(1924) 30 ALR 260
Lennon v Gibson & Howes Ltd [1919] AC 709
[1998] HCA 28
Quinn v Leathem [1901] AC 495
[1901] UKHL 2
Re Palmer
Source
Original judgment source is linked above.
Catchwords
Yeo v Clemow [1900] 2 Ch 182
In re Lesser(1924) 30 ALR 260
Lennon v Gibson & Howes Ltd [1919] AC 709[1998] HCA 28
Quinn v Leathem [1901] AC 495[1901] UKHL 2
Re PalmerPerpetual Trustee Co Ltd v Palmer (1903) 3 SR (NSW) 141
Re Rosewood Research Pty Ltd (No 2) [2014] NSWSC 1226
Re the Estate of Robbins (Deceased)
Judgment (17 paragraphs)
[1]
Background
The deceased died intestate on 7 May 2014. At the time of his death he was a partner of PriceWaterhouseCoopers. The plaintiff was the deceased's de facto wife. The deceased was survived by four children - two adult children from a former marriage and two minor children from a former de facto relationship.
The deceased's estate consisted, as at 20 June 2017, of the balance in a National Australia Bank (NAB) account (fully off-set against an NAB Business Loan); an entitlement to partnership profits (as at the date of death an amount estimated at $292,455), a loan of $38,300 and personal items estimated at $23,000, together with the proceeds of (or, perhaps more accurately in the case of the Metlife insurance policy, a beneficial interest in the proceeds of) the insurance and superannuation policies the subject of the present application. Those proceeds are a sum of about $700,000 under a Sunsuper superannuation policy which was payable as a death benefit and amounts totalling $3,135,424.69 plus £449.97 from the three insurance policies said to be life insurance policies within the meaning of the Life Insurance Act 1995. The amounts payable under the Abbey Life and TAL policies have already been paid to the estate. The amount payable under the Metlife insurance policy ($2.5 million) has been paid to PricewaterhouseCoopers Nominees (NSW) Pty Ltd (PwC Nominees), the policy in question being a PricewaterhouseCoopers Partners Group Life Plan.
The estate has a number of unsecured liabilities, the most significant of which in monetary terms being the amount owing on the NAB Business Loan (estimated at $849,769.30 plus interest) and tax liabilities (of around $1.2 million, plus general interest charges). Some of those tax liabilities were incurred prior to the deceased's death but by far the bulk of those tax liabilities (estimated by the Commissioner as being in the sum of $983,384.90) is comprised of a sum described in the amended statement of facts as a "post-death" liability. I was informed by Senior Counsel appearing for the Commissioner that the "post death" tax liability (or part of it) arose because an amount of about $780,000 was treated as income generated by a deemed dividend under Division 7A of the Income Tax Assessment Act 1936 (Cth) (referable to certain loans of the deceased on which interest was not paid after his death). In other words, it was said that this was not simply a matter of a notice of assessment issued after death in relation to income earned before death; rather, that a significant proportion of the tax liabilities arises from a notice of assessment issued after the death of the deceased in respect of income earned after his death (see T31-32).
It does not appear to be disputed that the deceased's assets, excluding the superannuation and life insurance proceeds, will be insufficient to meet his unsecured liabilities but that if the proceeds of the Abbey Life, TAL and Metlife policies are not protected from the deceased's creditors (at least in respect of post-death liabilities) then there would be money available to discharge those debts. The Commissioner's position is that the proceeds of the life insurance policies (if each of the three policies in question is properly to be treated as a life insurance policy) should be distributed to creditors (at least those claiming for post-death liabilities).
On 5 May 2015, through their mother as tutor, the deceased's two minor children commenced family provision proceedings under Ch 3 of the Succession Act 2006 (NSW). Agreement has been reached as to the proposed settlement of those proceedings (under which agreement the superannuation and life insurance proceeds are to be paid to the deceased's four children). That settlement has not yet been approved and, having regard to its terms, there is clear potential for it to be affected by the outcome of the present application (since if the Commissioner is correct not all of the life insurance proceeds will be available for the children as contemplated by the proposed settlement of the family provision proceedings).
The plaintiff's application has been served on each of the Australian Taxation Office, NAB, and the deceased's children (or, in the case of his two minor children, their tutor). Only the Commissioner has intervened in the hearing of the application, though a solicitor acting in the family provision proceedings (Mr Dornan) was in attendance at the hearing of this application. No submissions were made by Mr Dornan in relation to the issues the subject of the judicial advice application.
The Commissioner accepts, as is clearly the case, that the proceeds of the deceased's Sunsuper superannuation policy are unavailable to the estate's creditors, not forming a part of the deceased's estate. Therefore the second aspect of the advice sought by the plaintiff is not contested and should be given.
[2]
Relevant provisions of the Life Insurance Act 1995 (Cth)
The Life Insurance Act 1995 relevantly provides:
9 Life policy
(1) Subject to subsection (2), each of the following constitutes a life policy for the purposes of this Act:
(a) a contract of insurance that provides for the payment of money on the death of a person or on the happening of a contingency dependent on the termination or continuance of human life;
(b) a contract of insurance that is subject to payment of premiums for a term dependent on the termination or continuance of human life;
(c) a contract of insurance that provides for the payment of an annuity for a term dependent on the continuance of human life;
(d) a contract that provides for the payment of an annuity for a term not dependent on the continuance of human life but exceeding the term prescribed by the regulations for the purposes of this paragraph;
(e) a continuous disability policy;
(f) a contract (whether or not it is a contract of insurance) that constitutes an investment account contract;
(g) a contract (whether or not it is a contract of insurance) that constitutes an investment‑linked contract.
(2) A contract that provides for the payment of money on the death of a person is not a life policy if:
(a) by the terms of the contract, the duration of the contract is to be not more than one year; and
(b) payment is only to be made in the event of:
(i) death by accident; or
(ii) death resulting from a specified sickness.
204 Protection of interest of insured
(1) The rights and interests of a person under:
(a) a life policy effected on his or her life; or
(b) a life policy effected on the life of the person's spouse or de facto partner;
are not liable to be applied or made available by any judgment, order or process of a court in discharge of a debt owed by the person.
(2) Subsection (1) applies:
(a) regardless of when a policy was issued; and
(b) in the case of a policy referred to in paragraph (1)(a) - whether or not the policy is owned by the person.
(3) This section has effect subject to the Bankruptcy Act 1966.
205 Protection of policy money on person's death
(1) If, on the death of a person, money becomes payable to the person's estate under a policy effected on the person's life, the following provisions apply:
(a) except as permitted by paragraph (b), the money is not liable to be applied or made available:
(i) under any judgment, order or process of a court; or
(ii) in any other manner whatsoever;
in payment of the person's debts;
(b) the money may be applied in payment of a debt of the person if:
(i) the person had entered into a contract that provided expressly for the money to be so applied; or
(ii) the person had charged the money with the payment of the debt; or
(iii) the person gave an express direction, in his or her will or other testamentary document signed by the person, that the money be so applied;
(c) none of the following constitutes an express direction for the purposes of subparagraph (b)(iii):
(i) a mere direction that debts be paid;
(ii) a charge of debts on the whole or a part of the person's estate;
(iii) the creation of a trust for the payment of debts.
(2) This section has effect regardless of when a policy was issued.
(3) This section has effect subject to the Bankruptcy Act 1966.
[3]
Submissions
The plaintiff submits that the relevant effect of s 205(1) is that money payable under a life insurance policy is not liable to be applied or made available in payment of the person's debts, including debts to the Crown, whenever those debts were incurred.
Although the Privy Council held in Attorney-General (NSW) v Curator of Intestate Estates [1907] AC 519 that s 4 of the former Life, Fire and Marine Insurance Act 1902 (NSW), a predecessor to s 205(1), did not bind the Crown, the Commissioner does not dispute that s 205(1) now binds the Crown. The Commissioner nonetheless submits that the proceeds of the TAL, Abbey Life and Metlife policies are liable to be applied to the deceased's tax debts for one or both of two main reasons, to which I will shortly turn.
First, however, I should note as a preliminary point that neither of the TAL and Abbey Life policies was in evidence on the present application and there was thus no evidence of the terms of either policy.
In that regard there were copies in evidence of two statutory declarations made by the plaintiff: one, in relation to the claim made in respect of the TAL policy, in which she states that the TAL policy was lost or destroyed and declares that she, as administrator, is "the person legally entitled to claim the proceeds of [the specified policy] on the life of Patrick John David McKeon"; and the other, in relation to the claim made in respect of the Abbey Life policy, in which she declares that she is "the person legally entitled to a Grant of Representation Certificate of Confirmation to the deceased's estate". The latter declaration identifies a policy number and identifies the assured life as being that of the deceased. The plaintiff submits that the fact of payments made to the estate under each of the TAL and Abbey Life policies supports the view that the policies engaged both s 204 and s 205 of the Life Insurance Act 1995, as being policies "on the life of" the deceased.
The Commissioner submits that it is not enough to know that TAL and Abbey Life have paid money to the estate; and argues that there must be evidence that the terms of the policy provided that on the death of the assured the money became "payable to the person's estate" (T 25.22).
In that regard, it is relevant to note that s 63(4) of the Trustee Act has the effect that there is no need for an applicant for judicial advice to adduce evidence; rather, it suffices, to attract the protection of s 63, that the applicant has stated the facts correctly to the Court. Conversely, an applicant is not protected if the relevant facts are not correctly stated to the Court.
In the present case there is at least an available inference, from the fact that moneys were claimed (and paid) under an insurance policy from a life insurance company on the event of a person's death, that the TAL and Abbey Life proceeds are moneys payable under a policy effected on the deceased's life.
Assuming that those policies were indeed policies effected on the deceased's life, such that under those policies moneys became payable in the event of his death, then the plaintiff would be justified in treating the proceeds received from the claims made under those policies as being protected by s 205 of the Life Insurance Act 1995 (subject to the discussion below as to the scope of that protection).
A second preliminary issue (before turning to the reasons advanced by the Commissioner for the construction of s 205 for which he contends) is as to whether (as the plaintiff submitted at the hearing) the Metlife policy death benefit is protected by both s 204 and s 205 of the Life Insurance Act 1995. There is no dispute that the Metlife policy falls within the definition of a "life policy" in s 9 of the Life Insurance Act 1995. Accordingly, the plaintiff submits, s 204 is engaged (even though the policy is owned by PwC Nominees) and hence the Metlife funds are protected under s 204 from "any judgment, order or process of a court in discharge of a debt owed by the person".
