//
[2015] WASC 422
General information, not legal advice.
Supreme Court of WA
2015-11-06
Original judgment source is linked above.
1 ACTING MASTER GETHING: Dawn Lorraine Phillips[1] died on 10 October 2013. She left a will dated 8 March 2012 (Will). The executor appointed under the Will was Matthew Jaime Bassett‑Scarfe. Probate of the Will was granted to Mr Bassett‑Scarfe on 26 February 2014.
2 At the time of her death, the Deceased had a de facto partner, John Joseph Browne. On the materials before me, there does not seem to be any contest that Mr Browne was the Deceased's de facto partner.
3 Pursuant to the Will, Mr Browne was to receive 10% of the residuary estate. The value of the Deceased's estate is approximately $340,000.[2] Thus under the will, Mr Browne stands to receive approximately $34,000. The remainder of the estate is distributed to 12 individuals and eight organisations which appear to be charities. There are two other distributions of 10% of the residuary estate. The remaining distributions are 5% or less.
4 Mr Browne considered that the bequest made to him did not adequately provide for his proper maintenance, support and advancement in life. Accordingly, he made an application pursuant to the Family Provision Act 1972 (WA) (FPA) s 6 for an order that further provision be made to him out of the estate. He has standing to make the application as he was living as the de facto partner of the Deceased immediately before the death of the Deceased.[3] All 20 beneficiaries were listed as defendants.
5 Mr Bassett-Scarfe is the only defendant to have entered an appearance. Five of the beneficiaries have filed notices with the court stating that they will abide by the decision of the court. The position of the second to thirteenth defendants (being the individual beneficiaries) appears to be that although none of them wish to file a memorandum of appearance, they wish Mr Browne's application to be opposed.[4]
6 As is the practice of this court, the FPA application was listed for a mediation at an early stage in the life of the application, which occurred in August. The matter did not settle at the mediation.
7 Mr Bassett‑Scarfe in his capacity as the executor of the Will now needs to make a decision as to whether or not to oppose Mr Browne's claim. By chamber summons filed 2 October 2015, Mr Bassett‑Scarfe sought directions pursuant to the Trustees Act 1962 (WA) (TA) s 92 on this issue. The text of the chamber summons is in refreshingly simple terms:
8 The application by Mr Bassett‑Scarfe has been referred to me for determination on the papers.
9 The TA s 92 provides as follows:
(1) Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.
(2) Every application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the Court thinks expedient.
11 With one caveat, in the particular circumstances of this case, and on the affidavit evidence available to me, I do not consider it expedient to require any of the beneficiaries to be served with the application. Mr Browne has an inherent conflict of interest on the position. The position of the remaining beneficiaries, that is the second to twenty‑first defendants, is set out above [5]. The caveat is that Mr Browne is entitled to be heard on any issue of whether any costs should be paid out of the estate.
12 The legal principles applicable to an application pursuant to TA s 92 have been the subject of recent consideration by Kenneth Martin J in Wood (as Co‑Executor and Trustee of the will of the deceased) v Wood [No 4],[6] Edelman J in Plan B Trustees Ltd v Parker [No 2][7] and Allanson J in Re Estate of Anastasios Keriacules Challis (dec).[8] I respectfully agree with and adopt the observations set out by their Honours. I also join with Allanson J[9] in adopting the following comments by Gillard J in Re Atkinson deceased:[10]
Where an executor or trustee is in doubt as to the course of action it should adopt, it is always entitled to take the opinion of the court as to what it should do. If in doubt as to whether or not it should take legal proceedings, then it is entitled to apply to the court for directions on the matter: see Halsbury's Laws of England, 3rd ed, vol 38, pp 946 and 1023-1024; in Re Brogden [1888] UKLawRpCh 89; (1888), 38 Ch D 546, at p 556; [1888] UKLawRpCh 89; [1886-90] All ER Rep 927; Chettiar v Chettiar (No. 2) [1962] UKPC 1; [1962] 2 All ER 238, at p 245. If the executor or the trustee then followed the direction of the court, it would be protected from any claim by a beneficiary or creditor arising from its action or inaction in accordance with the court's direction: see Underwood v Hatton [1842] EngR 371; (1842), 5 Beav 36; 49 ER 490; Smith v Smith (1861) 1 Dr & Sm 384; 62 ER 426. In cases of real doubt, the proper course for a personal representative or trustee to adopt is to seek the court's decision as to whether or not action should be brought, otherwise the representative or trustee might find itself paying the costs of any proceedings which a court might subsequently say were not 'properly incurred': see Re Beddoe; Downs v Cottam, [1892] UKLawRpCh 180; [1893] 1 Ch 547, at pp 558 and 562.
