Application of Doolan [2023] NSWSC 320 - NSWSC 2023 case summary — Zoe

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Application of Doolan [2023] NSWSC 320

[2023] NSWSC 320

Supreme Court of NSW|2023-03-24|Before: Meek J, System Amendment J

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Source facts

Court

Supreme Court of NSW

Decision date

2023-03-24

Before

Meek J, System Amendment J

Source

Original judgment source is linked above.

Judgment (46 paragraphs)

[1]

Background

The legislative history of s 92 was considered in some detail by Campbell J (as his Honour then was) in Ludwig. His Honour's decision is reported in part in relation to the provisions regarding ss 92 and 93 PA Act at (2006) 68 NSWLR 69. Ludwig also addressed powers of the police to retain property (banknotes) and is also reported in its entirety at (2006) 170 A Crim R 460. An appeal to the Court of Appeal from the decision of Campbell J in Ludwig was dismissed without any adverse comment regarding his Honour's commentary in relation to the workings of ss 92 and 93 PA Act: Ludwig v The Public Trustee [2008] NSWCA 115.
Section 92 is based on s 29 of the Law of Property and Trustees Relief Amendment Act 1859, 22 & 23 Vict, c 35 (Lord St Leonards' Act).
It is not necessary to set out a detailed history. However, it is appropriate to mention some of the provisions as they applied in New South Wales.

[2]

1862 - Trust Property Act

In 1862, the Trust Property Act 1862 (NSW) (Trust Property Act) was enacted (also referred to as 26 Vic No 12). It effectively applied the provisions of s 29 Lord St Leonards' Act in New South Wales.
Section 29 of the Trust Property Act was relevantly in the following terms: 29. Where an executor or administrator shall have given such or the like notices as in the opinion of the Court in which such executor or administrator is sought to be charged would have been given by the Supreme Court in its Equitable Jurisdiction in an administration suit for creditors and others to send in to the executor or administrators their claims against the estate of the testator or intestate such executor or administrator shall at the expiration of the time named in the said notices or the last of the said notices for sending in such claims be at liberty to distribute the assets of the testator or intestate or any part thereof amongst the parties entitled thereto having regard to the claims of which such executor or administrator has then notice and shall not be liable for the assets or any part thereof so distributed to any person of whose claim such executor or administrator shall not have had notice at the time of distribution of the said assets or a part thereof as the case may be but nothing in this Act contained shall prejudice the right of any creditor or claimant to follow the assets or any part thereof into the hands of any person who may have received the same respectively.

[3]

1898 - WPA Act

In 1898, the Wills Probate and Administration Act 1898 (NSW) (WPA Act) was enacted, and the provisions of s 29 Trust Property Act were relevantly repealed in sch 1 WPA Act.
Section 92 WPA Act in its original form provided that: (1) Where an executor or administrator has given such or the like notices as in the opinion of the Court in which such executor or administrator is sought to be charged would have been given by the Supreme in its equitable jurisdiction in an administration suit for creditors and others to send in to the executor or administrator their claims against the estate of the testator or intestate, such executor or administrator may, at the expiration of the time named in the said notices, or the last of the said notices, for sending in such claims, distribute the assets of the testator or intestate, or any part thereof, amongst the persons entitled thereto, having regard to the claims of which such executor or administrator has then notice. (2) Such executor or administrator shall not be liable for the assets or any part thereof so distributed to any person of whose claim he has not had notice at the time of such distribution.
Section 92 has been amended on a number of occasions. The particular form of s 92 considered by Campbell J had been incorporated into the PA Act by amendments in 1977.
His Honour noted that the 1977 amendments to s 92 had the effect of: 1. identifying the form of notice to be published by reference to a form prescribed by the rules of Court, rather than by reference to the practice of the Court in an administration suit; 2. identifying the class of people called upon to send in claims as being "beneficiaries (including children conceived but not yet born at the death of the testator …), creditors and other persons", rather than merely "creditors and others"; and 3. identifying the claims required to be notified as claims "in respect of the assets of the estate", rather than ones "against the estate": at [268].

[5]

Object and purposes of advertising

Sections 92 and 93 PA Act are part of the one statutory scheme which enables LPRs to establish what claims are made on the estate by any relevant parties including beneficiaries and creditors: Ludwig at [276].
The purpose of the provisions of s 29 of Lord St Leonards' Act were considered in Newton v Sherry (1876) 1 CPD 246 (Newton v Sherry).
In that case, Brett J observed that the title of Lord St Leonards' Act contains reference to it being an Act to relieve trustees and observed that it was beyond doubt that where distribution followed advertisement of notices, absent notices of claims, that executors and administrators were intended to be protected against subsequent claims of which they had no notice: at 255.
Similarly, Archibald J observed that the provisions were plainly intended for the protection of executors and administrators enabling them safely to make a distribution of the estate in a reasonable time: at 257.
Lindley J (as his Lordship then was) observed that the real object of the section was not merely to secure an indemnity to executors and administrators, but for the benefit also of persons having claims against the estates of deceased persons, by enabling the executor or administrator to administer the estate without the expense and delay of a Chancery suit: at 257-258.
The type of protection described in Newton v Sherry to LPRs under the provisions of Lord St Leonards' Act persists as the purpose of s 92: Ludwig at [272]. Clearly, it also facilitates the due administration of an estate: English v Stewart [2022] NSWSC 268 at [48] per Hallen J.
Despite its role within the current New South Wales statutory scheme, s 93 was not analogous to anything in the provisions of Lord St Leonards' Act but, rather, a provision like s 93 was first introduced into New South Wales by s 24 Probate Act of 1890 Amendment Act 1893 (NSW): Ludwig at [269].
Section 93 provides a procedure which enables a LPR to bring to a head any unresolved claims of which he has notice: Ludwig at [272].

[6]

Procedures for advertising

The procedure for publication of notices by LPRs and trustees has been conveniently reformed so that notices which an executor and/or trustee is required to publish in relation to distribution of an estate pursuant to s 92 PA Act, s 60 Trustee Act and s 93 Succession Act can be achieved by the use of one common form of document currently approved pursuant to s 17 Civil Procedure Act 2005 (NSW) (CPA). The approved form being UCPR Form 114.
The particular requirements as to advertising for LPRs are addressed in Pt 78 r 93 SCR which provide for the notice to be published in a case in which the notice relates to the intended distribution of the deceased estate where a grant has been made or resealed by the Court on the New South Wales Online Registry website or, in any other case, in a Sydney daily newspaper.
It is said that the advertisement must be placed promptly after the deceased's death: In re Kay; Mosley v Kay [1897] 2 Ch 518 at 523 per Romer J.
Whether the notice has been properly advertised or not is a question of degree and depends upon the circumstances of each particular case: Newton v Sherry at 257 per Archibald J.
It is important that the estate should not be distributed without reasonable means being taken to give notice to all who may have claims whether as creditors or otherwise. Whilst it is usual to confine notices to what might be described as "local" newspapers, if there are any reasonable grounds for supposing that the claimant is residing in a foreign country notice should be advertised there: Newton v Sherry at 256 (Brett J), 257 (Archibald J). On the facts in Newton v Sherry, Brett and Archibald JJ determined that there was no necessity for advertising otherwise than in The London Gazette and some English newspapers: at 256, 257. Lindley J considered that the question of advertising should await the determination of the enquiry regarding knowledge (at 258) and subsequently confirmed the sufficiency of the advertising: at 258.
That position regarding the extent of publication has been regarded in Australian texts as applicable in New South Wales: e.g. Stephen Janes, David Liebhold and Paul Studdert, Wills, Probate and Administration Law in New South Wales (2nd ed, 2020, Thomson Reuters) (Janes, Liebhold and Studdert) at 899 citing Newton v Sherry and Wood v Weightman (1872) LR 13 Eq 434.

[11]

Actual notice

There are a series of cases relating to the notice provisions of ss 92 and 93 PA Act or their legislative equivalents.
The essential facts of Newton v Sherry are summarised in the headnote: A., the daughter of the intestate, left her home at an early age (in 1857), changed her name, and, without notice to any of her relatives, went to America. In 1871 she returned to England and endeavoured to find her mother; but, the mother having changed her residence and married again, she was unable to find her. She again came to England in 1874, when she found that her mother was dead. In the meantime a sister of her mother had obtained letters of administration, and, after advertising in the London Gazette and in the Times and another London newspaper, in the terms of s. 29 of 22 & 23 Vict. c. 35, for "creditors and other persons having claims or demands against or upon the estate of the deceased," distributed the assets amongst the brother and two sisters (herself being one) of the deceased, being ignorant that the daughter, A., was still living.
The plaintiff, being the daughter of the deceased and niece of the deceased's sister (who was the LPR), after returning to England, obtained an order revoking letters of administration granted to the LPR and obtained a fresh grant of letters of administration to herself on the basis that she was the only next of kin. As the assets had been distributed the plaintiff obtained an assignment of the administration bond and brought an action against the sureties on the bond: at 251-252.
In the proceedings in the Court below, Denman J directed a verdict for the plaintiff but reserved leave to the defendants to move to enter a verdict for them if the Court should be of the opinion that certain pleas were proved.
There were various issues in the proceedings. Relevantly, there was a question as to whether the deceased's sister as LPR had no notice that her niece was living: at 254. Neither party had left that question to the jury.
Neither party was desirous of incurring the expense of a new trial and after some discussion between counsel and their Lordships it was arranged that the LPR should be examined and cross-examined before Lindley J in chambers as to whether or not she was aware of her niece's existence at the time the assets were distributed by her, and that the decision of the rule and of the demurrers should abide the result of Lindley J's report: at 254, 256.
The report regarding the enquiry into the LPR's notice is brief. Lindley J, in reasons delivered on 26 February 1876, simply states that "[t]hat examination and the documents which were produced before me satisfied me that she was not aware that her niece was then living": at 258.
In New South Wales, a LPR is not protected by s 92 advertising if there is distribution after actual notice of a claim: e.g. in Nowell v Palmer at 582E-F per Handley JA citing Guardian Trust and Executors Co of New Zealand Ltd v Public Trustee of New Zealand [1942] AC 115 (Guardian Trust). Guardian Trust involved a situation in which executors of a Will paid out certain legacies with notice that the next of kin intended on applying to revoke the grant of probate.
In McGrath v Troy, the issue was whether the administratrix had notice at the time of distribution of the estate of a family provision claim made on behalf of the plaintiff (at the time of the hearing an infant aged three) based on the assertion that the plaintiff was the child of the deceased (the plaintiff's mother having had a sexual relationship with the deceased at least within the year prior to the deceased's death): [2], [68].
There was evidence in the proceedings that the plaintiff's mother had telephoned the administratrix after the deceased's death to ask about the funeral and in the context of that had informed her that the deceased had a son: at [71]. Although the administratrix denied the conversation, White J (as his Honour then was) rejected the denial. There was further evidence that the administratrix had consulted a solicitor and a file note referred to the possibility of performing testing to establish whether the deceased was the father of the plaintiff.
White J rejected a submission that what were described as prior notifications were not notices of a claim within the meaning of s 92 but mere "assertions" or "conjectures". His Honour referred to the dictionary meaning of "claim" in the Macquarie Dictionary noting that it included an assertion of a right or alleged right and includes the assertion of something as a fact. His Honour concluded that to make an assertion is to make a claim: at [92].
His Honour further addressed the question of what amounts to or does not amount to notice of a claim. In that regard, his Honour referred to Robert Geddes, Charles Roland and Paul Studdert, Wills, Probate Administration Law in New South Wales (1st ed, 1996, LBC Information Services) referring to the fact that, under the analogous provision s 60(4) Trustee Act, the notice of claim submitted to an executor need not be formal, and that the fact that the executor does not receive particulars of the claim will not relieve the executor of the duty of providing for it: at [94]. Now see Janes, Liebhold and Studdert at 899 citing Re Land Credit Company of Ireland; Markwell's Case (1872) 21 WR 135 (Markwell's Case).
White J referred to Markwell's Case, Newton v Sherry and also Scottish Equitable Life Assurance Society v Beatty [1889] 29 LR Ir 290 at 298 per Fitzgibbon LJ.
In Application of Valda Ann Haberfield [2014] NSWSC 1421 (Haberfield), White J dealt with an application for judicial advice as to whether the executors of a deceased's estate would be justified in making a distribution to the beneficiaries on the basis of making an adjustment under a particular clause of the Will. The adjustment related to acquisition by the deceased's son of a truck using monies lent by the deceased.
White J noted that the beneficiaries' entitlements depended upon objective facts not upon any discretion of the trustees: at [6].
His Honour considered the interrelationship between ss 60 and 63 Trustee Act and ss 92 and 93 PA Act. His Honour observed that the statutory regimes provided two ways of proceeding in administering and distributing an estate. One way of the executors proceeding would be to give notice of an intention to distribute the estate pursuant to s 60 Trustee Act (his Honour noting that the executors presumably would also have given notice pursuant to s 92 - currently, I note that the same prescribed form of notice addresses both statutory provisions).
If, having given such notice in that case of a proposed adjustment of a specific amount giving rise to a specified entitlement, the executors did not receive notice of a claim then, not having received such notice, they could distribute the estate and be protected against any later claim by force of s 60(5) Trustee Act: at [6]-[7].
On the other hand, if the trustees did have notice of such a claim, if they were to distribute the estate without regard to the claim, they would be personally liable to make good any deficiency in the distribution if the affected beneficiary established the claim: at [8].
The executors could obtain protection against such a claim by giving notice under s 93 PA Act requiring the claimant to institute proceedings within three months, failing which the claim would be barred: at [8].
His Honour observed that an alternate course by proceeding on the basis of judicial advice could achieve much the same ends: [9].
If the advice sought were given, the trustees, in accordance with the notice, would still be required before distributing to give notice to any person whose rights as beneficiary might be prejudiced by the distribution: s 63(8) Trustee Act.
The effect of proceeding under s 63 would be, in substance, the same as if the executors proceeded by the giving of notices, including, if necessary, notice under s 93 PA Act, except that the time limits for a beneficiary to make a claim could be specifically fixed by the Court's order under s 63(10): at [12]. In this regard, White J indicated that a greater flexibility is provided under s 63 and on the facts of that case indicated that that was the preferred mode of proceeding: [13].
In Application of the NSW Trustee and Guardian; Estate of SGB [2015] NSWSC 398, White J referred to his decision in Haberfield and did not, in the context of an application for judicial advice, express any different view: at [19].
Beyond what I have stated above, Australian texts do not deeply explore what is constituted by notice beyond actual notice.
Janes, Liebhold and Studdert express the opinion that a LPR is not protected against a remote contingent liability of which they had knowledge before distributing citing Taylor v Taylor at 903. The learned authors indicate that in such a case the LPR can call on beneficiaries to refund: citing Jervis v Wolferstan (1874) LR 18 Eq 18; Wittaker v Kershaw (No 2) (1890) 45 ChD 320.
Janes, Liebhold and Studdert do not cite Troy v McGrath.
Ford and Lee: The Law of Trusts (Thomson Reuters) (Ford & Lee) refers to Newton v Sherry, In re Long (deceased) [1951] NZLR 661 (Re Long) and Ludwig: at [41.6030].
In In the Will of Walker (1943) 43 SR (NSW) 305 (In the Will of Walker) the Will of the deceased provided for an annuity to a certain named person for her life.
The executor, Perpetual Trustee Company Ltd, had published the s 92 notice and had served upon two respondents (who claimed to be the nominated person under the Will entitled to the annuity) s 93 notices calling upon them to take proceedings to enforce their claims within a period of six months. Neither of the respondents took any steps to prosecute their claim within that period and the executor moved for an order pursuant to s 93(2) barring the claims.
Procedurally, whilst it appeared that the application before the Court had nominated the women as respondents, there was no appearance by the respondents on the application.
Nicholas CJ in Eq took the view that the s 93 procedure could apply to persons claiming to be legatees as well as those claiming to be creditors or next of kin. On the facts a barring order was made.
In Re Long, there was a motion brought by the Public Trustee as executor of an estate for an order barring a claim of a son of the deceased who had entered an arrangement with the Public Trustee to look after the deceased for a certain consideration. The son was paid for that arrangement. However, it appears that he put forward a further claim at a higher amount for having previously looked after the deceased for a period of eight years. That claim was disputed, and the Public Trustee called upon the son to take legal proceedings within three months. The son had not notified the Public Trustee of any such legal proceedings and, accordingly, the Public Trustee sought an order barring the claim.
Relevantly, the son appears to have been served with the motion but did not appear. The matter was dealt with at first instance by Gresson J. His Honour held that the claim was not such a claim as could be barred and dismissed the motion.
On appeal, the Court of Appeal held that an earlier decision of Myers CJ in In re Griffin (deceased) [1940] NZLR 174 (which advocated a restrictive view of what constituted a "claim against the estate") ought to be overruled and the view of Nicholas CJ in Eq in In the Will of Walker was to be preferred. That is, a person who claims to be entitled to a portion of the assets of an estate is someone who is making a claim "against the estate", regardless of whether the basis of the claim is a legacy under the Will or some other basis: at 670 per Stanton J for the Court.
Thus, Re Long does not advance the issue of what types of notice constitute notice of the claim. It deals more particularly with the question of barring of claims.
Dal Pont in the Law of Executors and Administrators refers to the decision of White J in McGrath v Troy but does not explore the question of constructive notice: at 434 n 239.

