PERPETUAL TRUSTEES WA LIMITED AS EXECUTORS OF THE ESTATE OF SHEILA CATHERINE KOLECKI

PERPETUAL TRUSTEES WA LIMITED AS EXECUTORS OF THE ESTATE OF WLADYSLAW KOLECKI

Inheritance (Family and Dependants Provision) Act - Leave to bring application out of time - Principles to be applied - Estate distributed - Difficulty of tracing assets - Small estate

Inheritance (Family and Dependants Provision) Act 1972, s 6, s 7

Trustees Act 1962, s 65

Girando v Girando, unreported; SCt of WA; Library No 960485; 3 September 1996

Walton Stores v Maher [1988] HCA 7; (1988) 164 CLR 387

1 MASTER SANDERSON: This is the plaintiff's application for leave to bring an action out of time under the provisions of the Inheritance (Family and Dependants Provision) Act 1972 ("the Act") in relation to the estate of Sheila Catherine Kolecki ("the deceased"). The first defendant is sued in its capacity as the executor of the estate of the deceased. The second defendant is sued in its capacity as executor of the estate of the late Wladyslaw Kolecki ("Kolecki"), who was the husband of the deceased and the step-father of the plaintiff. The third defendant is the son of the deceased and Kolecki and is the half-brother of the plaintiff. He is the sole beneficiary of Kolecki's estate. The second and third defendants have been joined in these proceedings because they will be affected if leave given and the plaintiff commences proceedings.

2 By way of introduction, it is enough if I say that Kolecki was the sole beneficiary of the deceased's Will and the third defendant is the sole beneficiary of Kolecki's Will. The estate of the deceased has been fully distributed. Were the plaintiff permitted to commence proceedings under the Act and were an order to be made in her favour, this would reduce the amount available for distribution from Kolecki's estate and would adversely affect the third defendant. In the circumstances then, it is only proper that the second defendant and the third defendant be entitled to put their position in relation to this application.

3 Section 7(2) of the Act is in the following terms:

"No application under subsection (1) of this section shall be heard by the Court unless -

(a) the application is made within six months from the date on which the Administrator becomes entitled to administer the estate of the deceased in Western Australia; or

(b) the Court is satisfied that the justice of the case requires that the applicant be given leave to file out of time."

4 Although a number of affidavits were filed in support of, and in opposition to, this application, none of the parties saw fit to tender the grant of probate of the deceased's Will. It is common ground that this application, which is brought under s 7(2)(b) of the Act, was commenced three years and two months after the time had expired for bringing proceedings under s 7(2)(a). The question then is whether the court is satisfied that the justice of the case requires that the plaintiff be given leave to file an application out of time.

5 The principles to be applied in such a case were considered by the Full Court in Clayton v Aust (1993) 9 WAR 364. The Chief Justice approved what was said by Megarry VC in Re Salmon (deceased) (1981) Ch 170, at 175. Based upon what was said by Malcolm CJ in Clayton v Aust (supra), it is possible to set out a number of points which provide a guide when dealing with applications of this nature:

1. The time limit is a substantive provision laid down by the Act itself and is not a mere procedural time limit imposed by rules of court which will be treated with the indulgence appropriate to procedural rules. The burden on the applicant is no triviality. The applicant must make a substantial case for it being just and proper for the court to exercise its statutory jurisdiction to extend time.

2. The discretion conferred by the Act is unfettered but it is one that must be exercised judicially and in accordance with what is just and proper.

3. The onus lies on the plaintiff to establish sufficient grounds for taking the case out of the general rule and depriving those who are protected by its benefits.

4. The whole of the circumstances must be looked at and not least the reasons for the delay and also the promptitude with which, by letter before action or otherwise, the claimant gave warning to the defendants of the proposed application.

5. It is material whether or not negotiations have been commenced within the time limit.

6. It is relevant to consider whether or not the estate has been distributed before a claim under the Act is made or notified.

7. It is relevant to consider whether a refusal to extend the time would leave the claimant without redress against anybody.

8. It is relevant to consider whether or not the claimant has an arguable case, but no detailed consideration of the merits of the case is required at this stage.

