Batey & Anor v Potts & Ors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3809/03 SANDRA ROSEMARY BATEY & ANOR v MALCOLM ROBERT MARIO POTTS & ORS JUDGMENT 1 The plaintiffs are the executors of the will of the late Margaret Mary Potts. They brought proceedings under the Supreme Court Rules 1970, Pt 68 r 2 for the determination of questions arising in the administration of the estate. The first defendant is the son of the deceased. The second defendant is his estranged wife who is also tutor for their only son. The third defendant is a grandchild of the deceased. 2 In her last will, the deceased made provision for her husband Keith Edward Potts, deceased, and, in certain events, for the defendants. The first defendant was convicted of manslaughter of his father. The questions raised in the proceedings are whether the forfeiture rule applies to the interests of the first defendant under the will and, if so, whether relief should be granted under the Forfeiture Act 1995. 3 By her last will, the deceased granted pecuniary legacies and directed her executors with respect to her matrimonial home that: "My husband KEITH EDWARD POTTS may live in the house during his lifetime or so long as he remains unmarried or is in the absolute discretion of my Executors able to continue to reside therein." 4 Provision was made for the acquisition of a substitute house and the directions continued: "(f) When my husband KEITH EDWARD POTTS shall cease to live permanently in the house or in any new residence provided in substitution for the house my Executors shall hold the house or new residence upon the same trusts as are set out in Clause 8 of this will." 5 By Clause 8 the deceased gave the residue of her estate to her executors upon trust to pay the net income to the first defendant until he attained the age of 35 and thereafter to pay the capital and income of the trust fund to the first defendant but if that trust failed: "(b)(i) TO PAY the income thereof to my daughter-in-law TINA POTTS until the youngest of my grandchildren, being a child of my said son MALCOLM and his wife TINA shall attain the age of eighteen (18) years AND THEREAFTER (ii) TO DIVIDE the capital and income of the trust fund among such of my grandchildren including KIRSTEN VERWOORD as shall survive me and obtain their majority and if more than one in equal shares as tenants in common." 6 The parties agreed to consent orders in the alternative depending upon my decision on the questions whether the forfeiture rule applied and, if so, whether relief from it should be granted. There was no opponent to the agreed courses of action. 7 There was in evidence a certificate of conviction of the first defendant recording a not guilty verdict to murder but a guilty verdict to manslaughter. Also in evidence was an outline of directions to the jury and a transcript of the proceedings before Hidden J when the first defendant was sentenced. 8 An initial question was raised as to the use that might be made of these documents. Reference was made to Permanent Trustee Co Ltd v Gillett [2004] NSWSC 278 in which Austin J held inadmissible evidence of the decision of the trial judge as to the accused's condition of mental illness that led to a verdict of not guilty by reason of mental illness. His Honour concluded that this course was dictated by the Evidence Act 1995, s 91. It provided that evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding was not admissible to prove the existence of a fact that was in issue in that proceeding. 9 In this case, however, the certificate recorded a guilty verdict and while such a certificate was admitted in the famous case In the Estate of Crippen [1911] P 108 not only as proof of the conviction, but also as prima facie evidence of the commission of the crime, that case was overruled by the Court of Appeal in Hollington v F Hewthorn & Co Ltd [1943] 1 KB 587. 10 In Helton v Allen (1940) 63 CLR at 691 at 710 the High Court cited Helsham v Blackwood (1851) 11 CB 111 at 121-124 (138 ER 412 at 416-418) for the distinction between a certificate of acquittal and a certificate of conviction, the latter being admissible as an estoppel against a party to civil proceedings. 11 That distinction was preserved in the Evidence Act 1995, s 91(2). It provided that in a civil proceeding, s 91(1) did not prevent the admission or use of evidence that a party, or a person through or under whom a party claimed, had been convicted of an offence. There are exceptions irrelevant for present purposes. Section 92(3) provided that the hearsay rule and the opinion rule did not apply to such evidence. 12 It follows that evidence of the conviction of the first defendant was admissible in these proceedings. The Evidence Act 1995, s 178(2) enabled that evidence to be given by way of certificate. 