The Commissioner submits that s 204 deals with the rights and interests of a person while that person is alive in respect of a life policy whereas s 205 is the protection given to the proceeds of a life policy after the person's death. The plaintiff, however, submits that s 204 has application both before and after the deceased's death; it is said that "s 204 covers both life and death whereas s 205 only covers death" and that the sections "do very different work" (T 38).
As framed, the advice sought by the plaintiff did not encompass the potential application of s 204 of the Life Insurance Act 1995 and it is fair I think to say that I did not have the benefit of any particularly considered argument on that point. Suffice it to say that I accept the Commissioner's submission that the relevant section of potential application in the present case is s 205, which directly addresses the position applicable on the death of the person (as opposed to s 204, which in its terms appears more apt to apply to the protection of the rights and interests of the insured under life insurance policies whilst the insured is still alive).
Finally, by way of preliminary comment, I accept the plaintiff's contention that the phrase "a policy effected on the person's life" in s 205(1) of the Life Insurance Act 1995 covers policies taken out by or owned by persons other than the deceased, even though reference to such policies is not expressly included in the section (cf s 204(2)(b)). There is nothing in s 205(1) of the Life Insurance Act 1995 to require that the policy be one that was effected by or in the name of the person in question and I see no reason to read that into the section (particularly since the two sections have a different sphere of operation).
I turn now to the two main reasons one or both of which is advanced for the Commissioner as to why one or more of the three insurance policies in question are not protected from the deceased's creditors (at least in relation to post-death debts).
[4]
First issue - "payable to the person's estate"
First, the Commissioner submits that s 205(1) is not engaged where the money is payable in any other manner.
The Commissioner points to the terms of the Metlife policy, cl 6.1 of which provides that when a PwC partner covered by the Metlife policy dies the insurer is obliged to pay a death benefit to the "Policy Owner". The First Schedule to the Metlife policy identifies the Policy Owner as PwC Nominees. The definition of Policy Owner provides that the Policy Owner acts as sole trustee for the insured partners, each of whom owns his or her own insurance cover. Similarly, cl 15 of the Metlife policy provides that:
15.1 All benefits paid in respect of a Covered Person shall be paid to the Policy Owner (or a person nominated by the Policy Owner) who will hold the monies in trust for the benefit of that Covered Person and when applicable, in accordance with the terms of any Trust Deed.
15.2 All benefits will be payable in the manner set out in the Policy Schedule.
There is no evidence as to whether there is an applicable trust deed for the purposes of cl 15.1. The plaintiff and Commissioner have indicated that they are unaware of any such deed. However, as pointed out by the plaintiff (T 37.4), an applicant for judicial advice is bound to give all information relevant to the application to the Court lest the protection of s 63 be lost, or, as the Commissioner put it (T 23.50), the Court's advice can be qualified by reference to an assumption that there is no such deed.
The amount of the death benefit, is specified in the First Schedule, cl 7 of which provides:
7. How benefits are payable
Subject to the provisions of this Policy, when our claim requirements have been satisfied in respect of a Covered Person the benefit shall be paid as a lump sum payment to the Policy Owner.
An extract tendered from the firm's partner handbook indicates that partners are automatically insured under the Metlife policy and that premiums payable in respect of that policy are deducted from each partner's profit draw.
The Commissioner submits that since the Metlife policy obliges the insurer to pay the death benefit not to the deceased's estate but to PwC Nominees, albeit as trustee for the deceased's estate, the money did not become payable to the estate upon the death of the deceased and therefore does not fall within the terms of s 205 of the Life Insurance Act 1995.
The plaintiff, however, emphasises that although the policy is owned by PwC Nominees, the moneys payable are to be held "in trust for the benefit of that Covered Person" (i.e., the deceased). The plaintiff submits that (in the absence of any applicable trust deed for the purposes of cl 15 of the Metlife policy) the funds paid out under that policy are held by PwC Nominees on a bare trust (it having no active duties except to pay those funds to the estate of the deceased). Accordingly, it is said that the funds became payable to the estate upon the death of the deceased because the policy was effected upon the life of the deceased and, upon his death, the moneys became payable to his estate, albeit through the conduit of PwC Nominees as policy owner and bare trustee.
The plaintiff concedes that the circumstances may have been different if the policy owner had any kind of discretion in relation to the payment of the moneys received under the Metlife policy but in the present case (and contrary to the advice apparently communicated initially by PwC in response to an enquiry made of that firm) the plaintiff says there is no such discretion. Hence it is argued that the proceeds are protected by both s 204 and s 205 of the Life Insurance Act 1995.
[5]
Second issue - "of the person's debts"
The second issue raised by the Commissioner goes to the scope of the protection conferred by s 205 of the Life Insurance Act 1995. The Commissioner submits that s 205 of the Life Insurance Act 1995 only provides that proceeds of a policy effected on a person's life are not liable to be applied or made available in payment "of the person's debts"; and does not apply to debts incurred after the death of the person. In particular, the Commissioner submits that funeral and testamentary expenses, post-death tax liabilities and legal costs incurred by the administrator are not "the person's debts" and that the life insurance proceeds the subject of these proceedings (if they be life insurance proceeds) are liable to be applied to those debts.
The Commissioner refers to analogues of ss 204 and 205 in the Companies Act 1915 (Vic) and Companies Act 1928 (Vic), in which the phrase "his debts" was confined to debts incurred in the life of the deceased (In the Will of O'Brien (deceased) [1924] VLR 262 at 268; (1924) 30 ALR 260 at 262; In re Wertheim [1934] VLR 321 at 332), and to a similar construction placed on s 92 of the Life Insurance Act 1945 (Cth) (namely that it only prevented policy proceeds from being liable to be applied to debts that were incurred in the life of the deceased - see White v Commissioner of Stamp Duties [1968] Qd R 140).
The plaintiff, however, submits that s 205 protects benefits paid under life insurance policies from being applied even to debts incurred after the death of the deceased. She submits that the Commissioner's construction of the section does not accord with its purpose of protecting policy proceeds for the deceased's beneficiaries. It is said that the prima facie protection afforded by s 205 extends to all debts which are payable out of the estate. The plaintiff also points to the fact that Sch 3 of the Probate and Administration Act 1898 (NSW) requires the administrator to pay pre- and post-death liabilities of an insolvent estate and contends that the words "the person's debts" should not be confined to pre-death debts.
The plaintiff argues that in none of the cases cited by the Commissioner has s 205 of the Life Insurance Act 1995 been considered and submits that in those circumstances the Court should come to its own conclusion as to whether "the person's debts" include post-death tax liabilities. The plaintiff seeks to explain the ratio of the cases relied upon by the Commissioner as being that the historical analogues of s 205 do not protect life policy proceeds from being liable to be applied to debts incurred by an administrator or executor or another person (not the deceased estate). The plaintiff argues that the tax debts in this case are distinguishable because they have a "direct line to the deceased" in that they are incurred on his income and his loan (T 35.8).
The plaintiff notes that s 204 provides protection for the "rights and interests of the insured", while s 205, even more broadly, provides "protection of policy moneys". She submits that the clear purpose of each of the sections is to protect life insurance proceeds from creditors and, presumably (taking into account the predecessors of the section) to provide security for the family of the deceased. In those circumstances, it is submitted that the sections should be construed broadly and with that purpose in mind.
[6]
First issue
As to the first of the two issues, this arises only in relation to the Metlife policy. The question is whether the Metlife policy's death benefit was "payable to the person's estate under a policy effected on the person's life" (Life Insurance Act 1995, s 205(1)).
In my opinion, if a life insurance policy obliges the insurer to settle the death benefit on a bare trust for a person who is by then deceased, then the proceeds are proceeds that become "payable to the person's estate" "under" a policy effected on the person's life within the meaning of s 205 of the Life Insurance Act 1995. In the present case, in the absence of any applicable trust deed for the purposes of cl 15 of the Metlife policy, the administrator of the estate would have an immediate right to call for the money from PwC Nominees, which is holding the funds as trustee for the "Covered Person". Section 205 does not in terms require that the moneys be payable by the insurer directly to the deceased's estate. All it requires is that the moneys "become payable" to the person's estate under the terms of the policy. In this case the policy stipulates that the proceeds are payable to PwC Nominees "in trust for the benefit of" the Covered Person.
The purpose of construing the text of a statute is to ascertain therefrom the intention of the enacting Parliament (Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 374-375; [1998] HCA 28 at [41]). It seems clear that the Commonwealth Parliament's intention in including the words "payable to the person's estate" was that the protection under s 205 was not to apply to policies effected on the deceased's life but enuring to the benefit of a third party. This is not such a policy. The terms and scheme of the legislation also disclose a purpose to protect life policy proceeds from creditors. The interpretation I consider should be given to s 205 would best achieve that purpose and must therefore be preferred (Acts Interpretation Act 1901 (Cth), s 15AA).
[7]
Second issue
By way of introduction to the determination of this second issue, it was not disputed that ss 204 and 205 of the Life Insurance Act 1995 are to be construed in accordance with the general principles of statutory construction. As was said by the plurality in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 46-47; [2009] HCA 41:
… the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy. [footnotes omitted]
The principal object of the Life Insurance Act 1995 is said in 3(1) to be "to protect the interests of the owners and prospective owners of life insurance policies in a manner consistent with the continued development of a viable, competitive and innovative life insurance industry".
The relevant question for present purposes is as to the meaning of "the person's debts" in s 205(1)(a) of the Life Insurance Act 1995. As the answer to that question is not readily apparent on the face of the Act, both parties sought to make reference to materials outside the statute. In Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 248 CLR 378 at 412; [2012] HCA 56 Kiefel J (as her Honour then was) said in relation to extrinsic materials generally:
It is legitimate to resort to materials outside the statute, but it is necessary to bear in mind the purpose of doing so and the process of construction to which it is directed. That purpose is, generally speaking, to identify the policy of the statute in order to better understand the language and intended operation of the statute. An understanding of legislative policy by these means does not provide a warrant for departing from the process of statutory construction and attributing a wider operation to a statute than its language and evident operation permit.
In the present case, the materials outside the Act to which reference was principally sought to be made were two cases dealing with an earlier Victorian Act (O'Brien and Wertheim) and one case considering an earlier Commonwealth Act (White). Subsequent research in chambers after judgment was reserved unearthed a number of other statutes which may fairly be seen as precursors to the current Act as well as some case law discussing those statutes. Taken together, although these materials do not put the matter beyond doubt, they reveal a line of authority relevant to the resolution of the present question. (In circumstances where the conclusion I have reached draws heavily on the authorities to which reference was made at the hearing, I did not see the need to invite further submissions on the discussion that follows.)
