Cutting v Public Trustee For The Northern Territory
[2017] NTSC 6

PARTIES:	PHIllip frederick cutting
	
	v

	Public Trustee For The Northern Territory
	
TITLE OF COURT:	SUPREME COURT OF THE NORTHERN TERRITORY

JURISDICTION:	SUPREME COURT OF THE TERRITORY EXERCISING TERRITORY JURISDICTION

FILE NO:	45 of 2016 (21627074)

DELIVERED:	30 January 2017

HEARING DATES:	19 August 2016, 17 November 2016

JUDGMENT OF:	MASTER LUPPINO

CATCHWORDS:

Practice and Procedure – Joinder of parties – Application of Rule 9.06 in respect of claims under the Family Provision Act – General rule in such proceedings that only executors are named as defendant – Exceptions to the general rule – Principles relevant to determination as to whether joinder of beneficiaries should be permitted.

Family Maintenance Act claims – Application for approval of a compromise – Requirement for Court approval of a compromise – Principles to be applied and approach to be taken by the Court in respect of a compromise.

Family Provision Act s8.
Supreme Court Rules, r 9.06
 
Territory Pastoral Company Pty Ltd v Elders Limited [2009] NTSC 69.
Re Lanfear (1940) 57 WN NSW 181.
Albany v Albany (2010) 27 NTLR 89.
Bartlett v Coomber [2008] NSWCA 100.
Vasiljev v Public Trustee [1974] 2 NSWLR 497.
Collett v Knox (2010) QSC 132.
Re Scali [2010] NSWSC 1254.
Hore v Perpetual Trustee Co Ltd, unreported, Supreme Court of New South Wales, 8 June 1995.

REPRESENTATION:

Counsel:
	Plaintiff:	Mr Maher
	Defendant:	Mr Lisson
	Applicants:	Ms Walter

Solicitors:
	Plaintiff:	Paul Maher Solicitors
	Defendant:	Public Trustee
	Applicant: 	Ward Keller

Judgment category classification:	B
Judgment ID Number:	Lup1701
Number of pages:	15

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN

Cutting v Public Trustee For The Northern Territory
 [2017] NTSC 6

No. 45 of 2016 (21627074)

	BETWEEN:

	Phillip Frederick Cutting
	Plaintiff

	AND:

Public Trustee For The Northern Territory
		Defendant

CORAM:	MASTER LUPPINO

REASONS

(Delivered 30 January 2017)

