The recent decision of Re Chomley [2014] VSC 220 concerned an application by one of three administrators of an estate for permission to make a bid at an auction for the sale of an estate property.

The deceased died without leaving a Will. Letters of Administration were subsequently granted to her three adult children, who were the sole next of kin and were entitled to participate in the equal distribution of the estate. The inventory of assets and liabilities disclosed a gross estate of $1,126,712.18, which was primarily attributed to a property at Glenmaggie estimated at $770,000.

All other matters relating to the distribution of the estate have been agreed by the administrators. However:

  • two of the administrators were interested in purchasing the property and have each made an offer to purchase the property from the estate; and
  • the administrators have been unable to agree on how the property should be dealt with; and
  • the land remained held on trust for sale.

In order to resolve the issue, one of the administrators filed an originating motion seeking orders that the three administrators be directed to sell the property by public auction, and each of them be at liberty to bid at the auction to purchase the property from the estate. At that time, the property had an estimated value of approximately $1,300,000.

The Court accepted that the application of the rule against self-dealing where an executor or administrator cannot purchase from him or herself the property of an estate. However, the Court also accepted that it had the power to grant consent, which should be exercised only in exceptional circumstances.

In this case, the Court considered that:

  • the administrator’s involvement in the sale process is inextricably compromised if he is able to bid at the auction;
  • that conflict can only be resolved if the party wishing to bid and purchase the property was no longer an administrator of the estate and an independent administrator was appointed; and
  • there is no evidence of exceptional circumstances that justify the grant of leave for the administrator to make a bid at the auction.

The Court ordered that the administrators be directed to sell the property by public auction and refused to grant leave to the administrators to bid at the auction.

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