[12]

Constructive notice

Some consideration of the question of what constitutes notice was examined in detail in the UK in MCP Pension Trustees Ltd v AON Pension Trustees Ltd [2009] EWHC 1351 (Ch); [2010] 1 All ER (Comm) 323 (MCP [EWHC]), a decision of Jeremy Cousins QC sitting as a Deputy Judge of the High Court (whom I will refer to as "Cousins QC"). There was an appeal, and the Court of Appeal affirmed the decision of Cousins QC: MCP Pension Trustees Ltd v AON Pension Trustees Ltd [2010] EWCA Civ 377; [2011] 1 All ER (Comm) 228 (MCP [EWCA]).
The case involved a claim by a plaintiff claiming damages in respect of loss alleged to have been suffered as a result of the defendant's breach of contract or negligence in the provision of pension fund administration services.
In essence, the plaintiff claimed that it retained the defendant to administer a scheme between certain years. During that time, some 32 persons were transferred into the scheme. The plaintiff alleged that at some point after the transfer the defendant incorrectly amended the records of the scheme so as to remove reference to the 32 transferred members. Those persons were overlooked when the scheme was wound up and, when it was subsequently discovered, provision had to be made for 15 of the transfer members at substantial cost. The defendant contended the claim was time-barred. The case involved consideration of s 27 Trustee Act (UK) (effectively the equivalent of s 92 PA Act and s 60 Trustee Act).
The defendant made submissions in relation to what constituted notice for the purposes of s 27 by reference to the decision in Baden. The defendant submitted that notice in s 27 was limited to: (i) actual knowledge, (ii) wilfully shutting one's eyes to the obvious, and (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make. The defendant submitted that on that basis the trustee had no notice of the transferred members' claims at the time of distribution even though it had had such notice at an earlier time.
At first instance, Cousins QC cited each of Markwell's Case, Newton v Sherry and Guardian Trust for the proposition that a trustee who has "notice" of a claim will not be protected by the placing of an advertisement under the relevant statutory provision and the absence of a relevant response to the advertisement. However, his Lordship noted that those cases do not decide the extent of what constitutes such notice: [23]-[27].
Cousins QC noted that s 27(2) is concerned with notice and not knowledge: [63]. His Lordship noted that the concepts of notice and knowledge have been developed for different purposes. In the context of some statutory provisions, such as dealing with the purchase of land, notice (to be relevant for the statutory purpose) had to be linked to what was the purchaser's current knowledge (including knowledge to be derived from proper enquiry) at the time of the transaction under consideration: at [67].
His Lordship, whilst noting the submissions based on Baden, considered that authorities such as Baden (concerned with categories of knowledge) were of little assistance in resolving what constitutes notice for the purposes of s 27: [68].
Ultimately, in MPC [EWHC], Cousins QC found that because of a concession that the case involved actual notice that it was unnecessary to decide the question of whether imputed notice would be sufficient. However, his Lordship accepted a submission that knowledge of an agent would be imputed to the principal: at [72].
On appeal, their Lordships (Arden, Dyson and Elias LJJ) made a number of observations regarding s 27. Those observations included that: 1. the section relieves trustees from liability only with respect to claims of which they did not have notice at the time of distribution; 2. there is no definition in the section or, indeed, elsewhere in the Trustee Act (UK) of what constitutes notice; 3. having regard to general concepts of equity, notice means actual or constructive notice and the trustee may have constructive notice of the claim even though he does not have actual knowledge of it: [8]-[9] per Elias LJ.
The Court of Appeal's judgment appears to accept that some form of constructive notice can constitute notice for the purposes of the section. However, Elias LJ considered that the appeal in the case could be resolved simply by focussing upon the concept of actual notice and, accordingly, did not consider it necessary to identify the scope of constructive notice for the purpose of the section: at [11], [19].
Nonetheless, his Lordship did agree with Cousins QC that knowledge and notice are different things and observed that notice is not to be equated with knowledge. Thus, even if trustees forgot that notice had been given, that did not cause the notice to lapse or otherwise negate the notice: at [16]-[17].
Dyson and Arden LJJ (as his Lordship and her Ladyship then were) agreed: at [21]-[22].
The decisions in MCP at first instance and in the Court of Appeal do not appear to have been cited or applied in Australia.
In the context of the question of knowledge for the second limb of Barnes v Addy (1874) LR 9 Ch App 244 (accessorial liability claims in equity), the High Court, in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2003) 230 CLR 89; [2007] HCA 22 at [174]-[179] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ, accepted the view of Stephen J (Barwick CJ agreeing) in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; [1975] HCA 8 at 412, that knowledge within the categories which were later identified as (i) to (iv) of Baden is sufficient for the purposes of the second limb in Barnes v Addy, but constructive knowledge within category (v) of Baden, that is, knowledge of circumstances which would put an honest and reasonable person on inquiry, is insufficient: see e.g. Cassaniti v Ball as liquidator of RCG CBD Pty Limited (in liq) [2022] NSWCA 161 at [130] per Gleeson, Leeming and Mitchelmore JJA.
However, notice is not necessarily to be equated with knowledge. Further, even if one admits the possibility of s 92(2) PA Act not protecting a LPR in respect of some constructive notice, the law (in New South Wales) is not clear as to what form or degree of constructive notice might preclude reliance upon s 92(2).

[13]

Does advertising effectively achieve the purpose of alerting contingent claimants to make a claim?

Another fundamental issue which arises in relation to advertising is that there will be certain types of contingent claims which will never be able to be effectively addressed by advertising.
In Re Yorke, although Lindsay J did not consider specific statutory provisions concerning advertising as a means of protecting LPRs in distributing an estate in the context of potential claims on an insurance policy, his Lordship did state the following in relation to "advertising" (at 918): It is possible to find dicta which suggest even with respect to contingent creditors, that, should they not come in and claim in response to advertisement, then their only remedy would thereafter be against the legatees and that their remedy against the executors personally would have gone: Waller v Barrett (1857) 24 Beav 413, 53 ER 417. Such a view not only conflicts, in my judgment, with the earlier broad approach in such cases as Knatchbull v Fearnhead and Hawkins v Day (where the executors' ignorance of the claims was no defence) but with basic notions of justice and common sense. Especially is that so in the context of claims against a Lloyd's name where a policyholder (who could be anywhere in the world) could not reasonably be expected to know, at the time of any advertisement, even if it came to his notice or could be expected to have done so, that he had or might have a claim against some particular deceased. I do not propose to place any reliance on a possibility that in any case such as that before me executors could escape personal liability (be it for un-notified insurance or reinsurance claims based on events which have already happened or for future maturing continent liabilities) by the simple expedient of placing an advertisement and finding it to have yielded no response.
If one remembers that one of the objects of advertising is not merely to secure an indemnity to LPRs, but for the benefit also of persons having claims against the estates of deceased persons to give them a reasonable opportunity to bring forward such claims there must be questions as to whether an advertising procedure is entirely apt in some cases to fairly give persons (who have or might have claims which are contingent) notice of proposed distribution.

[15]

Inherent equitable and statutory jurisdiction

The Court has an inherent equitable jurisdiction to give advice: Macedonian Court Case at 81 n 47; Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441; [2005] NSWSC 558 (Macedonian No 2) at [23] per Palmer J.
There is also statutory jurisdiction pursuant to s 63 Trustee Act.
The High Court in the Macedonian Court Case at least expressly did not consider how far this Court may have jurisdiction to give judicial advice by reason of the inherent jurisdiction of a court of equity, or by reason of s 22 or s 23 Supreme Court Act 1970 (NSW): Cho-Poon at [172] citing Macedonian Court Case at 81 n 47, though cf Cho-Poon at [177]-[179].
The jurisdictional power under s 63 is enlivened where there is a question respecting the management or administration of the trust property or respecting the interpretation of the trust instrument: Macedonian Church Case at [58].
The inherent equitable jurisdiction allows for private advice to trustees. It is derived from the practice of the Court of Chancery under the general law in giving directions to those entrusted with the administration of property under the control of the Court - affording special assistance to those, such as trustees, who have no direct pecuniary interest in a fund but have assumed the onerous obligation of administering it for the benefit of others: Macedonian No 2 at [23].
The Court in a s 63 application is not bound to give judicial advice merely because a trustee has a right to apply for it: Cho-Poon at [43] per Lindsay J citing Application of Perpetual at [8]-[9] per Young CJ in Eq. Ultimately, the Court in dealing with such applications whether as to the form of the application or in the decision as to whether to give advice or not must be guided by what it perceives to be in the best interests of the trust estate: Macedonian Church Case at [72]; Cho-Poon at [45] citing Application by Marilyn Joy Cottee [2003] NSWSC 47 at [35] per Hallen J.