[1]	The substantive proceedings are an application by the Plaintiff for orders firstly, for an extension of time to make an application pursuant to the Family Provision Act (“the FPA”), secondly an order pursuant to section 8 of the FPA to approve a compromise of the Plaintiff’s entitlement and alternatively, a declaration as to the validity of that agreement.
[2]	The current application is by Summons by a number of the beneficiaries of the estate (“the Applicants”) for an order that they be joined as parties and with consequential orders. The Applicants are three of the six children and eleven of the thirteen grandchildren of the deceased. Four of those grandchildren are minors.
[3]	It is necessary to go into the background facts to put the application and the submissions of the parties into context.
[4]	The deceased died on 16 July 2006 having made her last will on 2 December 2003. Probate of that will was granted on 4 June 2008 to the executors named in that will. Those executors were two of the deceased’s sons-in-law.
[5]	At the time of her death the deceased owned a house in Anula (“the Anula Property”) and two shares in a company known as Philjan Nominees (NT) Pty Ltd (“Philjan”). The shares in Philjan represented 50% of the issued shares in that company. The Plaintiff owned the remaining issued shares.
[6]	The deceased and the Plaintiff were married on 1 December 1990. Both had been previously married and were divorced at the time of their marriage. Both had children from their previous marriage. The deceased acquired the Anula Property before she met the Plaintiff. The Plaintiff claims to have made contributions towards payment of the mortgage on the Anula Property as well as some of the costs of renovations affected to the Anula Property.
[7]	Philjan was incorporated in 1995.  The Plaintiff arranged for Philjan to purchase a property at Darwin River (“the Darwin River Property”). A mango farm and a dwelling was subsequently established on the Darwin River Property. The Plaintiff and the deceased resided both on the Darwin River Property and at the Anula Property. 
[8]	The Plaintiff made his own will approximately December 2003 at a time when he had some major health concerns. It appears that also prompted the deceased to make her own will. It may be the case that the deceased expected the Plaintiff to predecease her given his health issues as the deceased did not appoint the Plaintiff an executor, nor did she provide for him in her will.
[9]	In her will the deceased left one half of her shareholding in Philjan to her children per stirpes and the other half to specified grandchildren. She devised the Anula Property to her grandchildren and provided for the residue of her estate to go to her children per stirpes. The interest of the Applicants in the estate and the proceedings is therefore readily apparent.
[10]	As far back as January 2008 the Plaintiff, by his solicitors, put the then executors of the estate on notice of his intention to make a claim pursuant to the FPA. In the course of correspondence between the parties’ solicitors, on 1 August 2008 the Plaintiff made an offer to the executors to settle his claim. The offer was accepted on 16 August 2008.
[11]	The compromise was predicated on the assumption that the Darwin River Property, which was its only asset, had an estimated value of approximately $850,000. It was also assumed that Philjan was indebted firstly, to the Plaintiff in the sum of approximately $790,000, secondly, to the estate in the sum of approximately $53,000 and lastly, in the sum of approximately $107,000 to another company, the shareholding of which was all owned by the Plaintiff. Philjan also had a number of other smaller sundry debts which are small enough to be disregarded for current purposes. It can be seen from the foregoing that it was assumed that the liabilities of Philjan exceeded its assets by a significant amount such that the estate’s shares in Philjan had no value.
[12]	The compromise agreed to was for the estate’s share in Philjan to be transferred to the Plaintiff, for the estate’s debt of $53,000 to be assigned to the Plaintiff and for the Plaintiff to purchase the Anula Property from the estate at the reduced price of $250,000. That reduced price reflected an expected favourable order to the Plaintiff pursuant to the FPA of approximately $100,000 as the Anula Property was considered to have a value of $350,000.
[13]	The compromise was subject to the settlement being formalised in a Deed. The executor’s solicitors prepared a draft Deed but it was never finalised. The approval of all of the beneficiaries of the estate was sought before the Deed was to be executed and to date that approval has not been given.
[14]	Notwithstanding that, a contract to sell the Anula Property to the Plaintiff at the agreed reduced price was prepared and signed on about 10 March 2009. The Anula Property has been transferred to the Plaintiff and he has paid the sum of $250,000 to the estate as the consideration for the transfer.
[15]	Philjan is still a currently registered corporation. The company however sold the Darwin River Property in 2015. Until that time the Plaintiff had continued working that property and living in the house on the property, albeit not exclusively.
[16]	In March 2008 the Plaintiff attended at ASIC ostensibly to notify of the death of the deceased in respect to Philjan. The deceased had been a director of the Philjan until that time. The Plaintiff claims that he was given a form to complete for that purpose by personnel at ASIC. He says that he completed that form himself. It transpires that the form not only notified of the death of the deceased but it also had the effect of transferring the estate’s share in Philjan to the Plaintiff.
[17]	The Applicants sought legal advice when the executors sought the approval to the compromise. The Applicants rely on alleged variances as to the value of assets in valuations obtained on behalf of the former executors sometime after the compromise was agreed to. Those valuations disclosed that, as at 15 April 2009, i.e., eight months after the compromise, the value of the Anula Property was $390,000 and that the Darwin River Property was valued at $1,220,000. Philjan was valued by accountants, as at 30 June 2010, i.e, nearly two years after the compromise, in the sum of $236,000.
[18]	In July 2013 the executors withdrew as executors and the Public Trustee was appointed as executor of the estate by order of this Court made on 29 August 2013.
[19]	I do not think that the valuation of the Anula Property is a sufficient variance from the value agreed upon between the Plaintiff and the former executors to support the Applicants’ contention that the former executors failed to properly assess the Plaintiff’s claim. The variance with the valuation of the Darwin River Property is more relevant, even allowing for the passage of time, and it leaves a residual value for the shares of the estate of the order of $130,000 on the same simplistic basis as aforesaid. As per the valuation of Philjan, which was nearly two years after the compromise, the estate’s shares have a value of $118,000. However that variance does not automatically translate to evidence of impropriety by the former executors.
