As executor of his mother’s insolvent estate, Quinton Baddeley was ordered to pay legal costs for a relative who had to sue for $363,000 owed. Mr Baddeley wrongly took the view that he could refuse to pay the estate debt, giving priority to other relatives he assumed to be beneficiaries.
Kathleen Baddeley died in 2023. Her estate is divided between her two children, including son Quinton.
During her life, Kathleen received an interest free loan from granddaughter Lisa Blake, enabling her to buy an occupation right in a retirement village. An acknowledgement of debt was signed.
A clause in her will specifically referred to this debt, noting that the retirement village had been directed to pay the licence’s termination balance, due on death, direct to Ms Blake.
Kathleen made partial repayment before her death. After later receiving the contracted termination fee, Ms Blake was still owed $363,000.
The High Court was told Kathleen died insolvent, with an expected shortfall in her estate of about $20,000. There was insufficient to pay her debts in full; primarily the $363,000 still owed her granddaughter.
As executor, son Quinton said priority should be given to his mother’s expressed wishes that each of her seven grandchildren receive $10,000; a total of $70,000. He wanted to make these payments before repaying Ms Blake.
There is no mention in Kathleen’s will of any bequest to grandchildren.
Associate Judge Gardiner said Quinton as executor could not ignore payment of estate debts.
Even if the grandchildren were named as beneficiaries, payment of estate debts came first, she said.
The court was told Quinton claimed his mother’s will allowed him to divert payments with a clause stating: trustees have power to ‘retain any assets … without being liable for any loss caused by their retention.’
This common provision is not an excuse to leave estate creditors in the cold; it serves to protect executors from personal liability for any fall in the market value of estate assets during what can be an extended period of estate administration and winding up.
Blake v. Estate Kathleen Baddeley – High Court (7.08.24)
24.184