[16]

Purposes served by the jurisdiction

The primary purpose of judicial advice is to enable trustees to ascertain in advance whether particular conduct that they contemplate will be in accordance with their duties as trustees.
Applications by LPRs for advice under s 63 Trustee Act lay a foundation for an application to the Court: 1. under s 85 Trustee Act, to be granted relief against liability for a breach of trust: Cho-Poon at [120] citing National Trustees Company of Australasia Limited v General Finance Company of Australasia Limited [1905] AC 373; Re Investa Properties Limited [2001] NSWSC 1089; 187 ALR 462 at [39]-[43]; and 2. as evidence persuasive of an absence of any "wilful default" on the part of the trustee personally that, if present, could expose the trustee to liability Cho-Poon at [120] citing Perpetual Trustee Co v Watson (No 2) (1927) 28 SR (NSW) 43 at 46-47; Ah Toy v Registrar of Companies (Northern Territory) (1986) 10 ACLR 630 at 646.
In relation to the first matter, the High Court has indicated that it is desirable that trustees in doubt as to a course of action should not proceed with it and then seek s 85 relief, but rather seek s 63 relief first because one of the things which a trustee invoking s 85 requires to be excused from is his failure to seek s 63 advice: Macedonian Church Case at [36].
If trustees then act on the advice, they will have discharged their responsibility, and subject to the proviso in s 63(2) will not be liable for breach of trust. See also Australian Legion of Ex-Servicemen & Women [2021] NSWSC 149 at [44] per Robb J.
A related purpose concerns the right of a trustee to be indemnified from the trust fund for the trustee's costs of performing the trustee's duties.
In many cases, a trustee can obtain effective protection by acting upon the opinion or advice of a lawyer: Cho-Poon at [110] per Lindsay J.
Wills or trust provisions might provide a facility for the executor or trustee to rely upon counsel's advice or even other exemptive provisions. However, absent such an exemptive provision in the trust instrument, even though a trustee may be assisted by the provision of the opinion or advice of a lawyer, the intervention of a lawyer in this respect provides no guarantee of protection if a Court subsequently perceives that the opinion or advice was wrong or it was unreasonable for the trustee to have acted upon it: Cho-Poon at [110].

[20]

Differences between United Kingdom and New South Wales advice applications and description of protection

It is very easy to find broad statements regarding the protection afforded by distribution under an order for judicial advice.
In the United Kingdom, there is no exact statutory equivalent to s 63 Trustee Act (after the demise of s 30 Lord St Leonards' Act). There, Practice Direction 64B governs applications to the Court for Directions by Trustees in relation to the Administration of the Trust.
Rules of the Supreme Court (RSC), 1883 O 55 r 39 (which is an alternative means by which trustees in England could obtain, in functional terms, judicial advice) was replaced by RSC 1965, O 85 r 2. The latter in turn was replaced by the Civil Procedure Rules 1998 (UK), Pt 64.2. These provisions do not include the terms "fraud or wilful concealment or misrepresentation" or anything similar.
Nonetheless, the position in the United Kingdom regarding so called "Re Beddoe" applications (after In re Beddoe; Downes v Cottam [1893] 1 Ch 547 (Re Beddoe)) is that there is a requirement on the trustee or executor to make full disclosure of the material facts in any application for advice (failure to do which may threaten the protection afforded by the advice/directions). Accordingly, in Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431, Lightman J said (at 435): So long as the trustees make full disclosure of the strengths and weaknesses of their case, if the trustees act as authorised by the court, their entitlement to an indemnity and lien is secure.
Additionally, Hoffmann LJ (as his Lordship then was), with whom Hirst and Balcombe LJJ agreed, said in McDonald v Horn [1995] 1 All ER 961 at 970: Trustees are also able to protect themselves against the possibility that they may be held to have acted unreasonably or in their own interest by applying at an early stage for directions as to whether to bring or defend the proceedings. This procedure, sanctioned by the decision of the Court of Appeal in Re Beddoe, Downes v Cottam at 557, requires the trustee to make full disclosure of the strengths and weaknesses of his case. Provided that such disclosure has been made, the trustee can have full assurance that he will not personally have to bear his own costs or pay those of anyone else (emphasis added).
A further reminder of this principle was provided in Professional Trustees v Infant Prospective Beneficiary [2007] EWHC 1922 (Ch); [2007] WTLR 1631, where Lindsay J said (at [21]-[25]): 21. I do wonder also whether ''disclosure'' adequately covers all cases where inroads are, in justice, proper to be made into the total assurance of his costs which Beddoe relief will normally give a trustee. What, for example, if the trustee adequately discloses the strengths and, more particularly, the weaknesses of which he has knowledge but not the weaknesses which, had only he made a sufficient inquiry, he would have known of? What if he makes material factual mistakes which do not come to the notice of the Judge who hears the Beddoe application? Such cases, one might hope, will be exceptional. … 22 … But even where the proceedings are launched or are continued, a trustee will not, in my view, as a matter of inescapable necessity, get his costs out of the trust estate. If, for example, it transpires that the picture which the trustee painted before the Judge in order to get the Beddoe relief was materially inaccurate and that the inaccuracy was the trustee's fault, the trustee could, in my judgment, and without inconsistency with McDonald v Horn, find himself vulnerable in costs. In that sense, the Beddoe hearing, strictly speaking, determines nothing relevant. … 30. If there is want of that full disclosure, the whole Beddoe application can become close to pointless and that suggests that the trustees should err, if at all, if only for their own sake, on the side of disclosure. The modern notion of all cards being laid, in general, face up on the table, points in the same direction. Added to that is the fact that advices received by trustees as such are, in effect, trust property to which all beneficiaries are, broadly speaking, prima facie entitled.
In Australia, the notion that an executor or trustee is protected only if all material and relevant facts have been submitted to the Court appears in many texts. For example, see JD Heydon and MJ Leeming, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis) at 535 citing In re Grose, deceased [1949] SASR 55 (Re Grose) and Marley; Peter Young, Clyde Croft and Megan Smith, On Equity (2009, Thomson Reuters) at 489 citing Marley and Khoury v Zambena Pty Ltd (1997) 23 ACSR 344 (Khoury v Zambena) at 347 per Young J (as his Honour then was). Ford & Lee notes that protection is afforded provided all material and relevant facts are substantially as submitted on the application citing Re Grose at 60 per Mayo J: at [17.260].
The Australian texts must be read in light of the fact that the commentary often is directed to addressing norms of trust law across different jurisdictions in Australia rather than New South Wales and the Trustee Act in particular.
The position in New South Wales is that many cases predating the Macedonian Church Case have indicated that the utility of judicial advice is based upon the accuracy of the facts and if the facts are not accurate, and the trustee acts in accordance with the advice, the trustee is not protected by the statutory provisions in performing the act or relying upon the advice: Harrison v Mills [1976] 1 NSWLR 42 at 45E per Needham J. See also Khoury v Zambena, at 347 per Young J (as his Honour then was) citing Re Grose at 60 and Marley at 201 per Lord Oliver of Aylmerton for the Board; Application of Perpetual at [24] per Young CJ in Eq (as his Honour then was).
The position in New South Wales, as observed by Lindsay J in Cho-Poon at [167]-[168], is that authoritative guidance on the construction and operation of s 63 is available in the judgment of the High Court of Australia in the Macedonian Church Case, and care needs to be taken in relying upon broad, normative statements made in texts and caselaw predating the Macedonian Church Case regarding s 63 and 63(2) in particular.
Despite the large number of judicial advice applications that are made to Courts and, in particular, to this Court and the relative ease with which one can find statements to the effect that advices based on erroneous facts afford trustees and executors no protection, it is rare to find cases in which it has been held that a trustee is unable to rely upon advice that has been given or, alternatively, where an application has been made to set aside advice.
In Re PILT Nominees Pty Ltd - Londish v Seller [2011] NSWSC 74 (PILT Nominees), the plaintiff applied to the Court to set aside judicial advice allegedly on the basis of material nondisclosure and for repayment of trust funds paid out to trustees in reliance upon such advice: [57]-[62].
Ultimately, Ward J (as her Honour then was) was not satisfied that the interlocutory procedure seeking to set aside the orders was an appropriate mechanism to deal with the matter: at [88].
In Re Rosewood Research Pty Ltd (No.2) [2014] NSWSC 1226, Darke J rejected a submission by objectors that the failure of the trustees to provide the Court with certain information about their taxation affairs amounted to a failure to discharge their obligation of disclosure: at [26].
There is some tension between the wording of s 63(2) Trustee Act on the one hand and descriptions in textbooks and caselaw of protection afforded by advice on the other.
For that reason, it is appropriate to consider the issue of the extent of protection afforded by the statutory jurisdiction under s 63(2) Trustee Act.

[21]

Disclosure obligations on ex parte applications

In adversarial litigation, an applicant for ex parte orders must candidly disclose to the Court all matters material to the making or obtaining of the order or which as a real possibility may influence the Court's determination, especially material matters that may be adverse to the applicant's case: e.g. Thomas A Edison Ltd v Bullock (1912) 15 CLR 679; [1912] HCA 72 (Thomas A Edison v Bullock) at 681-682 per Isaacs J; International Finance Trust Co Ltd v NSW Crime Commission (2009) 240 CLR 319; [2009] HCA 49 (International Finance Trust) at [130]-[133] per Hayne, Crennan and Kiefel JJ.
The obligation to make proper disclosure when seeking relief from a Court without notice to any opposite party applies not merely to applications for interlocutory injunctions but to a wide range of circumstances and is not confined to cases where equitable relief is sought: International Finance Trust at [132].
For example, it applies in relation an ex parte application: 1. for a grant of letters of administration: Murakami v Murakami [2005] NSWSC 953 at [29]-[35] per Windeyer J; 2. under s 93 PA Act for a barring order: Ludwig at [273] per Campbell J (obiter).
In adversarial settings, the source of the obligation is understood as lying in the very nature of the adversarial system coupled with the emphasis given to the desirability of finality in litigation: International Finance Trust at [133].
In the Supreme Court of New South Wales, the obligation might be seen as rooted in the requirement of s 56 CPA that the overriding purpose of that Act and the UCPR is "to facilitate the just, quick and cheap resolution of the real issues" in proceedings: International Finance Trust at [133].
It is said that any demonstrated breach of an ex parte applicant's material disclosure obligation will generally lead to dissolution of any orders that have been obtained: e.g. Thomas A Edison v Bullock at 682; Garrard (t/as Arthur Anderson & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 676-677 per Mahoney A-P (Clarke JA agreeing).
What is material will depend upon the nature of the proceedings, the nature of the right affected, the nature of the power being exercised and statutory provisions: Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (2017) 94 NSWLR 606; [2017] NSWCA 53 (Fitz Jersey) at [75]-[77] per Basten JA (as his Honour then was) and at [109] per Leeming JA (Beazley A-CJ - as her Excellency then was - agreeing with both judgments at [2]).

[24]

Statutory construction

There is a broad uniformity regarding approaches to construction of legal instruments across a number of areas of the law: see e.g. Marley v Rawlings [2015] AC 129; [2014] UKSC 2 at [20]-[23] per Lord Neuberger of Abbotsbury PSC (as his Lordship then was) (Lord Clarke of Stone-cum-Ebony, Lord Sumption, Lord Carnwath and Lord Hodge JJSC agreeing); Al Dakhili v Al Kheurallah [2023] NSWSC 47 at [356].
At least as far as legal principle is concerned, there is only one true construction of any legal instrument including a statutory provision: Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [154] per Edelman J.
Statutory construction and contractual construction involve the Court looking at text, context and purpose: see e.g. Zhang v ROC Services (NSW) Pty Ltd (2016) 93 NSWLR 561; [2016] NSWCA 370 (Zhang) at [86] per Leeming JA. See also Hackett (a pseudonym) v Secretary, Department of Communities and Justice [2020] NSWCA 83 at [35] per Leeming JA.
A helpful way of considering the matter of construction of complex provisions within written instruments is guided by Leeming JA in Zhang.
His Honour there noted that the construction of a complex (in that case contractual) provision involves the following considerations: 1. first, determine the literal or grammatical meaning or meanings of the clause. 2. secondly, determine the legal meaning of the clause. 3. thirdly, apply that legal meaning to the facts as found by the Court: at [53].
Whilst those considerations are described in a sequential way as phases (Zhang at [54]), the actual process by which our minds work will in many cases involve some degree of crossover between those phases as those matters are assessed.
There is not a sharp line dividing the threshold stage of ascertaining grammatical or literal meaning and the subsequent stage of determining legal meaning: Zhang at [77].
Determining the literal or grammatical meaning is a matter of English, not a matter of law. It does not turn on evidence: Zhang at [54].

