Haberl v Haberl

These proceedings concern the estate of the late Gary Haberl (the Estate). Without disrespect, I will refer to the parties by their given names.

The plaintiff, Andrea, is the administrator of the Estate. The defendants, Robert and Karin, are Gary's brother and sister.

Andrea sues Robert and Karin for the repayment and return by them to the Estate of funds and an Olympic torch and stand which Andrea contends belong to the Estate. Robert and Karin's defence in relation to at least some of the funds is that they represent loans that were made to Gary which they are entitled to have repaid to the lenders. For the reasons which follow, that defence succeeds and the orders to which Andrea will be entitled are limited to $3,000 with interest, together with the torch and stand, all matters about which there was ultimately no dispute.

Andrea was represented today by Mr N J Simpson of Counsel. Robert and Karin appeared for themselves.

The background facts may be shortly stated.

Gary was married to Andrea. He had represented Australia at the Olympics in table tennis. Despite his sporting achievements, unfortunately he suffered from mental health issues.

Gary and Andrea had one child, Isabella, born in November 2015.

Gary and Andrea divorced in July 2019. Their divorce settlement required the sale of the matrimonial home with a division of the proceeds between them. That sale only occurred after Gary’s death.

Gary had a wedding car business. Around the time of his divorce, he was in desperate financial straits. In early September 2019, with Robert's help, Gary sold the wedding cars and the proceeds of approximately $57,000 were paid at Gary's request into a bank account controlled by Robert. The account was later supplemented by some other amounts of cash and other proceeds about which there was no dispute that they all belonged to the Estate. The funds were later moved from the initial account into another account. Nothing turns on this and I shall refer to "the Account" as being either account containing funds that undoubtedly were Estate property.

Tragically, Gary committed suicide in November 2019. Gary left no will, so the entire Estate (primarily comprising Gary's interest in a proportion of the proceeds of sale of the matrimonial home under the divorce settlement) went on intestacy to Isabella, who was then aged four.

Robert and Karin organised Gary's funeral. Because this later became a source of dispute between the parties, I interpose that there is nothing untoward about Robert and Karin stepping in to do that when Gary had not appointed an executor. In the ordinary course of family affairs it might be said that they were the natural people to do so, given that Gary was divorced from Andrea at the time of his death. The funeral took place in November 2019.

In January 2020, Karin received an email from a solicitor acting on behalf of Andrea. That email included:

Unsurprisingly given the contents of that email, but acting without the benefit of legal assistance, Karin began the process of applying for letters of administration. I say “unsurprisingly” because if the contents of that email were correct, Karin had correctly intuited that Andrea would not have been an appropriate person to be the administrator of the Estate she was threatening to sue.

Karin's application for letters of administration was not successful. In accordance with the practice of this Court to grant letters of administration to either NSW Trustee & Guardian or a parent where the sole beneficiary of an estate is a minor, letters of administration were granted to Andrea on 24 March 2021.

On 5 May 2021, Andrea commenced these proceedings by way of summons. A statement of claim was filed on 23 June 2021 seeking relief including:

Between 2020 and the commencement of these proceedings in 2021, a deal of what might be described as unnecessarily strident correspondence passed from Andrea's legal representatives to Robert and Karin. That correspondence demanded that Robert and Karin pay the entire contents of the Account (approximately $60,000) to Andrea.

On 4 May 2021, $35,651 was paid by Robert into Andrea's solicitors’ trust account, with Robert informing them that he was retaining $3,000 in the Account "until all matters [were] resolved". There was no dispute before me today that the $3,000 should and would be paid to Andrea as administrator of the Estate because today's hearing will finally resolve the dispute between the parties.

Robert and Karin consistently responded to Andrea's solicitors' correspondence that there was no dispute that what was in the Account was part of the Estate, but that they wished to have the benefit of what lawyers would recognise as set-offs in relation to payments that they had made in relation to the Estate and to repay two loans said to have been made to Gary.

Those payments, lawyers would again readily recognise, were made by Robert and Karin in their capacity as executors de son tort, having taken on various roles in relation to the administration of Gary's affairs, some with the earlier consent of Andrea before she was fully aware of her right to apply for administration of the Estate as Isabella’s parent.