6 I think these principles clearly emerge from not only the two cases that I have mentioned, but from Re Ruttie (1971) WLR 89, Re Gonin [1977] 2 All ER 720; Re Dennis (deceased) [1981] 2 All ER 140; Roberts v Roberts, unreported; SCt of WA; Library No 5193; 22 December 1983. All parties to this application were in agreement as to the principles to be applied.

7 Dealing first with the question of whether the plaintiff has an arguable case, in Clayton v Aust the Master had at first instance posed the question: "Has the applicant got an arguable case on the merits?". The learned Chief Justice concluded that this was the proper way to approach the matter (at 368). The answer to that question requires consideration of the two stage process outlined in Bondelmonte v Blanckensee [1989] WAR 305. Approaching the case in this way, it is first necessary to establish whether or not the plaintiff has been left without adequate provision for her proper maintenance, support, education and advancement in life. This is a question of fact which must be assessed at the date of the death of the deceased and does not involve an exercise of discretion. If this jurisdictional question is answered in the plaintiff's favour, then the court has a discretion as to what, if any, variation should be made to the Will of the deceased, and this does involve an exercise of discretion. An example of how this two stage task should be approached is provided by the High Court decision of Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201.

8 In the context of this application it is not appropriate for me to go through, in detail, the evidence in support of the plaintiff's evidence on the jurisdiction question. That, after all, is the task that must be undertaken by the court were this application to be successful. It is sufficient, I think, if I say that I am satisfied that the plaintiff has an arguable case, at least so far as jurisdiction is concerned. She falls within that class of persons who are entitled to make a claim under s 7(1)(c) of the Act. The Will of the deceased left her nothing. The evidence as to the plaintiff's financial position as at the date of death of the deceased is thin. However, having regard to her financial position, the size and nature of the deceased's estate, the totality of the relationship between the plaintiff and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon her bounty, I am satisfied that the plaintiff's case is arguable: see Singer v Berghouse (supra), per Mason CJ, Deane and McHugh JJ at 210. Furthermore, if the matter is approached on the basis of what a wise and just testator in the position of the deceased would have done with her Will in relation to the plaintiff, I am satisfied that proper provision has not been made: see In re Allen; Allen v Manchester (1921) 41 NZLR 218, per Salmond J at 220 - 221.

9 Having established that the jurisdiction question is likely to be answered in the plaintiff's favour, there is then the rather more difficult question of whether a discretion is likely to be exercised in the plaintiff's favour. As at the date of the death of the deceased, her estate amounted to some $88,836.83. This estate comprised almost exclusively assets distributed from the estate of the late Athol Laird. After deduction of expenses, the estate amounted to just over $82,000, all of which was distributed to Kolecki. He received $76,250.38 in cash and a number of units in certain investment funds managed by the Perpetual Group. Kolecki died some two years and eight months after the death of the deceased. The net value of Kolecki's estate was $75,209.51: see annexure "SCP1" to the affidavit of Spencer Charles Percival sworn 17 February 2000. From that amount is to be deducted the executor's fees, which I am advised at present amount to approximately $8,000. Further, there are the executor's solicitors' costs which I understand are in the region of $17,000. At present then, the total value of Kolecki's estate is in the region of $50,000.

10 Part of the deceased's estate can be traced to the estate of Kolecki quite easily. The units in the funds managed by the Perpetual Group passed from the deceased's estate to Kolecki and now comprise part of Kolecki's estate. However, the bulk of the estate was cash. That cash passed to Kolecki and it is unclear how it was spent. This fact was pointed out to the plaintiff's solicitors by the solicitors for the first and second defendants in correspondence, and it was intimated that the first and second defendants would raise this matter at the hearing. With that in mind, at the commencement of the hearing of this application, counsel for the plaintiff applied for an adjournment and for an order for discovery which effectively was directed at finding out what became of the cash passing from the deceased's estate to Kolecki. This discovery process would have amounted to obtaining documents from the period subsequent to the distribution of the deceased's estate through to Kolecki's death. Such a process would be time consuming and costly, and I have some doubts as to its utility. In the circumstances, I refused the adjournment and I refused to make an order for discovery.