[25]

Literal or grammatical meaning

The noun "misrepresentation" conveys something that has been represented in an incorrect way. The verb "misrepresent" is defined to mean "to represent incorrectly, improperly, or falsely": Macquarie Dictionary, online ed.
Essentially, for there to be a misrepresentation there must be some standard. A misrepresentation generally occurs if there is a discrepancy between true facts and the represented facts.
The law applies the noun misrepresentation to a broad range of conduct. Depending upon the particular context, the law distinguishes between types of misrepresentation including innocent misrepresentation, negligent misrepresentation and fraudulent misrepresentation.
An "innocent misrepresentation" is a false statement of a past or present fact made by words or conduct, that induces the representee party to act in a particular way (such as enter into a contract) but which is not made with an intention to deceive: Encyclopaedic Australian Legal Dictionary (LexisNexis) (Australian Legal Dictionary).
It is distinguished from a "fraudulent misrepresentation" which is a false statement of fact, made by a person who does not believe the truth of the statement or is recklessly indifferent to whether it is true, to another with the intention that the other person will rely on it: Australian Legal Dictionary citing Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; [1912] HCA 9; Commercial Banking Co of Sydney Ltd v RH Brown & Co (1972) 126 CLR 337; [1972] HCA 24.
"Fraud" is an intentional dishonest act or an omission done with the purpose of deceiving: Australian Legal Dictionary.
"Wilful concealment" depending on context has various meanings. The adjective "wilful" refers to intentional, deliberate conduct. Concealment in the context of a Court application will often refer to nondisclosure of evidence or, in particular, suppression of evidence. Where the expression is used it is generally in the context of there being a duty on the relevant party to disclose that information to the Court.
At first blush, the text of s 63(2) suggests by the grouping of the word "misrepresentation" with "fraud or wilful concealment" conduct that appears to be closer to "fraudulent misrepresentation" than "innocent misrepresentation". Such a reading is supported by the maxim noscitur a sociis ("a thing is known by its associates" or, in this context, "the meaning of a word is known by the company it keeps"). The rationale of the maxim is that the interpretation or meaning of a word can be gleaned from its associated words: Perry Herzfeld and Thomas Prince, Interpretation (2nd ed, 2020, Thomson Reuters) (Herzfeld and Prince) at [6.20] n 7 citing Lend Lease Real Estate Investments Ltd v GPT RE Ltd [2006] NSWCA 207 at [30] per Spigelman CJ (McColl and Basten JJA agreeing).
The maxim has a number of sub-principles including the rule ejusdem generis ("of the same kind") and the rule copulatio verborum indicat acceptationem in eodem sensu ("the linking of words indicates that they should be understood in the same sense"): Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152 at [13] per Spigelman CJ. In that case, Spigelman CJ used the latter sub-principle to construe the words "negligence" and "breach of trust", which appeared in a statutory provision referring to "civil proceedings … for negligence, default, breach of trust or breach of duty", as limited to obligations under the general law only (and not statutory obligations): at [11].
The sub-principle ejusdem generis provides that "where there is a list of things that are specific instances (species) of a class or category (genus), general words following the list are restricted to species of that genus": Hertzfield and Prince at [6.50] citing R v Regos (1947) 74 CLR 613; [1947] HCA 19 at 623 per Latham CJ (McTiernan J agreeing). It has been said that "[f]or the purposes of that canon you must first find in your particular instances which precede the general words some common attributes or characteristics which enable you to formulate a category or description: Cody v JH Nelson Pty Ltd (1947) 74 CLR 629; [1947] HCA 17 at 648 per Dixon J.
A reading of the text which interprets "misrepresentation" as being conduct closer to "fraudulent misrepresentation" than "innocent misrepresentation" appears reinforced by use of the word "guilty".
The word "guilty" can be used as a noun or adjective. As a noun it essentially names or represents a plea or a verdict on conduct. As an adjective it tends to describe types of actions.
Leaving aside the specific legal context in which being guilty conveys being legally responsibility for a criminal offence, the word in its plain meaning conveys a seriousness or gravity regarding culpability.
However, it can be acknowledged that the word is also commonly used in less serious contexts such as determining whether a party is "guilty of postponing conduct" where there is a priority dispute between holders of equitable interests in land: see e.g. Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd [2014] NSWSC 952 at [119] per Darke J.

[26]

Context and purpose

The origins of s 63 were referred to by the High Court in the Macedonian Court Case at [37].
Section 63 has effectively two limbs. The first relating to questions regarding management or administration of trust property and second relating to interpretation of trust instruments.
The genesis of the first limb of the Trustee Act is s 30 Lord St Leonards' Act.
Section 30 Lord St Leonards' Act provided as follows: Any Trustee, Executor, or Administrator shall be at liberty, without the institution of a Suit, to apply by petition to any Judge of the High Court of Chancery, or by summons upon a written Statement to any such Judge at Chambers, for the Opinion, Advice, or Direction of such Judge on any Question respecting the Management or Administration of the Trust Property or the Assets of any Testator or Intestate, such Application to be served upon or the Hearing thereof to be attended by all Persons interested in such Application, or such of them as the said Judge shall think expedient; and the Trustee, Executor, or Administrator acting upon the Opinion, Advice, or Direction given by the said Judge shall be deemed, so far as regards his own Responsibility, to have discharged his Duty as such Trustee, Executor, or Administrator in the Subject Matter of the said Application; provided nevertheless, that this Act shall not extend to indemnify any Trustee, Executor, or Administrator in respect of any Act done in accordance with such Opinion, Advice or Direction as aforesaid, if such Trustee, Executor, or Administrator shall have been guilty of any Fraud or wilful Concealment or Misrepresentation in obtaining such Opinion, Advice, or Direction; and the Costs of such Application as aforesaid shall be in the discretion of the Judge to whom the said Application shall be made. (emphasis added).
Section 30 Lord St Leonards' Act was amended, shortly after its commencement, by s 9 of the Law of Property Amendment Act 1860, 23 & 24 Vict, c 38, in a manner not materially relevant for the purposes of this judgment.
These provisions were enacted in New South Wales as s 30 Trust Property Act which provided: 30. Any trustee executor or administrator shall be at liberty without the institution of a suit to apply by petition or by summons upon a written statement to the Primary Judge in Equity for the opinion advice or direction of such Judge on any question respecting the management or administration of the trust property or the assets of any testator or intestate such application to be served upon or the hearing thereof to be attended by all persons interested in such application or such of them as the said Judge shall think expedient and the trustee executor or administrator acting upon the opinion advice or direction given by the said Judge shall be deemed so far as regards his own responsibility to have discharged his duty as such trustee executor or administrator in the subject matter of the said application Provided nevertheless that this Act shall not extend to indemnify any trustee executor or administrator in respect of any act done in accordance with such opinion advice or direction of such Judge if such trustee executor or administrator shall have been guilty of any fraud or wilful concealment or misrepresentation in obtaining such opinion advice or direction Provided also that every such petition or statement shall be signed by the party his Counsel or Attorney and that the Judge may require the petitioner or applicant to attend him in Chambers or in Court when he deems it necessary and such party may appear by Counsel or Attorney and the costs of such application as aforesaid shall be in the discretion of the Judge to whom the said application shall be made.
Section 30 Lord St Leonards' Act was repealed by s 51 (Sch) of the Trustee Act 1893, 56 & 57 Vict, c 53 (Trustee Act 1893).
In New South Wales s 30 Trust Property Act was replaced by s 20 Trustee Act 1898 (NSW) (Trustee Act 1898) which provided 20. (1) Any trustee, executor, or administrator may, without the institution of a suit, apply by petition or by summons upon a written statement to the Chief Judge in Equity for his opinion, advice, or direction on any question respecting the management or administration of the trust property or the assets of any testator or intestate ; such application to be served upon, or the hearing thereof to be attended by, all persons interested in such application, or such of them as the said Judge thinks expedient, and the trustee, executor, or administrator acting upon the opinion, advice, or direction given by the said Judge shall be deemed, so far as regards his own responsibility, to have discharged his duty as such trustee, executor, or administrator in the subject matter of the said application : (2) This Act shall not extend to indemnify any trustee, executor, or administrator in respect of any act done in accordance with such opinion, advice, or direction of such Judge if such trustee, executor, or administrator shall have been guilty of any fraud or wilful concealment or misrepresentation in obtaining such opinion, advice, or direction : (3) Every such petition or statement shall be signed by the party, his counsel, or solicitor, and the Judge may require the petitioner or applicant to attend him in Chambers or in Court when he deems it necessary, and such party may appear by counsel or solicitor, and the costs of such application as aforesaid shall be in the discretion of the Judge to whom the said application is made.
I pause to observe that the marginal note in relation to s 20(2) Trustee Act 1898 was: Trustee following the advice is indemnified in the absence of fraud.
Section 20 Trustee Act 1898 was in turn replaced in 1925 by s 63 Trustee Act in the following form: (1) A trustee may apply to the Judge or the Master in Equity for his opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument. (2) If the trustee acts in accordance with the opinion advice or direction, he shall be deemed, so far as regards his own responsibility, to have discharged his duty as trustee in the subject matter of the application, provided that he has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction. (3) Unless otherwise prescribed by rules of court, the application may be made by summons or appointment upon a written statement signed by the trustee, his counsel, or solicitor. (4) Unless the Judge or the Master otherwise directs, it shall not be necessary to serve notice of the application on any person, or to adduce evidence by affidavit or otherwise in support of the application. (5) The Judge may, if he thinks fit, adjourn the application into Court, and the Master may, if he thinks fit, refer the application to the Judge. (6) The costs of the application shall he in the discretion of the Judge or Master, as the case may he, and the Judge or Master may, if he thinks fit, assess the costs. (7) The jurisdiction of the Judge or Master under this section shall be subject to such limits, if any, as to amount or otherwise, as may be prescribed by rules of court, provided that the Master shall not exercise the jurisdiction under this section where the trust estate exceeds one thousand pounds in value. A finding under the hand of the Master as to the value of the trust estate shall be conclusive evidence of the value upon any question as to the jurisdiction of the Master. (8) Where the question is "who are the beneficiaries or what are their rights as between themselves, the trustee before conveying or distributing any property in accordance with the opinion advice or direction shall, unless the Judge or Master otherwise directs, give notice to any person whose rights as beneficiary may be prejudiced by the conveyance or distribution. (9) The notice shall state shortly the opinion advice or direction, and the intention of the trustee to convey or distribute in accordance therewith. (10) Any person who claims that bis rights as beneficiary will be prejudiced by the conveyance or distribution may within such time as may be prescribed by rules of court, or as may be fixed by the Judge or Master, apply to the Court for such order or directions as the circumstances may require, and during such time and while the application is pending, the trustee shall abstain from making the conveyance or distribution. (11) Subject to the provisions of subsection ten of this section any person on whom notice of any application under this section is served or to whom notice is given in accordance with subsection eight of this section shall be bound by the opinion advice or direction of the Judge or Master, or by the order and directions of the Court, as the case may be, as if the opinion advice or direction, or the order and directions, had been given or made.
The enactment of s 63 in 1925 went beyond merely re-enacting s 20 Trustee Act 1898. In addition, three major innovations were made. First, advice on questions about "the interpretation of the trust instrument" could be given. Secondly, s 63(4) made it plain that it was possible for evidence to be adduced by affidavit or otherwise. Thirdly, s 63(11) recognised that an express right of appeal might be created: Macedonian Church Case at [39]-[40].
The High Court observed that in England another means by which judicial advice could be given to trustees without an administration order was developed making reference to an alternative jurisdiction alongside s 30 Lord St Leonards' Act, namely, RSC, 1883 O 55 r 39(e)-(g) - see Macedonian Church Case at [41]. This jurisdiction was more concerned with the Court's discretion of whether to allow a trustee or executor's costs to be paid out of the trust fund or estate. The RSC, 1883 O 55 r 39 provisions did not include the phrase "fraud or wilful concealment or misrepresentation".
Many of the authoritative cases in England, including Re Beddoe, were decided pursuant to O 55 r 39 (and not s 30 Lord St Leonards' Act) - see Macedonian Church Case at [44], and therefore did not involve consideration of a statutory provision with the phrase "fraud or wilful concealment or misrepresentation".
In New South Wales, Lindsay J elaborated on the origins of s 30 Lord St Leonards' Act and its eventual phasing out in his paper "An Application for Judicial Advice: Text, Context and Functional Purpose", The Blue Mountains Law Society Succession Law Conference, 18 November 2021 (BMLS Paper): at [66]-[79].
Such was the recourse by practitioners to the RSC that, eventually, s 30 came to be regarded as "obsolete": see BMLS Paper at [78].
The High Court has observed that the possibility that the rights of beneficiaries under private trusts could be affected by judicial advice led the New South Wales Parliament in 1925 to introduce the protections given by s 63(8)-(11) and in that sense to strike a compromise between the purpose of affording protection to trustees and need for affected persons to be given a hearing in some cases, albeit that such persons are not strictly speaking "parties" to "proceedings" by reason of the closing words of s 63(11): Macedonian Church Case at [65].
In construing the provisions of s 63 Trustee Act the High Court in the Macedonian Church Case made reference (at [43]) to the text of HS Nicholas and HE Harrington, Trustee Acts of New South Wales (1st ed, 1926, Butterworth & Co (Australia Ltd)), produced within a year after the Trustee Act was enacted in New South Wales (as was highlighted there, HS Nicholas was a judge and later Chief Judge in Equity in the NSW Supreme Court from 1935 to 1946).
The annotation to s 63(2) provides helpful contextual insight to the statutory purpose.
The learned authors state at 101: The protection afforded by this section to the trustee depends on the completeness and correctness of information disclosed to the Court. If there is found wilful concealment or misrepresentation, then the trustee will not be deemed to have discharged his responsibility. The words "fraud" or "wilful concealment" or "misrepresentation" do not include an innocent omission by the trustee. They are taken from sec 20 of the Trustee Act, 1898. But it is to be observed that under that section the rights of beneficiaries were not affected except as against the trustee.
That commentary is reiterated in the second edition in 1939: HS Nicholas and JD Evans, The Trustee Acts of New South Wales (2nd ed, 1939, Butterworth & Co (Australia Ltd)) at 112.
Innocent misrepresentation per se in life is not necessarily actionable. Generally, what causes misrepresentation to be actionable is whether it has induced action in another causing that other to do something or to incur loss or damage. Different areas of the law, specifically statutory jurisdictions, equity and common law have different responses to the effects of an innocent misrepresentation.
The above suggests the wisdom of addressing the requirements of disclosure to the Court on a s 63 judicial advice application by reference to the precise nature and content of the statutory regime: Fitz Jersey at [75]-[77] per Basten JA (as his Honour then was) and at [109] per Leeming JA (Beazley A-CJ - as her Excellency then was - agreeing with both judgments at [2]).
The purpose of the statutory provision providing protection to trustees must be considered as indicated by the High Court. The operative mechanism by which any fraud, wilful concealment or misrepresentation referred to in s 63(2) precludes a discharge of the trustee's responsibility is that it has arisen in the "obtaining" of the opinion, advice, or direction of the Court (being wording sourced from s 30 Lord St Leonards' Act) rather than "induced" such advice.