There was no dispute that from the date of Gary's death until the grant of the letters of administration to Andrea on 24 March 2021, Robert and Karin were executors de son tort with all the responsibilities and liabilities that went with that role.

The solicitors' correspondence identified numerous issues about which Andrea was unsatisfied and which she would not concede to Robert and Karin as proper testamentary expenses or debts of the Estate. It is not necessary for me to go into that in any detail. While Mr Simpson's opening written submissions foreshadowed a claim for $15,838.39 and return of an Olympic torch and stand, by after morning tea today the areas of dispute, many of them which I must say related to astonishingly small amounts, had been reduced - very sensibly - with the assistance of counsel to three matters:

I will deal with each of those matters in turn.

The Invoice is dated 20 April 2020 from InvoCare, which controls the Lake Macquarie Memorial Park where Gary's cremated remains have been interred. There was no dispute that at the time of Gary's death there was a Haberl family grave at the memorial park. Mr Haberl Senior had already been interred there and the intention of the Haberl family was that it would eventually be occupied by Mrs Haberl Senior (who gave evidence before me today) and by Karin.

A decision was taken by Karin and Robert, in part to avoid unnecessary expense to the Estate, that Karin would give up her intended entitlement for her remains to be placed in that grave in favour of Gary's remains. That is what occurred. Gary's cremated remains were interred in the plot.

The Invoice in the sum of $998.80 relates to a photo in a frame and a cremation tablet. The photo in the frame is of Gary and the tablet upon which it is placed is in the nature of a headstone on the grave.

Andrea did not accept that the Invoice was for a reasonable and proper testamentary expense for which Karin and Robert could reimburse themselves before remitting the balance of the funds in the Account to Andrea.

Mr Simpson submitted that because the grave was that of Mr Haberl Senior, it was an expense that should be applied to Mr Haberl Senior's estate and not to Gary's estate. Mr Simpson made no further submission in support of that proposition. He was, with respect, correct to go no further.

It is plain that the expense of the cremation tablet with a photo of Gary placed on a grave in which his cremated remains are interred is a proper expense of his Estate. Karin and Robert as executors de son tort in arranging the funeral and then attending to arrangements at the grave were perfectly entitled to incur that expense and to have satisfied the Invoice from the Account.

Andrea disputed that Robert and Karin were entitled to have repaid Karin's Loan and the Mrs Haberl Loan from the Account. She submitted that the two loans were in fact gifts to Robert. Before I consider the evidence in relation to those loans, it is necessary to say something about how the Court approaches claims of this kind in relation to deceased estates.

While it is true that the person who asserts must prove, who is making the assertion must be properly identified to establish upon whom the onus to prove any particular matter lies. Mr Simpson helpfully referred me to the judgment of Spigelman CJ in Coshott v Sakic [1998] 44 NSWLR 667 at 671 in which his Honour said: "In Australia, the burden of proving the fact that an advance of money was by way of loan, rather than by way of gift, is on the plaintiff".

The learned Chief Justice cited as authority for that proposition the decision of the High Court in Heydon v The Perpetual Executors, Trustees and Agency Company (WA) Limited (1930) 45 CLR 111; [1930] HCA 26. That was a case in an action by an executor where the issue was whether a sum of money had been lent or given to the defendant. The Court there held that the onus of proving that the transaction was a loan rather than a gift lay upon the party asserting it was a loan. In this case the onus of proving that the two payments were loans was upon Robert and Karin as the persons asserting that proposition.

It is also convenient to recall how the Court is to approach claims against deceased estates where the legal personal representative has no personal knowledge of whatever the alleged arrangement was and there is little or no independent verification. The approach which I will respectfully adopt is based upon these observations by Bryson J (as his Honour then was) in Day v Couch [2000] NSWSC 230:

It follows in relation to both payments that the Court must carefully assess the evidence such as it is, not necessarily requiring corroboration, but recognising that at the end of the day the onus was on Robert and Karin to prove on the balance of probabilities - creating a state of actual satisfaction in the tribunal of fact - that the two transactions were in fact loans rather than gifts.

Robert readily conceded that he had no firsthand knowledge of the circumstances in which the transactions occurred. The primary evidence came from Karin, upon whom Robert had relied in how he had dealt with the funds in the Account in relation to those two amounts.