13 It does not seem to me, however, that these considerations apply to the outline of directions to the jury or the observations made by Hidden J in sentencing the first defendant. The exception to the general exclusion of evidence of findings in prior proceedings under the Evidence Act 1995, s 91(2) is limited to proof of the conviction. 14 As well as applying to the case of murder (Crippen, Re Jane Tucker (1920) 21 SR (NSW) 175), the forfeiture rule applies to manslaughter (In the Estate of Hall, Hall v Knight & Baxter [1914] P 1, In re Giles, decd [1972] 1 Ch 544). The rule does not, however, apply where the person who kills another is not guilty of an offence by reason of mental illness (In re Plaister. Perpetual Trustee Co v Crawshaw (1934) 34 SR (NSW) 547). 15 The first defendant was diagnosed as suffering from chronic schizophrenia well before the incident in question. There was in evidence, without objection, a medical report of Dr Olav Nielssen, a forensic psychiatrist, who examined the first defendant eight months after the homicide. He did not elicit from the first defendant acute symptoms of mental illness producing a defect of reason. The doctor remarked that the exacerbation of symptoms of schizophrenia was apparent in the disorganisation of the first defendant's thinking, his irritability and impulsiveness. Doctor Nielssen concluded that the contribution of intoxication with cannabis to the first defendant's state of mind exacerbated symptoms of chronic mental illness and produced an abnormality of mind that significantly affected his perception of events and his judgment and self control. 16 It is open to a court to infer that a person was mentally ill when a homicide occurred (Plaister at 557-558). However, as Clift v Clift (1964) 82 WN (Pt 1) (NSW) 298 demonstrates, a conclusion of insanity within the M'Naghten Rules (1843) 10 Cl & F 200 at 210 (8 ER 718 at 722), that an accused was labouring under such a defect of reason, from disease of the mind, as not to know the nature and quality of the act or, if the accused did know it, he did not know that what he was doing was wrong, is difficult to draw by way of inference. In that case Jacobs J refused to conclude insanity from the fact that the impulse of the beneficiary to kill the testatrix was not controllable and was irresistible. 17 In this case the first defendant was suffering from schizophrenia. That in itself does not satisfy the M'Naghten Rules. That Doctor Nielssen did not elicit from the first defendant acute symptoms of mental illness but, rather, an exacerbation of the symptoms of his chronic illness leads me to the view that insanity should not be inferred. I conclude, therefore, that the first defendant's actions were sufficient to invoke the forfeiture rule. 18 The rule is said to have been first enunciated in the Court of Appeal in Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147 at 156 where Fry L J said: "It appears to me that no system of jurisprudence can with reason include amongst the rights which it enforces rights directly resulting to the person asserting them from the crime of that person." 19 In Hall at 7, Hamilton LJ said the principle could only be expressed in the wide form that a man should not slay his benefactor and thereby take his bounty. That the rule was based upon a principle of public policy was accepted by the High Court in Helton at 709. 20 In Troja v Troja (1994) 33 NSWLR 269 at 299, Meagher JA expressed the rule thus: "That rule provides that where a person who would otherwise obtain a benefit by the death of another, has brought about that other's death by violent means, he shall not be entitled to take that benefit." 21 The rule is usually invoked where a perpetrator kills a testator or testatrix. That is not the situation in the instant circumstances. The first defendant killed his father and thereby accelerated the time at which the deceased's gifts to him were to take effect. I see no reason why the rule should not apply to such circumstances. The public policy against benefiting from one's crime is not limited to fixed categories. Nor does it focus upon the manner in which the felony results in benefit to the perpetrator. As Meagher JA pointed out in Troja at 299, its principle is founded in public abhorrence of homicide. That abhorrence is no less pronounced because the first defendant killed his father rather than his mother. 22 In Cleaver at 157, Fry LJ had no difficulty in supposing that the rule applied to such a case. He said: "It would equally apply, it appears to me, to the case of a cestui que trust asserting a right as such by reason of the murder of the prior tenant for life or of the assured in a policy." 