11 Under the provisions of s 65 of the Trustees Act 1962, where an executor has distributed an estate, it is possible to follow the assets. Section 65(2)(a) refers specifically to claims brought under the Act. However, s 65(5) and s 65(6) are in the following terms:

"(5) Subject to the provisions of subsection (6) of this section, an order under this section shall not be made by the Court -

(a) where the claim is an application for an order under the Inheritance (Family and Dependants Provision) Act 1972, unless that application, is made within the time permitted by that Act; or

but, notwithstanding the foregoing provisions of this subsection, the order may be made, with the special leave of the Court, on application made within the time within which the applicant could have enforced his claim, in respect of the estate, with special leave of the Court, if the assets had not been distributed.

(6) Notwithstanding anything to the contrary in subsection (5) of this section, where a trustee has made a distribution of any assets forming part of the estate of a deceased person or subject to a trust, and any person who is entitled to apply for an order under this section has, within the time specified in that subsection applied to the Court for an order on the claim and that person was not aware of the distribution at the time that he made that application, the Court may hear an application by that person under this section after the expiration of the period prescribed in subsection (5) of this section, if it is made within six months after the date on which the person first became aware of, the distribution, and may make an order accordingly."

12 The precise application of these subsections was not the subject of detailed argument during the course of the application. Nonetheless, it does cast doubt on whether or not, even assuming that the plaintiff was able to overcome the jurisdictional hurdle, it would be possible for the court to make an order allowing for the following of assets of the deceased's estate through to Kolecki's estate.

13 On balance, I am satisfied that the plaintiff has an arguable case. In reaching this conclusion, I have little doubt that the plaintiff would succeed in relation to the jurisdiction question, but I do have considerable doubt as to whether or not it would be possible to follow any of the assets of the deceased so as to make an order in the plaintiff's favour. Any order would have to be made against the second defendant, and that may not be possible given the provisions of the Trustees Act. Final determination of that matter must, of course, await hearing of any application brought by the plaintiff with leave.

14 Turning then to the other matters which are properly to be considered in an application such as this. There is the question of the delay in bringing the application. It is considerable when viewed against the time limit of six months specified in the Act. Furthermore, after the death of the deceased, the plaintiff indicated to the first defendant that she was considering making an application under the Act. She took legal advice in January of 1996 and there followed correspondence between her solicitors and solicitors appointed by the first defendant. On 19 July 1996, the plaintiff wrote to the first defendant's solicitors informing them she had decided to "cancel all legal actions" in relation to the deceased's estate. It was after this letter (which is to be found as annexure "SCP1" to the affidavit of Spencer Charles Percival sworn 8 September 2000) that the first defendant sought advice from its solicitors and subsequently distributed the estate. The plaintiff, in her affidavit in support of the application sworn 17 November 1999, explains her actions in the following way:

"63. My stepfather was at that time ill and although an in-patient at the Mt Hawthorn Geriatric Hospital he spoke of going to a private nursing home. He was very distressed by the threat of my claim under the Act and told me he was concerned that he would lose his house and would not be able to go into a private nursing home because I was tying up the money from the estate.

64. I did not want to cause him that distress or for the claim to affect our relationship.

(a) the emotional upset it was causing my stepfather;

(c) the belief my stepfather would ensure that I would be provided for fairly in his Will,

I instructed my solicitors not to take any further action in the matter in July 1996."

15 It was submitted by the second defendant that, in the face of the plaintiff's unequivocal decision in July of 1996 to now give leave under s 7(2)(b) would not be in the interests of justice. The submission, articulated by counsel for the second defendant, was that the plaintiff's actions were unconscionable. Reliance was placed by the second defendant on the decision of Myers J in Re T F Dun (deceased) (1956) 56 SR (NSW) 181. The facts in that case were not directly comparable with the facts in this case. In fact, the estate had not been distributed except as to certain minor legacies. Moreover, the applicant maintained that she did not bring an application within the period limited by the Act because she did not appreciate she was entitled to make a claim. Myers J accepted the applicant's evidence on this point. In the course of his judgment, his Honour said (at 183):

"If he [the plaintiff] had elected to be bound by the will or, knowing his rights to make an application for an extension of the time, delayed for a long period in doing so, or lulled the beneficiaries into a false sense of security so that they ordered their affairs on the basis that their legacies could not be disturbed, or induced them to refrain from requiring a speedy distribution, that might be conduct which would disentitle an applicant to an order extending the time."