As was said in Lennon v Gibson & Howes Ltd [1919] AC 709; [1919] UKPCHCA 2 by Lord Shaw in delivering the judgment of the Privy Council in an appeal from the High Court of Australia (at 711-712):
In the absence of any context indicating a contrary intention, it may be presumed that the Legislature intended to attach the same meaning to the same words when used in a subsequent statute in a similar connection.
It has been said that whether statutes are in pari materia is determined on a case by case basis (Wilson v Transport Accident Commission [2017] VSC 209 at [27], referring to DC Pearce and RS Geddes, Statutory Interpretation in Australia (8th ed, 2014, LexisNexis) 128-9 [3.36]-[3.37]).
Statutes affording protection in respect of policies of life insurance were enacted in the colony of NSW from the mid-1850s, a development later followed in Tasmania (in 1866), Victoria (in 1873), Queensland (in 1879), South Australia (in 1882) and Western Australia (in 1887) (AC Gray, Life Insurance in Australia: An Historical and Descriptive Account (McCarron Bird, 1977) at 62-63).
Some key legislative enactments preceding the Life Insurance Act 1945 (the immediate predecessor to the Life Insurance Act 1995) include the Life, Fire and Marine Insurance Act ss 4-7; the Companies Act 1938 (Vic) s 554; the Life Assurance Companies Acts 1901-1934 (Qld) s 18; the Life Assurance Companies Act 1936-1941 (SA) s 7; the Life Assurance Companies Act 1889 (WA) s 33; the Life Assurance Companies Act 1885 (Tas); and the Policies Protection Act 1887 (SA) ss 3-5. Wickens (PC Wickens, The Law of Life Insurance in Australia (Lawbook Company, 1979) at 96) notes that:
In so far as these [legislative provisions] protected policies upon their owners' bankruptcy they were replaced, as from 1st August, 1928, by the provisions of Commonwealth bankruptcy legislation; for the protection afforded by them against creditors in circumstances other than bankruptcy there was from, 20th June, 1946 substituted that given by the Life Insurance Act [1945 (Cth)].
Before considering the Commonwealth legislation, it is instructive to consider the operation and effect given to the earlier legislation by state courts.
[8]
State legislation - Western Australian
In Anderson v Egan (1905) 3 CLR 269, the High Court considered s 33 of the Life Insurance Companies Act 1889. That section relevantly provided that:
The property and interest of every policy-holder in any policy or policies, or in the moneys payable under or in respect of such policy or policies … shall be exempt from liability to any law now or hereafter in force relating to bankruptcy or insolvency, or from liability to be seized or levied upon by the process of any Court whatsoever. … Provided also, that the protection hereby afforded shall … accrue … in the case of a life assurance, for the benefit of the personal representatives only of the policy-holder, and in no case for any assignee of the policy-holder … [my emphasis]
In Anderson v Egan, the administrator of an estate (which consisted solely of £1253 3s 2d, an amount payable to the legal representatives of the deceased under a policy of assurance) relied upon s 33 in response to a claim by a creditor owed £420 13s 2d. The High Court held that the proceeds were protected in the hands of an executor or administrator, whether or not the executor or administrator was also the next-of-kin of the deceased. For present purposes, the relevance of Anderson is simply that the High Court had regard to the interpretation of similar provisions throughout Australia (see, e.g., at 275: "Reference to previous Australian legislation on the subject makes, to my mind, this conclusion quite clear") but nevertheless affirmed the need to construe the provisions on their own terms (see, e.g., 277-279).
[9]
State legislation - New South Wales
The earliest NSW Act appears to be the Australian Mutual Provident Society Act 1857 (NSW). Section 14 of the Act relevantly provided as follows:
14. The property and interest of every member or of his personal representatives in any policy or contract made or entered into bona fide for the benefit of such member or his personal representatives or in the moneys payable under or in respect of such policy or contract (including every sum payable by way of bonus or profit) shall be exempt from liability to any law now or hereafter in force relating to bankruptcy or insolvency or to be seized or levied upon by the process of any Court whatever. …
As Griffith CJ explained (at 276) in Anderson v Egan, the protection afforded by this Act was limited to members of the Australian Mutual Provident Society. A more general statute was passed in 1862 (see the Life Assurance Encouragement Act 1862 (NSW), s 2), though the relevant provisions were essentially identical. The preamble read, "[w]hereas it is expedient to encourage and protect Life Insurances and other like provident arrangements for the benefit of insurers their wives and families." Although it was described as "statesmanlike and clear", Manning J remarked that the Act was "ill-drawn" (In the Estate of Adams (1894) 15 LR (NSW) B & P 135 at 144; 149).
When the Act came before Simpson CJ in Eq for consideration in Re Palmer; Perpetual Trustee Co Ltd v Palmer (1903) 3 SR (NSW) 141, his Honour acknowledged (at 142) that the scheme was "sufficiently clear" but considered the Act "not easy to construe", even remarking at the conclusion of his judgment that he would "be glad if the parties could see their way to take the opinion of a higher Court on the matter" (at 146).
The issues agitating the court in Adams and Palmer were different to the question now arising for consideration, but both highlight that notwithstanding the clear policy underlying statutes which propose to protect the proceeds of life insurance policies, courts have long found it difficult to discern the precise ambit of the protection envisioned by the legislature.
In 1902, the Life, Fire and Marine Insurance Act was passed. Section 4 of that Act provided as follows:
The property and interest of every person who has effected, or shall hereafter effect, any policy for an insurance bona fide upon the life of himself or any other person in whose life he is interested, or for any future endowment for himself or any other such person, and the property and interest of the personal representatives of himself or such other person in such policy, or in the moneys payable thereunder or in respect thereof, and in the contributions made towards the same, shall be exempt from any law now or hereafter in force relating to insolvency or bankruptcy, or from being seized or levied upon by or under the process of any Court whatever. [my emphasis]
In In the Estate of Mattson (1906) 6 SR (NSW) 11, the deceased, an insane patient, had been maintained out of funds belonging to the consolidated revenue of the State. This gave rise to a debt. A petition by the Attorney-General brought against the Curator of Intestate Estates in respect of this Crown debt was resisted on the basis of s 4 of the Life, Fire and Marine Insurance Act. Walker J dismissed the petition on the basis that policies of insurance within the provisions of that Act were equally exempt from the claim of the Crown in respect of the Crown debt as they are in respect of debts due to ordinary creditors (see 13). The Court of Appeal affirmed his Honour's judgment and held that the Life, Fire and Marine Insurance Act bound the Crown (cf Attorney-General (NSW) v Curator of Intestate Estates [1907] AC 519). Darley CJ said the following (at 15):
[The High Court in Anderson v Egan (1905) 3 CLR 269] held that the money under the policy was exempt from liability to be applied in payment of the testator's debts and was not assets in the administrator's hands for the payment of debts.
In this case no doubt there was no will, but I cannot see that that makes any difference. I am of opinion that the Act makes the money in all cases exempt and that the curator as being the "personal representative" of the assured, holds this money exempt from all debts Crown or otherwise, and for the benefit of the next of kin. [my emphasis]
Despite the width of the words "in the administrator's hands for the payment of debts" and "all debts Crown or otherwise", this passage, read in context, does not shed any light on the present issue of construction. In Mattson, the debt, though due to the Crown, was clearly one arising in the course of the deceased's life. In any event, although s 4 of the Life, Fire and Marine Insurance Act is certainly one manifestation of the species of legislation under consideration (Palmer v The Public Trustee (1916) 21 CLR 645 at 665), like other enactments of the period, it contains no reference to the payment of an insured's "debts" and its present relevance is therefore limited. The Victorian legislation, to which I now turn, stands in a different category.
[10]
State legislation - Victoria
In Davey v Pein; Colonial Mutual Life Assurance Society v Davey [1883] 9 VLR 169, two cases were heard by the Full Court of the Supreme Court of Victoria which required consideration of the Life Assurance Companies Act 1873 (Vic). Section 37 of that Act provided as follows:
The property and interest of any person to the extent of One thousand pounds in the whole in any policy or policies of assurance on his own life shall not be subject to be seized or taken in execution under the process of any Court, and in the event of the insolvency of such person shall not vest in the assignee or trustee of his estate unless such insolvency occurs within two years after the date of the policy, and on the death of such person shall not be assets for the payment of his debts; but if he die within two years after the date of the policy a portion of the sum assured equal to the amount of premiums actually paid shall be assets for the payment of his debts. … [my emphasis]
Higinbotham J (as his Honour then was), with whom Cope J agreed, commenced his judgment with a general consideration of the Act (at 462-463):
The general policy of the Legislature in passing [s 37 of the Life Assurance Companies Act 1873 (Vic)] was to encourage persons to adopt the prudent practice [of] insuring their lives either for their own benefit or that of others. The terms of the section were copied from an Act of the New South Wales Legislature incorporating the Australian Mutual Provident Society. …
The general purport of the Act being to encourage, the prudent practice of a man insuring his life, how is it carried out? The section contemplates three events, any one of which may happen to any man. Any man may have the misfortune to have his property seized at the suit of a creditor to satisfy a judgment, or he may become insolvent, in which case his property will vest in his assignee or trustee, or he may die encumbered with debts; and the enumeration of those three occurrences points to the different ways in which the encouragement to insurance is to be given. …
The probable intention was … to afford encouragement in divers ways by appeals both to the interests of the individual himself and also to his natural and proper regard to the care and interests of his family. [my emphasis]
Pausing there, Higinbotham J's reference to an individual dying "encumbered with debts" may be significant. On one reading the remark may be taken as attributing to the legislature an intention to confine the statutory protection to debts that the individual has incurred as at the time of his or her death, on the footing that those debts are the ones which an individual is "encumbered by" at death. Higinbotham J then considered how the object of the Act was to be carried out (at 463):
How is that object carried out? What is the encouragement given in the section? The section extends its protection over the property and interest which exists at the time when anyone or another of the events contemplated by it occurred. It is the property of the execution debtor which he then has which is liable to be seized in execution at the instance of a creditor. It is the property of an insolvent which he then has which vests in an assignee or trustee on the sequestration of his estate, and lastly, it is the property of an intestate or a testator which belongs to him at the time of his death, which becomes assets in the hands of his representatives, and liable for payment of his debts. And this section declares that that property existing in him at the time any of those three events occurs shall be protected to a certain amount. [my emphasis]
His Honour emphasised the circumstances as existing at the date of death. In this passage his Honour refers to property "which belongs to [the deceased] at the time of his death" (my emphasis) immediately before a reference to the payment "of his debts", and subsequently to property "existing in him at the time" (my emphasis). However, one should also bear in mind his Honour's explicit acknowledgment (at 463) of the likelihood that the legislature had intended to appeal to both the interest of the insured, as well as to his "natural and proper regard to the care and interests of his family". In other words, the temporal emphasis in this passage upon the circumstances of the deceased (that is, his assets and liabilities) must be read in its context; a context which involved the acknowledgment of the beneficial nature of the legislation
Higinbotham J then considered the operation of the section (at 464):
How is it to be protected? The language of the section is remarkable. It is negative. It does not say that the property and interest of the assured … shall become assets for payment of his debts, subject to a claim for a certain amount. The language is negative. It says that the property and interest shall not … be assets for the payment of his debts, except in certain cases. I understand those words to mean that [the policy proceeds] shall not be assets for the payment of his debts to a certain extent, to the extent I think of 1000l. in the whole. It would follow from that, that till the policy or policies attain to the value of more than 1000l. … a creditor in case of the death of the debtor, [cannot] acquire any interest at all in them, or have anything to do with them; they are prohibited from interfering with the policy or policies unless and until they have reached a particular value, which is to be ascertained if necessary at the time of the occurrence of anyone of the three events named in the section. …
… till the value of that property and interest is shown to exceed 1000l., neither the execution creditor nor the assignee in insolvency, nor the creditor at the assured's death, has any interest or right whatsoever in the policy or policies. [my emphasis]
The reference to "the creditor at the assured's death" (my emphasis) may be taken as suggesting that the protection is confined to debts incurred during the lifetime of the deceased. Nonetheless, I do not consider that these passages from Davey v Pein significantly advance the resolution of the question as to the interpretation of "his debts" in the Life Assurance Encouragement Act 1873 (and, by extension, "the person's debts" in s 205 of the Life Insurance Act 1995).