23 In Giles, the Court of Appeal held the rule to be absolute and not to depend on the degree of moral culpability for the offence. Young J came to a contrary view in Public Trustee v Evans (1985) 2 NSWLR 188. He concluded that no public interest was served by invoking the rule against a woman who shot and killed her husband while involved in an act of domestic violence commenced by the deceased where the jury was discharged at the conclusion of the Crown case on the grounds that a nominal punishment would, in all the circumstances, be sufficient. (See, also, Public Trustee v Fraser (1987) 9 NSWLR 433, Re Keitley [1992] 1 VR 583, Permanent Trustee Co Ltd v Freedom From Hunger Campaign (1991) 25 NSWLR 140). 24 In Troja, the Court of Appeal held that the rule applied irrespective of the motive of the perpetrator, was absolute in its operation and there was no scope for its discretionary application. It follows, in my view, that the forfeiture rule applied to the first defendant. 25 The interest acquired by Keith Edward Potts, deceased did not constitute a life estate. It was a right of residence and not a right of occupancy which extends beyond residence permitting a tenancy and so constituting the same interest as a life estate (White v Arizon Pty Ltd [2003] NSWSC 1051 at par 20). The distinction was explained by AH Simpson CJ in Eq in Re Keenan (1913) 30 WN (NSW) 214 at 215: "A direction that a person may reside or live in a house prima facie confers a personal right for a man cannot reside by deputy. But a right to use and occupy, or to occupy only, stands on a different footing for a man can "occupy" by himself or a tenant." 26 The personal right of residence granted to Keith Edward Potts, deceased was foreshortened by the first defendant's felony and his entitlements were accelerated. It is the benefit of that acceleration that the forfeiture rule strikes down for it denies a felon the enjoyment of any benefit that might otherwise flow from his felonious act. It does not, however, cross the line and take from the felon rights or interests that are not consequential upon his felonious act (Rasmanis v Jurewitsch (1968) 88 WN (Pt 1) (NSW) 59 at 63). 27 In my view, the gifts to the first defendant of income and corpus remain intact. They were made by the deceased and did not flow from the homicide. They are not struck down by the forfeiture rule. It is only to the extent that their enjoyment was accelerated that the rule has application. In such circumstances the appropriate remedy is to deprive the killer of the enjoyment of his interest for the period of the victim's life expectancy (Mason and Carter, Restitution Law in Australia, Butterworths, Sydney, 1995, par 1928). 28 Keith Edward Potts, deceased was born on 5 May 1933 and was 67 years of age when he died on 4 May 2000 or on 5 May 2000. Life expectancy tables were in evidence without objection. They suggested that a male aged 67 had a life expectancy of 14.79 years. 29 When his father died, the first defendant was 32 years of age. He did not reach his 35th birthday until 13 October 2002. In terms of the will, he was entitled to the income of the estate until 13 October 2002 when he became entitled to the residue. 30 The forfeiture rule applies to the first defendant to deprive him of the benefit of acceleration of interest by approximately 15 years. He will be denied access to the income of the estate before his 35th birthday and he will not succeed to the residue of the estate until some time in 2015. 31 The Forfeiture Act 1995 ameliorated the effect of Troja. Section 4(2) provided that the Act did not apply to an unlawful killing committed in New South Wales that constituted murder. That exclusion does not arise in the instant circumstances. Section 5(1) provided that if a person had unlawfully killed another person and was thereby precluded by the forfeiture rule from obtaining a benefit, any interested person might make an application to the court for an order modifying the effect of the rule. 32 Unlawful killing was defined in the Forfeiture Act 1995, s 3 to include any homicide committed in the State that was an offence. Keith Edward Potts was killed in New South Wales. That killing was an offence. The forfeiture rule was defined in s 3 to mean the unwritten rule of public policy that in certain circumstances precluded a person who had unlawfully killed another person from acquiring a benefit in consequence of the killing. 33 The pre-conditions for the operation of the Forfeiture Act 1995 having been found to exist in this case, it follows that the court is empowered to consider an application for modification of the rule. 34 The Forfeiture Act 1995, s 7(1) provided that unless the court gave leave for a late application, an application for a forfeiture modification order, where the forfeiture rule operated immediately on the death of the victim, was to be made within 12 months of death. Section 7(2)(d) provided that the court might give leave for a late application if it considered it just in all the circumstances to do so. 35 When the matter came before the court, I gave leave to file a cross claim in which leave for a late application was sought. That application was made expeditiously following the first defendant's release from prison and, in light of my attitude to the effect of the forfeiture rule in this case, I am of the view that it is just that leave be granted. 