Aronis & Anor v Aronis [2021] QSC 87 [2021] 19 QLR

SUPREME COURT OF QUEENSLAND CITATION: Aronis & Anor v Aronis [2021] QSC 87 PARTIES: THEODORA LOULA ARONIS AS EXECUTOR OF THE ESTATE OF PETER GEORGE ARONIS (DECEASED) (first plaintiff) THEODORA LOULA ARONIS (second plaintiff) v MATINA ARONIS AS EXECUTOR OF THE ESTATE OF MARIA ARONIS (DECEASED) (defendant) FILE NO: SC No 12875 of 2015 DIVISION: Trial Division PROCEEDING: Application DELIVERED ON: 29 April 2021 DELIVERED EX TEMPORE AT: Brisbane HEARING DATE: 20 April 2021 JUDGE: Flanagan J ORDERS: 1. Pursuant to s 127 of the Land Title Act 1994 (Qld), Caveat No. 716825957 over property located at 74 Vulture Street, West End in the State of Queensland, properly described as Lot 2 on Registered Plan 11157, Title Reference 11525014 (“74 Vulture Street”) be removed, on the condition that: (a) the net proceeds of any sale of 74 Vulture Street, after payment of any agent’s commission, selling costs, and other usual adjustments on sale, be paid into the trust account of the defendant’s solicitors; (b) such funds not be dealt with or disbursed except: (i) in accordance with paragraph 2 of this order; or (ii) with the prior written consent of the plaintiff’s solicitors; or (iii) with the Court’s leave. 2. The funds referred to in paragraph 1 of this order may be applied: -- 1 of 10 -- 2 (a) by payment in respect of maintenance, repairs, rates, land tax and other charges in relation to Lot 1 on Registered Plan 92106, Title Reference 13403001, described as 3 Hayling Street, Salisbury; (b) by payment in respect of maintenance, repairs, rates, land tax and other charges in relation to: (i) Lot 4 on Registered Plan 92106, Title Reference 13296123; (ii) Lot 5 on Registered Plan 92106, Title Reference 13296124; and (iii) Lot 6 on Registered Plan 92106, Title Reference 13296126, collectively described as 17 Hayling Street, Salisbury; (c) by payment in respect of maintenance, repairs, rates, land tax and other charges in relation to Lot 142 on Registered Plan 45158, Title Reference 12765113, described as 99 Burn Street, Camp Hill; (d) by payment of: (i) the defendant’s costs and disbursements in Supreme Court proceeding 12875/15 (“this proceeding”); and (ii) the defendant’s costs of defending any interlocutory appeal in this proceeding; and (iii) other bona fide expenses of the estate of Maria Aronis. 3. For the avoidance of doubt, paragraph 2 of this order does not authorise, and the prior written consent of the plaintiff’s solicitors or the further leave of the Court is required, before the funds referred to in paragraph 1 of this order may be applied: (a) in repayment of any money which Matty Aronis, in her personal capacity, has advanced to the estate of Maria Aronis (deceased), whether: (i) in connection with this proceeding; or (ii) in connection with Supreme Court proceeding 10436/19 (“the probate proceeding”); or (iii) for any other purpose; or (b) to defend the probate proceeding. -- 2 of 10 -- 3 4. Pursuant to s 96 of the Trusts Act 1973 (Qld), the Court declares that the defendant is justified in: (a) selling 74 Vulture Street; and (b) applying the sale proceeds as set out in paragraphs 1 to 3 of this order. 5. The trial listed to commence on 31 May 2021 is adjourned to 10.00 am on 30 August 2021 for a ten-day trial before Jackson J. 6. The defendant has leave to uplift and take copies of the documents produced, as at the date of this order, in response to subpoenas issued at the request of the plaintiff on 16 March 2021 (“the subpoenaed documents”). 7. Within 7 days of this order, the defendant (by her solicitors) must: (a) uplift and take copies of the subpoenaed documents; (b) review the subpoenaed documents to form a reasonable belief as to whether the subpoenaed documents, or any of them, or any parts of them, are irrelevant to: (i) the issues in this proceeding; or (ii) the mental capacity of Maria Aronis at or about the time she gave instructions to defend this proceeding; or (iii) the mental capacity of Maria Aronis at or about the time she made her affidavit filed in this proceeding; (c) supply to the plaintiff’s solicitors copies of all of the subpoenaed documents, excepting any of them, or any parts of them, in respect of which a reasonable belief has been reached in accordance with subparagraph (b); and (d) provide an index of the subpoenaed documents which: (i) contains a sufficient description of each of the subpoenaed documents so that they can be individually identified; and (ii) identifies which documents or parts of documents (if any) have not been supplied to the plaintiff’s solicitors in accordance with subparagraph (c). -- 3 of 10 -- 4 8. If, after the date of this order, any further documents are produced in response to the subpoenas issued at the request of the plaintiff on 16 March 2021, then: (a) subject to subparagraph (b) hereof, the provisions of paragraphs 6 and 7 of this order shall apply to and in respect of such documents; and (b) in respect of such documents, the period of 7 days stipulated in paragraph 7 of this order shall run from the date on which the plaintiff’s solicitors inform the defendant’s solicitors, in writing or by email, that such further documents have been produced. 