Executor’s criminal contempt

Pauline Tyson (”the deceased”) died on December 11, 2003, shortly after finalising her last Will. In this Will, the deceased named her brother Howard ( “the executor”) as the executor and trustee of her estate. The deceased bequeathed $65,000, the furnishings from her home and all her other personal belongings to her daughter, Wendy. Additionally, she has $30,000 to share among her sister, brother-in-law, grandson, and granddaughter. 

The deceased’s Will left her entire estate in trust to the executor as executor and trustee with the following instructions:

• (a) To settle her just debts along with funeral and testamentary expenses;
• (b) To pay $15,000 to her daughter, Wendy Ann Bennett, with the expressed wish to use the funds to help purchase a motor vehicle, along with an additional $50,000 for her personal use and benefit, and to provide her with the testator’s home contents and personal belongings;
• (c) To grant her sister and brother-in-law $10,000 for their personal use and benefit;
• (d) To allocate $10,000 to her grandson, Aaron Bird (who I believe is the son of the defendant);
• (e) To provide $5,000 to her granddaughter, Jessica Ann Bird (the defendant’s daughter).

The plaintiff in this proceeding, Chloe Angel Fahey (”the plaintiff”), is the deceased’s granddaughter, who turns 21 on 3 January 2023.  

Clause 9 of the deceased’s Will confers benefits to the plaintiff concerning the residuary estate to the defendant as trustee upon separate trusts for the plaintiff and the defendant. The remainder of the deceased estate would be distributed equally between the executor and the plaintiff upon her turning 21.

The Victorian Supreme Court granted the executor Probate of the deceased’s Will on April 30, 2004, and the estimated residual value of the deceased’s estate was around $332,000.

The plaintiff sought information from the executor.

After turning 20 in 2022, the plaintiff tried to contact the executor to ask about the investments made concerning her share of the deceased estate and the trust’s current value. At that time, the plaintiff was unemployed, receiving a Youth Allowance, living in a rental home, and facing considerable financial difficulties.

The plaintiff called the executor three times a week for six weeks at his workplace, sent him emails to both his professional and personal email addresses, texted him, and messaged him through Facebook. However, the executor never replied to any of the plaintiff’s communications.

The plaintiff then hired lawyers who contacted the executor on her behalf. The plaintiff explained that she was undergoing severe financial hardship and urgently needed funds for her housing situation, which was complicating her ability to meet financial obligations. Additionally, she sought updates about how the executor was managing her trust.

The executor failed to respond to the letter, prompting the plaintiff’s lawyers to request the Registrar of Probates exercise discretion under r6.03 of the Supreme Court (Administration and Probate) Rules 2023 to compel the executor to submit an Administration Account to the Probate Office. The executor ignored the Registrar’s requests and any follow-ups from the Probate Office.

The plaintiff subsequently petitioned the Supreme Court of Victoria, requiring the executor to present and verify accounts concerning the management of the deceased estate. Moreover, the plaintiff sought a declaration to dissolve her trust, which required the executor to transfer all trust assets to her immediately. A process server hand-delivered the plaintiff’s application to the executor at his workplace.

In Fahey v Bird VSC 533 [2022], Mukhtar AsJ ruled that the plaintiff had the legal right to dissolve her trust. Thus, she could immediately instruct the executor to pay her the full amount of her beneficial interest, bypassing the requirement that she turn 21. The plaintiff’s request to dissolve the Chloe Fahey Trust is made by what is commonly referred to as the “rule” in Saunders v Vautier (1841) 4 Beav 115; 49 ER 282, which is a rule of law rather than a rule of interpretation. 

The High Court of Australia acknowledged this rule in CPT Custodian v Commissioner of State Revenue (2005) 224 CLR 98. It embodies a “consent principle” that:

“… acknowledges the rights of beneficiaries who are of full legal capacity and collectively have absolute entitlement to the trust property to exercise their property rights to override and nullify the intention of a testator or settlor to impose property under the ongoing trusts, powers, and limitations of a Will or trust document. (2005) 224 CLR 98 at [43].”

CPT Custodian adopted the contemporary version of the rule as follows: 

… an adult beneficiary (or several adult beneficiaries acting together) who possesses (or they collectively possess) an absolute, vested, and indefeasible interest in the principal and income of the property can demand the transfer of the property to him (or them) at any moment and may end any accumulation.

In Beck v. Henley [2014] NSWCA 201, the New South Wales Court of Appeal clarified that:

“… the “rule” can be most accurately characterised as a power granted to the beneficiaries, with a corresponding obligation imposed on the trustees. The exercise of this power does not require the trustees to fulfil any aspect of their role as active trustees; instead, it concludes their role entirely.”

Fahey v Bird VSC 533 [2022] contradicted the terms in the deceased’s Will, which stipulated that the plaintiff must reach that age. Furthermore, the Court directed the executor to provide a detailed account of the management of the deceased estate and Chloe’s trust to the plaintiff’s solicitors by September 22, 2022.