In Allen v Edmonds [1886] 12 VLR 789, the Court considered the position of a deceased who had in 1879 effected a policy of insurance on her life for a specified sum. She died in 1885. Prior to her death, her husband, Mr Edmonds, had become insolvent and in July 1886 the trustee of his estate assigned for value to another all the real and personal estate devised or bequeathed to Mr Edmonds under the deceased's will (at 791). A question arose as to who was entitled to the proceeds of the life insurance policy that had been received by the executors. Webb J referred to Davey v Pein and deduced from the opinions in that case that (at 792):
… whilst the Act only negatively provides that the policy shall not be capable of being taken in execution, shall not pass to the assignee for the payment of his debts after his death, the dominion over the policy is left with the assured, who may dispose of it either during his life, or by his Will. With this principle I entirely concur, for I can see nothing in the Act to raise any trust for, or beneficial interest in, the family or next of kin of the assured. Primarily, the assured, and he alone, is entitled to the policy. The Act saying it shall not be available to his creditors, in no way restricts, but rather enlarges, his interest in the policy. Before the Act it was his, subject to a liability to be applied in satisfaction of his debts. After the Act it remains his, but relieved of that liability. Therefore, in this case, the 300l. policy money forms a portion of the estate of [Mrs Edmonds], subject to the dispositions of her Will, but not liable to the payment of her debts unless made so by her Will; for it necessarily follows from the views I have expressed that a testator having the dominion over the sum assured may, if he please, make it liable to the payment of his debts. [my emphasis]
This passage accords with the view that a liberal construction was to be given to the Act. In respect of Mrs Edmonds' funeral and testamentary expenses, his Honour said (at 792):
In this case the testatrix has directed her funeral and testamentary expenses to be paid out of her estate. This policy money formed part of her estate. Her debts could only be paid out of that portion of her estate which constituted assets for payment of her debts. By express legislation this policy money did not constitute such assets, but her funeral and testamentary expenses were, by the express terms of her Will, payable out of her estate including the policy money. [my emphasis]
Webb J appears to have been of the view that, absent the express direction by the deceased, funeral and testamentary expenses may have been protected by the Life Assurance Companies Act 1873. However, his Honour went on (at 793) to state that:
I am now dealing with the express terms of this Will. But I am far from saying that the same result would not follow in every case; sec. 37 only providing that the policy money shall not be assets for the payment of debts, but possibly leaving it assets for the payment of funeral and testamentary expenses. [my emphasis]
In respect of the executor's costs, charges and expenses, his Honour held that the executor could have resort to the policy money (at 793). In any event, Allen v Edmonds does not in terms limit the protection afforded by s 37 of the Life Assurance Companies Act 1873 to the debts incurred during the lifetime of the deceased and accordingly does little to advance the present discussion.
However, the case of O'Brien does appear to take the matter further. That case involved consideration by Cussen ACJ of s 476 of the Companies Act 1915 (Vic) which provided, relevantly, as follows:
(1) The property and interest of any person in any policy or policies of assurance on his own life shall not to the extent of One thousand pounds of the sum assured be rendered available for payment of his debts either in process of execution or in insolvency except as hereinafter provided.
(2) On the insolvency of any such person any policy or policies dated less than two years before such insolvency shall notwithstanding the provisions of sub-section (1) be available in the hands of the assignee or trustee for payment of his debts provided that the insolvent or any person thereto authorized in writing by him shall within three months from the date of his insolvency be entitled to purchase from the said assignee or trustee such property and interest to the said extent, and the amount of purchase money shall not exceed the amount of the premiums actually paid on such policy or policies in respect of the property and interest so purchased ; and if the insolvent or any such person so purchases such property and interest under the power hereby given, such property and interest shall not thereafter be available in the hands of the assignee or trustee nor form part of the insolvent estate.
(3) Notwithstanding anything contained in his will or any codicil thereto, on the death of any person the property and interest of such person in any policy or policies of assurance on his life maturing only at his death shall not be assets for the payment of his debts except those (if any) for the payment of which he in such will or codicil declares an intention to make such property and interest assets by words expressly referring to such policy or policies and expressly negativing the provisions of this section; but if he dies within four years after the date of any policy a portion of the sum paid under such policy equal to the amount of premiums actually paid in respect of so much of the sum assured as exceeds One thousand pounds shall be assets for the payment of his debts.
[my emphasis]
In O'Brien, the testator had died on 8 January 1923 leaving a will in respect of which probate was granted to Messrs Patrick Raftis and Josephine Raftis (the plaintiffs). The will contained no directions as to the payment of the testator's debts, funeral or testamentary expenses, or as to the payment of probate duty (at 263). At the time of his death the testator's debts included an overdraft on his current account at the English, Scottish and Australian Bank Ltd (secured by certain preference shares, then held by the bank) (at 264). His estate included (in addition to realty specifically devised, certain shares, certain furniture and effects and other personal property) two life policies maturing only at death, the sum assured in each case being under one thousand pounds (at 263-264). By summons, the plaintiffs asked, inter alia (at 264):
3. Out of what portion or portions of the estate of the testator and in what proportions and in what order in relation thereto should the testator's debts and the funeral and testamentary expenses be provided for?
In particular,
(a) What property is included in the residuary estate of the testator?
(b) Is the bequest in the said will to the testator's wife … of all the testator's life policies furniture effects specific or residuary?
(c) Should the funeral and testamentary expenses be provided for to any and what extent out of the moneys collected by the executors and trustees under the testator's life insurance policies?
4. Out of what portion or portions of the estate of the testator and in what proportions in relation thereto should the probate duty be provided for?
In particular,
(a) What property is included in the residue of the testator's estate?
(b) Is the property included in the bequest in the said will [to the testator's wife] of the testator's life policies furniture and effects part of the residue of the testator's estate?
(c) Should the probate duty be provided for to any and what extent out of the moneys collected by the executors and trustees under the testator's life insurance policies?
[my emphasis]
His Honour held that the bequest to the testator's wife of "all my life policies furniture effects and all other personal property whatsoever" was residuary (at 267). His Honour then went on to determine how certain debts, funeral and testamentary expenses, and state probate duty were to be provided for (at 267). The probate duty was imposed by the Administration and Probate Act 1915 (Vic), ss 132 and 133 of which provided, relevantly, as follows:
132. The duty payable under this Part shall be deemed to be a debt of the testator or intestate to His Majesty and shall be paid by any executor or administrator out of the estate of the testator or intestate after payment of the testamentary and funeral expenses and in priority to all debts of the testator or intestate.
133(1) Unless a contrary intention appears in the will the executor or administrator of the estate of any deceased personal shall (subject to the provisions of the last preceding section) pay any duty payable on the whole or any part thereof under the provisions of this Part out of the residue of such estate.
(2) Where there is no residue or where the residue (after providing for the payment of funeral and testamentary expenses) is insufficient for the payment of such duty the executor or administrator with the will annexed shall in order to provide for the payment of the duty or the balance of the duty (as the case may be) deduct from each and every devise bequest and legacy coming to any person under the will in proportion to the value of such devise bequest or legacy such an amount as may be necessary for that purpose unless the testator has in his will made a different provision as to the payment of the duty. [my emphasis]
It was submitted for the plaintiffs in O'Brien that the life policies were exempt from being applied not only in respect of debts incurred by the testator during his lifetime, but from other claims subsequently arising which were in the nature of debts against the estate (at 266). His Honour said that the effect of s 476 of the Companies Act 1915 in the case before him was that the life policies were not liable for the payment of "ordinary debts" (at 268). His Honour later said the following (at 268):
I think it is clear that the provisions as to debts contained in sec. 476 (2) and (3) of the Companies Act 1915, which protects life policies that satisfy certain conditions from being liable for the assured's debts on his decease are to be read as limited to ordinary debts - i.e., debts incurred by him during his lifetime: See Lilly v. West Australian Trustee, etc., Co. Ltd. [(1911) 13 CLR 416 at 428], in which case the Act there under consideration provided that the duty payable under the Act should be deemed a debt of the testator and should be paid out of the estate, after payment of the funeral and testamentary expenses, in priority to all other debts. This view is strengthened by the reference in sec. 476 itself to insolvency and execution.
