SUCCESSION - trust and trustee - judicial advice, Trustee Act 1925 (NSW), s 63 - whether plaintiff should have taken advantage of procedure of Probate and Administration Act 1898 (NSW), s 93
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SUCCESSION - trust and trustee - judicial advice, Trustee Act 1925 (NSW), s 63 - whether plaintiff should have taken advantage of procedure of Probate and Administration Act 1898 (NSW), s 93
Judgment (2 paragraphs)
[1]
Judgment - EX TEMPORE
Revised and reissued 11 March 2020
This is an application for judicial advice under the Trustee Act 1925 (NSW), s 63. The application was overtaken by events in a way which I will describe and was not ultimately pressed. Counsel for the plaintiff sought orders dismissing the application but providing that the costs of the application be paid out of the estate, the subject of the application, on an indemnity basis. There is of course no difficulty with the dismissal of the application, but I requested argument on whether I should make the costs order sought. This judgment deals with that issue.
The plaintiff is the executrix of the estate of the late Shirley Jean Coleman who died in March 2018 at the age of 83. The deceased had three children: Susan Lewis (the plaintiff), Mark Coleman and Jenny Campbell. The evidence says nothing about the father of those children, but it seems that the deceased's marriage, or relationship, with him broke up many decades ago, and it was not suggested that he had survived the deceased.
At the time of her death, the deceased was living in a long‑term de facto relationship with James Stephen Bartlett. He was born in 1917 and had two sons from a previous marriage or relationship, James Bartlett Jnr and David Bartlett.
The deceased's principal asset was a home at Urunga on the Central Coast. The property had apparently been acquired in the deceased's name in 1988.
In the events which have happened, the deceased's last will was one made in December 2016. By that will, the deceased gave her de facto husband, James Bartlett Snr, a life estate in the Urunga property (conditional on paying outgoings on the property). The residue of the estate (including the property, on termination of the life estate granted to James Bartlett Snr) was to be divided between her three children in equal shares with $10,000 legacies to each of David Bartlett and James Bartlett Jnr.
James Bartlett Snr died in January 2018, and the deceased died shortly afterwards in March. As a result, under the terms of the deceased's will, the property will fall into residue and, subject to the two $10,000 legacies, will inure to the benefit of the deceased's children.
In April 2018, solicitors acting for James Bartlett Jnr, Fishburn Watson O'Brien ("FWO"), lodged a caveat on the Urunga property. The caveat asserted that the property was held on constructive trust for James Bartlett Snr's estate.
Subsequent correspondence between the solicitor acting for the estate, Michelle Harding, and FWO revealed that the case made in support of the caveat was that the deceased and James Bartlett Snr had contributed equally to repaying the loan on the property, and it had only been put in the deceased's name alone because James Bartlett Snr was on a veteran's pension (and presumably did not wish to jeopardise that pension by disclosing ownership of the property). FWO further alleged that the deceased and her de facto husband had entered into a mutual will arrangement under which, on the death of the survivor of them, their five surviving children should share the property equally.
In July 2018, probate of the deceased's will was formally granted to Ms Lewis. On 6 November, another firm of solicitors, Firths, wrote to Ms Harding advising that they were now acting for James Bartlett Jnr. The letter gave notice that Mr Bartlett intended to make a claim against the estate, but that Firths were in the process of obtaining the file from Mr Bartlett's previous solicitors.
Shortly afterwards, Ms Harding took steps to have the caveat lapse, but on 11 December a further caveat over the property was lodged by Firths to similar effect to the one lodged by FWO. This led to negotiations between Ms Harding and Firths, and on 1 April, it was agreed that the caveat would be withdrawn to allow the sale of the property to be completed, but the net proceeds of sale would be held in Ms Harding's trust account until such time as Mr Bartlett's claim had been dealt with. Firths were to be given 21 days' notice of any intended distribution of estate funds (other than those associated with the sale of the property and the administration of the estate). The sale of the property was subsequently completed.