Karin said she had loaned Gary $1,000 in cash. Her evidence was that she had gone to see Gary and had given him $1,000. Her evidence was (T50:37-45):

Karin accepted that there was no written record of the arrangement and Mr Simpson challenged her, entirely appropriately, that there may have been no advance at all let alone one that was in fact a loan rather than a gift.

Karin adhered to her evidence. She drew attention to the factual context (such as it has been able to be proven) of the circumstances at the time. She lay particular emphasis on Gary's bank statement that was in evidence:

Her evidence was that after a mental health incident Gary had asked for the money that had been advanced that is shown in that bank statement to be removed from the account. This involved paying back $110,000 that had been loaned by Mrs Haberl Senior to Gary, and the repayment to Karin of $40,000 recorded on the bank statement as being loans from Karin.

Karin submitted that I should believe her as a witness of credit and that it made sense that where Gary had asked for the money to be taken out of the account and at a time when there was no dispute that he was in dire financial straits, that she should have given him money as a loan in cash shortly thereafter.

I observed Karin carefully in the course of giving her evidence and in the way in which she had approached the conduct of the case generally, both before me and as emerged from the correspondence. From reading the correspondence in evidence (mostly written by Robert for both of them) and seeing both Karin and Robert today, my impression was that they were honest and straightforward people who were trying to do their best in a very difficult situation, including in the face of legal correspondence that might be described as strident (as I have already said) and uncompromising.

They were not lawyers and they did not fully appreciate the legal ramifications of what they were doing. However, Robert as a former tax audit officer had obviously approached the responsibilities that he had assumed in relation to the Account with care and diligence, attempting to ensure that there was a proper record and receipt of everything where that was available. Both of them understood that at all times they were dealing with Gary's funds.

That impression of the way they have conducted themselves forms an important part of the background to my assessment of Karin's evidence in relation to Karin's Loan. In addition to that impression, the other point that satisfies me on the balance of probabilities that I should accept Karin's evidence is the inherent likelihood that someone in her position (she suffers from multiple sclerosis and is on the disability pension) would have given cash to her brother and said that it should be repaid (rather than making a gift) because at the time she knew he was both selling his house as part of his divorce settlement and selling his cars. There was, therefore, a realistic basis to expect he would be able to pay her back in the not too distant future. While I accept that there was very little evidence to go on, her evidence and those matters persuade me to the level of actual satisfaction that I should accept her evidence of what occurred and the Court finds accordingly.

Unlike Karin's Loan, there is some contemporaneous documentary evidence concerning the Mrs Haberl Loan. That evidence is a Westpac payment summary that shows that on 5 August 2019 Karin effected the transfer of $7,000 to Gary's account from Mrs Haberl Senior's bank account. That payment summary included:

Karin's evidence was that Gary had come to her and said something to the effect that he did not want to be given small amounts of money (which Karin acknowledged had occurred from time to time), he really needed a larger amount, and that there was some urgency. Karin said she went to her mother and said, "We should lend him some money", and that is what her mother agreed to. Karin then arranged for the money to come from Mrs Haberl Senior's account. Her evidence about this in answer to me was (T45:9-31):

Robert also called Mrs Haberl Senior to give evidence. I should immediately say, with no disrespect intended, that I give it no weight. Mrs Haberl Senior is eighty-six years old, has poor English, and was, to some extent, disoriented and distressed in giving her evidence. While she was able to say that the transaction was a loan, I am concerned that her evident confusion means she is not a witness on whose evidence I should place any weight, and I do not do so.

There was some background material relevant to the evidentiary analysis. Karin drew attention to the bank statement set out in [37], which showed that she had loaned $40,000 to her brother, and that Mrs Haberl Senior had herself lent $110,000 to Gary. As I understood her submission, it was that the Court should infer that if large amounts were being advanced to Gary, it was as a loan.

On the other hand, as was highlighted by Mr Simpson, there were two circumstantial matters which pointed against the $7,000 being a loan. The first was that, as will be seen from the transfer (see [43]), Karin described the advance as a "transfer". Mr Simpson put to her and to the Court that it would have been a simple matter if it had been a loan to record it as such. There was force in his submission that if, as was the case (see [37]), Karin had recorded the $40,000 advances as loans to appear as such on Gary's bank statement, she could have done so on the transfer document as well. Karin's response to this was that there was no particular science to what she had written. This was a family arrangement, and she had written "transfer" as a narration without thinking too deeply about it.

