Tipple v Phillips

In form, these are proceedings for judicial advice pursuant to s 63(1) of the Trustee Act 1925 (NSW). In reality, they are a means of resolving a dispute between two beneficiaries and the executor of their late mother's estate ("Estate").

The plaintiff, Mr Tipple, is a solicitor and the executor of the estate of the late Helen Muriel Potter (Mrs Potter). Mrs Potter died on 22 June 2016. She and her husband, Mr Potter, lived in a unit in a retirement village (the “Unit").

Under her will, after providing for Mr Potter to live in the Unit for his lifetime, Mrs Potter essentially left the Estate to her three adult children in equal shares. Without intending any disrespect, I shall refer to her children by their Christian names: Nerolie, Kaylene and Warren (together, the “Beneficiaries”).

Warren has played no part in these proceedings. For good order, and given the costs orders that I propose to make, Nerolie and Kaylene will be formally joined as defendants to the proceedings.

The Estate currently comprises approximately $90,000 in cash. No payment has yet been made from the Estate in relation to the costs of these proceedings, other than the filing and hearing fees.

By the time of the hearing, the only contested issue was whether Mr Tipple should be given the advice he now seeks: that he would be justified in completing the administration of the Estate without taking any further steps to challenge a Valuation of the Unit as at 1 December 2016 of $250,000 (the “Valuation") in an endeavour to increase the monetary benefit of the Unit to the Estate.

Nerolie, to some extent supported by Kaylene, submits that Mr Tipple should challenge the Valuation. She says that the correct Valuation should have been between $350,000 to $400,000. However, she has no evidence to support that assertion. Furthermore, even if she were correct, Nerolie and Kaylene now accept that the additional benefit to the Estate would only be approximately $20,000 to $30,000 before the costs of pursuing the matter are taken into account.

In those circumstances, the Court is satisfied that Mr Tipple should be given the advice he seeks and that he should proceed to complete the administration of the Estate. These proceedings were properly brought, so he is entitled to his costs of the proceedings out of the Estate on the trustee basis. Given their respective roles in causing these proceedings, Mr Tipple's costs should be paid out of the Estate by being borne by Nerolie and Kaylene's respective shares. Nerolie has agreed, in that eventuality, that three-quarters of those costs should come from her share and only one quarter from Kaylene's.

Mr P Menadue of Counsel appeared for Mr Tipple. Nerolie and Kaylene represented themselves. Given the small size of the Estate, and the fact that Nerolie and Kaylene were without legal representation, I have approached the matter with as little formality and technicality as possible with a view to resolving the real issues in dispute between the parties in a way that is just, quick and cheap so as to enable this small estate to be finally administered without further delay.

Mr and Mrs Potter moved into the Unit in 2006. From a strictly legal point of view, it appears that their occupation of the Unit was as licensees. Under their arrangements with the retirement village operator, on the Unit being sold they (or the relevant estate) would be entitled to receive $185,000 (being what they had paid in, less a management fee) plus an amount representing a share of any capital gain. That share was calculated pursuant to a formula which depended on a valuation of the Unit when they moved in (being $200,000) and a valuation of the Unit when they (or the survivor of them) left. Both valuations were to be obtained on the instructions of the retirement village operator.

Mrs Potter made a Will on 20 October 2008 which included:

Mrs Potter died on 22 June 2016. Mr Potter continued to live in the Unit until his death approximately 6 months later.

On 20 September 2016, Mr Tipple applied for probate of Mrs Potter's will. The sworn inventory of property disclosed that the Estate had a net value of approximately $194,000. No real property was listed among the Estate's assets. That appears to have been correct. Nor was there any reference to the Estate having any entitlement, contingent or otherwise, to any money upon Mr Potter vacating the Unit. The Court does not have enough information to determine whether there was an entitlement that should have been included in the inventory but, in making this observation, no criticism is intended of Mr Tipple.

Probate of Mrs Potter's will was granted to Mr Tipple on 16 February 2017.

The Estate later received Mrs Potter's half share of the funds in respect of the Unit, being approximately $102,000. That amount was calculated by reference to the Valuation, as appears from the correspondence extracted in paragraph [18] below.

A dispute broke out between Warren, Nerolie and Kaylene. This was summarised in the statement which was provided to the Court in accordance with UCPR Pt 55, r 55.1:

It is necessary to set out some of the correspondence which passed between the parties before these proceedings were commenced.

