted that s 59 of the Civil Procedure Act 2005 (NSW), requires the Court to, as far as possible, eliminate delay between the commencement of proceedings and their final determination. Section 60 requires the Court to endeavour to resolve issues in such a way that the cost to parties is proportionate to the importance and complexity of the subject-matter in dispute.

Both sections recognise the fact that delay and case backlog are matters that affect not only the public cost in delivery of justice, but the court's ability to provide individual justice, and that the reforms introduced by the Civil Procedure Act promote the provision of individual justice notwithstanding that they may have adverse effects on the claims of individual parties in particular circumstances: Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at [37] (Allsop ACJ). Also see UBS AG v Tyne (as trustee of the Argot Trust) (2018) 265 CLR 77; [2018] HCA 45 at [38] (Kiefel CJ, Bell and Keane JJ).

The Court is not required to indefinitely delay the completion of the hearing in the hope that the respondent might change his mind and appear: Allesch v Maunz (2000) 203 CLR 172 at 186, 189-191; [2000] HCA 40 (Kirby J); Taylor v Taylor (1979) 143 CLR 1 at 4; [1979] HCA 38 (Gibbs J). The right to have the opportunity to be heard is not a right to frustrate the hearing of proceedings by not attending to, or appearing, thereat. Justice requires consideration to be given to all the parties.

The respondent has had the right to be heard at the hearing, and otherwise, although he has chosen not to take advantage of it, and he has not communicated any explanation for his non-appearance to the Court or, it appears, to the applicant.

As stated, I am satisfied, from the affidavits of service, and otherwise, that the respondent has been made aware of the orders sought by the applicant and of the hearing date. I am also satisfied that he is well aware of the bases upon which the applicant seeks the relief, namely that there has not been a proper accounting, by him, to the applicant, who is one of several residuary beneficiaries named in the Will dated 26 October 2012.

Naturally, I considered whether the Court should adjourn the proceedings to give the respondent one further opportunity to appear. However, there is no utility in doing so, in the absence of any reasons for him not having filed an Appearance, or for not having appeared at any of the directions hearings, or the hearing. There is no reason to believe that he would be more likely to appear on any subsequent occasion to which the hearing of the notice of motion was adjourned.

In the circumstances the Court determined that the hearing of the application should proceed in the absence of the respondent.

Following the reading of the evidence and the making of some oral submissions, the matter was stood down until 2:00 p.m., as I wished to consider the evidence and prepare and make a form of orders, which I set out at the conclusion of these reasons. (Another reason for adjourning the matter was to enable the applicant’s solicitors to confirm that only one distribution of $800,000, had been made to the applicant by the respondent.)

As previously mentioned, immediately before the Court made the orders, at 2:00 p.m., the matter was called, and again, there was there no appearance by, or on behalf of, the respondent. I informed the legal representatives of the applicant that I would publish reasons as soon as I am able. These are the reasons.

The deceased died on 22 February 2013, leaving property in New South Wales, almost 9.5 years ago.

This Court granted Probate of the deceased’s Will to the respondent, on 6 June 2013, as one of the executors named in the Will. The Probate parchment noted that “Inese Ronis, the other executor renounced probate”.

At the time of the grant of Probate to him, the respondent was a solicitor. However, his practising certificate was suspended on 22 June 2011 and had not been renewed. Proceedings, subsequently, were commenced by the Law Society of New South Wales, on 16 October 2012, in the Administrative Decisions Tribunal, now the Civil and Administrative Tribunal of New South Wales, being a disciplinary action, claiming that he had engaged in professional misconduct, in which orders had been sought, including that he be removed from the Roll and that he pay the Law Society’s costs.

In a liability decision published on 26 February 2015, the Tribunal held that the admitted evidence sufficiently proved the conduct of the respondent, as described in the application, and that this conduct constituted professional misconduct both at common law and under the Legal Profession Act 2014 (NSW). The hearing on penalty and costs was set down for 16 and 22 December 2015 and reasons for judgment were delivered on 3 May 2016. The Tribunal concluded that “the probability is that the Solicitor is permanently unfit to practise. We accordingly order under s 562(2)(a) of the LP Act that his name be removed from the local roll”: Council of the Law Society of New South Wales v Liepins (No 3) [2016] NSWCATOD 51 at [160].

(It is unnecessary for the Court to rehearse the conduct of the respondent giving rise to the removal of his name from the local roll. I have not relied upon it in reaching my decision. I have referred to the proceedings as background.)

By her Will, the deceased left a pecuniary legacy of $25,000 to each of 7 named beneficiaries, a pecuniary legacy of $50,000 to each of 2 named beneficiaries, a legacy of $60,000 to two named beneficiaries as tenants in common in equal shares, and a legacy of $100,000 to Ms Ronis. She then made specific devises of different parcels of real estate to named devisees, and divided her residuary estate into 6 equal parts, two of which passes to the applicant.

In the Inventory of Property that was attached to, and placed inside, the Probate document, the deceased’s estate was stated to have an estimated or known value of $6,137,656.66. It was a large estate.

