Case note: Re Estate of Hagendorfer (Injunction) [2024] VSC 482
The Supreme Court of Victoria’s decision in Re Estate of Hagendorfer (Injunction) [2024] VSC 482 (Hagendorfer) highlights the importance for executors and administrators to exercise caution before distributing an estate, having granted an injunction which effectively froze funds distributed early, pending the determination of a claim against the estate.
Beneficiaries of a Will may often expect executors or administrators to make a distribution to them, be it interim or final, within a short time after a Grant of Probate or Letters of Administration is issued. In many cases, the executors and administrators of an estate will themselves be the beneficiaries and anxious to finalise the administration of the estate at the earliest opportunity.
While executors and administrators must act in a timely and efficient manner, they need to be aware that Courts have the jurisdiction to alter the terms of a Will in a way that affects certain beneficiaries’ entitlements. This jurisdiction exists where a person makes a claim for a family provision order, within certain time limits. It poses a risk for any executors and administrators who distribute early.
In Victoria for example, an ‘eligible applicant’ for a family provision order will ordinarily have six months from the date probate is granted within which to contest the Will pursuant to section 99(1) of the Administration and Probate Act 1958 (the Act). In some circumstances, the Court can permit an application to be brought even later.
The Hagendorfer decision should put executors on notice of the risks which can flow from distributions to beneficiaries of a Will in haste, particularly within six months of the date of a grant of probate.
The Hagendorfer case
Tanya Brink (the Plaintiff) was one of four children of Claudio Hagendorfer (the Deceased). The Plaintiff was excluded from the Deceased’s last Will, which left his estate comprising of assets totalling $896,210.27, to the Plaintiff’s two siblings, Natasha Hagendorfer (the Executrix) and Aletta Spinks (the Second Defendant).
Probate of the Deceased’s last Will was granted to the Executrix on 24 March 2023.
The Plaintiff made an application for provision under Part IV of the Act on 18 September 2023 within the requisite 6-month period. However, the Executrix had already taken steps without notice to distribute the estate in full to herself and the Second Defendant by 26 May 2023, both of whom then used the distributions in part to pay down their respective mortgages.
The Executrix argued that the Plaintiff had authorised the early distribution, but the relevant communications occurred prior to a grant of probate and were regarded by the Judge to be an issue for trial.
The Plaintiff applied to Court for a freezing order or interlocutory injunction effectively preventing the Executrix and Second Defendant from selling, transferring or further encumbering their homes until such time as her claim could be properly considered.
The Executrix opposed the Plaintiff’s application arguing the Plaintiff did not have a valid claim against the Deceased’s estate and that there was no risk of assets of either herself or the Second Defendant being dissipated.
The Court’s decision
The Court granted an interlocutory injunction ordering that the Executrix and Second Defendant not sell, dispose of or further encumber their respective properties without the Court’s approval, and that they retain at least $150,000 in equity to satisfy potential claims.
In granting the interlocutory injunction, the Court found that the Plaintiff needed only to demonstrate she had an arguable case against the estate and the named beneficiaries, and that it is not necessary to demonstrate that the claim will be successful as such a finding may not be possible until a full hearing.
The Court found that the Plaintiff did have an arguable case to make a claim against the estate because she made a claim within six months of the date of the grant of probate, was ‘a daughter of the deceased with limited assets who does not own a home, for whom no provision was made out of a reasonably substantial estate, and for whom provision had been made in a prior will’.
The fact that the estate assets had been distributed was not a barrier to the interlocutory injunction being granted. The Court simply made orders effectively freezing an amount in the hands of the persons who received the distribution in order to preserve those funds if needed to meet judgment on the Plaintiff’s claim.
The Court also observed that executors and administrators who distribute early will be personally liable for any loss to a claimant arising from the early distribution. In other words, if funds distributed early could not be preserved through an injunction or otherwise repaid to the estate, the executor or administrator would become personally liable for any judgment. Funds required to be returned to the estate would need also to be returned with interest.
Conclusion
This case supports the position that prudent executors or administrators should as a general rule delay the distributing any part of an estate during the period within which an application for further provision for an estate may be made and is a timely reminder that Courts have the ability to protect estate assets until such time as valid family provision claims are resolved.
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