[27]

Conclusions on s 63(2) protection

Qualification on the protection that is afforded to a trustee who acts in accordance with s 63 advice is best expressed in the statutory language as being effective so long as the proviso to s 63(2) is satisfied: Macedonian Church Case at [65]; PILT Nominees at [74] per Ward J (as her Honour then was).
The protection afforded to trustees under s 63(2) is qualified by a proviso that focuses attention on the state of mind of a trustee: Cho-Poon at [142].
The text, context and purpose of the statutory provisions indicate that the nature of any conduct of the LPR in obtaining s 63 advice which precludes protection is of a graver nature than mere innocent misrepresentation or omission of some facts.
Put another way, protection is seemingly afforded by s 63(2) to a LPR who seeks judicial advice pursuant to s 63, notwithstanding some form of innocent misrepresentation or innocent omission of the facts.
Thus, there would appear to be at least some greater degree of tolerance for the accuracy or completeness of factual material placed before the Court afforded by the terms of s 63(2), than some pre-Macedonian Church Case descriptions of the advice jurisdiction, which suggest that any misdescription or incompleteness of facts placed before the Court will render the advice useless or preclude a LPR relying upon such advice.
Other than making that observation, this judgment is not the occasion to explore the extent of tolerance afforded by s 63(2) in LPRs obtaining advice as there is not the slightest suggestion that the plaintiffs have at each stage of this application attempted to act other than in a careful manner in progressing the application for advice.
What can be said is that as a practical matter what the above discussion and analysis point to is that some degree of rigour and care should be taken by LPRs (for their own sake and the sake of those who will be affected by Court advice acted upon by LPRs) in providing to the Court a sufficiently satisfactory base of stated facts (whether by statement evidence or other materials) which thus enables the Court to properly exercise the statutory jurisdiction with a degree of confidence.

[30]

1997 - Re Yorke

Re Yorke involved an issue regarding contingent liabilities of an estate.
In Re Yorke, the plaintiffs were the executors of the estate of Richard Michael Yorke QC, the deceased, being a former underwriting member of Lloyd's. At the time of the application, the deceased's estate had been administered to a significant, but not a full, extent. All the inheritance tax liabilities had been discharged subject only to minimal adjustments. Further, all debts and liabilities other than particular unascertained or contingent liabilities, had, with minor exceptions, been met. The estate had net assets of approximately $620,000 almost exclusively in cash on deposit available for distribution.
The deceased had been a "name" at Lloyd's of London Insurance Market from 1983 until his death in 1991.
There was evidence from the chairman of Lloyd's Underwriting Agents Association explaining that each individual member of a syndicate ("names" such as the deceased) agrees to assume a proportion of the risks underwritten by that syndicate. The liability of an individual for that agreed part is unlimited, but there is no liability on the individual for the failure of any fellow member of the syndicate to bear that other's proportion: at 911.
Relevantly, on becoming a name at Lloyd's each individual signs a general undertaking to the effect that he and his personal representative shall be bound by the rules of Lloyd's. Whilst each syndicate in a sense was an annual venture, the syndicates were accounted under a three-year accounting system in which the syndicate's profit or loss was calculated only at the end of the three years. At the end of that period, there were likely to be unsettled claims and the possibility of future ones. In order to achieve finality in respect of any accounting period there was a system called "reinsurance to close": at 911. The nature of the reinsurance system and reinsurance methods was described by Lindsay J in the judgment.
In the period 1988 to 1992, Lloyd's suffered enormous losses. A reinsurance group Equitas was formed into which all liabilities for 1992 and earlier years were to be reinsured. The deceased's estate had acquired the benefit of reinsurance into Equitas in respect of every possible Lloyd's risk to which it would or might otherwise be vulnerable: at 913. However, as Lindsay J noted, reinsurance is only as good as the relationship between the funds available or to become available to the reinsurer and the claims it has to meet: at 913.
The reasons for judgment detail certain of the risks facing the estate in respect of claims based on detailed evidence: at 914-916.
Lindsay J held that, on the facts of the particular case, the executors could distribute without retaining out of the estate a fund or any particular security beyond the personal security of the recipients in support of an indemnity from the beneficiaries to the executors should it transpire that they had been overpaid by reason of there being emerging debts in respect of the deceased's "open years" which were unsatisfied by the Equitas arrangements: at 922-923.

[31]

1999 - Estate Hall

In Estate Hall, the deceased was also a name of Lloyd's. The executors wished to finalise the administration of the estate and to distribute it to the relevant beneficiaries but were concerned because of the existence of possible contingent claims against the estate arising out of the deceased's underwriting activities and their consequent risk of personal liability. The executors believed that the interests of any claimant against the estate had been reasonably secured by virtue of reinsurance arrangements made for names through the Equitas group (as was the case in Re Yorke) but nonetheless sought advice regarding distribution.
Austin J accepted and adopted the reasoning and conclusion of Lindsay J in Re Yorke.
The particular issue in Estate Hall was the question as to whether there was sufficient evidence adduced on the application to enable his Honour to apply the principle in Re Yorke: at [9]. There was no direct evidence adduced as to the general contractual position of Lloyd's names and the overall arrangements which were negotiated with the Equitas Group. However, his Honour considered that he was able to rely upon the details which emerged in the reasons for judgment in Re Yorke: at [9]-[10].
That was not the only issue regarding evidence. When the matter initially came before Austin J, there was no evidence that the relevant insurance premium had been paid and, whilst financial statements for the Equitas Group for the relevant 1999 year were put in evidence, his Honour found it difficult to relate those statements to the financial picture described by Lindsay J in Re Yorke. Given the (then) recent turbulence in the financial performance of reinsurance companies his Honour was concerned there was no evidence updating the financial position of the Equitas Group after March 1999. His Honour adjourned the hearing to give the executors the opportunity to obtain and adduce further evidence: at [12].
Subsequently, additional evidence was adduced - including of financial statements and a letter from Jardine (Lloyd's Underwriting Agents) Ltd, the members' agent for the deceased - more particularly addressing the deceased's "Finality Statement" and the arrangements regarding Equitas. On the basis of the additional evidence, his Honour concluded that the Equitas reinsurance arrangements were in full force and effect with respect to the deceased's estate and provided reasonable protection to the estate with respect to any contingent liability of his as a name: at [18].
His Honour proceeded to make an order similar to the order made by Lindsay J in Re Yorke in respect of the matter.
The extent to which Austin J could rely upon the decision in Re Yorke regarding the contractual position of Lloyd's names and the overall arrangements negotiated with the Equitas Group was, however, limited. His Honour referred to a number of findings of Lindsay J in Re Yorke which were critical to his Lordship's decision. Those matters on which there would need to be specific evidence were: 1. the current financial statements for the Equitas Group; 2. whether there was any syndicate in which the deceased participated which had been left outside the Equitas arrangement; 3. that the Equitas reinsurance arrangements, so far as they affected the deceased, were still in force; and 4. that the two Equitas companies which had been granted authorisation to operate as reinsurers still had the benefit of that authorisation and that there was no basis for apprehending that it would be withdrawn: at [11].

[33]

2010 - Thompson v Gamble

In Thompson v Gamble, the deceased was also a name at Lloyd's. He left a substantial estate with a net distributable value in excess of $5.6 million. There were several applications before the Court. One related to a family provision claim. The second related to advice sought by trustees pursuant to s 63 Trustee Act as to whether they were at liberty to distribute the deceased's estate without making any retention or security on account of the estate's contingent liabilities for the deceased's role as a name at Lloyd's. Slattery J referred at length to the decision of Lindsay J in Re Yorke: at [15]-[16].
His Honour explained the particular dilemma of the "stark choice" faced by executors between retaining the entire estate indefinitely which would be unfair to the beneficiaries or distributing on the basis the creditors have no right to expect the trustees to make such an indefinite retention when the creditors have protection which has been assessed to be commercially appropriate: at [19].
His Honour considered the possibility of a future claim by a Lloyd's policyholder in a relevant syndicate year against the deceased's estate was so remote as to not prevent a distribution: at [19].
In Thompson v Gamble, Slattery J, after outlining the evidence, referred, in particular, to the above-mentioned factors identified by Austin J and focussed on three of those four factors: at [29]-[30]. His Honour found that those factors were relevantly established on the evidence: at [30]. His Honour also referred to the fact that the evidence established that the executors had advertised an intention to distribute pursuant to the provisions of s 60 Trustee Act and that no notice of any other liability had been given to the trustees: at [45].
Although there was a remote possibility that, in the event that the overall reinsurance arrangements failed, a further claim may be made against the estate, Slattery J was satisfied in light of the assessments of the position that Lindsay J had made in 1997 and Austin J in 1999, and, on the basis of events since that time, that the possibility was sufficiently remote that it should not prevent the trustees from distributing the whole estate and, accordingly, gave advice to that effect pursuant to s 63: at [47].

[35]

2017 - Barr v Rockman

In Barr v Rockman [2017] VSC 581 (Barr), there was an application to the Court for directions by the (remaining) executors of an estate. The nature of their concern related to a potential contingent liability arising out of a motor vehicle accident where a tenant of a property owned by the trustee of the deceased's family trust suffered serious but not critical injuries. The trustee held certain insurance cover which was detailed in the reasons for judgment. There was a risk that the accident might give rise to a contingent liability to the estate as the deceased had managed the property and the tenant personally (with some assistance from her daughter and a bookkeeper) in circumstances where the deceased had indemnified the director of the trustee: at [24].
McMillan J noted that there was a risk that the accident may give rise to a contingent liability to the family trust: at [25].
Her Honour observed that, generally, where trustees know of or reasonably anticipate an outstanding claim, a sufficient sum must be retained to satisfy the claim before distribution of trust assets: at [31].
Detailed evidence in respect of the potential contingent claim was adduced: at [34].
Her Honour concluded that the possibility of a future claim was so remote as to not prevent the final distribution of the estate and the trust: at [34].
The particular considerations that supported that conclusion included (1) the fact that the tenant had received compensation for the injuries sustained; (2) the description of events prima facie did not establish negligence in failing to repair the driveway before the accident or were not otherwise causal of the accident; (3) the two insurers were notified of the accident and the policies covered a liability for personal injury up to $30 million in total, providing reasonable protection to the estate, the trust and to contingent creditors; and (4) that the executors of the estate and trust had advertised their intentions to distribute and no notice had been given to them of any other liabilities: at [35].
In Barr, McMillan J referred to the decision of Slattery J in Thompson v Gamble and summarised by reference to his Honour's decision factors that should be taken into account in relation to advice regarding distribution in the face of a potential contingent liability as including: 1. the risk of a possible claim being made in the future by a creditor; 2. whether protection could be achieved by the taking out of adequate insurance that has been assessed as commercially appropriate to cover the contingency; and 3. whether the trustee has advertised the intention to distribute the estate: at [33].

[38]

Discussion

The submission of there being a real chance albeit unlikely that a claim could be made against the estate begs a number of questions.
There is no evidence or proved factual basis for concluding that the deceased acted negligently.
On the initial hearing of the application, I raised with Dr Birch SC the fact that there was no particular evidence regarding the number of matters in which the deceased acted, nor detail about claims made or circumstances that might give rise to a claim.
In the absence of any such evidence, the most that can be said is that simply by dint of human experience it is conceivably possible that in one or more of the matters that the deceased was involved in during the course of his practice as a solicitor that he acted or failed to act in such a way as to give rise to potential negligent conduct.
One possibility is to provide the Court with some information in relation to the number of matters in respect of which the deceased acted regarding financial agreements and some information in relation to the claims history of the deceased.
That has some limitations which are inherent in any legal proceedings with the nature of any form of "tendency evidence". The fact that any deceased legal practitioner has had many claims made against him does not necessarily mean that such deceased was prone to acting negligently.
On the other hand, the fact that the deceased has had no claims does not necessarily mean that the deceased was exemplary in practice.
However, there are some possible ways that the matter might be considered without necessarily "looking for a fight" or "boxing at shadows".
The premise on which the application is made is based on the fact that the most likely area of potential risk of the deceased's practice arose out of advising in relation to prenuptial or cohabitation agreements.
The Opinion referred to legislative and caselaw provisions bearing upon this.
Following my discussion with Dr Birch SC regarding searches that might be carried out the plaintiffs, as noted above, availed themselves of the opportunity of providing further factual material supplementing the material in the SF and initial affidavits.
Whilst it is not the role of the Court on a judicial advice application to make any specific finding or determination in respect of whether the deceased during the course of his practice engaged in potentially negligent conduct, the further factual material has assisted the Court in making a determination as to whether the executors would be justified in distributing the entirety of the net estate.
The following factors combine to provide a sound basis for thinking that it is not likely and indeed remote that the deceased engaged in negligent conduct such that the contingent liability concern might be realised. Namely: 1. some clarity (albeit not complete precision) has been given to the number of matters that the firm and indeed the deceased acted upon relating to financial agreements; 2. the deceased was a careful and meticulous lawyer; 3. the precedents that the deceased used, to the extent that the plaintiffs are aware, did not exhibit any issues that had been raised by cases dealing with financial agreement legislative provisions; 4. the financial agreement precedents were constantly revised by reference to considered input from a number of different sources; and 5. the deceased has no history of any claims being made against him and the only potential claim notified did not reveal any negligent conduct and was not ultimately pursued.