There is evidence that, despite the passage of over 9 years, the estate of the deceased has not yet been fully administered, although there is evidence that some interim distributions had been made.

Furthermore, the respondent does not appear to have provided any estate accounts despite requests having been made, on behalf of the applicant, since 2018. What the respondent has done is provide a copy of some bank statements.

Relevantly, in an email dated 4 September 2020, sent to the respondent, by the applicant’s solicitor, Mr Moloney, it was written:

By email dated 10 September 2020, the respondent responded:

In another email, sent on 10 September 2020 to the respondent, Mr Moloney set out what he asserted were the bases for the entitlement to information. A request was made for:

This prompted an email dated 24 September 2020 from the respondent in the following terms:

On 1 April 2021, the solicitors for the applicant sent an email to the respondent, which relevantly, was in the following terms:

On 31 May 2021, the respondent sent an email to the applicant’s solicitor stating that:

On 22 June 2022, the applicant’s solicitor sent the following email to the respondent’s email address, although the email was addressed to his wife:

On the same day, the respondent replied, in the following terms:

On 26 June 2022, the applicant’s solicitor received another email from the respondent which email was in the following terms:

On the same day, the applicant’s solicitor responded to the respondent’s email, in the following terms:

Later that day, the respondent replied:

The applicant’s solicitor sent one further email on 26 June 2022, to the respondent, in the following terms:

The applicant’s solicitor deposes that he has not received any other emails from the respondent since his last email sent on 26 June 2022.

The filing and passing of accounts is a formal process. There are several sources for the Court’s power to compel an executor to file and pass accounts.

A primary source of the power to make orders compelling an executor to file and pass accounts, at the request of “interested” persons, is found in s 85 of the Probate and Administration Act 1898 (NSW). Relevantly, the section provides:

The proceedings brought under s 85 are not an administration suit. The section, relevantly, deals with the obligation of an executor to render to the Court accounts relating to his, her, or its, administration.

The Court’s jurisdiction to deal with matters of breach of trust, what assets are part of the estate and what the executors have received, which do not fall within s 85 is vested in the Equity Division under Supreme Court Act 1970 (NSW) s 53(3)(a): The Estate of Maureen Laila Huber, of Cobram VIC; The Estate of Dolf Paul Huber [2020] NSWSC 1539 at [63] (Slattery J).

The obligation under s 85 is specified as one to be carried out “within such time, and from time to time, and in such manner as may be fixed by the rules or as the Court may order”. Here, it is asserted that no accounts have ever been prepared and provided by the respondent.

Often, a common response, when complaints are made to the court about failure, or delay, by a legal personal representative to proceed with due administration, is to give notice to the executor to file and pass accounts under s 85. In some cases, that is sufficient to urge a dilatory executor to act, but in some cases, as here, the requests have been, effectively, ignored. Furthermore, no reasons have been given explaining why, as the executor, the respondent is not under an obligation under s 85(1) of the Act to file an inventory of the estate of the deceased and to file, or file and pass, accounts in relation to the administration of the estate of the deceased.

The next step, as has occurred here, has been to institute proceedings against the executor under s 85 with a view to obtaining an order for him to verify and file accounts.

As is well-known, probate litigation is "interest litigation": Nobarani v Mariconte (2018) 265 CLR 236; [2018] HCA 36 at [49] (Kiefel CJ, Gageler, Nettle, Gordon and Edelman JJ); Gertsch v Roberts; The Estate of Gertsch (1993) 35 NSWLR 631 at 634B-C (Powell J).

To commence, or to be a party to proceedings, relating to a particular estate, a person must be able to show that his, or her rights will, or may, be affected by the outcome of the proceedings. The applicant must establish his standing to seek accounts.

The applicant, being a residuary beneficiary, plainly has a sufficient interest in the distribution of the estate to be an “interested person”: Kemp v Burn (1863) 66 ER 740 as cited in Williams v Stephens (1986) 17 BPR 33,839 (Young J).

Another ground of jurisdiction upon which reliance may be placed is UCPR rule 54.3, which, relevantly, provides:

UCPR r 54.1 defines “estate” to mean a deceased person’s estate.

During oral submissions, counsel for the applicant agreed that r 54.3 is an alternate source of power stating (Tcpt, 14 July 2022, p 6(32-34)):

The object of the jurisdiction set out in UCPR Pt 54 is to enable questions to be settled between beneficiary and executor.

In McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 636B-D; (1985) 9 ACLR 926 at 935, Young J explained the right of a beneficiary to an order in the following way:

In Re Estate Schwartz, Deceased; Application of Gellert; Gellert v Bentwood and Schwartz [2015] NSWSC 1484 at [12], Lindsay J described UCPR Pt 54 as a “procedural expedient” that is “designed to provide [a] summary, cost-effective [alternative] to an application for general administration of a trust by the Court” (citations omitted).