9. The plaintiff has liberty to apply to the Court on 3 days’ notice for orders that they be provided access to any document or part of a document not provided by the defendant in compliance with (or in purported compliance with) paragraphs 7 and 8 of this order. 10. The costs of the defendant’s application to adjourn the trial be each party’s costs in this proceeding. 11. The plaintiff pay the defendant’s costs of: (a) the application filed on 26 March 2021 to remove the caveat; and (b) the application filed on 8 April 2021 under r 422B(5) of the Uniform Civil Procedure Rules 1999 (Qld). CATCHWORDS: REAL PROPERTY – TORRENS TITLE – CAVEATS AGAINST DEALINGS – REMOVAL – PARTICULAR CASES – where the plaintiff seeks a declaration of constructive trust over estate property – where the executor of the estate applies for the removal of a caveat over part of the estate property to permit its sale for the purposes of funding the defence of the claim – where the plaintiff objects to the sale of the property on the basis that it would deprive her of the benefit of receiving the property in specie if successful at trial – whether the caveat should be removed and the sale of the property permitted EQUITY – TRUSTS AND TRUSTEES – APPLICATIONS TO COURT FOR ADVICE AND AUTHORITY – APPLICATIONS FOR AUTHORITY NOT CONFERRED BY TRUST INSTRUMENT – OTHER CASES – where the executor of an estate applies for a declaration that she is justified in selling estate property and applying the sale proceeds for the purposes of defending litigation brought against the estate – whether that declaration should be made -- 4 of 10 -- 5 PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DISCOVERY AND INTERROGATORIES – DISCOVERY AND INSPECTION OF DOCUMENTS – PRODUCTION AND INSPECTION OF DOCUMENTS – GROUNDS FOR RESISTING INSPECTION – IRRELEVANCE – where the plaintiff seeks orders permitting her to inspect documents the subject of a subpoena issued on her behalf – where the defendant gave written notice of objection to inspection of the documents – where the defendant objects on grounds of irrelevancy – where the documents sought to be inspected are historical medical and dental records of the deceased testator – whether inspection of the documents should be permitted Land Title Act 1994 (Qld), s 127 Trusts Act 1973 (Qld), s 96 Uniform Civil Procedure Rules 1999 (Qld), r 422B National Employers’ Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372, cited Xstrata Queensland Ltd v Santos Ltd [2005] QSC 323, applied COUNSEL: A J Morris QC for the plaintiff D G Clothier QC, with S J Webster, for the defendant SOLICITORS: Walt Allan for the plaintiff Cooper Grace Ward for the defendant [1] HIS HONOUR (ex tempore): This is the matter of Theodora Loula Aronis as executor of the estate of Peter George Aronis, deceased, and another against Matina Aronis as executor of the estate of Maria Aronis, deceased, BS12875 of 2015. There are three applications before the Court: two brought by the defendant and one by the plaintiff. [2] The applications are: (a) an application by the defendant for the adjournment of the trial in the proceeding which is scheduled to commence on 31 May 2021 for 10 days before Wilson J; (b) an application by the defendant for orders for the removal of a caveat over real property at 74 Vulture Street, West End to permit the property to be sold and directions as to the use of the sale proceeds; and (c) an application by the plaintiff for the inspection of documents subpoenaed by her. [3] The background to the proceeding is set out in the decision of Bowskill J in Aronis v Aronis [2019] QSC 275 at [1]-[11]. In brief, the proceeding is for declarations of constructive trust over real property owned by the late Maria Aronis. The proceeding was commenced in December 2015 while Maria was still alive. The plaintiff is Maria’s daughter-in-law who sues both as executor of her late husband’s estate and -- 5 of 10 -- 6 in her own capacity. The plaintiff has lodged caveats over the six properties comprising Maria’s estate. The defendant is the daughter of Maria and the executor of her estate. Prior to her death in October 2016, Maria gave instructions to defend the proceeding and swore an affidavit refuting