[44]

Discussion

The inherent uncertainty of a matter in the administration of a trust might in some cases mean that a question is not ripe for determination. Nonetheless, uncertainty per se does not preclude a LPR from availing itself of the advice procedure. Indeed, the legislative scheme is such that it is desirable that trustees in doubt as to a course of action should not proceed with it and seek relief under s 85 afterwards, but rather seek s 63 advice first: Macedonian Church Case at [36]; Mills v Mills [2018] NSWSC 363 at [22] per Sackar J.
Senior counsel is of the opinion, which I accept, that there is at least a possibility of a contingent claim against the deceased's estate arising from his legal practice which, if there was such a claim, would most probably arise from his conduct in regard to advising upon and facilitating the execution of financial agreements by clients: Opinion at [34].
The question arises as to whether the plaintiffs might have notice of any claim having advertised pursuant to s 92 PA Act.
Specifically, the issue is whether for the purposes of s 92(2) PA Act the plaintiffs might have notice of circumstances which would: 1. indicate the facts to an honest and reasonable executor that a claim of a contingent liability existed and would be made; or 2. put an honest and reasonable executor on inquiry that a claim of a contingent liability existed and would be made: Opinion at [43]-[44].
The Opinion acknowledges that the plaintiffs are in a position where they know that there is at least a possibility that previous clients of the deceased my find themselves in the situation where a financial agreement, prepared on their behalf by the deceased, is found to be unenforceable and a claim is consequently made against the estate: Opinion at [47].
Further, Dr Birch SC is of the opinion that it is at least arguable that a Court might find such a potential contingent claim is one of a sort of which the plaintiffs as executors presently have sufficient knowledge such that they are not protected by publication of the s 92(2) PA Act notice: Opinion at [47]. Subject to what I note below, I accept that proposition.
The issue in relation to advertising is essentially twofold.
First, there is the conundrum that even if one admits the possibility of s 92(2) PA Act not protecting a LPR in respect of some form of constructive notice, the law (in New South Wales) is not clear as to what form or degree of constructive notice might preclude reliance upon s 92(2).
Secondly, the comments of Lindsay J in Re Yorke point up the fact that there are some types of contingent claims for which an advertising procedure as a means of protecting LPRs is not entirely apt because such advertising might not also give fair notice to potential claimants and a reasonable opportunity to bring forward their claims.
In relation to the seeking of judicial advice, the Opinion addresses some remarks to whether the possibility of a claim being made against the deceased is greater than the possibility of a claim against the deceased's estate considered by Slattery J in Thompson v Gamble: Opinion at [48].
I doubt the utility of comparison of possibilities. However, I do agree that the uncertainty regarding the possibility of claims made by potential former clients of the deceased provides the basis for the Court to consider whether or not to give the advice sought.
Dr Birch SC is of the opinion that it is not likely that the sort of claim that he has described will eventuate against the plaintiffs as executors: Opinion at [54].
It seems to me that the possibility of a claim being made by a client against the deceased's estate in respect of negligence arising out of the deceased's legal practice and, in particular, that part of the deceased's practice involving work in relation to financial agreements which would not be covered by a cap on professional indemnity insurance is remote.
In particular, I note: 1. the Firm and the deceased undertook a very small percentage of work with respect to advising in relation to financial agreements; 2. the deceased was a capable, careful and meticulous lawyer who with other partners of the firm took steps to mitigate risks arising out of advising in relation to financial agreements; 3. the plaintiffs as executors have no notice of any actual claim in respect of conduct by the deceased in respect of his legal practice; 4. there is nothing about the deceased's claim history which suggests that any claim against the deceased is likely; 5. the period for which there is no indemnity cap was at least 15 years ago; 6. there is doubt as to the extent of protection afforded to the plaintiffs as executors consequent upon the advertising of the notice of distribution pursuant to s 92 PA Act specifically as to whether protection is afforded from notice of circumstances which would (a) indicate the facts to an honest and reasonable executor that a claim of a contingent liability existed and would be made; or (b) put an honest and reasonable executor on inquiry that a claim of a contingent liability existed and would be made; and 7. if a fund were to be set aside or retained by the executors there are obvious difficulties in determining what if any amount should be retained and for what period of time.
In light of the above it seems to me that it is appropriate to enable beneficiaries to have early enjoyment of property to which they will, as a matter of practical certainty, ultimately become entitled and accordingly to give to the plaintiffs the advice that the plaintiffs seek.

Legislation Cited (16)

(UK) Family Law Act 1975(Cth)

Family Law Amendment Act 2000(Cth)

Amendment Act 1893(NSW)

(UK) Succession Act 2006(NSW)

Trust Property Act 1862(NSW)

Trustee Act 1898(NSW)

Wills Probate and Administration Act 1898(NSW)

Trustee Act 1925(NSW)

Probate and Administration Act 1898(NSW)

Civil Procedure Act 2005(NSW)

Professional Standards Act 1994(NSW)

Supreme Court Act 1970(NSW)

Supreme Court Rules 1970(NSW)

Uniform Civil Procedure Rules 2005(NSW)

Succession Act 2006(NSW)

Family Law Act 1975(Cth)

Cases Cited (81)

STATUTORY CONSTRUCTION - Consideration of principles regarding statutory construction - What is material to disclose to a Court depends upon the precise nature and content of any applicable statutory regime - Maxim noscitur a sociis explained LEGAL PRACTITIONERS - Professional Indemnity Insurance - Operation of Professional Standards Schemes - Limitation of liability - Consequences of nonparticipation Legislation Cited: Civil Procedure Act 2005 (NSW) Civil Procedure Rules 1998 (UK) Family Law Act 1975 (Cth) Family Law Amendment Act 2000 (Cth) Federal Justice System Amendment (Efficiency Measures) Act (No 1) 2009 (Cth) Law of Property Amendment Act 1860, 23 & 24 Vict, c 38 Law of Property and Trustees Relief Amendment Act 1859, 22 & 23 Vict, c 35 Probate Act of 1890 Amendment Act 1893 (NSW) Probate and Administration Act 1898 (NSW) Professional Standards Act 1994 (NSW) Rules of the Supreme Court 1965 (UK) Rules of the Supreme Court 1883 (UK) Succession Act 2006 (NSW) Supreme Court Act 1970 (NSW) Supreme Court Rules 1970 (NSW) Trust Property Act 1862 (NSW) Trustee Act 1893, 56 & 57 Vict, c 53 Trustee Act 1898 (NSW) Trustee Act 1925 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Wills Probate and Administration Act 1898 (NSW) Cases Cited: Ah Toy v Registrar of Companies (Northern Territory) (1986) 10 FCR 356 Al Dakhili v Al Kheurallah [2023] NSWSC 47 Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 Application by Marilyn Joy Cottee [2003] NSWSC 47 Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441; [2005] NSWSC 558 Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247 Application of Perpetual Trustee Company Ltd [2003] NSWSC 1185 Application of the NSW Trustee and Guardian; Estate of SGB [2015] NSWSC 398 Application of Valda Ann Haberfield [2014] NSWSC 1421 Australian Karting Association Ltd v Karting (New South Wales) Incorporated [2022] NSWCA 188 Australian Legion of Ex-Servicemen & Women [2021] NSWSC 149 Baden v Société Générale pour Favoriser le Developpement du Commerce et de l'Industrie en France [1993] 1 WLR 509 Barnes v Addy (1874) LR 9 Ch App 244 Barr v Rockman [2017] VSC 581 Black v Black (2008) 38 Fam LR 503 Bullas v Public Trustee [1981] 1 NSWLR 641 Cassaniti v Ball as liquidator of RCG CBD Pty Limited (in liq) [2022] NSWCA 161 Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd [2014] NSWSC 952 Chelsea Waterworks v Cowper (1795) 1 Esp 275; 170 ER 355 Cody v JH Nelson Pty Ltd (1947) 74 CLR 629; [1947] HCA 17 Commercial Banking Co of Sydney Ltd v RH Brown & Co (1972) 126 CLR 337; [1972] HCA 24 Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455; [1969] HCA 47 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; [1975] HCA 8 Coshott v Parker (2019) 268 FCR 288; [2019] FCAFC 14 Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152 Edwards v Attorney-General (2004) 60 NSWLR 667; [2004] NSWCA 272 English v Stewart [2022] NSWSC 268 Estate L H Hall [1999] NSWSC 1297 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2003) 230 CLR 89; [2007] HCA 22 Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (2017) 94 NSWLR 606; [2017] NSWCA 53 Fletcher v Stevenson (1844) 3 Hare 360; 67 ER 420 Garrard (t/as Arthur Anderson & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662 Gonzales v Claridades (2003) 58 NSWLR 188; [2003] NSWSC 508 Gonzales v Claridades (2003) 58 NSWLR 211; [2003] NSWCA 227 Guardian Trust and Executors Co of New Zealand Ltd v Public Trustee of New Zealand [1942] AC 115 Hackett (a pseudonym) v Secretary, Department of Communities and Justice [2020] NSWCA 83 Harrison v Mills [1976] 1 NSWLR 42 Hawkins v Clayton (1988) 164 CLR 539; [1988] HCA 15 In re Beddoe; Downes v Cottam [1893] 1 Ch 547 In re Blake; Jones v Blake (1885) 29 Ch D 913 In re Griffin (deceased) [1940] NZLR 174 In re Grose, deceased [1949] SASR 55 In re Kay; Mosley v Kay [1897] 2 Ch 518 In re Long (deceased) [1951] NZLR 661 In re Tankard; Tankard v Midland Bank Executor and Trustee Co Ltd [1942] Ch 69 In the Will of Walker (1943) 43 SR (NSW) 305 Ingrey v King [2015] EWHC 2137 (Ch); [2016] WTLR 131 International Finance Trust Co Ltd v NSW Crime Commission (2009) 240 CLR 319; [2009] HCA 49 Jervis v Wolferstan (1874) LR 18 Eq 18 Khoury v Zambena Pty Ltd (1997) 23 ACSR 344 Lend Lease Real Estate Investments Ltd v GPT RE Ltd [2006] NSWCA 207 Ludwig v Public Trustee (2006) 68 NSWLR 69; [2006] NSWSC 890 Ludwig v The Public Trustee [2008] NSWCA 115 Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 Macrae v Walsh (1927) 27 SR (NSW) 290 Marley v Mutual Security Merchant Bank & Trust Co Ltd [1991] 3 All ER 198 Marley v Rawlings [2015] AC 129; [2014] UKSC 2 McDonald v Horn [1995] 1 All ER 961 McGrath v Troy (as administratrix of the estate of the late Wade) [2010] NSWSC 1470 McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 MCP Pension Trustees Ltd v AON Pension Trustees Ltd [2009] EWHC 1351 (Ch); [2010] 1 All ER (Comm) 323 MCP Pension Trustees Ltd v AON Pension Trustees Ltd [2010] EWCA Civ 377; [2011] 1 All ER (Comm) 228 Midgley v Midgley [1893] 3 Ch 282 Mills v Mills [2018] NSWSC 363 Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 Ministry of Health v Simpson [1951] AC 251 Murakami v Murakami [2005] NSWSC 953 National Trustees Company of Australasia Limited v General Finance Company of Australasia Limited [1905] AC 373 National Westminster Bank Plc v Lucas [2014] EWCA Civ 1632 National Westminster Bank plc v Lucas [2014] EWHC 653 (Ch); [2014] BPIR 551 Newton v Sherry (1876) 1 CPD 246 Nowell v Palmer (1993) 32 NSWLR 574 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; [1912] HCA 9 Perpetual Trustee Co Ltd v Attorney General (NSW) [2018] NSWSC 1456; (2018) 17 ASTLR 126 Perpetual Trustee Co v Watson (No 2) (1927) 28 SR (NSW) 43 Professional Trustees v Infant Prospective Beneficiary [2007] EWHC 1922 (Ch); [2007] WTLR 1631 Re Estate of the late Chow Cho-Poon; Application for Judicial Advice [2013] NSWSC 844; (2013) 10 ASTLR 251 Re Evans (deceased); Evans v Westcombe [1999] 2 All ER 777 Re Investa Properties Limited [2001] NSWSC 1089; 187 ALR 462 Re K (deceased) [2007] EWHC 622 (Ch); (2007) 9 ITELR 759 Re Land Credit Company of Ireland; Markwell's Case (1872) 21 WR 135 Re Mayes; Application by O'Reilly [2015] VSC 708; (2015) 15 ASTLR 376 Re PILT Nominees Pty Ltd - Londish v Seller [2011] NSWSC 74 Re Rosewood Research Pty Ltd (No.2) [2014] NSWSC 1226 Re Yorke (deceased); Stone v Chataway [1997] All ER 907 Rosenbaum v Baidarman (No 2) [2021] NSWSC 574 R v Regos (1947) 74 CLR 613; [1947] HCA 19 Ryan v The Public Trustee of Queensland [1998] 1 Qd R 679 Scottish Equitable Life Assurance Society v Beatty [1889] 29 LR Ir 290 Simpson v Trust Company Fiduciary Services Limited [2009] NSWSC 912 Taylor v Taylor (1870) LR 10 Eq 477 Thomas A Edison Ltd v Bullock (1912) 15 CLR 679; [1912] HCA 72 Thompson v Gamble; Gamble v Thompson [2010] NSWSC 878 Todd Hadley Pty Ltd v Lake Maintenance (NSW) Pty Ltd (No 2) [2020] NSWCA 81 Wang v Cai (No 2) [2021] NSWSC 1268 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 Wilcox v Poole [1974] 2 NSWLR 693 Wittaker v Kershaw (No 2) (1890) 45 ChD 320 Wood v Weightman (1872) LR 13 Eq 434 Zhang v ROC Services (NSW) Pty Ltd (2016) 93 NSWLR 561; [2016] NSWCA 370 Texts Cited: Australian Accounting Standards Board, Accounting Standard AASB 137: Provisions, Contingent Liabilities and Contingent Assets Dal Pont, GE, Law of Executors and Administrators (2022, LexisNexis) Encyclopaedic Australian Legal Dictionary (LexisNexis) Ford and Lee: The Law of Trusts (Thomson Reuters) Geddes, Robert, Charles Roland and Paul Studdert, Wills, Probate Administration Law in New South Wales (1st ed, 1996, LBC Information Services) Handler, Les & Richard Neal, Mason and Handler Succession Law and Practice New South Wales (LexisNexis) Herzfeld, Perry and Thomas Prince, Interpretation (2nd ed, 2020, Thomson Reuters) Heydon, JD and MJ Leeming, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis) Janes, Stephen, David Liebhold and Paul Studdert, Wills, Probate and Administration Law in New South Wales (2nd ed, 2020, Thomson Reuters) Learmonth, Alexander, Williams, Mortimer & Sunnucks - Executors, Administrators and Probate (21st ed, 2018, Thomson Reuters) Lindsay J, "An Application for Judicial Advice: Text, Context and Functional Purpose" (Paper), The Blue Mountains Law Society Succession Law Conference, 18 November 2021 Macquarie Dictionary, online ed Nevill, AG and AW Ashe, Equity Proceedings with Precedents (NSW) (1981, Butterworths) Nicholas, HS and HE Harrington, Trustee Acts of New South Wales (1st ed, 1926, Butterworth & Co (Australia Ltd)) Nicholas, HS and JD Evans, The Trustee Acts of New South Wales (2nd ed, 1939, Butterworth & Co (Australia Ltd)) Practice Direction 64B (UK) Professional Standards Bill 2004 (NSW) Williams, Sydney and Frank Guthrie-Smith, Daniell's Chancery Practice (8th ed, 1914, Stevens & Sons Ltd) Young, Peter, Clyde Croft and Megan Smith, On Equity (2009, Thomson Reuters) Category: Principal judgment Parties: Paul Andrew Doolan in his capacity as an Executor of the Estate of the late John Andrew Barkus (First Plaintiff) Victoria Anne Ball in her capacity as an Executor of the Estate of the late John Andrew Barkus (Second Plaintiff) Representation: Counsel: C Birch SC (Plaintiffs)