The executor did not comply with these directives; the plaintiff threatened the executor with imprisonment and fines if they ignored the orders. The plaintiff then filed a summons with the Court, and the executor represented himself during the proceedings.

The executor informed the Court that he recognised the seriousness of the allegations and the possible repercussions, including fines and imprisonment, should he continue his non-compliance with the orders.

The executor failed to attend subsequent court hearings, which resulted in a decision to issue a warrant for the Sheriff to arrest him and bring him before the court.

Contempt and Executors

Courts possess the inherent power to punish contempt, regulated by Rule 75.11 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), which allows penalties (including suspended penalties) such as imprisonment, fines, or both.

The Court’s inherent power to punish for contempt is regulated by Rule 75.11 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), allowing penalties such as imprisonment, fines, or both, with provisions for suspension of punishment. 

Courts distinguish between civil contempt, which aims to coerce compliance, and criminal contempt, which punishes deliberate defiance and protects the judicial process. However, this distinction is sometimes blurred, as civil contempt may involve punitive elements. 

Criminal contempt typically results in more severe penalties, including conviction. The Court may consider wilful breaches contumacious if they involve deliberate defiance of court orders. The seriousness of contempt requires penalties to be assessed similarly to criminal conduct, even though the Sentencing Act 1991 does not directly apply.

Although the distinction remains, Witham v Holloway (1995) 183 CLR 52 observed overlap, noting civil contempt often carries punitive elements. Contempt involves interference with the administration of justice, frequently arising from non-compliance with court orders (Grocon case[2014] VSCA 261). Criminal contempt typically results in more severe penalties, including imprisonment.

Contumacious Conduct

Disobedience may escalate to criminal contempt if it is contumacious (deliberate and defiant). Factors include knowledge of the prohibition, obstinate resistance, or direct intention to disobey (Hera Project (No 2) [2019] VSC 625.) Courts consider contempt’s nature, seriousness, and consequences alongside mitigating factors like apologies or contrition (Pelechowski (1999) 198 CLR 435 and R v Hinch (No 2) [2013] VSC 554). Imprisonment is a last resort for civil contempt but appropriate for serious interference with justice.

Executors and Contempt

Executors hold a fiduciary office subject to higher compliance standards with court orders. In Prothonotary v Whit [2023] NSWSC 264, the court emphasised the public trust in executors imposing a suspended prison sentence for serious, prolonged non-compliance. Kunc J highlighted the executor’s dual accountability under civil procedure obligations and fiduciary duties, reflecting the broader public interest in proper estate administration.

Persistent non-compliance, defiance despite warnings, and failure to purge contempt exacerbate the severity of contempt. Courts penalise such conduct to uphold judicial authority and deter similar behaviour. Contempt, whether civil or criminal, undermines justice. Courts evaluate the contemnor’s intent, compliance history, and impact on judicial integrity when determining penalties, particularly for fiduciaries like executors.

On 9 May 2023, the defendant admitted guilt to two charges of contempt (the charges): 

Charge 1 

On 9 September 2022, Associate Justice Mukhtar issued directives (Orders) in the proceedings that required the defendant to provide the plaintiff’s solicitor by 22 September 2022: 

(a) a complete and accurate account of the management of the Estate of Pauline Ann Tyson, who is deceased (the Deceased); and 

(b) a complete and accurate account of the management of the Chloe Fahey Trust. 

2. The defendant failed to deliver to the plaintiff’s solicitor an account of the management of the Estate of the Deceased and/or an account of the management of the Chloe Fahey Trust by 22 September 2022 or at any time thereafter, thereby breaching the Orders. 

Charge 2 

On 6 April 2004 and 22 April 2004 (incorrectly noted as 28 April 2004 in the Affidavit of the Plaintiff affirmed 13 September 2021), the defendant provided a commitment to the Court that he would make and file or ensure that a true and just account of the administration of the Estate of the Deceased would be made and filed in the Court if required by the Court or Registrar (Undertaking). 

The defendant breached the Undertaking by failing, neglecting, and/or refusing to fulfil his commitment by not making and filing, or causing to be made and filed, a true and just account of the administration of the Estate of the Deceased, despite being called upon to do so by the Registrar. 

In Fahey v Bird (No 2) [2023] VSC 540 on September 12, 2023, Moore J considered the executor’s failure to comply with his commitments to the Court. The Court orders indicated willful acts that categorised his contempt as criminal despite his awareness of the violations.

These judgment reasons address the decision regarding what penalty, if any, should be imposed on the defendant for his acknowledged contempt of court.

The executor had asked for and received numerous chances to avert his contempt by submitting the required documentation to the Court but took no action. Coupled with the many court hearings he missed and his lack of justification for these absences, his failures were deemed significant and intentional disregard for judicial authority.

On September 12, 2023, Moore J ordered the executor to serve a four-month prison sentence, suspended for 28 days, granting him one final chance to fulfil his previous obligations.