The funeral and testamentary expenses and the State probate duty must be paid out of the general personal estate, including the life policies, which will be sufficient to pay them all. [my emphasis]
Accordingly, his Honour answered questions 3 and 4 as follows (at 268-269):
3 and 4. The testator's debts are to be paid - so far as it is sufficient to satisfy such debts - out of the property (excluding the proceeds of the life policies) referred to in the bequest of "all my life policies furniture and effects and other personal property whatsoever" and the balance of such debts to an amount not exceeding the amount due on overdraft to the English, Scottish and Australian Bank Ltd. is to be paid out of the proceeds of the shares or some of the shares lodged as security therefor; provided that the executors may fix the portion of such debts representing the value of the property included in such question, and such portion may be provided by the defendant Annie Petty O'Brien [i.e., the testator's wife], and the property included in such bequest transferred to her. The funeral and testamentary expenses and probate duty are to be paid out of the property referred to in the said bequest, including the proceeds of life policies. The said bequest is residuary. [my emphasis]
The ratio of O'Brien would appear to be that s 476 of the Companies Act 1915 protected the property or interest of a deceased in a life insurance policy from being applied in payment of the "ordinary debts" of the deceased, by which Cussen ACJ meant debts which were incurred during the lifetime of the deceased. In O'Brien, the consequence was that the testator's life insurance proceeds could be applied in respect of testamentary expenses and probate duty. In reaching this conclusion, Cussen ACJ relied upon two matters. First, the earlier decision of the High Court in Lilly & Steere v West Australian Trustee & Agency Co Ltd (1911) 13 CLR 416. Second, the reference in s 476 to insolvency and execution. In relation to the latter, I note that s 205 of the Life Insurance Act 1995 (although expressly said to be subject to the Bankruptcy Act 1996 (Cth) in s 205(3)) does not contain such a reference. In relation to the former, it is necessary to consider what was decided in Lilly & Steere itself.
In Lilly & Steere, Griffith CJ, Barton and O'Connor JJ heard two appeals which required consideration of the Duties on Deceased Persons' Estates Act 1895 (WA) (the DDPEA Act) and the Administration Act 1903 (WA). Section 12 of the DDPEA Act (which related to the Steere appeal) provided as follows:
12. The duty payable under this Act shall be deemed a debt of the testator or intestate to Her Majesty, and shall be paid by any executor or administrator out of the personal estate of the testator or intestate after payment of the funeral and testamentary expenses, in priority to all other debts, and, if the personal estate be insufficient, the executor or administrator shall satisfy the same out of the real estate. [my emphasis]
Section 13 of the DDPEA Act also provided as follows:
13. Subject to any special provision by a testator for the payment of the duty imposed by this Act, every executor or administrator with the will annexed, shall deduct from each and every devise, bequest, or legacy, and in every case of intestacy an administrator shall deduct from each distributive share, an amount equal to the duty upon the same respectively; and, subject to any special provision by a settlor for the payment of duty, the beneficial interests under a settlement such as by tins Act is required to be registered shall contribute proportionally to the duty payable on the estate of the settlor ; reference being had in each case to the relationship of the beneficiary to the testator or settlor.
Sections 87 and 111 of the Administration Act (which related to the Lilly appeal) were relevantly identical. In both of the appeals heard by the High Court, the testator had given the residue of his estate to certain persons after payment of his debts, funeral and testamentary expenses (Lilly & Steere at 417; 420). It was argued, among other things, that the duty payable under the relevant Acts was in either case a "testamentary expense" and should be paid in accordance with the testator's directions as to testamentary expenses. In each case, the relevant direction was said to amount to a "special provision" within s 111 of the Administration Act or s 133 of the DDPEA Act, reliance being placed upon In re Clemow; Yeo v Clemow [1900] 2 Ch 182. (In that decision, Kekewich J had held, among other things, that a testator's direction for payment of "testamentary expenses" in respect of his wife included the payment of any estate duty payable on her death.)
Their Honours held that the duty payable in each case under the relevant Act was not a testamentary expense within the meaning of the wills under consideration. Their Honours drew attention to s 87 of the Administration Act which "clearly distinguishes between the duty under the Act and testamentary expenses" (their Honours noting that s 12 of the DDPEA Act was relevantly identical) (at 428). In relation to the reliance placed upon In re Clemow, their Honours said (at 428):
Now when the legislature in an Act dealing with wills and duties which may be called succession duties uses the term "testamentary expenses" in one sense, it can hardly be contended with any hope of success that a testator is to be taken, on the authority of an English decision upon a different Statute, to have meant to use the words in a different sense from that in which the legislature has used them. The legislature did not use the term "testamentary expenses" as including the duty.
Their Honours then said the following (at 428):
Then an ingenious argument was put forward by Mr. Boultbee, that the testator gave his residue after payment of his debts, that the duty is deemed to be a debt of the testator, and that the testator consequently gave the residue after payment of it. But it is plain that when the legislature said that the duty should be paid in priority to all other debts, it referred to the debts of the testator incurred during his lifetime. [my emphasis]
For present purposes, the ratio of Lilly & Steere would appear to be that the duty imposed by s 87 of the Administration Act and s 12 of the DDPEA Act is to be paid before "all other debts", "debts" in this context referring to those incurred by a deceased during his lifetime.
Pausing here, the relevant passages in both Lilly & Steere and O'Brien interpret "debts" in their relevant statutory contexts as referring to those of the deceased, qualified with the phrase "incurred during his lifetime". In Lilly & Steere, a distinction seems to be made between pre-death debts and post-death debts in the context of a consideration of a particular argument advanced by counsel (one which, it would seem, sought to subvert the clear intention of the legislature to confer priority upon the duty payable under the relevant Acts albeit with certain exceptions, this priority being provided for in a manner clearly premised on a distinction between testamentary expenses and all other debts). In O'Brien, the distinction appears in relation to a specific question as to the scope of s 476 of the Companies Act 1915 in relation to certain debts (namely, funeral and testamentary expenses and State probate duty) the answer to which turned on whether those debts were, properly understood "his debts" (that is, debts of the deceased).
In the absence of other authority, it may be thought that determinative weight should not be placed on the phrase "incurred by him during his life" in O'Brien, a case dealing with s 476(3) of the Companies Act 1915, for the present task of construing s 205 of the Life Insurance Act 1995. One reason is O'Brien's reliance upon Lilly & Steere. As is clear from the passage extracted above, their Honours were construing different legislation; specifically, a reference to duty being paid "in priority to all other debts". The statements in Lilly & Steere and in O'Brien were directed at the particular legislative provisions in question, applied in a specific factual matrix. As was said in Quinn v Leathem [1901] AC 495 at 506; [1901] UKHL 2 (referred to approvingly in New Galaxy Investments Pty Ltd v Thomson [2017] NSWCA 153 at [280]):
… every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found.
Even apart from this general proposition, while s 205 of the Life Insurance Act 1995 and s 476(3) of the Companies Act 1915 share common subject matter they are differently expressed. The latter concerns the protection of "the property and interest of such person in any policy or policies of assurance on his life maturing only at his death"; such property and interest "shall not be assets for the payment of his debts" (my emphasis). The former concerns the protection of "money [that] becomes payable to the person's estate under a policy effected on the person's life"; such money is not to be applied for "the payment of the person's debts" (my emphasis).
There is another reason why it may be considered that determinative weight should not be placed on the phrase "incurred by him during his lifetime" in that judgment. It is at least conceivable that the relevant phrase simply reflects an assumption that, generally speaking, in the ordinary course of events an obligation to pay a sum of money arises as a consequence of one's own acts or omissions and therefore ex hypothesi in the course of one's life, such words not however intending to foreclose the possibility that in an appropriate case a debt in the context of the statutory schemes considered in O'Brien may nonetheless be considered a debt of the deceased notwithstanding that it was technically incurred after death. The relevant debt in O'Brien was probate duty. That was deemed by statute to be a debt of the testator. In other words, the legislation itself acknowledged the true state of affairs (namely, that absent such a deeming provision probate duty was not a debt of the testator). Similarly, testamentary expenses are properly characterised as debts of the administrator or executor, not the deceased (see RA Woodman, Administration of Assets (2nd ed, Law Book Company, 1978) at 10).
To return to the Victorian cases, in Wertheim, Mann ACJ (with whom Lowe and Martin JJ agreed) considered s476(3) of the Companies Act 1928 (relevantly identical to the corresponding section in the Companies Act 1915, as considered in O'Brien). Wertheim involved the equitable doctrine of marshalling. However, a question arose as to the availability of life insurance policies for the payment of certain debts, including (see 323-324):
… (a) … probate duty, (b) … estate duty, (c) … Commonwealth income tax in respect of income derived by the testator before his death, assessed since his death, (d) … Victorian State income tax in respect of income derived by the testator before his death, assessed since his death, (e) … Victorian State unemployment relief tax in respect of income derived by the testator before his death, assessed since his death … [my emphasis]
Mann ACJ said the following (at 332):
Other questions raised by the summons relate to claims made upon the executors in respect of funeral and testamentary expenses and various Crown debts respecting five different taxes payable out of the estate. None of these claims is in respect of a debt of the testator in his lifetime, and therefore, as was decided in In re O'Brien the proceeds of the life policy are available along with the rest of the assets for their payment, since the immunity conferred by the Companies Act does not extend to such claims. [my emphasis]
In a concurring judgment, Lowe J referred to funeral, testamentary and administration expenses and the Crown debts, noting that (at 336):
… for one reason or another, as mentioned in argument and in the judgment of the Acting Chief Justice, all these debts may be paid out of the policy moneys. [my emphasis]
Accordingly, Wertheim confirmed the construction adopted by Cussen ACJ in O'Brien, the consequence being that s473 of the Companies Act 1928 was to be interpreted as referring only to debts of the testator incurred during the life of the testator. In fact, Wertheim appears to go further than O'Brien: protection is denied not only in respect of probate duty (a tax debt which was statutorily deemed to be a debt of the testator) but also in respect of certain taxes levied by reference to income derived by a testator before death but assessed and therefore incurred after death.
