In the matter of an application in the estate of Hanley [2007] ACTSC 70 (31 August 2007)

IN THE MATTER OF AN APPLICATION IN THE ESTATE OF
THELMA JUNE HANLEY
[2007] ACTSC 70 (31 August 2007)

ADMINISTRATION AND PROBATE – identification of assets – whether payments by deceased in her lifetime to some children were loans, gifts or trust moneys – entitlement of executor to reimbursement of expenses – entitlement to commission – declarations as to disposition of estate.

TRUSTS – moneys held on trust by solicitors for vendors after settlement – whether individual vendors entitled to reimbursement of expenses – declarations as to disposition of trust moneys.

IN THE SUPREME COURT OF THE )
) No. SCP 407 of 2006
AUSTRALIAN CAPITAL TERRITORY )

1. Carol Hanley was not at the date of death of the deceased and is not indebted to the estate in any amount.
2. Tony Hanley was not at the date of death of the deceased and is not indebted to the estate in any amount.
3. Paul Hanley is entitled to reimbursement out of the estate of expenditure of $2,090.00.
4. Paul Hanley is entitled to payment out of the estate in the nature of commission and in lieu of reimbursement for loss of earnings of $1,600.00.
5. Paul Hanley is entitled to be paid $2,550.00 out of the proceeds of the sale of block 25 section 888 (3 Mimosa Close) Isabella Plains.
6. Tony Hanley is entitled to be paid $3,000.00 out of the proceeds of that sale.
7. The balance of the funds held in trust by Jordan & McNutt in relation to that sale are held jointly on behalf of Paul Hanley, Tony Hanley, Robin Jones, Susan Goslin, Karen Carrera and Carol Hanley.
THE COURT ORDERS THAT:
1. An amount of $5,000.00 be paid out of the estate to Collaery Lawyers towards the costs of the applicants of this application.
2. The balance of the estate be distributed within 14 days in accordance with clause 4.1 of the will of the deceased.

1. Thelma June Hanley made her last will on 12 October 2005, and died on 4 December in the same year. Probate of the will was granted to her son Paul Hanley, the executor named in the will, on 29 August 2006. The present application is made by Carol Hanley and Robin Jones, daughters of the deceased. It has been treated as an application for declaratory relief.
2. The executor affirmed an affidavit of applicant for probate on 7 August 2006, acting on his own behalf. The then Registrar raised a requisition as to two matters, a caveat by another daughter of the deceased and the form of the inventory of the property of the deceased. In response to the requisition the executor affirmed another affidavit on 23 August 2006. The inventory annexed to that affidavit described the property of the deceased in the following terms:

Description	Value
Furniture second-hand value estimate	$2,000.00
Loan of $20,000.00 to Carol Hanley for deposit on house in Wollongong - outstanding	$11,900.00
Loan of $5,000.00 to Tony Hanley - outstanding	$2,000.00
Commonwealth passbook account 62908.5014235 at 4 April 2006	$38,032.30
Total	$53,932.30