13 There is a jurisdictional threshold to the pursuit of relief under TA s 92, being that the applicant must point to the existence of a question concerning any property subject to a trust, or respecting the management or administration of that property, or respecting exercise of any power or discretion vested in the trustee.[11] As the decisions in Wood¸ Plan B and Challis illustrate, a request to the court for directions as to the position an executor should take in relation to litigation is a classic exercise of this power.
14 An executor has a duty to 'defend the will', which in the context of an application pursuant to the FPA involves a duty to either compromise the claim or to contest it to seek to uphold the provisions of the will.[12] The application is only required to be served on the executor.[13] The court will typically make an order that the application be served on all other beneficiaries.[14] If the beneficiaries take an active part in opposing the application, then there may be less or no need for the executor to do so. However, especially in a small estate, the executor's duty remains.[15]
15 Mr Bassett‑Scarfe is in a difficult position. He has a duty to either compromise or contest the application. He does have a presumptive right for his costs to be paid out of the estate pursuant to Rules of the Supreme Court 1971 (WA) (RSC) O 66 r 9(2), but he runs the risk that the court may order otherwise, including if it can be said that he has acted unreasonably.
17 When the question concerns the justification of legal action, the relevant considerations include the prospects of success, the potential to deplete the estate, costs should the application be unsuccessful and what will be gained if the action is to succeed.[17]
A court will usually be reluctant to exercise discretion in favour of sanctioning, as justified, a course of action by a trustee unless the trustee has taken reasonable steps necessary to form its own opinion on the subject. Where the direction sought is that legal action is justified then it will generally be necessary for the trustee to obtain a legal opinion before approaching the Court. This is because the trustee should have taken reasonable steps to form its own opinion on the subject about directions which are sought before approaching the Court for directions. Legal action should never be commenced unless the trustee is satisfied that it is properly arguable.
19 In the present case, I am not told whether Mr Bassett-Scarfe has obtained an independent legal opinion as to whether he should continue to oppose Mr Browne's application. He is of course a certified legal practitioner. What I do have in evidence is a letter from Mr Bassett‑Scarfe to Mr Browne's lawyers dated 28 August 2015 which, in my view, contains a well‑reasoned argument as to why he would be justified in continuing to oppose the application.[19] In this letter, Mr Bassett-Scarfe analyses Mr Browne's current financial situation and his likely future financial needs.
20 Mr Browne's position is that he is entitled to the entire proceeds of the estate.[20]
21 In my view, in the context of the present application and Mr Browne's position, the information set out in the letter of 28 August 2015 is more than adequate to enable me to form the view that there are properly arguable grounds to oppose Mr Browne's claim. Obtaining an opinion from independent counsel would have been a waste of the limited resources of the estate. Having said that, if the litigation is to proceed, there is a role for independent counsel in the ongoing management of the case.
22 The primary reason for Mr Bassett‑Scarfe to continue to oppose the application is that there does not appear to be another beneficiary who is prepared to be a contradictor to the claims made by Mr Browne. The other two individuals who will receive 10% of the residue of the estate only stand to receive approximately $34,000.
23 The principles in relation to the award of costs for applications under the FPA were the subject of recent consideration by the Court of Appeal in Dean v Collins [No 2].[21] In that decision, Chaney J (with whom Martin CJ & Buss JA agreed) described the 'general policy' of the court in FPA cases in the following terms:[22]
In relation to the question of whether the appellant's costs should be borne by the estate or by the beneficiaries named in the will, it is now the general policy of the court to order that the costs of proceedings under the Family Provision Act be borne by the beneficiaries or claimants who were unsuccessful in the proceedings. The reasons for that policy are exemplified by this case. First, an order that the costs be paid out of the estate would, in effect, have the consequence that the successful appellant would be bearing one-third of her own costs. Second, the substantive parties to the dispute which was litigated were the appellant and the named beneficiaries. As the named beneficiaries were unsuccessful in their opposition to the appellant's claim, there is no reason why the usual practice as to costs should not apply, with the consequence that they should be ordered to pay the appellant's costs.