Cited By (9)

Application of Macedonian Orthodox Community Church St Petka Inc [2023] NSWSC 918

Application of NBT Pty Ltd [2023] NSWSC 919

Chang v Tjiong

Estate of Guamani; Guamani v De Cruzado

Hadid v Sabouh

In the matter of Asbestos Injuries Compensation Fund Limited (and WorkCover Queensland) [2024] NSWSC 1163

In the matter of Gainer Associates Pty Limited [2024] NSWSC 1138

Jurak v Latham

Contingent liabilities

The framing of the specific question on which the plaintiffs seek advice is, as noted above, by reference to what I have described as the contingent liability concern.
The executors wish to make a distribution of the entirety of the estate without retaining any such further security in respect of such contingent liability concern.
The Macquarie Dictionary, online ed defines "contingent liability" as being an obligation, associated with a past transaction, which will occur in the future only if some particular event occurs.
There are various descriptions of "contingent liability" for different purposes under the law: see e.g. Australian Karting Association Ltd v Karting (New South Wales) Incorporated [2022] NSWCA 188 (Australian Karting) at [66] referencing comments of Kitto J (Barwick CJ agreeing) in Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455 at 459; [1969] HCA 47 citing English authority in the context of defining a "contingent creditor". In Australian Karting, Gleeson JA (Meagher JA and Simpson AJA agreeing) described a "contingent liability" as "a liability that may or may not arise, depending on the occurrence (or non-occurrence) of a certain event" and contrasted that with a "prospective liability" which is "an obligation to pay a sum of money which is not immediately payable, but which will certainly become due in the future either on some date which has already been determined or on some date determinable by reference to future events" citing Edwards v Attorney-General (2004) 60 NSWLR 667; [2004] NSWCA 272 at [59] per Young CJ in Eq (as his Honour then was).
For the purposes of financial statements, accounting standards provide for specific definitions of contingent liabilities: e.g. Australian Accounting Standards Board, Accounting Standard AASB 137: Provisions, Contingent Liabilities and Contingent Assets at [10].
The above Macquarie Dictionary, online ed description is apt for the purposes of this case.

Basis for possibility of any contingent or potential claims against the estate

Dr Birch SC's opinion addressed family law legislative provisions in caselaw regarding financial agreements.
Relevantly commencing on 27 December 2000, provisions of the Family Law Amendment Act 2000 (Cth) (assented to on 29 November 2000) introduced the concept of financial agreements to family law. The amendments provided for pre-nuptial agreements where parties could make binding agreements prior to a marriage as to the division of property in the event that they separated. Prior to this amendment, there was provision for such agreements in regard to de facto relationships under some State laws.
The legislation was initially highly prescriptive as to the form and manner in which the agreements were to be made including requiring parties to be given independent legal advice and for such advice to be certified.
In 2008, the Full Court of the Family Court of Australia held that strict compliance with the statutory requirements was necessary if the financial agreement was to be binding: Black v Black (2008) 38 Fam LR 503 at 511-512 per Faulks DCJ, Kay and Penny JJ.
Although there was no evidence to this effect, the Opinion anecdotally referred to a prevailing view of family law practitioners at the time that there was likely to be a very substantial number of agreements that would prove unenforceable which would likely result in a substantial number of negligence claims against solicitors.
There was a legislative response to the Full Court decision and, on 4 January 2010, the Federal Justice System Amendment (Efficiency Measures) Act (No 1) 2009 (Cth) commenced, which retrospectively changed the requirements to make a financial agreement binding and, in particular, required strict compliance with the requirements of s 90G Family Law Act 1975 (Cth).
Apart from the potential for a solicitor to incur liability through failure to produce a binding financial agreement, the Opinion referred to complications arising from applicable limitation principles.
In particular, it was noted that an action in tort against a negligent solicitor does not crystallise until a loss is suffered citing Hawkins v Clayton (1988) 164 CLR 539; [1988] HCA 15. It was further noted that in certain circumstances a loss is not suffered even though a transaction may have been legally defective unless a claim or demand is made citing Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55.
In determining whether a loss is suffered one must determine with some precision the nature of the interest that the transaction is intended to protect. Thus, for example, where a valuer negligently values a security for a mortgage, the interest is ensuring the debt may be paid from the security and a loss is suffered where there is default and sale of the property. In such circumstances, it is not necessary to wait to see whether the mortgage debt may ultimately be paid under the personal covenants pursuant to the mortgage: see Todd Hadley Pty Ltd v Lake Maintenance (NSW) Pty Ltd (No 2) [2020] NSWCA 81.
Because any defects in relation to financial agreements will only [or I infer perhaps usually] crystallise in a loss giving rise to a claim if and when the relevant marriage breaks down, it was submitted that there is almost no outer limit on when a claim may be made against the deceased's estate which would still be within the relevant limitation period.

Protection afforded by s 92 PA Act

Dr Birch SC addressed the extent of protection afforded by s 92 PA Act.
In discussing the scope of protection afforded by s 92(2) PA Act, Dr Birch SC indicates that there are a number of decisions in which the Court has given advice to executors in circumstances where there was fear of a future claim and where the claimant had not come forward or been identified at the date of the advice. He submitted that those cases did not discuss in detail whether or not s 92(2) (or the English equivalent) would have given protection but appeared to assume that it is at least doubtful that it would: Submissions at [17].
Dr Birch SC observed that the terms of s 92(2) PA Act appear on a superficial reading to suggest a high level of protection to executors who distribute assets after the publication of the relevant notice. However, he noted that that protection does not extend to an executor or administrator who has notice of a claim at the time of distribution: Opinion [36].
Dr Birch SC is of the opinion that whilst executors with actual notice of a claim (in context, a claim of a liability) may deal with that by way of the provisions of s 93 PA Act, where the claim is merely contingent or potential, the matter is far less clear: Opinion [36].
Dr Birch SC made reference to the fact that a number of dicta in English and Australian authorities suggest that despite the apparently clear terms of s 92(2) PA Act, it may not protect against a number of potential contingent claims. He observed that the difficulties of similarly worded English provisions were summarised by Lindsay J in Re Yorke (deceased); Stone v Chataway [1997] All ER 907 (Re Yorke), referring to the considerable doubts existing about the full extent of protection afforded by the English provision for contingent claims: Opinion [37].
The Opinion then made reference to and commented on the decision of Slattery J in Thompson v Gamble; Gamble v Thompson [2010] NSWSC 878 (Thompson v Gamble): Opinion [38]-[39].
The Opinion stated that Slattery J considered that similar doubts existed about the protection afforded to executors in New South Wales under s 92(2) PA Act: Opinion at [38].
I pause to observe that I do not think it is correct to say that Slattery J expressed similar doubts. His Honour did not consider the terms of s 92 PA Act in the reasons for judgment. His Honour briefly made reference to there being evidence in relation to the advertising of the trustees' intention to distribute under s 60 Trustee Act, but without making any comments regarding the extent of protection afforded by s 60 Trustee Act: at [45].
The Opinion states that there is a dearth of authority, or textbook commentary on the extent and nature of what constitutes notice for the purpose of s 92 PA Act: at [41]. That proposition is at least self-evidently qualified by the fact that there are clearly authorities dealing with actual notice.
The Opinion addresses the more vexed question of what beyond actual notice constitutes notice for the purpose of s 92 PA Act.
Dr Birch SC made reference to the taxonomy of knowledge discussed by Peter Gibson J in Baden v Société Générale pour Favoriser le Developpement du Commerce et de l'Industrie en France [1992] 4 All ER 161 (also reported at [1993] 1 WLR 509) (Baden): Opinion at [42].
The five Baden categories of knowledge specified by Peter Gibson J are actual knowledge (category (i)), wilfully shutting one's eyes to the obvious (category (ii)); wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make (category (iii)); knowledge of circumstances which would indicate the facts to an honest and reasonable man (category (iv)); and knowledge of circumstances which would put an honest and reasonable man on inquiry (category (v)): Baden at [1993] 1 WLR 509 at 575-576, 582.
Dr Birch SC suggested that it is doubtful that the concept of notice for the purposes of s 92 PA Act would be viewed by the Court through the prism of the five Baden categories. He opined that nonetheless, whilst those categories have been criticised as overly analytical and praised as useful by different Courts at different times, they provide a useful means of attempting to grapple with the concept of notice where little guidance is otherwise available: Opinion at [42], [45].
Whilst I accept that there is no clear authority in New South Wales as to what form or degree of constructive notice might preclude reliance upon s 92(2) PA Act, there is some discussion of the issue in the United Kingdom, to which I will refer below.
There is no suggestion that the plaintiffs have any actual knowledge of the claim against the estate of the deceased that would give rise to contingent liability arising from acts or omissions by the deceased and the conduct of his legal practice. Nor is there any suggestion that the plaintiffs have wilfully and/or recklessly failed to make such inquiries as to any such contingent liability concern.
The arena of risk addressed by the Opinion is whether, assuming the Baden categories of knowledge were to be somehow analogously applied as being categories of notice, the plaintiffs might have constructive notice which might preclude reliance upon the s 92(2) PA Act notice of distribution, and so not be protected against liability in the face of distribution of the entirety of the estate. In particular, Dr Birch SC entertained the possibility that: 1. notice of circumstances which would indicate the facts to an honest and reasonable person that a claim of a contingent liability existed and would be made might be thought to potentially constitute a form of notice; 2. but notice of circumstances which would put an honest and reasonable person on inquiry that a claim of a contingent liability existed and would be made would more doubtfully be considered to be a form of constructive notice for the purposes of s 92(2) PA Act: Opinion at [43]-[44].
Dr Birch SC acknowledged that it may be hard to determine the exact scope of the concept of notice as used in s 92(2), particularly in the context of a type of ex parte application without a contradictor: Submissions at [19].
Ultimately, Dr Birch SC did not submit what view the Court ought to take regarding what constitutes "notice of a claim" for the purposes of s 92(2). In essence, he noted that the cases permit a conclusion that there may be "notice of a claim" for the purposes of s 92(2) where the executors are aware of the potential nature of a possible claim, although not aware of any specific claimant or not aware as to whether any specific claim will in fact ever crystallise: Submission at [19].
That submission is in essence a step away from a type of constructive notice to a more generalised awareness of possibilities.
The Opinion states that in neither Re Yorke nor Thompson v Gamble was there any specific insured claimant identified who could have a contingent claim as distinct from a potential class of persons who could possibly make a claim against the deceased's estate in the future: Opinion at [46]. That is correct. The Opinion further states that that must have been treated as sufficient as to preclude reliance by the executors upon the protections provided by s 92(2) PA Act: Opinion at [46]. For the reasons I have indicated, I do not accept that as being the case. Slattery J in Thompson v Gamble did not address the extent of the protections provided by s 92(2) PA Act, nor (subject to a general comment on advertising to which I will refer) did Lindsay J in Re Yorke expressly address the statutory United Kingdom equivalent to s 92(2) PA Act.