3. Probate was granted by the Court in reliance on the executor’s affidavit of 23 August.
4. The will of the deceased left her estate to her children Paul Hanley, Tony Hanley, Robin Jones, Susan Goslin, Karen Carrera and Carol Hanley as tenants in common in equal shares. She stated that it was her intention that John Thomas James, Dianne Hanley, Helen Hanley and June Hanley not benefit or inherit under her will on the basis that she had made adequate provision for them during her lifetime. She expressed the wish that her executor divide her chattels and personal effects equally and equitably between her stated beneficiaries after consulting with each of them as to their wishes and desires. The will was prepared by Trinity Law, a firm of solicitors.
5. The major asset owned by the deceased during the months leading up to her death was her house at 3 Mimosa Close, Isabella Plains. An agreement was reached in the weeks before her death that she would transfer the property to the six of her children who were named as beneficiaries, and this took place. The deceased and each of the six children signed contracts in relation to the transfer. The six children then sold the house. Although one of the children of the deceased, Tony Hanley, is an estate agent, the sale was a direct one without the intervention of an agent, to a buyer who was personally known to one of the children of the deceased. I am satisfied that each of the beneficiaries signed the contract for sale and authorised its exchange. The sale price was $305,000.00. Settlement took place on 17 November 2006. After the conventional adjustments for rates and the cost of a building report which the executor had paid from his own funds, and after deduction of the costs and disbursements of the solicitors for the vendors, cheques were handed over on settlement for $48,171.49 in favour of each of the six vendors. The solicitors, Jordan & McNutt, have retained the 5% deposit of $15,250.00 in their trust account pending agreement between the vendors as to how it should be shared. The stumbling block is that Paul Hanley claims $2,144.64 for expenses which he claims he incurred personally in relation to the sale of the house, and Tony and Carol Hanley claim $6,179.70 by way of reimbursement for stamp duty which they paid on the transfer from their late mother to the six children. The parties to the present litigation have agreed that in the interests of minimising legal costs, I should deal with the dispute about these claims, and the division of the deposit monies held by Jordan & McNutt in trust, in addition to determining the issues arising out of the will. All six of the children of the deceased involved in the purchase and subsequent sale of the house have been witnesses in the present proceedings and have been in court for at least part of the hearing. Having regard to the sums involved it is desirable that I adopt this course and make orders in the present proceedings which will dispose of all the matters in dispute within the family.
6. There were other children of the deceased, one of whom lodged a caveat against the grant of probate, but I am informed that that matter has been resolved. The other children of the deceased were not parties to the present proceedings, nor, as far as I can see, are their interests likely to be affected by any orders I might make.
7. The six children of the deceased who are involved in the present dispute have divided into two camps. The executor Paul Hanley is supported by his sisters Susan Goslin and Karen Carrera. The applicants in the present proceedings, Carol Hanley and Robin Jones, are in the other camp with their brother Tony Hanley. Sadly it seems to me that relations between the two sets of siblings have broken down, probably permanently and irretrievably. I have no optimism that any orders I make in these proceedings will be likely to mend the breach.
8. The practicalities are that the brothers and sisters are arguing amongst themselves about a bank balance of about $40,000.00, and a deposit held in a solicitor’s trust account of about $15,000.00; a total amount which if divided between the six would give each something less than $9,000.00, before making any allowance for the costs of the present proceedings. These figures illustrate to me the importance of disposing of the dispute finally, without further delay and as far as possible without further expense.
9. The present application was commenced on 4 July 2007, supported by affidavits sworn by Carol Hanley and Robin Jones. Carol Hanley denied in her affidavit that she had received a loan of $20,000.00 from her mother and that that amount was owing to her estate. She annexed correspondence between her solicitors, Collaery Lawyers, and the executor. Robin Jones said in her affidavit that she was not aware of the existence of a loan by Carol from her late mother in the sum of $20,000.00 and was not aware that that amount was owing to the estate.
10. The application came before me on 27 July and I embarked on the hearing. Carol Hanley gave oral evidence. It emerged in the course of that evidence that her late mother had given her $10,000.00 in January 2001 to look after on her behalf. Her mother’s action was motivated a concern that, following winnings at a club, the money she had in her bank account might reduce her pension. Between 2001 and 2005, the late Mrs Hanley gave other amounts to Carol, bringing the total by 2005 to about $14,000.00. Carol’s evidence is that she put this money in her own bank account with NetBank. NetBank had a mortgage over Carol and her husband’s house at Wollongong to secure a housing loan. The effect of the payment of the money into the bank account was to reduce the principal and hence to reduce Carol and her husband’s liability for interest. I am not satisfied that either the late Mrs Hanley or Carol regarded or treated this transaction as a loan. It should probably be seen more appropriately as a payment on trust, but Mrs Hanley and Carol were both, in my assessment, naïve about matters of that kind and I am not satisfied that either of them saw anything inappropriate about Carol paying the amount into her own account, as opposed to opening a trust account on behalf of her mother. That might in any event have defeated the mother’s purpose of maximising her social security benefits, a purpose which I see, and which I think should objectively be seen, as a dishonourable one, though it is something which probably goes on in the community to a much greater degree than one would like to think. Both Carol and her mother probably gained some benefit from the arrangement; Carol and her husband in their relationship with their bank, and her mother at the expense of the revenue. It seems to me that Carol originally intended that this arrangement not come to the attention of the Court.