In Fahey v Bird (No 3)[2024] VSC 148, the Court issued the following directives:

1. The executor has been found guilty of contempt of court for the following reasons:

• (a) In violation of orders issued in this case on 9 September 2022 by Mukhtar AsJ, he failed to deliver to the plaintiff’s solicitor a report on the management of the Estate of the deceased and/or a report on the administration of the Chloe Fahey Trust by 22 September 2022 or at any time thereafter; and
• (b) In contravention of commitments he made to the Court on 6 April 2004 and 22 April 2004, he has not made or submitted, nor facilitated the making or submission of, an accurate and complete account of the management of the Estate of the deceased, even though the Registrar of Probates required him to do so, and sentenced to four months in prison.

2. The imprisonment period specified in paragraph (1) was entirely suspended provided that, by 4:00 PM on 18 October 2023, the executor submits to the Registrar of Probates and the solicitors for the plaintiff:

• (a) an accurate and complete account of the management of the estate of the deceased; and
• (b) an accurate and complete account of the management of the Chloe Fahey Trust.

3. The accounts mentioned in paragraph (2) of this order should be:

• (a) prepared in line with Form 3-6AA of the Supreme Court (Administration and Probate Rules) 2014 and attached to a verification affidavit filed through RedCrest-Probate alongside the original probate application; and
• (b) sent to the plaintiff’s Lawyers via email or delivered directly to their offices.

The defendant is a contemnor who is presently committed to prison. He applied for a discharge from prison under r 75.12 of the Supreme Court (General Civil Procedure) Rules 2015 (the Rules) before the expiry of his term of imprisonment or an order under r 75.11(4) to suspend his sentence and release him from custody.

Fahey v Bird (No 3) [2024] VSC 148

The defendant is serving a sentence of 4 months imprisonment under the following orders made on 12 September 2023. Moore J provided reasons for making the orders in Fahey v Bird (No 2)[2023] VSC 540.

The defendant failed to comply with the condition in paragraph 2 of the orders made on 12 September 2023.   The Court issued a committal warrant for the defendant’s arrest on 26 October 2023.  However, execution of the warrant did not occur until Thursday, 21 March 2024, following which the sheriff placed the defendant in custody at the Melbourne Assessment Prison. 

The defendant’s solicitor filed an affidavit supporting the present application after hours on Friday, 22 March 2024. The defendant’s solicitor deposed that the defendant had taken the following steps to purge his contempt:

In support of his application, the defendant also relied upon an affidavit by his instructing solicitor dated 8 February 2024, filed earlier in the proceeding.

• (a)        On 2 February 2024, the defendant instructed his solicitors to retain a forensic accountant to produce an account of the administration of the deceased’s estate and the Chloe Fahey Trust.  
• (b)       A forensic accountant completed a draft report on 19 March 2024 (two days before the sheriff executed a committal warrant).  The defendant asked his solicitor for a few days to review the accounts more closely.  
• (c)        After his arrest on 22 March 2024, the defendant’s solicitor filed and served an expert report dated 20 March 2024 by Mariano Rossetti, a forensic accountant (the Rossetti report), which purports to be an account of the administration of the deceased’s estate.

The Court heard the defendant’s prison discharge application on Tuesday, March 26, 2024. Senior counsel who appeared for the plaintiff did not oppose the application.   

Senior counsel for the plaintiff also informed the Court that, on a cursory review by his instructing solicitor, the primary source documents by which a forensic accountant prepared the Rossetti report appeared to be reflected correctly in the accounts contained in the Rossetti report.  

Further, assuming the instructions and materials upon which the forensic accountant prepared the Rossetti report were accurate, senior counsel informed the Court that the Rossetti report appeared to account for the funds of the deceased’s estate correctly.  

Given these observations, although the account contained in the Rossetti report was not in the form required by the orders made on 12 September 2023, Moore J proceeded on the basis that the filing and service of the Rossetti report constitutes substantial compliance by the defendant with his obligations in respect of the preparation of accounts.  Consistently with that view, senior counsel for the plaintiff believed that by making an affidavit verifying the contents of the Rossetti report, the defendant would comply with the orders of the Court

Decision

In Fahey v Bird (No 3) [2024] VSC 148, Moore J accepted that the defendant has demonstrated valid grounds to receive leniency concerning the punishment assigned to him by the orders issued on 12 September 2023 and that it serves the interests of justice to release him before completing his prison term. The Court will issue the following orders to allow for his immediate release from custody, conditioned on him verifying through an affidavit the accuracy of the Rossetti report:

1.           Subject to the condition specified in paragraph 2, releases the defendant from his further obligation to undergo imprisonment following paragraph 1 of the order made on 12 September 2023, so he is to be discharged from custody.

2.           Within 14 days, the defendant files with the Registrar of Probates and serves on the plaintiff’s solicitors an affidavit made by him that exhibits the Rosetti report filed on 22 March 2024 and which verifies the truth and accuracy of its contents to the best of his knowledge and belief.

3.           Paragraphs 2 and 3 of the order made on 12 September 2023 are vacated.

4.           Except as provided by paragraph 3 of this order, the order made on 12 September 2023 remains in force. Still, this order will prevail to the extent of any inconsistency.

5.           Liberty to apply.