In In re Aylwin [1937] VLR 105, at death the testator had unsecured debts of 1,511l. 13s 5d. A question arose as to whether the proceeds of certain life insurance policies could be applied in respect of (at 106):
…(a) … funeral expenses; (b) probate and estate duty; (c) executors' commission; (d) legal and other expenses incurred in the administration; [and] (e) arrears of state and federal income tax due and payable by the deceased at the date of his death. [my emphasis]
Martin J held (at 111):
With the exception of those in clause (e) thereof all the liabilities of the testator's estate set out in question 2 have been incurred since his death and so the proceeds of the various policies are not protected by the provisions of sec. 476(3) of the Companies Act 1928 from being used to help satisfy them. So far as the liabilities in clause (e) are concerned … I have heard no argument, but it seems to be conceded, by all counsel engaged, that the said provisions are ineffective to save the policy moneys from being used to contribute towards payment of the debts since the debts are due to the Crown and the Crown is not bound by the statute. [my emphasis]
Aylwin thus also confirms that the protection afforded by the Victorian legislation (then found in s 476 of the Companies Act 1928) did not extend to debts incurred after the death of the deceased. The sole reason advanced for the non-protection of the policies in respect of arrears of state and federal income tax incurred as at the date of death was that the Crown was not bound by the statute. (As noted earlier, in the present case, the Commissioner does not deny that the Crown is bound (see T 10; 21.32).)
By the time of In re Lesser; National Trustees Executors & Agency Co of Australasia Ltd v Lesser [1944] VLR 210, the relevant legislation was found in s 554 of the Companies Act 1938 (Vic). Section 554(4) provided as follows:
Notwithstanding anything in his will or any codicil thereto, on the death of any person the property and interest of such person in any policy or policies of assurance on his life not maturing only at his death shall not to the extent of One thousand pounds of the sum assured be assets for the payment of his debts except those (if any) for the payment of which he in such will or codicil declares an intention to make such property and interest assets by words expressly referring to such policy or policies and expressly negativing the provisions of this section. [my emphasis]
In Lesser, the deceased had charged his estate with the payment of alimony to his former wife (at 212). It was submitted that his "estate" should not be regarded as including certain policy moneys, by virtue of s 554 of the Companies Act 1938. The originating summons asked, among other things (at 213):
… Is the liability of the estate of the testator to [the deceased's former wife] … secured upon, (a) the proceeds of the said life policies, (b) the other assets comprised in the estate of the testator, to any and what extent?
Gavan Duffy J noted that the legislation did not prevent the insured from charging the policy during his lifetime and that "legislation, now found in s 554 of the Companies Act 1938, prevents policies to the extent of 1,000l. being made liable for debts" (at 213). His Honour (adopting the language of Webb J in Allen v Edmonds at 792) held that despite the Act preventing the policy proceeds from being used "for the payment of debts after [the assured's] death", "the dominion over the policy is left with the assured, who may dispose of it either during his life, or by his will" (at 213). His Honour then said the following (at 213):
Mr Sholl [who acted for the former wife] … made use of section 554 in another way. He said what the testator charged in the indenture was his "estate" and, since the policy moneys were not liable for payment of debts, the word "estate" should not be construed so as to cover them. I cannot accept this contention. The policies are part of the property he owns when he dies, they pass to his executor and they are liable for administration expenses, estate duty and any other tax levied on the estate. They are in my opinion clearly comprised within the word "estate". [my emphasis]
His Honour's conclusion (namely, that the policies were not protected by the Companies Act 1938 in respect of administration expenses, estate duty and "any other taxes levied on the estate") does not appear to have turned solely on his Honour's view that that Act did not prevent an insured charging the policy during his lifetime. In other words, although his Honour did not refer to the earlier cases, the reasoning in this passage appears to be premised on construction of the statute, not on the fact that the deceased had indeed charged the policies and thereby removed them from any protection they might have otherwise had. If that is the case, then although his Honour did not in terms refer to the earlier cases of O'Brien, Wertheim and Aylwin his conclusion is consistent with them. That said, it may be that Aylwin can be distinguished insofar as: administration expenses are debts personal to the administrator, not the deceased; estate duty is statutorily deemed to be a debt of the testator but is not, properly understood, such a debt (hence the need for statutory deeming); and his Honour refers to taxes levied on the estate (as distinct from, say, taxes which are properly considered to be "his debts", namely those levied by reference to conduct of the individual during his (or her) life, even though they do not, for whatever reason, become due and payable until after death).
In any event, as the foregoing demonstrates, there is indeed a line of authority by reference to the old Victorian Companies Acts suggesting (either in terms or in substance) that the protection afforded by those Acts extended only to the "ordinary debts" of the deceased, "ordinary debts" being those incurred by the deceased in the course of his or her life (O'Brien; Wertheim). The consequence was that the policies were not exempt from probate duty (O'Brien; Aylwin) or estate duty (Wertheim; Aylwin; Lesser); or from testamentary and funeral expenses (O'Brien; Aylwin) or administration expenses (Aylwin; Lesser); nor, most relevantly, from taxes levied in respect of income derived by the deceased during his lifetime but assessed and hence incurred after death (Wertheim; Aylwin).
[11]
Commonwealth legislation - the Life Insurance Act 1945 (Cth)
The various statutes enacted throughout Australia were replaced by Commonwealth legislation towards the middle of the last century. In the Second Reading speech on 25 May 1945, the purpose of the Life Insurance Bill 1945 (Cth) was said to be the regulation of life insurance business in Australia and "to protect the interests of persons who have effected life insurance policies" (at 1). A main object of the Life Insurance Bill 1945 was said (at 2) to be to replace all State legislation on the subject of life insurance. As to the protection of life policies from the payment of creditors, the explanatory memorandum provided as follows (at 6):
Life policies, being usually effected for the benefit of a man's dependants are (with small exceptions) protected from his creditors in the event of Bankruptcy. This Division extends similar protection against creditors in the event of his death. [my emphasis]
As enacted, ss 92 to 93 of the Life Insurance Act 1945 (Cth) provided as follows:
92(1) Subject to the Bankruptcy Act 1924-1933, the property and interest of any person in a policy effected (whether before or after the commencement of this Act) upon his own life shall not be liable to be applied or made available in payment of his debts by any judgment, order or process of any court.
(2) In the event of a person whose life is insured dying after the commencement of this Act, the moneys payable upon his death under or in respect of a policy effected upon his life shall not, subject to the Bankruptcy Act 1924-1933, be liable to be applied or made available in payment of his debts by any judgment, order or process of any court, or by retainer by an executor or administrator, or in any other manner whatsoever, except by virtue of a contract or charge made by the person whose life is insured, or by virtue of an express direction contained in his will or other testamentary instrument executed by him that the moneys arising from the policy shall be so applied.
(3) A direction to pay debts, or a charge of debts upon the whole or any part of the testator's estate, or a trust for the payment of debts, shall not be deemed to be such an express direction.
93(1) A married woman may effect a policy upon her own life or upon the life of her husband, for her separate use, and the policy and all benefits of the policy shall enure accordingly.
(2) The protection of the last preceding section shall extend to any such policy bona fide effected by a married woman. [my emphasis]
The only decision on the operation of s 92 to which I was referred in the course of argument on the present application was White. Although White is a first instance decision and his Honour confined his analysis to provisions of the relevant taxing statute, on one reading his Honour's remarks appear to be consistent with the line of Victorian authority considered above.
In White, Gibbs J (as his Honour then was) heard an appeal by petition from an assessment by the Commissioner of Stamp Duties on succession arising or deemed to arise on the death of the deceased. It was argued that the assessment was invalid because it was contrary to s 92 of the Life Insurance Act 1945. After setting out the relevant provisions, his Honour said the following (at [28]):
… If this section is applied to the present case, the person whose life is insured was Raymond John Carter, and the debts in payment of which the moneys are not liable to be applied are the debts of Raymond John Carter. But the succession duty now levied was not a debt of Raymond John Carter; it is a debt due by the successors (s. 43) and by certain other persons who have a limited liability for it (s. 46), but it was not chargeable until after the death of Raymond John Carter and could not have been his debt. Quite plainly the section has no application and there is no substance whatever in this objection to the assessment. [my emphasis]
The remarks in the first part of the passage effectively dispose of the argument raised by the petitioner in White. Section 92 required that the debt be that of the person in respect of whose life the policy was effected but the succession duty was clearly not such a debt - it was a "debt due by the successors" and certain other persons.
On one reading, the second part of the passage contains a confirmation of the view expressed in the Victorian cases (albeit without reference to those decisions) if read as suggesting that the succession duty was not properly the debt of the deceased solely because it was "not chargeable until after [his] death" (my emphasis). Reading the passage as a whole, it appears that the reason for the non-application of s 92 was that the debt could not in any sense be that of the deceased because it was a debt incurred by the successors and certain other persons on the statutory hypothesis that the insured had in fact died. It is not clear from the passage that his Honour intended to lay down any broad principle as to the meaning of "his debts". Rather, the remarks were made in the course of emphasising that which is made express in s 92; namely, that protection is conferred in respect of "his debts" (that is, the deceased's) alone. Debts arising as a consequence of succession duty imposed on the deceased's successors are clearly not debts of the deceased.
Accordingly, although White is not inconsistent with the Victorian authorities (and, as noted, on one reading is consistent with them), I do not consider that it settles conclusively for present purposes the meaning of "his debts" in s 92.
[12]
Parallel developments
For completeness, I note certain parallel developments.
Section 94 of the Life Insurance Act 1945 provided as follows:
94(1) Subject to the Bankruptcy Act 1924-1933, a policy effected (whether before or after the commencement of this Act) by any man upon his own life, and expressed to be for the benefit of his wife, or of his children, or of his wife and children, or any of them, or by any woman upon her own life, and expressed to be for the benefit of her husband, or of her children, or of her husband and children, or any of them, shall create a trust in favour of the objects named in the policy, and the moneys payable under any such policy shall not, so long as any object of the trust remains unperformed, form part of the estate of the person whose life is insured, or be subject to his or her debts. … [my emphasis]
As Crisp J noted in In re Perry (1963) 5 FLR 116, s 94(1) was not "a novelty". His Honour there referred to s 11 of the Married Women's Property Act 1882 (UK), which relevantly provided as follows:
A policy of assurance effected by any man on his own life, and expressed to be for the benefit of his wife, or of his children, or of his wife and children, or any of them, or by any woman on her own life, and expressed to be for the benefit of her husband, or of her children, or of her husband and children, or any of them, shall create a trust in favour of the objects therein named, and the moneys payable under any such policy shall not, so long as any object of the trust remains unperformed, form part of the estate of the insured, or be subject to his or her debts … [my emphasis]
and his Honour noted (at 118) that this provision was "reproduced in most, if not all, Australian States either in statutes of the same name or, in the case of New South Wales and Queensland, in statutes dealing with life insurance". In relation to the new Commonwealth Act, his Honour said (at 118) that it was:
… if not strictly a consolidating Act, at least what I would call a unifying Act in that it expressly repealed and replaced those provisions of State Life Insurance Acts, and impliedly repealed those provisions of the Married Women's Property Acts which have been referred to.