the allegations of any “family agreement” giving rise to the alleged constructive trust. [4] At [12] of the judgment of Bowskill J, her Honour noted that, in addition to the constructive trust proceeding, in September 2019, one of the children of the plaintiff, Marietta Aronis, commenced a new proceeding in this Court which is proceeding number 10436 of 2019, seeking the return of the grant of probate in common form of Maria’s 2016 will, and a grant of probate in solemn form (essentially challenging Maria’s 2016 will on the basis that she lacked capacity and seeking to prove an earlier will made by her in 1991). [5] Turning, then, to the adjournment application. The plaintiff does not oppose the granting of this application and it is appropriate to exercise the discretion to adjourn the trial which was to commence on 31 May 2021. [6] A previous application for an adjournment brought by the plaintiff was granted by Burns J on 18 February 2021. The basis of that adjournment, as is evident from the transcript and as outlined in paragraph 21 of the defendant’s written submissions, was as follows: (a) the plaintiff needed 12 weeks to obtain an independent audit of financial reports, followed by a forensic accountant expert report which would be “critical to the outcome” of the case; (b) the audit was a necessary component of allowing the plaintiff’s expert, Mr Vincent, to produce his report; (c) the length of the adjournment of the trial would be minimised to reduce prejudice to the defendant, so that rather than being adjourned to the second half of the year as the plaintiff proposed, it would be heard in the first half of 2021; and (d) prejudice to the defendant could be further ameliorated in the circumstances in which the parties agreed in principle that a further estate property could have the caveat removed in order for it to be sold. [7] At the time of the adjournment application before Burns J, the plaintiff had not disclosed 397 financial reports that had been prepared between January and mid-February 2021. The adjournment sought by the defendant here is on the basis that the defendant’s expert requires more time to respond to the plaintiff’s material. In his affidavit, Mr Lytras identifies that the plaintiff intends to brief Mr Sneesby of Merrotts Chartered Accountants to audit the financial reports, and then brief Vincents Chartered Accountants to prepare a forensic accountant report based on the audited financial reports. Until the defendant’s expert reviews the audit report and the forensic accounting report and underlying source documents, he is unable to provide a precise estimate of how long it will take to review, advise and respond to the report. As a rough estimate, he considers that a minimum of eight weeks and, more realistically, 12 weeks are required. I note that the plaintiff no longer intends to have the financial reports audited, but Mr Lytras nevertheless requires time to consider and respond to Mr Vincent’s foreshadowed report. -- 6 of 10 -- 7 [8] In those circumstances, it is appropriate that the trial be adjourned. The trial will be adjourned to commence on 30 August 2021 before Jackson J for 10 days. [9] As to the defendant’s second application to remove the caveat over the Vulture Street property, she has previously brought an application for a removal of the caveat over one of the other properties at 95 Burn Street. This was the application that was dealt with by Bowskill J on 29 October 2019. The defendant sought to have the caveat lifted for the purposes of selling the property. Bowskill J permitted the property to be mortgaged but not sold. In making those orders, her Honour observed at [25]: “I have no hesitation in concluding that [the defendant] is justified in continuing to defend the constructive trust proceeding. [The plaintiff’s] claim in that proceeding is based upon oral conversations dating back to 1979, asserting a beneficial entitlement to all of the property owned by Maria. There are some concerning features, including the circumstances of the purported appointment of Peter as Maria’s power of attorney in 1991, and the 1991 will purportedly made by Maria. The proceeding was commenced against Maria as a defendant during her lifetime; and defended by her personally, with the claims made by [the plaintiff] clearly and unequivocally refuted by Maria in her affidavit made in May 2016.” [10] Her Honour further observed at [28]: “… In my view, the rhetorical question posed by counsel for [the defendant] – why should [the defendant] be required to defend those proceedings personally, and without recourse to estate funds, simply because she happens to be the executor as well as a beneficiary? – is a fair one. The answer, in my