[20]	Initially Public Trustee was excused from participation in the current application and agreed to simply abide my decision on joinder. After argument of this matter on 19 August 2016, I thought it preferable to have some input from Public Trustee specifically in respect of whether Public Trustee could undertake the executor’s duties in respect of all beneficiaries in the event that I were to decline the application for joinder. 
[21]	A number of directions hearings to investigate that were held over a period of time until 14 November 2016. The parties had in the meantime further explored the possibility of settlement but that proved unsuccessful. The matter was then again mentioned in Court on another application and it became apparent that it was necessary for me to rule on the current application.
[22]	With that background, the current proceedings quite properly only named the current executor of the estate as the Defendant. Joinder of parties generally is regulated by rule 9.06 of the Supreme Court Rules (“the SCR”). The decision of this Court in Territory Pastoral Company Pty Ltd v Elders Limited  is authority that the rule is to be given a wide beneficial interpretation so that all necessary parties will be before the Court to enable all issues to be litigated. Rule 9.06 of the SCR provides as follows:-
9.06		Additional, removal, substitution of party
At any stage of a proceeding the Court may order that:
(a)	a person who is not a proper or necessary party, whether or not he was one originally, cease to be a party;
(b)	any of the following persons be added as a party:
(i)	a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated on; or
(ii)	a person between whom and a party to the proceeding there may exist a question arising out of, or relating to or connected with, a claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding; or
(c)	a person to whom paragraph (b) applies be substituted for one to whom paragraph (a) applies.
[23]	As the Defendant to proceedings under the FPA is usually only the executor of the estate, clearly the nature of the claim impacts on the operation of rule 9.06. The general rule in claims for provision out of the estate pursuant to the FPA is that the beneficiaries should not be a party notwithstanding that they have an obvious interest in the proceedings. 
[24]	In Albany v Albany (“Albany”) Mildren J said:-
Where an application is made for provision to be made out of an estate under the Family Provision Act, the parties to proceedings for such an order are generally just the applicants for the orders and the legal personal representatives of the deceased. Beneficiaries may be joined, but this is an exceptional power exercised, usually, only if the legal personal representative is not fulfilling his duty to either compromise the claim or claims, or contest it and seek to uphold the provisions of the will.
[25]	In Bartlett v Coomber (“Bartlett”) the Court also said that in a compromise situation, it may be appropriate that a beneficiary is given the opportunity to persuade the Court that the personal representatives were not adequately representing the interests of the beneficiaries.
[26]	In Bartlett Mason P said:-
I accept that the court’s power to reject a compromise reached in proceedings under the Act is available both where the sum to be provided is too low or too high. Either extreme might indicate, for example, that the proceedings were being conducted through to completion for a purpose foreign to that of the Act and/or that some fundamental mistake vitiated the settlement process.
But it must be borne in mind that litigation under the Act takes place in an adversary context in which the active parties to the particular litigation are usually expected to be the best judges of what is in their own interests. The policy of Australian law encourages the settlement of disputes… Our legal system would collapse were it not for the fact that most disputes are resolved by agreement.
One of the principles giving effect to this policy is the principle that a valid compromise gives effect to an agreement that effectively supersedes the antecedent rights of the parties. The possibility of greater success and the risk of greater failure is transposed into an arrangement that frees the litigants and the witnesses of the risks, costs and toils of further disputation. This principle is not displaced in the context of proceedings under the Act, although for reasons already outlined, the court may decline to give effect to a settlement if doing so failed to effectuate the specific policies of the Act, amounted to an abuse of process or otherwise offended public policy in a demonstrable way.
[27]	The general rule that only the executor of the estate is to be the defendant in a claim under the FPA recognises that it would be unworkable in most cases, certainly in smaller estates, if there were multiple defendants, in part as costs could be prohibitive. Rather, the approach taken by Courts in all jurisdictions is to rely on the duties on the executors and to dispense with the involvement of beneficiaries as parties except in very specific instances. See generally Vasiljev v Public Trustee, Collett v Knox, Re Lanfear an Re Scali. 
[28]	Other examples cited in the authorities as possible appropriate instances where joinder of beneficiaries should be permitted is where the executors take an attitude which compels beneficiaries to seek representation to protect the gifts, or where the executors are not fulfilling their duty to represent the beneficiaries interests, or if there is some other reason to justify that course. The Applicant’s primarily rely on the first two of those instances to support their application.
[29]	The current proceedings involve the purported compromise of the Plaintiff’s FPA claim. The Plaintiff submits that the proceedings seek only approval of the compromise and that therefore the proceedings are distinct from a typical contested FPA claim. Although I accept that the relief sought is not the same as that in a contested application, I do not accept that all principles relevant to determining applications for provision out of an estate under the FPA are to be disregarded as the Plaintiff seems to be suggesting.
[30]	The Applicants complain of the processes by the former executors leading up to the compromise and rely on what they allege to be deficiencies in the conduct of the former executors to justify the Applicant’s application for joinder.