16 In my view, the decision of re Dun needs to be treated with some caution. It was decided in June of 1955, almost 40 years before Clayton v Aust, and 26 years before Re Salmon (deceased). In Re Salmon (deceased), McGarry VC makes the point that the principles, or as the learned Vice Chancellor refers to them, the guidelines, had developed largely within 14 years prior to that decision. So far as I am aware, there has been no case where the decision whether to grant an extension of time to bring an application has turned on the question of whether an election by the plaintiff at an earlier date not to proceed was determinative of the outcome. Counsel for the third defendant submitted that the actions of the plaintiff in not pursuing the claim against Kolecki now gave rise to an estoppel, the effect of which was to preclude the possibility of leave being granted.

17 In my view, the proper approach is to take into account, in exercising the Court's discretion, the fact that the plaintiff was aware of her right to proceed against the deceased's estate within the time period and the reasons why she chose not to act. In my view, to talk of unconscionable conduct or estoppel, or even common law election, unnecessarily complicates the matter. The authorities make it plain that all surrounding circumstances must be taken into account. One of the matters specifically referred to by McGarry VC is whether or not notice of the claim was given before the time expired and whether negotiations took place. Clearly it is relevant, in circumstances where the plaintiff made a deliberate decision not to proceed, to take into account both the fact that there was such a deliberate decision and the reasons for that decision.

18 There is one final point which, in my view, is relevant. That has to do with the size of the estate. As I have indicated above, the net value of Kolecki's estate is in the region of $50,000. If the matter proceeded through to a full hearing and the application was contested, as seems most likely to be the case, costs would further reduce the amount available for distribution. Assuming the plaintiff was successful, and assuming any claim she might have had was not defeated by s 65 of the Trustees Act, the amount left for division between the plaintiff and the third defendant would be little more than nominal. I acknowledge that there is no direct evidence on this issue, and it is not possible to say with any precision at all what legal fees are likely to be incurred. So far as the plaintiff is concerned, any further legal expenses to prepare for the hearing may not be all that great. In support of this application, the plaintiff filed a comprehensive affidavit and she supplemented her evidence by a further affidavit, after affidavits were filed by the defendants. It is unlikely that the first and second defendants would need to file any further affidavits in proceedings under the Act, save perhaps to update the present position of the estate. The third defendant filed an affidavit in these proceedings. The plaintiff objected to almost all of the material in that affidavit and, while it is unnecessary for me to deal with each objection, in my view, the plaintiff's complaints were well made. The third defendant would no doubt wish to file a further affidavit and would undoubtedly be given leave to do so were the plaintiff given leave to proceed. Discovery may be an issue between the parties, although to what extent is problematical. There would then be the hearing of the application and the costs associated with preparation for that hearing. By any measure, the legal costs would be considerable and the residue of the estate available for distribution would be modest.

19 Taking all matters into account, I have determined that this is not an appropriate case for the grant of leave. I have reached that conclusion for three principal reasons. First, the estate is fully distributed and the distribution was undertaken after an unequivocal assurance by the plaintiff to the first defendant that no claim would be made under the Act. I fully appreciate that this decision not to proceed was made by the plaintiff on compassionate grounds. It is difficult not to admire her for making such a decision; but, having made that decision, it seems to me that she must live with the consequences. Furthermore, the time which has passed since the decision was made is significant and weighs heavily against leave being granted.

20 Secondly, the deceased's estate has been fully distributed and following the assets may prove difficult. Allied with this is the fact that any claim made by the plaintiff may run into difficulties with s 65 of the Trustees Act. Once again, in my view, the fact that the estate has been fully distributed weighs against the plaintiff being granted leave.

21 Thirdly, there is the fact that Kolecki's estate is of modest size already and is likely to be substantially reduced if the plaintiff takes action under the Act. In the circumstances of this case, the small size of Kolecki's estate and the difficulties associated with the claim generally, seem to me to weigh against the plaintiff being granted leave.

22 For the sake of completeness, I should acknowledge that I am satisfied that the plaintiff has an arguable case. It may be that any claim she made would be defeated by s 65 of the Trustees Act. But, leaving that to one side, I am satisfied that the test for an arguable case posed in Clayton v Aust would be answered in the plaintiff's favour. However, I am not satisfied that this fact alone is sufficient to outweigh other matters telling against any leave being granted.

23 In the circumstances, I would dismiss the plaintiff's application. I will hear the parties with respect to costs.