The net value of the estate at present is approximately $300,000. On 22 May 2019, notice of intended distribution of the deceased's assets was filed with the Court pursuant to the Probate and Administration Act 1898 (NSW), s 92. On 27 May, Ms Harding wrote to Firths giving notice that at the expiration of 21 days Ms Lewis intended to distribute the estate. A further notice to similar effect was given on 16 August.
In response, on 19 August Firths wrote to Ms Harding purporting to "confirm" that Mr Bartlett would be commencing proceedings within 21 days of receipt of the letter of 16 August. But nothing further happened.
Eventually, on 25 November 2019 the Summons which commenced these proceedings was filed, seeking judicial advice. The application came before me for hearing on 11 February. On that occasion, at the last possible minute, counsel instructed by solicitors acting for Mr Bartlett appeared (this was apparently a consequence of the Summons having been served on Mr Bartlett's solicitors, but no prior notice had been given).
Counsel for Mr Bartlett indicated that he did wish to pursue the claim which had been foreshadowed in the caveats and in the earlier correspondence, although the precise form of that claim was not clear. In the circumstances, I considered that there was no alternative but to allow Mr Bartlett's legal representatives a short opportunity to formulate the claim and file it so as to demonstrate that they were serious about pursuing it. I adjourned the proceedings to the following day.
Following the adjournment, Mr Bartlett's solicitors did manage to file a Statement of Claim, and on 12 February there was further debate about the nature of the claim and whether amendments were required. I adjourned both proceedings to 19 February where, following further debate, they were adjourned again until today. Earlier today I was informed Mr Bartlett's fresh proceedings had been settled and I made consent orders disposing of those proceedings. Hence the need for the judicial advice fell away.
At the time the application came before me for hearing on 11 February, I had studied the written submissions and statement of facts in support of the application, and would have been prepared to grant it had there been no appearance on behalf of Mr Bartlett. But at that time I had not considered, nor had I been referred to, s 93 of the Probate and Administration Act. I was referred to that provision in the course of one of the directions hearings by counsel for Mr Bartlett who suggested that rather than bringing a judicial advice application, Ms Lewis should have taken advantage of the procedure provided by that section.
Section 93 relevantly provides:
(1) When the executor or administrator of the estate of a testator or an intestate has published the notices referred to in section 92 (1) and a claim in respect of the assets of that estate is submitted to the executor or administrator, the executor or administrator may, if the executor or administrator disputes the claim, serve on the person by whom or on whose behalf the claim was submitted a notice calling on the person to take proceedings to enforce the person's claim within a period of 3 months from the date of service of the notice and to prosecute the person's claim.
(2) If, after a notice has been served on a person in accordance with subsection (1) and the period of 3 months referred to in the notice has expired, that person does not satisfy the Court that the person is prosecuting the person's claim, the Court may, on an application in that behalf made by the executor or administrator:
(a) make an order barring the claim of that person as against the executor or administrator, subject to such conditions (if any) as it thinks just and equitable, or
(b) make such other order in respect of the application as it thinks just and equitable, having regard to the circumstances of the case.
Counsel for Ms Lewis contended that proceeding by way of application for judicial advice under the Trustee Act, s 63, was at least as suitable on the facts of this case as proceeding under s 93 of the Probate and Administration Act. But I am not sure that that is correct.
In the first place, where mutual wills are made, the Court may grant relief which requires the executor of a party to the mutual will arrangement who has left his or her property otherwise than in accordance with the mutual will arrangement. The Court may declare that there is a constructive trust over the property which requires it to be held and administered in accordance with that arrangement. On one view, in such a case the constructive trust out‑flanks the terms of the will; the assets of the deceased are subject to the constructive trust and do not fall within the deceased's estate at all.
The significance of this is that s 63 of the Trustee Act operates by reference to the management or administration of the property of a particular trust (or in this case, estate) and protects the trustee who acts on the Court's advice from any claim which may be made against the trustee for breach of duty as trustee of that trust. Arguably this would not protect the trustee if the Court were to declare that the estate or the assets in the estate were subject to a constructive trust in different terms: see Re Dallaway [1982] 3 All ER 118; [1982] 1 WLR 756 at 121. I do not however need to reach a final conclusion on this. It seems to me that, where it applies, the Probate and Administration Act, s 93 procedure is more suitable than an application for judicial advice for more general reasons.
If the s 93 procedure is followed and proceedings are then brought in response to the notice, no question of protecting the trustee relevantly arises. The trustee simply defends the proceedings in the usual way. If no claim is brought within the three month period, then the trustee can make an application for a barring order. That application will be an ordinary adversarial application inter partes, and the Court directly considers the underlying issue, namely whether the claim should be extinguished. The Court also has power to impose appropriate conditions on the belated bringing of any such claim, and that power would enable the Court to impose appropriate conditions (for example, the giving of an undertaking to pay interest) which would protect the interests of the beneficiaries of the estate from any delay.
In an application under s 63, by contrast, the principal focus for the Court's consideration is the conduct of the trustee in connection with the administration of the estate. The rights and wrongs of the underlying claim are only indirectly relevant.
Usually, s 63 proceedings are taken ex parte. It is true that protection is available to an executor under s 63 but that advice is always subject to challenge on the ground that full disclosure has not been made to the Court: see s 63(2). I have not overlooked the fact that under s 63(8) and s 63(10) there is provision for issues affecting the rights of third parties to be determined in a summary way by the Court, and for those parties to be permitted to appear for that purpose. But that was not the way the application was brought to me, and in any event there would seem to be no advantage to such summary proceedings over the specifically tailored Probate and Administration Act, s 93 procedure.
Counsel for Ms Lewis pointed out that there had been a lack of clarity in the way in which the claim on behalf of Mr Bartlett was articulated. Counsel submitted that this made the s 93 procedure inapplicable.
It is true that the basis for the claim made by Mr Bartlett was hard to pin down and appears to have varied over time. That continued even after the proceedings had been commenced. But I do not think this makes any difference. Had notice been given on behalf of Ms Lewis under s 93, then, judging by subsequent experience, the most likely result would have been that the proceedings which were commenced at the last gasp in February this year would have been commenced at an earlier point in time. Once those proceedings had been commenced, any difficulty in understanding the claim could have been dealt with using the Court's ordinary procedures, including if appropriate, an application to strike the proceedings out.
This, I think would have been more favourable to the interests of the beneficiaries of the estate inasmuch that as soon as the proceedings were commenced there would have been a right to recover the costs of dealing with the claim directly from Mr Bartlett. Whereas the effect of treating the claim as an issue to be dealt with in the administration was that the cost of considering it were only costs of administering the estate and could not be recovered even if the claim were ill‑founded.
The other possibility, had the notice procedure under s 93 been followed, is that there would have been no response in which event an order could have been sought barring Mr Bartlett's claim under s 93(2). Such an order would have protected the estate against the claim no matter how it was formulated.
What all of this shows is that there is room to argue about whether the interests of the estate were properly served by bringing an application for judicial advice rather than by following the s 93 procedure. I stress that this is only a possibility. On closer investigation it may appear that there would have been little or no practical difference and the cost to the estate would have been the same in any event. But the point is that further investigation and consideration would be needed to reach that conclusion.
In the ordinary course, any debate about this question would be resolved in the way in which the propriety of any charge to an estate is normally resolved. The beneficiaries who will bear the cost of the item in question would have an opportunity to question the relevant item of cost and ultimately, if they chose, to obtain a ruling from the Court on whether it was a proper charge to the estate.
If I make an order now that the costs of these proceedings be paid on an indemnity basis out of the assets of the estate, I will for practical purposes deprive the beneficiaries who are not before the Court of any opportunity to take this point. In saying this, I do not wish to be taken to encourage any such dispute. It may be that there is nothing in it; or the solicitors acting for Ms Lewis may choose to moderate their costs. But I think it would be undesirable, in principle, for the Court to foreclose any debate on the question by making an order in the form which is sought.
The order of the Court is that the plaintiff's Summons be dismissed.
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Decision last updated: 11 March 2020