Payment of debts

The LPR's duty is said to be one to pay debts with due diligence having regard to the assets in the hands of the LPR which are properly applicable for that purpose. Whether due diligence has been shown is determined in all the circumstances of the case: WMS at 817 citing In re Tankard; Tankard v Midland Bank Executor and Trustee Co Ltd [1942] Ch 69 (Re Tankard) at 72 per Uthwatt J.
Nonetheless, there is no specific rule of law to the effect that a LPR must pay the debts of the estate within the so-called "executor's year". There will be occasions where the LPR's duty to act with due diligence will mean that early payment is necessary whilst on other occasions circumstances and the nature of assets comprised in the estate may justify a delay in payment: WMS at 817.
Often there will be directions in the Will to pay debts funeral and other testamentary expenses. However, creditors are entitled to payment of debts regardless of what the deceased may have stipulated in his Will: WMS at 817; Re Tankard at 74. This contrasts with the position of beneficiaries whose entitlement to estate assets depends upon and is subject to the terms of the Will: WMS at 817; Re Tankard at 74. Importantly, although a LPR is under a duty to pay the debts of an estate, the LPR is not automatically under a duty to contact potential creditors to see if they wish to pursue claims that may be disputed or stale: WMS at 817.
Under the general law, the debts and liabilities of the deceased are enforceable against (and met from) the estate and are the subject of priority ahead of distribution of the estate to beneficiaries: GE Dal Pont, Law of Executors and Administrators (2022, LexisNexis) (Dal Pont) at 336.
A LPR is not personally liable for debts beyond organising the payment of those debts and liabilities from the estate (assuming there are sufficient estate funds to do so). A distinction is made between (a) liabilities arising in the deceased's lifetime, for which the LPR is responsible only to the extent of the assets of the deceased, and (b) debts and liabilities incurred by the LPR after the deceased's death, for which the LPR is personally liable but nonetheless may look to the estate for an indemnity: Dal Pont at 336-337.
In respect of liabilities of the deceased the LPR is liable (to the extent he has assets to pay them) even if he had no notice of them: WMS at 818 citing, inter alia, Chelsea Waterworks v Cowper (1795) 1 Esp 275; 170 ER 355.
Failing to pay an estate debt before distributing an estate may constitute a devastavit: Taylor v Taylor (1870) LR 10 Eq 477 (Taylor v Taylor) at 478 per Lord Romilly MR.
Particular considerations apply in relation to circumstances in which a debt is statute-barred and decisions of a LPR in relation to whether to pay the debt or not or whether the LPR is obliged to set up a defence of a plea of res judicata, namely a judicial determination that the claim is statute-barred. In part, analysis of these matters will depend upon the terms of statutory provisions in any given jurisdiction: see e.g. Midgley v Midgley [1893] 3 Ch 282 at 297-300 per Lindley LJ, 301-303 per Lopes LJ and 306-307 per AL Smith LJ; McGrath v Troy (as administratrix of the estate of the late Wade) [2010] NSWSC 1470 (McGrath v Troy) at [54]-[58] per White J (as his Honour then was); Re Mayes; Application by O'Reilly [2015] VSC 708; (2015) 15 ASTLR 376 at [43]-[90] per McMillan J; Coshott v Parker (2019) 268 FCR 288; [2019] FCAFC 14.

What protective options are available to LPRs to distribute an estate in light of potential contingent liabilities of an estate?

There are various options available to a LPR who wishes to distribute an estate but nonetheless be provided with protection against liabilities.
Under the general law, the options available to LPRs include: 1. retaining a fund to meet possible liability; 2. obtaining indemnities from beneficiaries to whom the estate is to be distributed; 3. obtaining insurance; and 4. applying to the Court for distribution in an administration suit.
Apart from general law protections, there are also statutory provisions. The main statutory protective provisions include: 1. distribution of estates after advertising for claims: s 92 PA Act (and cognate legislation and prior legislation); 2. obtaining discrete orders relating to distribution of the estate: r 54 UCPR (and previously Pt 68 Supreme Court Rules 1970 (NSW) (SCR)); and 3. obtaining the advice of the Court: s 63 Trustee Act.
I address these various protective options below.
Such options are not the only possibilities of protection, and it has been said that personal representatives, particularly of small estates, should not be discouraged from seeking practical solutions to difficult administration problems, without the expense of resort to the Court: Re Evans (deceased); Evans v Westcombe [1999] 2 All ER 777 (Re Evans) at [24] 785 per Richard McCombe QC (sitting as a Deputy Judge of the High Court).
The abovementioned options are not entirely mutually exclusive courses.
Thus, a LPR might seek an indemnity as well as retaining part of a fund.
Further, there is a flexibility of statutory procedures so that, subject to compliance with procedural fairness principles, proceedings commenced as an application for judicial advice under s 63 of the Trustee Act might evolve into contested application in which parties are joined (for example in a "construction suit") under r 54.3 UCPR or vice versa: Re Estate of the late Chow Cho-Poon; Application for Judicial Advice [2013] NSWSC 844; (2013) 10 ASTLR 251 (Cho-Poon) at [20] citing Application of Perpetual Trustee Company Ltd [2003] NSWSC 1185 (Application of Perpetual) at [14]-[20] per Young CJ in Eq (as his Honour then was); AG Nevill and AW Ashe, Equity Proceedings with Precedents (NSW) (1981, Butterworths) at [1204].

Retention of a fund

The mere fact that a debt has not crystallised at the date of death (such as a potential liability under a guarantee given by a deceased) gives the LPR no defence to a subsequent claim in the event that the estate has been distributed: Les Handler & Richard Neal, Mason and Handler Succession Law and Practice New South Wales (LexisNexis) at [1469.1].
Retaining a contingency fund to pay future claims is an option for LPRs: Re Yorke at 918. Some differences apply in different jurisdictions as to how retention of a fund is addressed.
In New South Wales, as a practical matter, a LPR may for example make an interim (or partial) distribution of the net assets of the estate but, nonetheless, consider holding back a fund to deal with potential contingent liabilities. As with cases of indemnity, the LPR may seek to negotiate an arrangement with the beneficiaries to retain an appropriate fund to deal with a contingent liability but otherwise distribute the balance of the estate. If a consensual arrangement is reached, then the fund will be available to the LPR to address such contingent liability. If a consensual arrangement is not able to be reached the LPR may seek to be protected in other ways.
In the United Kingdom, the remedy of retention of a fund was recognised as early as 1753 as a possible way of protecting executors against the risk of contingent debts maturing: see Re Yorke at 919.
The procedure in England and later the United Kingdom was formalised by Court orders although, by the early 1940s, appears to have been phased out. Lindsay J noted orders being made as late as 1943: Re Yorke at 919.
The principle on which the Master would act in fixing the amount or nature of the security or retention is not disclosed in the cases, but it appears that it was never suggested that the calculation had to be such that the security would necessarily and in all possible events suffice to meet in full whatever amounts an executor might have to pay creditors: Re Yorke at 919. The touchstone appeared to be flexible in what the Court would look to itself as being considered reasonable as sufficient security for the possible demands: Fletcher v Stevenson (1844) 3 Hare 360; 67 ER 420 at 425 per Sir James Wigram V-C.
Contingent creditors had no strict right at law or in equity to insist upon a retention or upon a security. It appears that the Court, in fixing any such retention or security, nonetheless acted on the basis that creditors should to some extent be protected: Re Yorke at 920.
It is said that in many cases the potential liability would be truly unascertainable perhaps even as to a theoretical maximum. It appears the Court looked in general at the reasonable probability of there being future claims against the estate and a practical view as to amount and any timing for retention of a fund would be taken: Re Yorke at 920.
Where a distribution order is made by the Court, in general, the order, subject matters that I will come to, affords a complete protection to the LPR and the LPR need not and indeed should not look, for example, to a retention, for any protection beyond that: Re Yorke at 921. An order may be made on terms requiring a LPR to set aside a sum to cover any liability which might in any reasonable probability arise: Re Yorke at 920.
Lindsay J noted that the effect of such an order was that a creditor with a late maturing contingent debt would, save in exceptional circumstances (such as fraud, misrepresentation or concealment) not be able to recover against the LPR but would only be able to recover, if at all, against the beneficiaries: Re Yorke at 921.
It appears clear that where retention of a fund is proposed or an option, the determination of the amount of the fund and the length of retention ought be undertaken on the basis of a rational assessment: Re K (deceased) [2007] EWHC 622 (Ch); (2007) 9 ITELR 759 (Re K) at [68] per Richard Arnold QC, sitting as a Deputy Judge of the High Court (whom I will refer to as Arnold QC).
In Re K, Arnold QC concluded that the administrators should have the Court's sanction to pay the admitted creditors and then to distribute the estate without reference to the claims of potential creditors but subject to a retention in the sum of £50,000 to be kept in an interest-bearing account unless and until needed for a period of three years with regard to potential future litigation costs. A retention beyond that and for other purposes was rejected principally on the basis that it was virtually impossible to make any rational assessment of what sum should be retained and for how long: at [68].

General administration orders

Historically, in the United Kingdom, anyone interested in a residuary estate who instituted a suit to administer the estate had the right to require, and as a matter of course obtained, the full decree for the administration of the estate: In re Blake; Jones v Blake (1885) 29 Ch D 913 at 916 per Cotton LJ.
The precise origins of the decree for general administration have been said to be not quite known: McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 (McLean) at 634D per Young J (as his Honour then was). It is not presently necessary to explore them. In any event, administration suits were often difficult, time-consuming and expensive procedures. Some of the difficulties were referred to by Young J in McLean at 634E-F. The slow-moving and vexed procedures of such suits satirised by Dickens in Bleak House in (the fictional probate case of) Jarndyce v Jarndyce were remedied during the 19th century with reforms described by Young J as a "three-pronged attack" not debasing the remedy but streamlining its procedures: McLean at 634G.
Those reforms translated to New South Wales, and it is possible to obtain discrete orders relating to the administration of an estate in equity including the estate's distribution without the whole estate being administered under the jurisdiction of the Court. This procedure is currently formalised in r 54 UCPR (and previously Pt 68 SCR).
McLean appears to have been the last very notable attempt in New South Wales to obtain such an order. Although, it is still possible to find cases in which such an order has been sought. For example, in Wang v Cai (No 2) [2021] NSWSC 1268, there was an application for a general administration order listed before Ward CJ in Eq (as the President then was) in September 2021. However, the application was ultimately resolved by consent: at [4]. In Rosenbaum v Baidarman (No 2) [2021] NSWSC 574, an application for a general administration order was refused by Williams J: see at [81], [674].

Partial administration orders

LPRs may bring an application for any relief which could be granted in administration proceedings: r 54.3 UCPR. The rules expressly provide for determination of discrete questions or claims: r 54.3(2)-(4). There is no requirement to seek a general administration order under the direction of the Court: r 54.3(6) UCPR.
The r 54.3 procedure is similar to an application for judicial advice under s 63 Trustee Act. That is because each procedure is directed to the same end and a determination under each procedure if adopted, will not only protect a trustee from later complaint that he or she should have acted otherwise, but also protect the trustee from personal liability for costs incurred: Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 (Macedonian Church Case) at [44]-[45] per Gummow A-CJ, Kirby, Hayne and Heydon JJ.
The Court, in permitting distribution in an application by a LPR under r 54.3 UCPR, where there are factual uncertainties or remote contingencies which impact the administration of an estate, does so without determining the legal or equitable rights of the potentially affected parties. Rather, it acts in the convenient administration of the estate and trusts in which the Court, having assessed the competing interests, may favour an early distribution of property so that those apparently entitled can enjoy the benefits of such estate or trust rather than have the estate or trust being tied up for lengthy periods: see e.g. Macrae v Walsh (1927) 27 SR (NSW) 290 at 294-295 per Long Innes J; Wilcox v Poole [1974] 2 NSWLR 693 (Wilcox v Poole) at 697 per Mahoney J (as his Honour then was) citing Sydney Williams and Frank Guthrie-Smith, Daniell's Chancery Practice (8th ed, 1914, Stevens & Sons Ltd) 1539-1540; Bullas v Public Trustee [1981] 1 NSWLR 641 at 643 per Kearney J; Gonzales v Claridades (2003) 58 NSWLR 188; [2003] NSWSC 508 (Gonzales v Claridades) at [75]-[76] per Campbell J (as his Honour then was), unaffected by the appeal which was dismissed in Gonzales v Claridades (2003) 58 NSWLR 211; [2003] NSWCA 227 (Gonzales v Claridades [NSWCA]); Simpson v Trust Company Fiduciary Services Limited [2009] NSWSC 912 (Simpson v Trust Company) at [27]-[32] per Ward J (as her Honour then was).
The principle is a beneficial one which enables the Court, after assessing the relevant interests, to enable beneficiaries to have early enjoyment of property to which they will, as a matter of practical certainty, ultimately become entitled: Wilcox v Poole at 697F; Simpson v Trust Company at [29].