In Commissioner of Probate Duties (Vic) v Mitchell (1960) 105 CLR 126, Fullagar J described (at 143) the object of s 94 of the Life Insurance Act 1945 as being:
… to encourage life insurance, and, subject to the laws relating to bankruptcy and insolvency, to enable husbands and wives to make some safe and sure provision for one another and for their children.
It was held that the effect of s 94 was to create an immediate trust in respect of the beneficial interest in the policy. This meant that the policy moneys did not form part of the dutiable estate of the deceased for the purpose of s 104 of the Administration and Probate Act 1958 (Vic) (liability depending on whether the transaction creating the beneficial interest amounted to a "disposition of property" within s 100 of that Act) (at 139-142; 152).
In Forsyth v Commissioner of Stamp Duties (1966) 114 CLR 194 the High Court held that there was no constitutional inconsistency between s 94 of the Life Insurance Act 1945 (Cth) and s 102(2)(h) of the Stamp Duties Acts 1920-1959 (NSW). Kitto J explained the operation of s 94 as follows (at 202-203):
[Section 94] creates beneficial interests in favour of the persons expressed to be the beneficiaries, and it expressly enacts the logically necessary consequence, namely that to the extent of the interests thus created the policy and its proceeds form no part of the estate to be administered by the legal personal representatives of the person who, by effecting the policy, constituted the trust. It explicitly provides that the policy moneys are not to be subject to that person's debts. The State provision proceeds on the footing that this is the law. It merely charges the policy … with a duty computed on a statutory hypothesis, acknowledged by the statute itself to be contrary to the fact, that those moneys form part of the deceased's estate; and though s. 114 of the State Act makes the duty a debt payable by the administrator out of the estate of the deceased in the same manner as the debts of the deceased it does not deny, indeed it impliedly admits, that it is not such a debt. …
…
… It may be thought … the section [i.e., s 94] travels only part of the way towards complete fulfilment of the underlying policy, for it leaves room for a State Act to throw upon the policy moneys the burden of a tax imposed by reason of the death of the proponent, although acknowledging that they are not assets of his estate; but even if this be conceded it remains impossible, I think, to say that the test of inconsistency in operation is satisfied. [my emphasis]
The potential relevance of this passage for present purposes lies in his Honour's acknowledgment that the protection afforded by s 94 was not absolute in the sense one might have otherwise expected in light of the beneficial nature of the legislation, though the constitutional context, and the fact that, unlike s 92, s 94 creates an immediate trust, must be borne in mind.
Taylor J considered the meaning of the concluding words of s 94 (those being in similar terms to s 92) (at 209-210):
The argument which is addressed to us is largely based upon a dissection of the concluding words of s. 94. Once the section declared that a trust was created it was, it was asserted, unnecessary in order to remove the policy moneys from the reach of the creditors of the deceased to go further and enact that they should not form part of the estate of the person whose life is insured, or be subject to his or her debts. Therefore it was said that a more far-reaching effect was intended by these words. But the argument is, I think, without real substance; the form of the concluding words is traditional and they serve no purpose other than to make it clear beyond doubt that the policy moneys are not to form part of the estate of the deceased in the sense of being an asset in the administration of the deceased's estate and, therefore, not subject to his or her debts.
Holding this view, as I do, concerning the meaning and effect of s. 94 I see no ground upon which it can be said to be in conflict with s. 102 (2) (h) of the Stamp Duties Act. That section does not constitute the policy moneys an asset in the deceased's estate. Nor does it render them subject to the debts of the deceased; it merely deems them to be part of his estate for a very limited purpose, that is to say, the assessment and payment of duty upon the estate. The liability to duty does not constitute a debt of the deceased; it becomes due and payable on the assessment thereof by the Commissioner or within six months from the death of the deceased and it constitutes a debt payable to His Majesty out of the estate of the deceased in the same manner as the debts of the deceased. Section 120, provides that where any property which is, or the value of which is, included in the dutiable estate of a deceased person is vested in any person other than the administrator the duty payable in respect thereof shall be paid by the persons entitled thereto according to the value of their respective interests therein, to the administrator. I see nothing inconsistent in this provision; it is simply a means of ensuring that, in a case such as the present, liability for death duty in so far as it is referable to the policy moneys, will fall ultimately on the recipient. [my emphasis]
Finally, of potential relevance is the following remark of Barwick CJ (with whose judgment McTiernan J expressed agreement) in Hill v Federal Commissioner of Taxation (1969) 119 CLR 72 at 74:
No question arises as to the ownership of the proceeds of the policy. By its terms they belong beneficially to the appellant, Shirley Hilda Hill, and s. 94 of the Life Insurance Act ensures that the policy moneys themselves are not available for the payment of any debt of the deceased or, in my opinion, of his estate. [my emphasis]
[13]
Commonwealth legislation - Life Insurance Act 1995 (Cth)
The relevant provisions of the Life Insurance Act 1995 have been extracted earlier. The Court was not referred to any judicial consideration in relation to s 205 of the Life Insurance Act 1995 shedding light on the present issue of construction. Some cases have considered s 205 but, as none advances the matter, it is not necessary to consider them (see Burke v Commissioner of Taxation [2004] FCA 126 at [17]; Re the Estate of Robbins (Deceased); ex parte Robbins [2008] WASC 243 at [16]-[21]; Riches v McInnes [2010] WASC 298; In the Estate of Cornford (Deceased) [2015] SASC 15 and Addison v Shore [2016] WASC 223). For completeness, I note that it appears that s 205 was inserted into the Life Insurance Bill 1994 following a Committee of the House of Representatives on 16 November 1994, the Supplementary Explanatory Memorandum in relation to s 204 providing as follows (at 39):
This clause provides for the protection of the interests of a person against creditors in certain cases. The clause ensures the protection of the interests of the life insured, irrespective of who effected the policy, and the protection of an interest on the life of the spouse. This clause is subject to the Bankruptcy Act 1966.
In relation to s 205, the Supplementary Explanatory Memorandum provided as follows (at 39):
This clause relates to policies effected by a person on their own life for the benefit of their estate. This clause protects the money payable under the policy from being applied or made available for the payment of the person's debts, except in the circumstances outlined in paragraph 1(b). This clause is subject to the Bankruptcy Act 1966.
[14]
Conclusion as to the scope of statutory protection
If the present question were res integra, I would have considered there to be considerable force in the submission that the expression "the person's debts" in s 205 of the Life Insurance Act 1995 is not necessarily confined to those debts of the deceased which he or she incurred in his or her lifetime (as opposed to debts arising after the person's death by the operation of some deeming position as is the case here). Confining "the person's debts" to those debts incurred during the lifetime of the deceased, as opposed to debts for which the deceased's legal personal representative is liable to pay out of the deceased's estate (not being debts incurred by that legal personal representative in the administration of the estate) stands in an uneasy relationship to that which the authorities considered above have taken to be the underlying object of provisions such as ss 204 and 205 of the Life Insurance Act 1995, and the clearly remedial or beneficial nature of legislation of this kind (which, it has been said, suggests that it should not be construed "in any narrower or more restrictive sense than its language would fairly allow" - see NM Superannuation Pty Ltd v Young (1993) 41 FCR 182 at 43.
I am of course mindful of the warning sounded by French CJ and Hayne J in Certain Lloyd Underwriters at [26]:
A … danger that must be avoided in identifying a statute's purpose is the making of some a priori assumption about its purpose. The purpose of legislation must be derived from what the legislation says, and not from any assumption about the desired or desirable reach or operation of the relevant provisions. [my emphasis]
Nevertheless there are indications in the text supporting the plaintiff's construction. First, the comprehensive nature of the prohibition in s 205(1)(a)(i)-(ii) ("not liable to be applied or made available under any judgment, order or process of a court or in any other manner whatsoever in payment of the person's debts" (my emphasis)). Second, the limited nature of the exceptions enumerated in s 205(1)(b) (namely, express provision by contract, the charging of the money, or an express direction), coupled with the precise clarifications in s 205(1)(c). Third, the absence of anything in the text or context of the provision which is indicative of a legislative intention that there be imposed on the concept of "debts" a distinction drawn by reference to the precise time at which the debt in question crystallised. As the plaintiff submits, s 205 refers to "debts" but does not attempt further to define that term, whether by category of debt or category of creditor.
Accordingly, absent authority on the point, I would have been inclined to the view that the plain and ordinary meaning of s 205 of the Life Insurance Act 1995 is that money becoming payable to a person's estate under a policy effected on that person's life is not liable to be applied or made available "in payment of the person's debts", whensoever those debts were incurred, provided that those debts - upon a proper consideration of the circumstances giving rise to the debt, including any relevant legislation - are properly to be characterised as debts of the person (as distinct from, say, debts arising out of the administration of the estate or debts personal to the administrator or executor).
However, there is indeed a line of authority weighing in favour of the construction advanced by the Commissioner. Particularly decisive in this regard is Wertheim, a decision of the Full Court of Victoria, where Mann ACJ (with whom Lowe and Martin JJ agreed) said that debts owing by virtue of Commonwealth and Victorian income tax (both in respect of income derived by the testator before his death, but assessed since his death) were not claims "in respect of a debt of the testator in his lifetime" and hence that the proceeds of the life policy was available for their payment (at 338) (my emphasis). As noted above, their Honours endorsed the view of Cussen ACJ in O'Brien which itself relied upon the decision of the High Court in Lilly & Steere.
Notwithstanding the possible difficulties I have noted in the course of these reasons as to the scope or meaning of these authorities, I do not consider that it is open to me, sitting as a court of first instance, to depart from them in circumstances where they are decisions of relatively long standing concerning legislation clearly antecedent to s 205 of the Life Insurance Act 1995 and cannot in my respectful opinion be said to be plainly wrong. As suggested above, s 205 does indeed convey the impression that the legislature intended to confer broad protections, subject to limited exceptions. However, that impression can also be derived from a plain reading of the earlier legislation (namely, the Victorian Companies Acts of 1915, 1928 and 1938), yet cases such as O'Brien, Wertheim and Aylwin each adopted (either in terms or in substance) the view that the word "debts" in the relevant provisions was to be read as the ordinary debts of the deceased, being those incurred by the deceased in the course of his or her lifetime.