In Stamoulos v Constantinidis; Constantinidis v Constantinidis [2017] NSWSC 1808 at [50]-[51], Parker J in discussing the rule, stated:

Finally, should it be necessary, the Court has an inherent jurisdiction, as part of its equitable jurisdiction, to supervise the administration of trusts to make an order of the type that is sought: Palmer v Ayres; Ferguson v Ayres (2017) 259 CLR 478 at 510–511; [2017] HCA 5 at [84] (Gageler J), citing Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at 724; [2003] UKPC 26 at [36] (Lord Walker for the Board). It is unnecessary, however, in this case, to rely upon the inherent jurisdiction.

The Court's power to require an executor to file and pass accounts is an important part of the Court's armoury of powers in the administration of estates. The Court’s ultimate purpose in doing so is to ensure that there is due and proper administration of the deceased’s estate and that the interests of the parties beneficially entitled to it are ensured. In this regard, an executor has an obligation to provide a full and candid record of his or her stewardship, including all appropriate financial accounts.

“Maintenance of proper records and accounts is fundamental to good management of a deceased estate”: Williams v Stephens, quoting Re Craig (1952) 52 SR (NSW) 265 at 267 (Roper J). It is usually the executor who is in absolute control of the administration of the estate and who is ultimately responsible for its proper administration.

The consequences of filing accounts and having them passed also benefits an executor. In Hons v Hons (2010) 3 ASTLR 278; [2010] NSWSC 247, at [111]-[112], Ward J (as the President of the Court of Appeal then was) wrote:

As was held by Kekewich J In Re Watson (1904) 49 Sol Jo 54, and cited by Young J in Williams v Stephens, the duty of an executor is threefold; first, the executor has a duty to keep accounts, second, a duty to deliver accounts and third, a duty to vouch accounts. Yet, the considerations to be applied to each of these three duties is not the same. The duty to keep accounts is an essential duty, and the executor must keep such accounts so as to be able to deliver a proper account within a reasonable time, if called upon to do so by a beneficiary. Different considerations apply to the duty of delivering accounts. If the account requested is very long, such that the executor may incur considerable expense, the executor does not have a duty to deliver accounts until the executor’s expenses have been guaranteed. Again, different considerations apply to the duty to vouch accounts. That duty cannot arise until after the accounts have been delivered.

In Jordan v Goldspring No 2 [2022] NSWSC 780 at [98], Henry J wrote:

It is not necessary for there to be any allegation of breach of trust on the part of the executor – the right of a beneficiary to inspect is an absolute right: Phillip Allan Yates v John Norman Phillips Halliday [2006] NSWSC 1346 at [49] (Lloyd AJ).

The duty to account carries with it an entitlement of the applicant to view the records and supporting evidence in order to monitor the proper administration of the estate. In Phillip Allan Yates v John Norman Phillips Halliday at [52], Lloyd AJ added:

In Hons v Hons at [101]-[104], her Honour outlined why the Court has a discretion as to whether or not to order the taking of accounts:

In that case, her Honour refused the application for an order for accounts, on the grounds that more than 20 years had passed since probate had been granted, that the value of the estate was small, and because the executor, during administration, had not known that he was required to file accounts (due to incorrect advice).

Determination

In this case, in the exercise of the Court’s discretion, I considered that verified accounts should be ordered. The applicant is entitled to accounts and there has been no reason advanced by the respondent for not providing them. A mere denial of an entitlement to accounts does not provide such a reason. After all, the respondent is the only person who is able to establish the true state of affairs in relation to the estate of the deceased since her death.

There has been a substantial amount of time that has passed since the death of the deceased, and again, no explanation for the delay has been provided. The respondent owes a duty to all of the beneficiaries to administer the estate in accordance with the deceased’s Will and, subject to the provisions thereof, to act in the best interests of all of the beneficiaries. The respondent should have provided a prompt, and proper, response to the reasonable inquiries and requests for information by the applicant.

There are also some apparent anomalies raised by the applicant’s solicitor in regard to the bank account statements that have been provided. By filing and serving accounts, the respondent will be able to shine more light on what has occurred in the administration of the deceased’s estate.

A third reason is the irreducible fact that there has been a failure by the respondent to engage in the processes of the Court, which, in my view, gives rise to an additional cause for concern, which requires a proper investigation of the financial affairs of the estate. As part of this reason, it is, of additional concern that commission may have been deducted prematurely.

The provision of proper accounts, and then, the passing of the accounts may dissipate the concerns held by the applicant, and may also quell any disputes between the respondent and the beneficiaries as to entitlements under the deceased’s Will. They may also satisfy the Court that the respondent has performed his duty.

In The Estate of Frances Kedesch Michell [2020] NSWSC 1300 at [103]-[106], I wrote:

I shall not deal with the question of the costs of the application at this stage. I shall simply reserve the costs. Nor will I deal with the principles relating to the passing of the accounts. What follows hereafter will be determined, inter alia, by the steps, if any, taken by the respondent in relation to the service of the written accounts and the supporting documents, and the consideration of what is produced by the respondent.

In the circumstances, the Court made the following orders: