Executors’ ‘clash’ of conflicts: ‘Should I stay or should I go now?’

19 March 2021

It is not uncommon for an executor of an estate to be conflicted in circumstances where they have, and choose to, prosecute a claim against the estate with which they have been tasked to administer. The authorities suggest that the existence of a conflict alone will not necessarily compel the Court’s exercise of its discretion to remove that executor. In fact, the circumstances of each unique case may show that the removal of a conflicted executor is not always in the best interests of the beneficiaries, and the estate.

The recent case of Connock v Connock1 demonstrates how a Court exercises its discretion when considering removing an executor who is in a potential position of conflict. Ultimately in this case, the Court decided not to exercise its discretion, and it dismissed the application for the executor’s removal. The practical effect of the Court’s decision was to allow the executor to continue in office whilst managing his competing conflicts, on the one hand as executor, and on the other hand as a prosecuting claimant in a related estoppel proceeding against the estate.

The Court’s decision not to remove the executor weighed heavily on a number of considerations which cumulatively determined that it was in the beneficiaries’ best interests for the executor to continue to administer the estate. These are set out below.

The facts

The plaintiff, Barbara Faye Connock (Faye), was the widow of the deceased, Dr Richard Connock. Both had previously married with children from their respective first marriages. The defendant, Richard Connock (Richard), was the executor of Dr Connock’s estate, and one of Dr Connock’s 3 children from his first marriage. Faye’s interest in the estate was limited to the assets of the deceased’s superannuation fund and proceeds from various term deposits and bank accounts. She did not have an interest in the residue of the estate pursuant to the terms of the Will.

Faye brought the proceeding seeking orders for Richard’s removal as executor pursuant to s34(1)(c) of the Administration and Probate Act 1958 (Vic) (Act) on the basis that he was in a position of conflict of interest:

  1. In exercising his duties as executor of the estate;
  2. Whilst prosecuting a claim for personal financial interest in a related estoppel proceeding against the estate; and
  3. As a beneficiary of the estate.

In the estoppel proceeding, Richard sought, amongst other things, a declaration such that the cash component of Faye’s testamentary gift be held on trust for her benefit and maintenance during her lifetime, but for the benefit equally of himself and his siblings upon her death. Richard’s proceeding asserted legal rights which were different to those his father had provided under his Will, since the Will provided Faye with an absolute entitlement to the cash in the relevant bank accounts.

Faye relied on the decision in Monty v Delmo2, where an executor was removed by the Court, in circumstances where he alleged that an amount of money given by him to the deceased during her lifetime was not a gift but rather a loan.

The reasons behind the Court’s decision not to remove the executor

It is well settled law that the Court has power to remove an executor pursuant to s34(1)(c) of the Act where an executor is ‘unfit to act in such office or is incapable of acting therein’. However, the authorities have established that not every conflict of duty and interest will result in the removal of an executor.

In this case, the Court accepted that Richard’s personal interest in the related estoppel proceeding created a conflict in the performance of his duties as executor. However, ultimately the Court reached the conclusion that the cumulative effect of the following particular circumstances did not warrant Richard’s removal:

  1. In contrast to the facts in Monty v Delmo, where the executor would have been called on to decide whether to accept or reject his own personal claim against the estate, Richard had no adjudicative role in respect of the claims made in the related estoppel proceeding. In other words, he did not have the authority to determine the validity of his claims in that proceeding, as that was incumbent upon the Court to make appropriate findings. Therefore, he was not in a position to unilaterally confer the benefit he claimed in the related proceeding. Given that the authority to resolve the estoppel claim was vested in the Court, the Court did not therefore identify any prejudice to Faye as a result of that estoppel proceeding (other than by virtue of it being brought against her). This is particularly so:
    • in circumstances where her bequest under the Will would be preserved irrespective of the outcome of the estoppel proceeding; and
    • if the estoppel proceeding was unsuccessful, then she would presumably be compensated by a costs order anyway.
  2. The other residuary beneficiaries were properly informed about, and supported the bringing and prosecution of Richard’s estoppel proceeding. This was not a case of an executor recklessly embarking upon litigation which put the beneficiaries’ interests at a risk which they opposed;
  3. The related proceeding did not put Faye’s beneficial interest at risk, as it was separate to the residue of the estate and was held on trust by Richard’s solicitors in an interest-bearing account;
  4. The administration of Dr Connock’s estate had been largely finalised, which meant that there was little utility in ordering Richard’s removal at that stage of the estate’s administration, and particularly in circumstances where there had been no other allegations of misconduct or misbehaviour against Richard outside of the conflict of interest claim;
  5. The Court considered that Richard was capable of discharging his duties as executor because he was a qualified barrister and solicitor, and officer of the Court. He also held the office of Ombudsman in the State of Tasmania, which was a role that equipped him well professionally and ethically to recognise and manage potential and actual conflicts of interest;
  6. Richard’s unchallenged evidence was that he had not and would not charge the estate any commission or other fee in the course of his executorship. On the other hand:
    • there was no evidence of either a consenting party to be appointed replacement trustee, nor of the potential costs to the estate upon the appointment of a replacement trustee;
    • the costs of a replacement trustee would inevitably be borne by the residuary beneficiaries, particularly in circumstances where Faye had not made any proposal to contribute towards those costs.
  7. Richard’s removal could result in a multiplicity of proceedings if the beneficiaries subsequently were to bring another action to compel the new executor to bring the estoppel claim against Faye, which would in turn result in costs and delays to the estate and its administration; and
  8. A final matter which the Court weighed against the removal of Richard, was the acknowledgement of the deceased’s testamentary wishes. Richard’s continuation in office as executor was consistent with the deceased’s direction in his Will appointing him as executor.

Please do not hesitate to contact the authors if you would like to discuss what practical options may be available to assist in managing a dispute or prosecuting a claim in a deceased estate matter.

This article was written by Simon Crawford, Partner, and Angela Liaskos, Senior Associate.

1.Connock v Connock (in His Capacity as Executor of the Estate of Connock) [2021] VSC 64. 
2. Monty v Delmo [1996] 1 VR 65.

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