On 2 November 2017, Mr Tipple's solicitor, Mr Kent, wrote to the Beneficiaries:

That letter included the Valuation. It appears that there was no complaint from anyone at that time about the Valuation being at an undervalue.

On 6 November 2017, Mr Kent wrote to the Beneficiaries:

By another letter of the same date, Mr Kent wrote to the Beneficiaries, including:

The instruction form was:

On 15 November 2017, Nerolie responded to Mr Kent's office by email, which included:

Nerolie subsequently submitted a form of the beneficiary instruction to Mr Kent which Nerolie had significantly amended by deleting the alternative instructions proposed by Mr Kent (see paragraph [22] above) and inserting:

On 26 November 2017, Warren responded to Mr Kent by letter. :

That letter was accompanied by this instruction signed by Warren:

On 6 February 2018, Mr Kent wrote a letter to the beneficiaries which included:

On 22 May 2018, Mr Kent wrote a letter in identical terms to Nerolie and Kaylene which included (emphasis in original):

These proceedings were commenced by summons filed on 17 December 2018.

On 26 February 2019, the proceedings were fixed for hearing before me on 18 July 2019. While the proceedings were proceedings for judicial advice, so that the Beneficiaries had not been joined as parties, they were all on notice of the proceedings.

Having received the file and noted the nature of the dispute and the size of the Estate, I ordered that a directions hearing take place before me on 26 June 2019. On that occasion, Mr Menadue appeared for Mr Tipple, and Nerolie and Kaylene appeared by telephone. What emerged at that directions hearing was that what might be termed the original dispute concerning the property said to have been taken by Warren (see paragraph [16] above) was no longer pressed by Nerolie or Kaylene.

However, Nerolie asserted that there were other assets of Mrs Potter that Mr Tipple had not located and expressed her concerns about the Valuation being incorrect. Nerolie had commenced proceedings in the NSW Civil and Administrative Tribunal (“NCAT”) against the proprietor of the retirement village in which the Unit had been located, but had been told that she did not have standing to bring those proceedings because she was not the executor of the Estate. As it happens, those proceedings in NCAT are listed for further directions tomorrow. That has presumably been done because it was known that these proceedings would be heard today.

At the directions hearing, Kaylene said that she did not want these proceedings to go to a hearing, but that she supported whatever steps Nerolie wished to take, in particular in relation to the Valuation.

I made these orders at the directions hearing on 26 June 2019:

The parties met by telephone as was contemplated by the directions which I had made.

On 15 July 2019 Mr Tipple wrote to the Beneficiaries:

Kaylene's position was thereafter made clear in an email which she sent to Mr Kent on 15 July 2019 in response to his letter reproduced in the preceding paragraph:

When the matter came on for hearing before me today, the position between the parties appeared to be:

As a result of the change in position of the parties, Mr Tipple submitted that the questions which the Court should answer ought to be:

I commence this part of the reasons by recording that Nerolie applied at the outset of the hearing for the summons to be dismissed. She did so on the basis of a concern that these proceedings were somehow "illegal" because the Court had been misled in the inventory that had accompanied the original probate application by the omission of any reference to the Unit. On that topic, I repeat what I have said in paragraph [13] above.

In any event, and with respect, Nerolie's application was misconceived. Even if there had been an error in the sworn inventory of property, that would not have been a reason to dismiss the summons. There was no dispute that the money to which the Estate was entitled in respect of the Unit had been received and had been properly accounted for by Mr Tipple, subject only to Nerolie's strongly expressed belief that the Valuation should be challenged.

Insofar as the question of challenging the Valuation is concerned, the Court concludes that Mr Tipple would be justified in taking no further action in relation to the Valuation and that he should proceed to administer the Estate. This is for four reasons.

First, Nerolie submitted that there were some inaccuracies in the Valuation, including a description that suggested there was no “car accommodation” (when there was, and in circumstances where the Valuation included a picture of the garage) and as to the floor space of the Unit. There was no evidence before the Court that would enable the Court to find that those were in fact errors given that the garage appeared to be being used for storage. Even if they were errors, having read the Valuation I find they would have been immaterial. The Valuation is regular on its face and there is nothing in it which it could be said should have put Mr Tipple on some form of inquiry.