I regard this piece of evidence as neutral because the word "transfer" is equivocal in its context. Referring to the transaction as a "transfer" does not help to determine whether it was a gift or a loan. If it was a gift, it could have been described as one. If it was a loan, it could have been described as such, but "transfer" is a neutral term which could describe either and does not shed a decisive light on the problem.

The other matter which Mr Simpson drew to attention by way of circumstantial background was that it was admitted that Mrs Haberl Senior had made substantial gifts to her children: $10,000 to Gary on his fiftieth birthday, $10,000 to Karin on her fiftieth birthday, and $10,000 to Robert on his sixtieth birthday. Mr Simpson submitted that this conduct made it more likely that the $7,000 was a gift as well.

I do not accept that the $10,000 birthday gifts assist in characterising the $7,000 advance. That is because the situations were quite different. A parent might be expected to make a substantial financial gift to an adult child on a significant birthday. Here, the context was quite different. The evidence shows that only two months before, substantial sums had been loaned both by Mrs Haberl Senior and by Karin to Gary. It is the size of the Mrs Haberl Loan in the context of other substantial loans two months earlier that fortifies me in the view I have formed that Karin is a truthful witness whose evidence I should also accept in relation to the Mrs Haberl Loan. The two matters raised by Mr Simpson do not persuade me to the contrary and I am satisfied on the balance of probabilities that the $7,000 advance from Mrs Haberl Senior to Gary was in fact a loan and find accordingly.

The result of these findings is that Andrea's case has failed in relation to seeking repayment of the three amounts that she says should not have been reimbursed to Karin, Robert and their mother out of the Account. The final relief will be confined to matters which were conceded and about which I will now have a discussion with the parties. They were the payment of the $3,000 retained by Robert in the Account, the payment of interest earned on the Account (an amount of less than $200), and the return of the Olympic torch and stand which belonged to Gary that he had kept after participating as an ex-Olympian in the Olympic torch run held before the 2000 Sydney Olympic games.

I indicated to the parties that I would add to the ex tempore reasons my reasons for the costs and related orders that I determined upon after hearing further argument and the provision of some further correspondence (ultimately irrelevant) by Robert and Karin. Those orders were:

There are three reasons why I decided that, inter partes, there should be no order as to costs.

First, Andrea failed on the three matters which she had ultimately chosen to contest. Robert and Karin had minimal legal costs related to putting some settlement offers. In those circumstances, and it being a case concerning family matters, costs between the parties should lie where they fall.

Second, at every turn Andrea rebuffed Robert and Karin's suggestions for resolution of the dispute that would have left her in a better position than the orders which the Court will ultimately make.

These two reasons are sufficient. However, there is a third which is less straightforward, but I nevertheless record while acknowledging the uncertainties which persist about the extent of the District Court's jurisdiction in equitable proceedings.

In my respectful view, this was a case to which Uniform Civil Procedure Rules 2005 (NSW) (UCPR) Part 42.34(2)(a) applies:

These proceedings could have been brought in the District Court pursuant to s 134 of the District Court Act 1973 (NSW) and, given the amounts involved (and ultimately recovered), the Court is not satisfied that their continuation in this Court was warranted. Section 134 relevantly provides:

The argument proceeded on the basis that there was approximately $460,000 in the Estate, therefore well in excess of $20,000. However, contrary to Mr Simpson's submission, in my respectful view these were not proceedings “for the administration of the estate” within the meaning of s 134(1)(f). As appears from the relief sought in the statement of claim (see [15] above) this was an action against third parties to recover chattels (the Olympic torch and stand) and an “equitable claim or demand for recovery of money or damages” within the meaning of s 134(1)(h).

