Citation: Smith Estate: Smith v Smith & Ors [2005] NSWSC 1340
Court: Supreme Court of New South Wales, Equity Division (Probate List)
Date: 16 December 2005
Judge(s): Palmer J
Background
The plaintiff, a grandchild of the deceased, commenced proceedings in 2004 seeking to set aside a grant of probate in solemn form made in 1983. He alleged that the grant had been procured by fraud, claiming that family members had conspired to conceal a 1977 will under which he was a beneficiary and had filed a submitting appearance in the probate proceedings purportedly on his behalf without his knowledge or instructions. He contended he did not discover the 1977 will until around September 2002.
The deceased had made three wills, in 1969, 1977, and 1978. The 1983 probate proceedings resulted in a consent order granting probate of the 1969 will. Under that will, the plaintiff received no benefit. Under the 1977 will, by contrast, he was both an executor and a beneficiary with interests in two significant properties.
The fourth and fifth defendants (the deceased's granddaughter and her husband) had received one of those properties, known as Fairview, by way of gift from their family member in 2002. They applied for summary judgment to have the plaintiff's claim against them dismissed entirely.
Legal Issues
- Whether summary judgment should be entered dismissing the plaintiff's claim against the fourth and fifth defendants, on the basis that the claim had no reasonable prospect of success.
- What the correct test is for summary judgment where a plaintiff seeks to set aside a judgment obtained by fraud.
- Whether, if summary judgment was not available, a temporary stay of the proceedings against the fourth and fifth defendants should be ordered instead.
- How costs of the application should be allocated given the outcome.
Decision
The court declined to enter summary judgment in favour of the fourth and fifth defendants. Palmer J reasoned that a claim to set aside a judgment on the ground of fraud is not readily amenable to summary dismissal. The threshold for summary judgment requires that the plaintiff's case be so clearly untenable that it could not possibly succeed at trial, a test derived from General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. The plaintiff's fraud allegations, though historically complex, could not be characterised as plainly hopeless at this interlocutory stage.
The pleaded case against the fourth and fifth defendants rested on the principle that, as volunteers (meaning they gave no valuable consideration for the conveyance of Fairview), they took the property subject to any prior equitable interests the plaintiff held under the 1977 will. Because they were not alleged to have been knowing participants in the original 1983 fraud, and because the plaintiff's entire case first required establishing that fraud against the remaining defendants, the strength of the claim against the fourth and fifth defendants depended entirely on the outcome of the main proceedings.
Palmer J raised the possibility of a temporary stay during submissions. Although the fourth and fifth defendants initially sought only summary judgment, they ultimately accepted the stay with some reluctance. The court ordered that the proceedings against the fourth and fifth defendants be stayed until the plaintiff's claims against the remaining defendants were determined, or until further order. This outcome had the practical effect of relieving those defendants from active participation in the litigation unless and until the fraud and testamentary capacity questions were resolved in the plaintiff's favour.
On costs, the court declined to award indemnity costs to either party. The plaintiff's letter offering to expedite proceedings fell short of the benefit the fourth and fifth defendants ultimately obtained through the stay. However, because the stay was a remedy suggested by the court rather than one the defendants had principally sought, a full costs award in their favour was also unwarranted. The court ordered costs of the application to be costs in the cause.
Orders Made
- The proceedings against the fourth and fifth defendants are stayed until determination of the plaintiff's claims against the first, second and third defendants, or until further order of the court.
- Costs of the application are costs in the cause.
- Exhibits may be returned.
Key Takeaways
- The Supreme Court confirmed that summary judgment will not be entered against a plaintiff seeking to set aside a probate judgment on grounds of fraud unless the claim is so clearly untenable it cannot possibly succeed at trial, applying the General Steel standard.
- Where a plaintiff's claim against certain defendants depends entirely on succeeding first against other defendants, those downstream defendants need not be forced to participate in the full litigation before the foundational issues are resolved.
- A temporary stay of proceedings can be an appropriate alternative remedy where summary judgment is unavailable but justice requires that particular defendants be relieved of active participation pending resolution of the core dispute.
- Volunteers who receive property by way of gift, without valuable consideration, may take that property subject to prior equitable interests, meaning the absence of direct fraud allegations against them does not automatically defeat a plaintiff's claim.
- In awarding costs, the court distinguished between a party achieving their primary relief and one achieving a lesser form of relief through a court-initiated suggestion, and declined to treat the latter as sufficient grounds for a full or indemnity costs order.
Legislation and Cases Referenced
Legislation:
- Testators' Family Maintenance and Guardianship of Infants Act 1916 (NSW), s 3
Cases:
- General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
- Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 65 ALR 683
- Birch v Birch [1902] P 130
- In re Diplock; Diplock v Wintle ("Diplock's Case") [1948] Ch 465
- Priestman v Thomas (1884) 9 PD 70
- Wentworth v Rogers (No 5) (1986) 6 NSWLR 534