view, in the circumstances of this case, is that it would not be practical or fair to require her to do so.” [11] The plaintiff does not oppose the caveat being lifted over the Vulture Street property, but only for the purpose of the property being mortgaged to secure a loan to fund the defendant’s legal costs in defending the proceedings. The plaintiff submits that the Court should not permit the sale of the property because the plaintiff will lose the benefit of receiving that property in specie if successful at trial. [12] I note that the order of Bowskill J which was unsuccessfully appealed was varied by Brown J to permit the property at 95 Burn Street to be sold primarily because the defendant was unsuccessful in obtaining a mortgage over the property. The total sum raised from the sale of 95 Burn Street after selling costs and outstanding land tax liabilities was approximately $570,000. Only $92,000 now remains. Much of the money has been spent on legal costs in relation to applications before Jackson, Bowskill and Brown JJ and two unsuccessful appeals brought by the plaintiff. [13] As I have already observed, in granting the first adjournment of the trial, Burns J noted a concession by the then senior counsel for the plaintiff that the parties had an understanding that, if sought, a further property could be sold. -- 7 of 10 -- 8 [14] In determining the defendant’s second application, the Court should proceed on the basis that, as found by Bowskill J, it is appropriate for the defendant to continue to defend the proceedings. She ought to have recourse to the assets of the estate to do so. I accept the submission of the defendant, recorded at paragraph 19(c) of the written submissions that, at its highest, the evidence before me identifies the mere possibility of a loan from a non-bank lender on terms which would require the payment of substantial fees, the capitalisation of substantial interest over two years, and a clear “exit strategy”, which could only sensibly be the sale of the Vulture Street property to repay the loan and accumulated interest. This means that if the property is not sold now, it ultimately will be when the loan is called in. [15] Mr Morris QC, in the course of oral submissions for the plaintiff, submitted that the plaintiff was willing to permit other properties presently the subject of caveats to be used as security for the purposes of the defendant raising any necessary loan. The plaintiff has also suggested that she would be, “happy to pay out a mortgage on 74 Vulture Street”, but, as noted by the defendant, no undertaking to this effect has been offered and no security offered which would make the undertaking worthwhile. The evidence reveals that the interest rate for a second-tier lender is 7.99 per cent per annum. If the property is sold now, the capitalised interest expense is avoided. Further, in my view, what is also avoided is the risk of the defendant being unable to refinance when any loan becomes repayable. Such a risk does not only impact on the Vulture Street property, but also on any other property offered as security for any such loan. This would constitute a risk that falls not only on the defendant, but also on the plaintiff if she is ultimately successful at trial. [16] I note that the evidence reveals that the defendant has no income stream to service a loan, which is why any proposed loan with a second-tier lender would involve capitalised interest. The reason that the Vulture Street property has been chosen for sale by the defendant is that the valuation evidence identifies this property as being the easiest to sell at the present time. Any suggestion that the plaintiff has an emotional attachment to the Vulture Street property primarily because of work conducted on that property by her late husband should be discounted in circumstances where she has indicated a previous preparedness to sell the Vulture Street property. I further note that no special or sentimental value as asserted by the plaintiff has previously been raised in these proceedings, which have been on foot for five-and-a- half years. [17] The evidence demonstrates, in my view, that the Vulture Street property is the most saleable property, with the other properties being in a more dilapidated condition and requiring substantial works in order to achieve a sale at market value. An order should therefore be made for the removal of the caveat and the sale of 74 Vulture Street on terms that the proceeds of sale be paid into a trust account and used for the limited purposes of defending this proceeding, maintenance and outgoings, and other incidental bona fide expenses of the estate. [18] I note, as stated in paragraph 19(h) of the defendant’s