11. At all events, once it came out, Carol swore a second affidavit on 9 August 2007 in which she accounted, in broad terms, for the expenditure of an opening balance of $14,000.00 from 5 October 2005 until her mother’s death and a little beyond that. Again, the point should be made that she seems to have no appreciation of the duties of a trustee: she conceded in cross-examination that in her accounting in relation to a number of payments she ‘rounded up’ the figures to her benefit.
12. I can only conclude, in relation to Robin Jones, that she was aware in general terms of the arrangement about her mother’s money and that she went along with Carol’s plan not to volunteer the arrangement about the $14,000.00 to the Court.
13. As the hearing proceeded, it became clear that relations between members of the family were extremely poor. There were differences and resentments which went back to the administration of the estate of a grandmother nearly twenty years ago. Family members, including spouses, appear to have adopted entrenched positions. Much of the oral evidence was coloured by emotion and generally speaking I am inclined to attach more credence to contemporaneous written records.
14. I must pay the highest regard to the terms of the will of the late Mrs Hanley, made within two months of her death. It seems to me significant that she expressed the wish that certain named children of hers, and other persons, were not to benefit under the will because she had made adequate provision for them during her lifetime. I am satisfied that if she had thought it appropriate to do so, it would have been open to her to make some specific reference to the money she had given to Carol Hanley, if she had wanted Carol’s share in her estate reduced to any extent to reflect that money.
15. There is evidence that some time before her death she had given her son Tony Hanley $5,000.00. This became known to other members of the family and created some ill feeling. I am equally satisfied that if Mrs Hanley had wanted Tony’s share reduced to reflect in some way this benefit, she could and would have done so.
16. I take the view that the clause in Mrs Hanley’s will leaving the whole of her estate to the six named children equally must be viewed as a considered decision, such that she did not intend that Carol Hanley should give credit for any part of the $14,000.00, or that Tony Hanley give credit for any part of the $5,000.00. I am in any event satisfied that Carol Hanley had expended, by a date soon after her mother’s death, all of the $14,000.00. The payment of $5,000.00 to Tony Hanley must be seen as a gift over and above his entitlement to his share under the will.
17. Although the will sets out the powers of the executor in considerable detail, it makes no provision for his remuneration. The executor, Paul Hanley, has not made any claim for commission based on a percentage of the estate, but he does claim reimbursement for amounts he has paid out of his own pocket on behalf of the estate, and he also claims reimbursement of expenses in relation to the maintenance and sale of the house separately from the estate. In addition, he claims an entitlement to be paid out of the estate, and also out of the deposit funds retained in trust by Jordan & McNutt, the solicitors who acted on the purchase and sale of the property, for the time he has spent on various tasks. He has claimed this at $50.00 for time spent during working hours and $40.00 per hour for other time. Paul Hanley is a building designer or architectural draftsman, although he is not qualified or registered as an architect. He is self-employed. He did not adduce any documentary evidence as to his gross, net or taxable income. He suggested at one stage, when it suited his case to do so, that he was only earning about $20,000.00 a year. I have no way of assessing with any accuracy what difference, if any, the time spent by Paul Hanley on the estate or on the sale of the house has made to his after-tax income.
18. There is no principle of law whereby he is entitled to remuneration, whether at $40.00 an hour or at some lesser rate, for time he has spent outside working hours which have made no impact on his earnings.
19. Paul Hanley conceded in cross-examination that some of the figures he had claimed as expenses had been inflated to include some allowance by way of recompense for his time. There were no accounts or receipts in evidence to enable me to arrive at precise figures for the outgoings.
20. I accept Paul Hanley’s evidence that he paid Trinity Law $2,090.00 by way of legal costs for work undertaken on behalf of his late mother during her lifetime. This is a proper estate debt and should be paid out of the estate. Paul Hanley is entitled to be reimbursed for that amount out of the estate.
21. Secondly, Paul Hanley paid a number of expenses in relation to the house between May and September 2006, including amounts in relation to gas, electricity and telephone, insurance, water and sewerage and general rates. He also paid for a new certificate of title for the property and for a building and pest report which was eventually paid for by the buyer in an adjustment on settlement. In the absense of receipts I allow $2,000.00 for these amounts, for which Paul Hanley should be reimbursed out of the proceeds of the sale of the house, that is out of the deposit reposing in the trust account of Jordan & McNutt.
22. Thirdly, Paul Hanley paid $250.00 for a carved chest and an entertainment unit, as replacement items for two items of furniture which went to other members of the family but which the six brothers and sisters had contracted to sell as part of the house sale. I am also satisfied that he paid to buy mulch for the garden at the house before settlement, and I allow $100.00 for that amount. He is thus entitled to another $350.00 for those payments.