Section 134(1)(h) would only not apply if s 134(1)(f) applies. I consider that the expression “proceedings for the administration of the estate” in the latter paragraph is to be understood by reference to the legal principles relating to an administration suit. If that is correct, then the question is resolved by the decision of Simpson CJ in Eq in Evans v Evans (1910) 10 SR (NSW) 594; 27 WN (NSW) 163 (Evans), where his Honour said (at 597): "But where the question raised is against a third person, as to whether certain assets which are claimed as belonging to the estate, belonged to the estate or to the third person, obviously that matter cannot be dealt with in an administration suit, except to this extent [what follows is inapplicable to the present case]". These proceedings meet that description.

Nor are these proceedings which engage UCPR Rule 54, which includes:

The present proceedings are not “administration proceedings” as defined. Nor are they “ancillary proceedings” because, applying Evans, these are not proceedings which are brought “for any relief which could be granted in administration proceedings” or “for the determination of any question which could be determined in administration proceedings” (emphasis added) for the purposes of UCPR Rule 54.3(1) or (2). In other words, on any view an action such as these proceedings against a third party (that is, a non-beneficiary) to recover estate property or for damages is not a proceeding “for the administration of the estate” under s 134(1)(f).

While the Court did not make an inter partes order for Andrea's costs, this still left the question of her entitlement to indemnify herself from the Estate for the costs she has incurred in this dispute with Robert and Karin. On this issue the Court's real concern is to protect the interests of Isabella. I was concerned that the litigation had been conducted in an uncompromising way and incurred expense disproportionate to the amounts involved. My impression of the correspondence in evidence, including an importunate and regrettable email from Andrea to Karin dated 31 January 2021 in which Andrea described Robert as "narcissistic", was that Andrea's personal animosity towards Robert and Karin overcame a proper appreciation of her obligation to act as trustee of the Estate for the benefit of Isabella. In short, given the amounts involved and the reasonable way in which Robert and Karin approached the matter, this dispute could and should have been resolved far earlier in the litigious process in the proper exercise of Andrea's duties as trustee.

There was no mediation in this matter. Mr Simpson's explanation when I asked about this was "there was an attempt for that, but given the background and the hostilities between the parties, it didn't seem to be a viable option save for letters that transpired between the parties to try to resolve the matter" (T79:32-35). The Court does not regard that as being satisfactory in a dispute about a relatively small amount in a modest estate being held for the benefit of a child. The correspondence in evidence suggests that the hostility was directed from Andrea to Robert and Karin and not the other way.

In answer to my question at the conclusion of my ex tempore reasons, Mr Simpson informed me that Andrea had incurred these legal fees in relation to the dispute:

In considering whether and, if so, to what extent Andrea can seek indemnity for her costs from the Estate, the dispositive matter in the Court's consideration is the defence filed by Robert on 23 July 2021. To a lawyer, the defence is unorthodox because, written by an intelligent layman, it provides a narrative response to the allegations in the statement of claim rather than a pleading of the kind a lawyer would draw. It nevertheless makes clear Robert's response to the allegations. Critically for present purposes, it included (emphases in original):

I do not accept Mr Simpson's submission that this was not able to be read as an offer capable of acceptance. While not in "legal language", it was such an offer, obviously foregoing the claims for Karin's Loan and the Mrs Haberl Loan. Given what was said in the defence, the Court is satisfied that a response saying Andrea accepted the return of the torch and $11,000 in full and final settlement would have brought the proceedings to an end. If there was any doubt about the purport of what was in the defence, a responsible approach by Andrea as administrator and her legal representatives would have been to seek clarification that Robert was offering to resolve the proceedings on those terms.

The Court is satisfied that the proceedings could and should have been resolved shortly after the defence was filed and served on the basis set out in paragraph 30 of that document. Andrea has achieved less than what Robert was proposing and it was unreasonable of her not to have resolved the proceedings in accordance with his proposal. For this reason the Court directed that Andrea not be entitled to indemnity from the Estate for her costs of the proceedings incurred after 6 August 2021. This is fourteen days after the date the defence was filed and, I infer, served, and more than enough time for Andrea to have accepted the proposal or sought clarification in relation to it.

Andrea's approach to the litigation as demonstrated by the correspondence in evidence is also why the Court made this order at the end of the hearing:

In Isabella's interest, the Court will consider the information provided and, if necessary, invite Andrea to address as to why the letters of administration granted to her should not be revoked in favour of NSW Trustee & Guardian.