36 The Forfeiture Act 1995, s 5(2) provided that the court might make an order modifying the effect of the forfeiture rule if it was satisfied that justice required the effect of the rule to be modified. For that purpose, s 5(3) provided that the court was to have regard to the conduct of the offender, the conduct of the deceased person, the effect of the application of the rule on the offender or any other person and such other matters as appeared to the court to be material. 37 The New South Wales Police Service fact sheet with respect to the homicide was in evidence without objection. It stated that the first defendant, having consumed approximately three cones of cannabis, was confronted by his father and verbally abused in a belittling fashion for some time. The first defendant then entered his father's bedroom and sprayed him with Mortein flyspray and threw a number of bedroom articles at him and punched him in the body and head. The first defendant obtained a large carving knife and returned to the bedroom and attacked his father inflicting deep lacerations to both forearms, scalp and face. He left the bedroom, closing the door behind him, and stepped into the bathroom to wait for his father to open the bedroom door. When he did, the first defendant lunged at him in a frenzied attack leaving his father face down on the floor where he died. The first defendant left the bedroom, washed the knife and replaced it, removed his clothes and placed them in the washing machine and showered and dressed in fresh clothing. He sat down and smoked more cannabis before telephoning the emergency number and requesting police and ambulance. 38 The first defendant was sentenced to seven years' imprisonment dating from 5 May 2000 with a non-parole period of three years and nine months. He was released on parole on 18 March 2004. 39 Since the first defendant is the residuary beneficiary under the will of the deceased, the effect of the forfeiture rule in postponing his enjoyment is simply to augment the corpus to which he will be entitled in 2015. Unless the first defendant dies before 2015, there will be no other interest in any other person under the will in the intervening period. Unless the gift of residue to the first defendant fails, the gift over to the second defendant and to the grandchildren of the deceased, including the third defendant, will not take effect. 40 A person who has an absolute indefeasible interest in a postponed gift and who may give a valid discharge, is not obliged to await the termination of the period of postponement but may demand immediate payment (Saunders v Vautier (1841) 4 Beav 115 (49 ER 282)). In my view, however, that rule does not override the forfeiture rule. If public policy demands that a felon's enjoyment of a bequest be postponed, that consideration will be given more weight than the principle that any restriction on the enjoyment of a vested interest by a beneficiary who is sui juris is inconsistent with the nature of that interest. The forfeiture rule operates regardless of the nature of the interest acquired by reason of the unlawful killing. 41 It remains the case, however, that the accumulation of income until 2015 will benefit no one other than the first defendant if he survives to that date. 42 Had it not been for the effect of the application of the forfeiture rule on the first defendant, I would not have been inclined to modify its application. While there was some provocation from his father, the first defendant's frenzied attack and the seeming deliberate acts that followed it, even though committed while there was an exacerbation of his schizophrenia that produced an abnormality of mind that significantly affected his perception of events and his judgment and self control, were such that public policy and its abhorrence of homicide would outweigh any requirement of justice to modify the rule. 43 However, since the effect of the forfeiture rule was to cancel the acceleration of the first defendant's enjoyment of the estate and that cancellation would simply augment that to which the first defendant will be entitled in 2015, and since the first defendant has been punished for his crime and served his sentence, I am of the view that the rule should be modified to enable the first defendant to take his benefits under the will from the date of death of his father. 44 I answer the questions raised in the plaintiff's summons below. The matrimonial home of the deceased was replaced by a house at 7/50-52 Melvin Street, Beverly Hills. It was subsequently sold:

(a) Did the first defendant unlawfully kill Keith Edwards Potts?

(b) Is the first defendant prevented by the application of that rule of law known as the forfeiture rule from enjoying the net income from the proceeds of sale of the property at 7/50-52 Melvin Street, Beverly Hills and, if so, for what period?

Subject to the operation of the Forfeiture Act 1995, the first defendant's enjoyment of the net income of the estate is postponed until 2015 under the forfeiture rule.

(c) Is the enjoyment by the first defendant of his interest in the capital being the proceeds of sale of the property at 7/50-52 Melvin Street, Beverly Hills postponed and, if so, for what period?

Subject to the operation of the Forfeiture Act 1995, the first defendant's enjoyment of the residue of the estate is postponed until 2015 under the forfeiture rule.

(d) Is the first defendant prevented by the application of the forfeiture rule from enjoying his interest in the capital being the proceeds of sale of the property at 7/50-52 Melvin Street, Beverly Hills?

(e) Is the second defendant, alternatively the third defendant (as representative for herself and such of the grandchildren of the testatrix as shall survive her and attain their majority) entitled to the net income from the proceeds of sale of the property at 7/50-52 Melvin Street, Beverly Hills?

(f) Did the class of grandchildren, including the third defendant, close on the death of the testatrix. Unnecessary to answer. 45 So far as the cross claim is concerned, I refuse to make a declaration that the first defendant's involvement in the death of Keith Edward Potts was not such as to invoke the operation of the forfeiture rule. Pursuant to the Forfeiture Act 1995, s 7(2) I will grant leave to the first defendant to make a late application for modification of the forfeiture rule and I will modify the rule to enable the first defendant to take his interests under the will of the deceased as from the date of death of Keith Edward Potts. 46 The parties prepared consent orders upon the alternative bases adopted by Austin J in Gillett. His Honour declared that either the circumstances were such as not to invoke the forfeiture rule or the court had jurisdiction to modify its effect under the Forfeiture Act 1995. I do not think it appropriate in this case to make orders in the alternative. I have found that the rule applies to the instant circumstances but that its effect should be modified under the Act. 47 The consent orders included the court noting an agreement between the parties modifying the application of the will of the deceased. There was in evidence a deed of release and indemnity for execution by the parties, a deed of release executed by the first and third defendants and a deed of release to be executed by the first and second defendants. 48 The deed of release and indemnity provides for the trustees to distribute the estate in accordance with consent orders. Those consent orders contain a provision by which the court is to note the agreement of the parties that the plaintiffs be authorised and directed to pay from the proceeds of sale of the property at 7/50-52 Melvin Street, Beverly Hills specified amounts to the third defendant and to the public trustee of New South Wales on behalf of Matthew Edward Potts, the son of the first and second defendants. 49 I doubt that the deed of release executed by the first and third defendants is a dutiable instrument under the Duties Act 1997. However, if the court makes the orders sought by the parties, its orders in conjunction with the other instruments, if executed, may constitute or evidence a transfer of dutiable property or an agreement for the transfer of dutiable property. If I am asked to make those orders I will, by analogy with s 304(2), require the plaintiffs to lodge the deed of release between the first and third defendants, the other deeds, if executed, and the court orders with the Chief Commissioner of State Revenue within seven days of the taking out of the orders. 50 The parties have agreed that the costs of all parties and those of Matthew Edwards Potts be paid on an indemnity basis out of the estate. I am of the view that such an order is appropriate in the circumstance.

51 I direct the parties to bring in short minutes of orders reflecting these reasons.

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