Accordingly, although I consider that there is considerable force in the view that one should not read into s 205 any temporal distinction between "pre-death debts" and "post-death debts" (that is, that the sole question should be whether the debt is the person's debt, with no a priori assumption as to the relevance of the precise time at which the debt is incurred), I have concluded that in view of the existing authorities, the Commissioner's construction of s 205 in this regard is the one that should be adopted at least at first instance.
As I have made clear earlier, I accept the Commissioner's submission that s 205 is the relevant provision in a case such as the present. In any event, the above reasoning would apply mutatis mutandis in respect of the phrase "a debt owed by the person" in s 204.
As to the content of the advice now to be provided in accordance with the above reasons, it is in two respects predicated on the assumption that the facts as presented by the plaintiff are correct: first, that the TAL and Abbey Life policies were indeed policies effected on the life of the deceased such that moneys became payable thereunder to his estate on his death; and, second, that there is no applicable trust deed for the purposes of cl 15 of the Metlife policy that would cause the trust on which PwC Nominees holds the funds for the benefit of the deceased's estate to be properly characterised as more than a bare trust. The advice will be qualified accordingly. Also, I do not consider it appropriate to provide judicial advice as to the solvency or otherwise of the estate as a result of the conclusion that I have reached as to the proper scope of the protection afforded by s 205 of the Life Insurance Act 1995 to the proceeds of the three life insurance policies. It should be sufficient for the plaintiff's purposes as administrator for judicial advice to be provided as to the construction of s 205.
[15]
Costs
As to costs, the plaintiff seeks her costs on the indemnity basis from the estate (such costs having priority as costs of estate administration). Such an order should be made.
As for the Commissioner's costs, the plaintiff points out that the only party to judicial advice is the trustee (referring to s 63(4)-(11)) and argues that, the Commissioner having chosen to take an active role in the proceedings aimed at protecting his own position, there should be no order as to his costs with the intent that he should bear his own costs (referring to Re Rosewood Research Pty Ltd (No 2) [2014] NSWSC 1226). However, the Commissioner having intervened as an interested party has been successful in advancing the construction of s 205 in his favour and in those circumstances I am of the view that the Commissioner should have his costs on an ordinary basis out of the estate of the deceased though with no priority over other unsecured creditors.
[16]
Orders
For the above reasons, I make the following orders:
1. Pursuant to s 63 of the Trustee Act 1925 (NSW), advise the plaintiff that, as administrator of the estate of the late Patrick John David McKeon ("the deceased"), the plaintiff would be justified in administering the estate of the deceased on the basis that:
1. the proceeds of the Sunsuper superannuation policy held by the deceased are not liable to be applied in payment of the debts of the deceased, not being part of the deceased's estate;
2. the proceeds paid to the administrator by Abbey Life Assurance Company Limited and TAL Life Limited pursuant to claims made by the administrator on those policies on the death of the deceased, and the proceeds paid to PwC Nominees Pty Ltd as trustee for the deceased's estate by Metlife Insurance Limited under the PricewaterhouseCoopers Partners Group Life Plan, are (pursuant to s 205(1)(a) of the Life Insurance Act 1995 (Cth)) not liable to be applied in payment of such debts of the deceased as were incurred during his lifetime (the pre-death liabilities) but are not so protected in respect of such of the tax liabilities of the deceased as were incurred in respect of income earned after his death (the post-death liabilities).
1. Note that the advice in order 1(b) above is predicated, in relation to the proceeds of the Abbey Life Assurance Company Limited and TAL Life Limited policies, on the assumption that those policies were insurance policies effected on the life of the deceased within the meaning of s205 of the Life Insurance Act 1995 (Cth) and, in relation to the proceeds of the Metlife Insurance Limited policy, on the assumption that there is no applicable trust deed (for the purposes of cl 15 of the said policy) pursuant to which PwC Nominees Pty Ltd was to hold the proceeds of the policy other than as bare trustee for the estate of the deceased.
2. The costs of the plaintiff be borne on the indemnity basis out of the estate of the deceased, with priority as an expense of the administration of the estate.
3. The costs of the Commissioner of Taxation be paid out of the assets of the estate on the ordinary basis, with no priority over unsecured creditors of the estate.
The above will presumably have an impact on the agreement pursuant to which the family provision proceedings were to be settled. When judgment is delivered in the present proceedings I will invite submissions (and to the extent practicable make directions) as to the further disposition or conduct of the family provision proceedings.
[17]
Amendments
26 September 2017 - Par [9], inclusion of the word "under" before '7A'
Par [40], amended the word 'debtors' to 'creditors'
Par [56], amendment to the name Australian Mutual Provident Society
Par [61], deletion of the words "the use"
Par [100], Insurance Bill changed to Life Insurance Bill
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 26 September 2017
e Assurance Companies Act 1889 (WA), s 33
Life Assurance Companies Act 1936-1941 (SA), s 7
Life Assurance Companies Acts 1901-1934 (Qld), s 18
Life Assurance Encouragement Act 1862 (NSW), s 2
Life Assurance Encouragement Act 1873 (Vic)
Life Insurance Act 1945 (Cth), ss 3(1), 92, 93, 94
Life Insurance Act 1995 (Cth), ss 9, 204, 205
Life Insurance Bill 1945 (Cth)
Life Insurance Bill 1995 (Cth)
Life, Fire and Marine Insurance Act 1902 (NSW), ss 4, 5, 6, 7
Married Women's Property Act 1882 (UK), s 11
Policies Protection Act 1887 (SA), ss 3, 4, 5
Probate and Administration Act 1898 (NSW), Sch 3
Stamp Duties Acts 1920-1959 (NSW), s 102
Succession Act 2006 (NSW), Ch 3
Trustee Act 1925 (NSW), s 63
Cases Cited: Addison v Shore [2016] WASC 223
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41
Allen v Edmonds [1886] 12 VLR 789
Anderson v Egan (1905) 3 CLR 269
Attorney-General (NSW) v Curator of Intestate Estates [1907] AC 519
Burke v Commissioner of Taxation [2004] FCA 126
Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 248 CLR 378; [2012] HCA 56
Attorney-General (NSW) v Curator of Intestate Estates [1907] AC 519
Commissioner of Probate Duties (Vic) v Mitchell (1960) 105 CLR 126
Davey v Pein; Colonial Mutual Life Assurance Society v Davey [1883] 9 VLR 169
Forsyth v Commissioner of Stamp Duties (1966) 114 CLR 194
Hill v Federal Commissioner of Taxation (1969) 119 CLR 72
In re Aylwin [1937] VLR 105
In re Clemow; Yeo v Clemow [1900] 2 Ch 182
In re Lesser; National Trustees Executors & Agency Co of Australasia Ltd v Lesser [1944] VLR 210
In re Perry (1963) 5 FLR 116
In re Wertheim [1934] VLR 321
In the Estate of Adams (1894) 15 LR (NSW) B & P 135
In the Estate of Cornford (Deceased) [2015] SASC 15
In the Estate of Mattson (1906) 6 SR (NSW) 11
In the Will of O'Brien (deceased) [1924] VLR 262; (1924) 30 ALR 260
Lennon v Gibson & Howes Ltd [1919] AC 709; [1919] UKPCHCA 2
Lilly & Steere v West Australian Trustee & Agency Co Ltd (1911) 13 CLR 416
Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42New Galaxy Investments Pty Ltd v Thomson [2017] NSWCA 153
NM Superannuation Pty Ltd v Young (1993) 41 FCR 182
Palmer v The Public Trustee (1916) 21 CLR 645
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28
Quinn v Leathem [1901] AC 495; [1901] UKHL 2
Re Palmer; Perpetual Trustee Co Ltd v Palmer (1903) 3 SR (NSW) 141
Re Rosewood Research Pty Ltd (No 2) [2014] NSWSC 1226
Re the Estate of Robbins (Deceased); ex parte Robbins [2008] WASC 243
Riches v McInnes [2010] WASC 298White v Commissioner of Stamp Duties [1968] Qd R 140
Wilson v Transport Accident Commission [2017] VSC 209
Texts Cited: AC Gray, Life Insurance in Australia: An Historical and Descriptive Account (McCarron Bird, 1977)
DC Pearce and RS Geddes, Statutory Interpretation in Australia (8th ed, 2014, LexisNexis)
PC Wickens, The Law of Life Insurance in Australia (Lawbook Co, 1979
RA Woodman, Administration of Assets, (2nd ed, Lawbook Company, 1978)
Category: Principal judgment
Parties: Teresa Clauson (as administrator of the estate of the late Patrick McKeon) (Plaintiff)
Commissioner of Taxation (Interested Party)
Representation: Counsel:
J Needham SC with FFF Salama (Plaintiff)
S Lloyd SC with S Foda (Interested Party)
Advice sought
Section 63(1) of the Trustee Act provides that a trustee may apply to the Court for an opinion, advice or direction on any question respecting the management or administration of the trust property. Section 5 of the Trustee Act defines "trustee" as including a "legal representative" which term is in turn defined as "executor or administrator" and thus includes the plaintiff, to whom letters of administration were granted in respect of the deceased's estate on 17 August 2015.
There is no doubt that the present application for judicial advice is properly made (in accordance with the general principles applicable to such an application as articulated in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at 89-94 [54]-[75]; [2008] HCA 42), in circumstances where the plaintiff, in her capacity as administrator of the deceased's estate, seeks to resolve legitimate doubts as to the proper administration of the estate and to protect the estate and those interested in it.
That said, as framed in the amended summons filed by leave at the commencement of the hearing the advice sought went beyond this and, in terms, went to the settlement of other (family provision) proceedings. At the hearing, that aspect of the plaintiff's application was not pressed - the application being limited to the seeking of advice in relation to the proper treatment of the proceeds of various insurance and superannuation policies held by or for the benefit of the deceased.
In summary, the advice that is sought is whether the plaintiff, as administrator of the deceased's estate, would be justified:
1. in administering the estate as an insolvent estate and on the basis that the proceeds of three insurance policies effected on the life of the deceased (policies issued by Abbey Life Assurance Company Limited (Abbey Life), TAL Life Limited (TAL), and Metlife Insurance Limited (Metlife)) are not liable to be applied in payment of the debts of the deceased pursuant to s 205(1)(a) of the Life Insurance Act 1995; and
2. in retaining the proceeds of a Sunsuper superannuation policy held by the deceased and not treating those proceeds as liable to be applied in payment of the debts of the deceased.