Second, and most importantly, there is no evidence to support Nerolie's contention that the Valuation is wrong. With respect, what she put to the Court on this question were no more than assertions from the bar table. When I asked Nerolie why she had not taken any steps to retain a valuer at least to provide some form of report to justify her position that the Valuation was wrong, she was unable to offer any satisfactory explanation. While, as I will shortly indicate, I think her belief as to what such a new valuation report would cost is unrealistic, her lack of explanation is all the more striking when one takes into account that she told me she believed getting a new valuation to demonstrate the error in the Valuation would only cost $450.

Third, compared to the risks involved, even if Nerolie were right, there would be no real benefit to the Estate warranting the time and expense that would be incurred in pursuing the matter when compared with the desirability of the prompt, final administration of the Estate.

During the course of the hearing I asked the parties to see if they could agree what the impact of an increased valuation would be, having regard to the formula used by the operator of the retirement village to determine the amount that would be payable to the Estate (as to the formula, see paragraph [18] above). That was done, and the parties agreed that if the correct valuation were $350,000 this would result in an approximately $20,000 benefit to the Estate; if the correct valuation were $400,000 this would result in an approximately $30,000 benefit to the Estate.

This prospect has to be measured against at least these matters:

Fourth, as appears in paragraph [36] above, Mr Tipple had offered to appoint Nerolie as the attorney for the Estate to prosecute proceedings in NCAT in relation to the Valuation, provided that she agreed to indemnify the Estate by leaving her remaining share of the Estate in the Estate's trust account to meet any costs that might be visited on the Estate. I asked Nerolie more than once whether she was prepared to agree to such an arrangement and to give such indemnity. More than once she replied that she was not prepared to do so. In the absence of her willingness to provide an indemnity to the Estate, supported by leaving her share of the balance of the Estate in the Estate trust account, Mr Tipple is justified in not pursuing any further the question of appointing Nerolie to prosecute the NCAT proceedings on behalf of the Estate.

What I have said disposes of the main issue in dispute between the parties. The other questions which the Court has been asked to answer relate to matters that are no longer pressed by either Nerolie or Kaylene. However, I accept Mr Menadue's submission that, for more abundant caution, the Court should answer those questions so a line can be definitely drawn under those issue as between the Beneficiaries and the Estate.

Mr Menadue applied for an order that Mr Tipple have his costs of these proceedings out of the Estate on the trustee basis, and for a special order that those costs be borne by Nerolie’s and Kaylene's respective shares of the balance of the Estate. Mr Menadue accepted that, as the evidence had fallen out, it would be appropriate to apportion the liability for those costs between Nerolie and Kaylene, with Nerolie to bear the greater share.

This application was properly brought by Mr Tipple. As the correspondence which I have extracted above demonstrates, Mr Tipple did all he could to avoid the need for these proceedings and warned Nerolie and Kaylene, more than once, of the risk that they may be ordered to bear the Estate's costs of the proceedings.

On any view, and in particular by reference to the correspondence set out in paragraphs [25] and [26] above, Warren's share of the balance of the Estate should not bear any part of the costs of these proceedings. In reaching that conclusion, I have not overlooked Nerolie and Kaylene's submission that Warren should also be responsible for some of the costs because, in some sense, this dispute was really Warren's fault as is set out in paragraph [16] above.

I do not accept that submission. Prior to the commencement of these proceedings, Warren made it clear that he was content for the Estate to be administered and did not wish to take any issue with what Mr Tipple had done or ought to do (see paragraphs [25] and [26] above). It would be most unfair for his share of the balance of the Estate to be reduced by the costs of these proceedings.

The correspondence and history of the proceedings which I have set out above demonstrates that the issues which have precipitated these proceedings were primarily driven by Nerolie. She was, to some extent, supported in that by Kaylene. However, in fairness to Kaylene, it is also clear (see the correspondence in paragraph [37] above) that at least after the directions hearing Kaylene wished to have no further part in the proceedings and wanted them to come to an end.

The evidence makes clear that both Kaylene and Nerolie were aware of the risk they bore in relation to costs. Kaylene said that she had not received the letter which I have set out in paragraph [28] above. Nevertheless, she affirmed in response to an answer from me that she had understood that she was at risk as to costs but "never thought it would come to this."

In those circumstances I am satisfied that it is proper for Nerolie's and Kaylene's remaining shares in the Estate to bear Mr Tipple's costs of these proceedings. To her credit, Nerolie has agreed that if the Court came to this view, in order to reflect their respective roles her (Nerolie’s) share should bear three-quarters of those costs and Kaylene's only one-quarter.

The opinion, advice and direction of the Court on the following questions is: