No one can handle a deceased person’s assets until probate is granted, and only the executor has that authority. An exception exists for banks, which may allow access to the deceased’s bank accounts to cover funeral costs and court fees.
Upon death, the deceased’s assets are considered under the control of the NSW Trustee and Guardian. However, once probate is granted to the executor, those assets are officially transferred to them. It’s crucial to note that if anyone, even the executor, manages or disposes of the deceased’s assets before probate is granted, they risk being personally liable for related expenses or losses, underscoring the importance of adhering to the legal process and the potential risks involved in deviating from it.
Additionally, suppose an executor permits someone else to interfere with the assets. In that case, they will also be personally accountable, underscoring the weight of the executor’s responsibilities and the need for them to be vigilant in protecting the deceased’s assets. The executor must notify anyone with the power of attorney that the contract ends immediately upon the person’s death.
When an executor misapplies estate assets, equity imposes conditions that can survive a bankruptcy discharge, highlighting the enduring nature of an executor’s intermeddling and the fact that they do not cease to exist with the discharge of bankruptcy. The Full Court’s unanimous judgment in HBSY Pty Ltd v Lewis (No 2) brings these doctrines into sharp relief. It addresses whether an assignee of a discharged bankrupt–beneficiary can insist on receiving their share of an estate, notwithstanding serious breaches of fiduciary duty by the bankrupt in administering those assets.
HBSY Pty Ltd v Lewis (No 2) [2025] FCAFC 44
Marjorie Lewis died on 15 August 2008, leaving her largest asset—a $550,000 gift from the Sir Moses Montefiore Jewish Home—to be shared among her residuary beneficiaries: her brother Allan Lewis and his four sons. Allan and his son Anthony were originally named executors, but both renounced. In January 2009, another son, Geoffrey, secured letters of administration.
Just ten days after Marjorie’s death, Anthony—acting as if he were executor—intercepted the $550,000, depositing it into an investment account he controlled. That company went into liquidation in February 2009, and the estate recovered only one‑fifth of the funds. By April 2009, Anthony was bankrupt, and Geoffrey lodged proof of debt on the estate’s behalf—without success.
In July 2011, Anthony’s bankruptcy trustee sold his interest in the Lewis estate to HBSY. Anthony was discharged in April 2012 and later took ownership of HBSY’s share capital. The central question: Could HBSY, as Anthony’s assignee, claim the full $550,000 share despite Anthony’s earlier misappropriation?
Background
Marjorie Lewis died on 15 August 2008 with an estate that included a $550,000 aged‑care bond—the bulk of her assets.
Residuary beneficiaries: Allan Lewis (Marjorie’s brother) and his four sons, Anthony and Geoffrey, are among them. Allan and Anthony were named executors, but both renounced. Geoffrey later secured letters of administration (Jan 2009).
Anthony’s intermeddling: Ten days after Marjorie’s death, Anthony, without probate, collected the bond cheque in the estate’s name and directed it into Lewis Securities, a company he controlled. That company soon entered liquidation; the estate recovered only one‑fifth of the funds.
Anthony declared bankruptcy in April 2009. Geoffrey lodged a proof of debt but expressly withheld Anthony’s beneficiary share. The Court assigned Anthony’s bankrupt interest to HBSY Pty Ltd, and following discharge, he acquired HBSY. Geoffrey sought a declaration that HBSY could not claim Anthony’s share until Anthony repaid the misapplied amount.
Court Determination
Intermeddling and executor status
Did Anthony’s actions make him an executor de son tort? This legal term refers to a person who acts as an executor without being legally appointed, with all attendant fiduciary liabilities, despite renunciation and absence of probate.
Survival of equitable claims
Were the equitable rights that permitted the estate’s administrator to withhold Anthony’s share “debts provable in bankruptcy” extinguished by his discharge under s 153(1) of the Bankruptcy Act?
Fraudulent breach exception
Did Anthony’s conduct amount to a “fraudulent breach of trust” under s 153(2)(b), thereby accepting his obligation from discharge?
Analysis
Intermeddling = Executor de son tort
The Court reiterated that any significant action to manage an estate without probate constitutes “intermeddling.” In simpler terms, this means that if someone starts handling the affairs of an estate without the proper legal authority, they are considered to be intermeddling.
As an intermeddler, Anthony acquired the liabilities of an executor (including a duty to account). He could not escape them by renouncing probate.
Equitable Rights vs. Bankruptcy Discharge
Section 153(1) releases a bankrupt from “debts provable in the bankruptcy”. Still, it does not touch equitable “conditions” attached to a trustee’s or executor’s entitlement.
In Re Dacre (1916) 1 Ch 344, the Court ruled that if a trustee who stands to benefit from a trust breaches their duties, they cannot take any portion of the trust assets until they’ve repaired that breach. Effectively setting off any shortfall against the share they would otherwise receive (“set-off” refers to a mechanism where one party can use a debt owed to them by another party to partially or fully discharge a debt owed by them to that same party) as if they had already paid the amount of their default.
This same principle applies to interests the trustee acquires indirectly—for example, by buying or inheriting a trust benefit. In such cases, their entitlement remains conditional on properly administering the trust.
If the trustee assigns their beneficial interest to someone else, the assignee steps into no better shoes: the trust share remains subject to the original trustee’s defaults, even if those breaches occur after the assignment. The only exception is where the assignee does not become a trustee until after the assignment – interest can’t be impounded for earlier defaults.
Similarly, Morris v Livie (1842) 62 ER 934 established that defaulting trustee-beneficiaries cannot claim their beneficial entitlement until they have made good their default (established in ).
Drawing on Re Dacre and Morris v Livie, the Court held that a defaulting trustee’s right to share is conditional on making good the breach (“doing equity”), and that condition is not a provable debt.
Because that equitable right arose before Anthony’s discharge, it survived, even though his underlying debts were otherwise discharged.
Fraudulent Breach of Trust Exception
Section 153(2)(b) carves out from discharge any debt “incurred through fraud or fraudulent breach of trust.”
Equity treats serious breaches of fiduciary duty (such as profiting from a conflict) as “fraudulent,” even without common‑law dishonesty.
Anthony’s unilateral diversion of estate funds into his company met this standard, so his liability remained undischarged.
No Waiver or Set‑off
Geoffrey’s proof of debt, which excluded Anthony’s share, did not waive the estate’s equitable claims except to the limited extent pursued in bankruptcy.
Section 86 (set‑off) was inapplicable: a testamentary gift is not a “mutual dealing” for those purposes.
Implications for Succession Practitioners
Probate is not optional. Without it, handling estate assets risks creating an executor de son tort with full fiduciary liabilities.
Equitable conditions endure: Bankruptcy does not cleanse a trustee’s or executor’s unremedied breaches of duty, underscoring the weight and enduring nature of fiduciary responsibilities.
Beware the fraud exception: Diverting estate funds to one’s benefit will almost certainly qualify as a “fraudulent breach of trust,” defeating any discharge.
Conclusion
HBSY Pty Ltd v Lewis (No 2) underscores that equity’s demands of loyalty and good conscience outlive statutory bankruptcy relief. Where an individual—named executor or non-intermeddles and misapplies estate assets, equity will bar any claim to benefit until the wrong is undone. For practitioners, the lesson is clear: proper grants of representation and strict adherence to fiduciary duties are indispensable, lest bankruptcy provides no refuge from equitable accountability.
Takeaway:
When a trustee‑beneficiary misappropriates estate funds, equity may impose a continuing bar on claiming shares until the default is remedied, regardless of bankruptcy discharge. Careful: Renouncing executorship or wiping out debts in bankruptcy won’t necessarily free a wrongdoer from having to “do equity.”
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