23. The major item in dispute within the family is Paul Hanley’s claim for his time, spent variously working on the house and garden preparing it for sale, instructing solicitors, opening the house for inspection and arranging the inspection for the building report. The total amount claimed in this regard is $6,230.00, although this includes a claim at $40.00 per hour for time spent by two of his sisters, Susan and Karen (both beneficiaries) and joint house owners, and their husbands. Susan and Karen gave evidence for Paul Hanley and I see them as part of his camp. He seems to be motivated to look after their interests whilst having no similar motivation towards his brother and his other two sisters. There is no evidence that Susan or Karen or their husbands lost any income by helping to clean up the house for sale, and indeed, as joint owners, it seems to me likely that they spent that time with a view to enhancing its value for sale, and hence in their own interest. I am satisfied that Paul Hanley spent some of his own time, in the interests of his brothers and sisters, in relation to the sale of the house but I find the claim grossly inflated. In the absence of precise evidence about the effect of the loss of this working time on his income I am inclined to adopt a figure of $20.00 per hour, and allow him ten hours, or a total of $200.00.
24. The value of the estate as it turns out is only about $40,000.00. A claim for commission at 4% on that sum would yield $1,600.00. The estate is a small one and it seems to me that it would be unfair to allow Paul Hanley any more than that out of it, having regard to his obligations as a trustee to his brother and sisters. In place of any allowance for loss of earnings based on time spent on the estate, I think it reasonable to allow Paul Hanley $1,600.00 commission. In summary, I propose to make orders which will result in payment to Paul Hanley out of the estate as follows:
Reimbursement of payments to Trinity Law $2,090.00
Commission $1,600.00
Total $3,690.00
25. I find that he is entitled to payment out of the proceeds of the sale of the house as follows:
Rates, reports etc $2,000.00
Furniture and mulch $350.00
Other expenses and loss of earnings $200.00
Total $2,550.00
26. I earlier mentioned claims by Tony and Carol Hanley for reimbursement of the amount they paid towards the stamp duty on the house. Carol Hanley conceded in her oral evidence that the amount she contributed, about $3,000.00, came out of her mother’s $14,000.00. She is thus not out of pocket herself. I accept that Tony Hanley paid $3,000.00 towards the stamp duty on the purchase of the house, and I accept that whilst some or all of this might have come out of the $5,000.00 his mother gave him, it was legally his money and he is entitled to be reimbursed by his fellow purchasers, out of the amount held in trust by Jordan & McNutt.
27. The orders I make are as follows:
1. A declaration that Carol Hanley was not at the date of death of the deceased and is not indebted to the estate in any amount.
2. A declaration that Tony Hanley was not at the date of death of the deceased and is not indebted to the estate in any amount.
3. A declaration that Paul Hanley is entitled to reimbursement out of the estate of expenditure of $2,090.00.
4. A declaration that Paul Hanley is entitled to payment out of the estate in the nature of commission and in lieu of reimbursement for loss of earnings of $1,600.00.
5. Order that the balance of the estate be distributed within 14 days in accordance with clause 4.1 of the will of the deceased.
6. A declaration that Paul Hanley is entitled to be paid $2,550.00 out of the proceeds of the sale of block 25 section 888 (3 Mimosa Close) Isabella Plains.
7. A declaration that Tony Hanley is entitled to be paid $3,000.00 out of the proceeds of that sale.
8. A declaration that the balance of the funds held in trust by Jordan & McNutt in relation to that sale are held jointly on behalf of Paul Hanley, Tony Hanley, Robin Jones, Susan Goslin, Karen Carrera and Carol Hanley.
28. This brings me to the question of the costs of the present proceedings. The applicants, Carol Hanley and Robin Jones, have been represented by solicitors. The executor has not, and nor have any of the other beneficiaries. All of the beneficiaries gave oral evidence. The proceedings were prolonged and complicated by the lack of frankness of Carol Hanley in her original affidavit in support of the application, in which she simply denied the asserted loan of $20,000.00 and said nothing about the arrangement whereby her mother entrusted her with $14,000.00. Nor did the other applicant Robin Jones, although she was well aware of it, having witnessed an authority about it, signed by the deceased two days before she signed her last will, and about two months before her death. Carol Hanley has had substantial success on her application but the costs are very much greater than they ought to have been, and at the same time, Paul Hanley has had some success in relation to his entitlements out of the estate, about which other members of the family seem to have been intransigent.
29. As I have said, this is a small estate. Its size was the major consideration in my decision to fix the amount I did by way of commission. A similar consideration applies in relation to the payment of legal costs out of the estate. I have come to the view that it is reasonable that some amount should be paid out of the estate towards the costs incurred by Carol Hanley and Robin Jones, and that in the interests in the whole family, that amount should be fixed now rather than left to taxation. It seems to me reasonable in all the circumstances that they should bear a substantial part of their own costs rather than having them borne by their brothers and sisters. It seems to me that an appropriate amount in the circumstances is $5,000.00.
30. I accordingly further order that an amount of $5,000.00 be paid out of the estate to Collaery Lawyers representing the reasonably recoverable costs of the applicants of this application.
31. This has the desirable consequence that all payments can be made and the estate can be wound up, as can the remaining trust following the sale of the house, within a short timeframe.

I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.

Solicitors for the applicants: Mr BJE Collaery
Respondent executor: In person
Date of hearing: 27 July 2007, 10, 17 and 21 August 2007
Date of judgment: 31 August 2007

Supreme Court of the ACT

In the matter of an application in the estate of Hanley [2007] ACTSC 70 (31 August 2007)