submissions, that she is prepared to further limit the ways in which the funds held on trust may be used so that further leave of the Court would be required to use the funds for any appeal in this proceeding and defending the probate proceedings brought by the plaintiff’s daughter, Marietta. The draft order provided by the defendant identifies, in order 1(d), that the proceeds are not to be used, without further leave of the Court, to repay -- 8 of 10 -- 9 any of the money which the defendant, in her personal capacity, has loaned to the estate. [19] The third application is brought by the plaintiff. It is for the inspection of documents subpoenaed by her. The application is made pursuant to r 422B(5) of the Uniform Civil Procedure Rules 1999 (Qld). What is applied for is for the Court to make a decision in relation to the defendant’s objection (given to the Registrar on 7 April 2021) to the plaintiff’s inspection of documents produced in accordance with subpoenas issued by the plaintiff dated 16 March 2021. [20] The application seeks that the Court overrule the defendant’s objection and give permission to the plaintiff to inspect and copy documents produced in accordance with the subpoenas. The defendant’s Notice of Objection was tendered as Exhibit 1 in this application. What was subpoenaed were the medical and dental records of Maria Aronis. The objection made by the defendant is that the records contain private information, the vast majority of which is irrelevant. [21] Unlike the probate proceeding, in the present proceeding there is no challenge to Maria’s capacity to make her 2016 will. Rather, the dental and medical records are sought to ascertain Maria’s cognitive abilities at or about the time she gave instructions to defend the present proceeding and to make her affidavit. [22] In Xstrata Queensland Ltd v Santos Ltd [2005] QSC 323, McMurdo J, as his Honour then was, cited with approval National Employers’ Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372 at 385 where Moffitt P stated: “The crucial question in relation to the exercise of the discretion to permit inspection [of documents produced to the court] is whether the documents have apparent relevance to the issues. … If there is particular objection from the witness, or questions of privacy are involved, no doubt procedures can be adopted to ensure that only relevant documents are inspected. …” [23] The mechanism proposed by the defendant is contained in paragraph 2 of the Notice of Objection, and involves the defendant having leave to uplift and take copies of the documents within seven days of the order, and to provide to the plaintiff copies of all documents produced in response to the subpoena, save for any documents or parts of documents that the defendant reasonably believes are not relevant to the issues and proceedings. The documents that should be provided to the plaintiff would, of course, include any documents relevant to Maria’s cognitive capacity or cognitive abilities at or about the time she gave instructions to defend the present proceeding and to make her affidavit. [24] Maria passed away in late October 2016. The plaintiff has subpoenaed medical and dental records of Maria relating to the period from January 2007 (in the case of medical records) and June 1999 (in the case of dental records). As to the medical records, one subpoena seeks all documents from the Nundah Family Doctors Pty Ltd containing information of the medical condition of Maria assessed during or after any consultation from 1 January 2013 and all documents containing information of any treatment provided or recommended during that period. Another subpoena seeks all documents from another doctor over a nine-and-a-half-year period containing information of the medical condition of Maria assessed during or after any -- 9 of 10 -- 10 consultation and all documents containing information of any treatment provided or recommended during that period. The dental records sought are over more than 17 years. [25] On their face, the documents sought by the plaintiff’s subpoenas are extremely wide. I accept the submission of the defendant that most of these medical and dental records – which are private to Maria, of course – must be completely irrelevant to issues in the proceeding. It is not necessary, in the course of these reasons, to discuss the impact of Maria’s death in relation to any issue of privacy. The present matter can be decided on the basis of relevance. [26] In those circumstances, there should be orders made consistent with the mechanism identified by the defendant in paragraph 2 of the Notice of Objection. In light of the above reasons, I will hear the parties as to the form of orders and costs. -- 10 of 10 --