[31]	The law is relatively clear. There is no specific prohibition in the FPA preventing a compromise of a claim pursuant to the FPA. However as an order for provision out of an estate pursuant to the FPA involves the exercise of the Court’s discretion, a binding agreement between the parties cannot be made without approval of the Court, see Bartlett and Albany. The same applies where some of the beneficiaries are infants. 
[32]	That is not to say however that any agreement reached will necessarily be disregarded. Indeed the fact of an agreement is a factor the Court will take into account. Where some beneficiaries are infants there is the added qualification in that the compromise is more carefully scrutinised for that purpose.
[33]	Condensing the nine separate bases for joinder in the Applicants’ submissions, the application is largely based on the perception that the former executors have not satisfied their duty to “defend the will” and to protect the interests of all relevant persons. Specifically the conduct of the former executors complained of relates to their assessment and compromise of the Plaintiff’s FPA claim. The Applicants allege that the former executors did not properly assess the Plaintiff’s claim before agreeing to the compromise.
[34]	However other than a bare assertion to that effect, no evidence to support that exists. The available evidence is to the contrary. Relevantly the former executors were legally represented at the relevant time. The evidence shows that their solicitors advised the former executors with respect to the prospects of success of the Plaintiff’s FPA claim and recommended acceptance of the Plaintiff’s offer. The letter making the recommendation clearly states that the recommendation was made “after carefully assessing” the Plaintiff’s claim. Although that letter does not make reference to specifically what was considered by the solicitors in making that recommendation, and therefore by the former executors in accepting the recommendation, that however does not translate to a lack of a proper assessment. If anything was to be inferred from that, it would more likely be the converse due to the obligations on the former executor’s solicitors coupled with the likely knowledge of the circumstances of the Plaintiff and the beneficiaries which the former executors had from their personal knowledge.
[35]	In terms of the tangible evidence relied on by the Applicants to support their submission that the former executors did not properly assess the Plaintiff’s claim, this mostly relates to assertions of discrepancies in values of relevant assets. The Applicants rely on valuations of the Darwin River Property, the Anula Property and the shares in Philjan obtained on behalf of the estate. These reveal values at variance with the estimates utilised by the former executors and their solicitors when assessing the Plaintiff’s claim. However, as at 7 May 2007 the former executors estimated the value of the Anula Property at $350,000 and the Plaintiff accepted that estimate. With respect to the Darwin River Property this was appraised by a real estate agent on 28 April 2009 in the range of $850,000 to $880,000. I agree with the Plaintiff’s submission that both valuations were completely consistent with figures relied on for the settlement.
[36]	An increase in the values over time should not be unexpected. That however does not automatically translate to support for the Applicant’s submission that the former executors did not properly assess the Plaintiff’s claim given when the higher values were assessed and that they were obtained after the compromise agreed to. Likewise with respect to the subsequent accounting valuation of the shares in Philjan. The basis upon which the shares in Philjan were assessed to be of no value, although simplistic, had an appropriate basis, relying as it did on the evidence of value of the Darwin River Property at the time and the book value of debts.
[37]	What I think is more relevant is whether the estimates relied on in the assessment of the Plaintiff’s claim were bona fide and, other than possible inferences based on the higher valuations, there is no evidence to conclude that they were not. Moreover, for the reasons given in the preceding paragraph, I would not draw such an inference.
[38]	I therefore do not consider that the variance in valuations necessarily establishes an improper or inappropriate assessment of the Plaintiff’s claim by the former executors.
[39]	The Applicants also rely on the removal of the former executors and substitution of Public Trustee to justify joinder. The appointment of the Public Trustee occurred on 29 August 2013. I do not see that there is any basis for saying that Public Trustee cannot now uphold the will owing to the actions of the former executors. At the outset I am not persuaded that there is evidence to sufficiently establish that the former executors are in breach of their obligations in any event but, even if there was sufficient evidence of that, I cannot accept the bare claim that as a result, Public Trustee cannot now uphold the will. Moreover the fact that Court approval of the compromise is required means that Public Trustee still has the opportunity to persuade the Court, if thought fit, not to approve the compromise or to only approve it subject to varied provision in favour of the Plaintiff.
[40]	Other than complaining in some fashion as to the substitution of Public Trustee in place of the former executors, no real basis has been put to show that Public Trustee could not now adequately comply with the obligations on it as the executor of the estate or that the change of executors justifies the joinder of some beneficiaries.
[41]	Although the Applicants appear unhappy with the decisions made by the former executors, no clear evidence exists that the former executors failed to fulfil their duty in respect of the Plaintiff’s claim. Moreover there is no evidence that the Public Trustee cannot do so if required.
[42]	As the current proceedings are primarily to obtain the Court’s approval of the compromise, there is no reason to conclude that Public Trustee cannot adequately represent the estate and properly comply with the duty on Public Trustee, even if it could be sufficiently established that the former executors had been deficient in the performance of their duty. If any finding of such deficiency by the former executors has tainted the compromise, the Public Trustee can adequately put that to the Court. There is nothing that the Applicants could do in respect of the substantive proceedings that the Public Trustee cannot do within the scope of its duty. Moreover Public Trustee can be more objective than the Applicants and all other beneficiaries and can better assess the position that the estate should take in respect of the compromise.
[43]	For the foregoing reasons, I dismiss the Applicant’s application for joinder.
[44]	I will hear the parties as to consequential orders.