Lancaster v Hallahan & Ors [2010] NSWSC 1382

New South Wales Supreme Court

CITATION : Lancaster v Hallahan & Ors [2010] NSWSC 1382

HEARING DATE(S) : 25 November 2010 JUDGMENT OF : Ball J

EX TEMPORE JUDGMENT DATE : 25 November 2010

DECISION : 1. Plaintiff's motion dismissed. 2. Costs reserved.

CATCHWORDS : WILLS AND ESTATES – administrator – removal of administrator – whether funds properly administered – whether estate liable to contribute to mortgage over property held under joint tenancy. PROCEDURE – separate questions

LEGISLATION CITED : Conveyancing Act 1919 (NSW)

CATEGORY : Procedural and other rulings

Karen Lynn Lancaster (Plaintiff) PARTIES : Lee Hallahan (First Defendant) Commonwealth Bank of Australia (Second Defendant) National Australia Bank (Third Defendant)

FILE NUMBER(S) : SC 2010/379949

Mr D Smallbone (Plaintiff) COUNSEL : Mr M Condon / Ms S Neumueller (First Defendant) Mr P Reynolds (Third Defendant)

Michael Lewis & Associates (Plaintiff) SOLICITORS : Tony Kelly Lawyer & Estate Planner (First Defendant) National Australia Bank (Third Defendant)

- 2 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BALL J

25 NOVEMBER 2010

2010/379949 KAREN LYNN LANCASTER v LEE HALLAHAN & ORS EX TEMPORE JUDGMENT 1 In these proceedings the plaintiff seeks an order that the grant of Letters of Administration of the Estate of the late Andrew Scott Norton-Smith to the first defendant be revoked. 2 The plaintiff has also filed a motion in which she seeks orders, in effect by way of interlocutory relief, that the grant of Letters of Administration of the estate be revoked and that a grant be made to her together with a number of ancillary orders, including orders requiring the first defendant to file an affidavit setting out amounts she has paid from the estate. 3 The deceased was survived by the plaintiff, who was his de facto spouse, and the first defendant who was his de jure spouse, together with a number of children. 4 The deceased died intestate and the first defendant took out Letters of Administration. The plaintiff was aware of that at the time but ultimately did not oppose it. 5 The principal liabilities of the deceased immediately before his death, consisted of a loan to the National Australia Bank of approximately $224,000 which is secured against a property at West Gosford, together with amounts totalling approximately $220,000 owed to the Commonwealth Bank in respect of two business loans. Those two debts are secured over a property at Hamlyn Terrace, which is the plaintiff's family home, together with a property at North Wyong. The deceased also owed approximately $246,000 to the Commonwealth Bank in respect of a home loan which is secured by a mortgage over the property at Hamlyn Terrace. 6 The property at Hamlyn Terrace and the property at North Wyong were held by the plaintiff and the deceased as joint tenants and the debt owed to the Commonwealth Bank is owed by the plaintiff and the deceased. The debt owed to the National Australia Bank is purely a debt owed by the estate. 7 There appears there may be a shortfall on the debts owed by the estate and there is a question of the extent to which the estate is liable to contribute to the debts owed to the Commonwealth Bank. The answer to that question depends, at least in part, on the correct construction of s 145 of the Conveyancing Act 1919. Subsection (1) of that section provides: "(1) Where a person dies after the commencement of the Conveyancing (Amendment) Act 1930 possessed of or entitled to, or, under a general power of appointment by his or her will disposes of: (a) property, which at the time of his or her death is charged with the payment of money, whether by way of legal mortgage, equitable charge, or otherwise (including a lien for unpaid purchase money), or (b) land in respect of which there is owing at the time of his or her death any money under a contract of purchase whether from the Crown or not, and the deceased has not by will , deed , or other document signified a contrary or other intention, the property so charged shall, as between the different persons claiming through the deceased, be primarily liable for the payment of the charge ; and every part of the property , according to its value, shall bear a proportionate part of the charge on the whole thereof." 8 It became apparent during the course of the hearing that a significant part of the dispute between the plaintiff and the first defendant related to the correct construction of that provision, and, in particular, whether it applied to joint tenancies at all. If the estate is liable to contribute to any shortfall in the amount owed to the Commonwealth Bank after the sale of the property at North Wyong, then the plaintiff has a very real interest in ensuring that the estate is in a position to contribute to the repayment of that debt. 9 The plaintiff points to various matters which she says justify the orders that she seeks. Those matters fall into two main categories. 10 First, she says that the first defendant has made distributions from the estate to herself in circumstances where the estate is insolvent or near insolvent with the effect, or likely effect, that the estate will not be able to contribute its proper share to the repayment of the debts owed to the Commonwealth Bank. 11 Second, the plaintiff claims that the first defendant has administered the estate in a way which is improper by incurring excessive expenses, including legal expenses. 12 During the course of the hearing, I invited the parties to indicate what undertakings they may be prepared to give to the court in relation to the administration of the estate for the purposes of determining whether I should grant the relief sought by the plaintiff. 13 The plaintiff offered undertakings to me. In addition, the plaintiff indicated undertakings that she thought it would be necessary for the first defendant to proffer, if she were to remain as administrator. The first defendant has indicated that she is prepared to give many, but not all, of those undertakings. 14 I am not prepared to grant the orders as sought by the plaintiff. That is not to say that ultimately the plaintiff may not be entitled to an order revoking the grant of the Letters of Administration to the first defendant. However, it seems to me that it is not appropriate to grant what is, in effect, final relief. That is particularly so having regard to the urgency with which the matter has been brought on. 15 Instead, what I think is important to focus on is what orders are necessary and appropriate to preserve the position pending a final determination of the case and what orders might be made to enable an orderly realisation of the estate so that the debts of the estate can be met. 16 In my opinion the undertakings that the first defendant has indicated she is prepared to give provide the plaintiff with adequate protection pending a final hearing. 17 In addition, as I have said, it seems clear that a substantial part of the dispute between the plaintiff and the first defendant turns on the correct construction of s 145 of the Conveyancing Act. 18 Having regard to that fact, I invited the parties to consider whether it would be appropriate for the Court to order that a separate question be determined in relation to that issue and, if the parties agreed, I indicated to them that I would be prepared to hear that separate question as a matter of urgency. 19 The parties agree that it is appropriate in principle that a separate question be asked, although it remains necessary for the parties to agree on the precise form of that separate question. 20 That seems to me to be another reason why the plaintiff's position would be adequately protected by accepting the undertakings that the first defendant has proffered. Once that separate question is answered, it will be possible to know what further orders may be appropriate to be made on an interlocutory basis. If the separate question is answered in the first defendant's favour that will undermine significantly the plaintiff's complaints about the administration of the estate. If it is answered in the plaintiff's favour, then that may make it appropriate for the court to grant additional interlocutory relief. The answer may also assist substantially in resolving the issue between the parties on a final basis. 21 Finally, one issue that is important in relation to the administration of the estate is the sale of the property at West Gosford which is subject to the mortgage to the National Australia Bank. 22 The undertakings given by the first defendant include undertakings to take steps for that property to be sold as quickly as reasonably possible in accordance with the wishes of the National Australia Bank. That is a another matter which I think provides significant protection to the plaintiff.