24 In view of this strong statement of policy, it is understandable why the individual beneficiaries do not wish to enter an appearance and contest the application. There is a real risk that, if Mr Browne's application is successful, their share of the residuary estate will be reduced significantly, and that they will face a liability not only to pay their costs, but the costs of Mr Browne as the successful party. These costs could extend well beyond any money received under the Will.
25 The main reason why Mr Bassett‑Scarfe may not be justified in continuing to oppose the claim is that any litigation is likely to lead to a significant portion of the estate being used up for his legal fees. As I have noted, he has a presumptive entitlement to be paid his costs out of the estate pursuant to RSC O 66 r 9(2). Further, pursuant to cl 10 of the Will, Mr Bassett‑Scarfe, being a solicitor, is entitled to charge and be paid all usual professional and other charges for business done, services rendered, or time spent by him or his firm in the administration of the estate.
26 In the end, I am primarily guided in the exercise of discretion by a sense of what action is in the best interests of the beneficiaries of the estate as a whole and would otherwise be prudent.[23] It would seem to me that their interests are best served by there being a cost effective contradictor to Mr Browne's claim. Mr Bassett‑Scarfe appears to be the only person in a position to perform this role. The liability for costs and risk of an adverse costs order, in the context of the very modest bequests to the beneficiaries, means that it is not economically feasible for any individual beneficiary to oppose the application. On the other hand, to the extent that Mr Bassett‑Scarfe's costs are met out of the estate, the residuary beneficiaries will, in effect, be collectively funding the opposition to the application.
27 The usual form of the order in cases like the present one is that the trustee is justified in opposing the action.[24] For the reasons set out above, I am of the view that Mr Bassett-Scarfe is justified in continuing to oppose Mr Browne's application. I am also of the view that Mr Bassett‑Scarfe would be justified engaging independent counsel to assist him. For the avoidance of any doubt, I am further of the view that Mr Bassett‑Scarfe would be justified to cease opposing Mr Browne's application if settlement terms could be reached which both he and independent counsel considered to be a fair and reasonable settlement of the application. A settlement by way of orders under the FPA varying the Will would have to be by way of consent order. It may be prudent for the approval of any consent order to be done in Master's chambers on notice to any beneficiary who has not filed a notice to abide by the decision of the Court.
28 I will publish these reasons and then list the application in master's chambers for the making of final orders, with Mr Browne having notice of the hearing. I direct that Mr Bassett‑Scarfe provide a minute of proposed orders giving effect to the reasons set out above, and dealing with any residual issues, including costs three business days prior to the hearing.
29 As to costs, it is well established that an executor seeking directions under TA s 92 should have his costs to be taxed paid out of the estate and on an indemnity basis.[25] Accordingly, I am of the preliminary view that the costs of this application should be taxed or fixed on an indemnity basis and be immediately paid out of the estate.
[1] Whom I will refer to as 'the Deceased'.
[2] Affidavit of Matthew Jaime Bassett-Scarfe filed 31 October 2014.
[4] Affidavit of Matthew Jaime Bassett-Scarfe sworn 22 June 2015, par 6.
[5] For example, see: Wood and Re Estate of Anastasios Keriacules Challis (dec) [2010] WASC 333 [17] (Allanson J).
[6] Wood (as Co‑Executor and Trustee of the will of the deceased) v Wood [No 4] [2014] WASC 393 [98] ‑ [139].
[7] Plan B Trustees Ltd v Parker [No 2] [2013] WASC 216 [37] ‑ [53]
[10] Re Atkinson deceased [1971] VicRp 73; [1971] VR 612, 615.
[12] Valilijev v Public Trustee [1974] 2 NSWLR 497, 503 (Hutley JA, with whom Hardie and Reynolds JJA agreed); Rijkhuijs v Barclay (1988) 13 NSWLR 639, 654 (Kirby J, with whom Hope JA agreed).
[18] Plan B [48] (footnotes omitted).
[19] Affidavit of Matthew Jaime Bassett-Scarfe sworn 24 September 2015, Attachment MJBS1, pages 4 ‑ 33.
[20] Affidavit of Matthew Jaime Bassett-Scarfe sworn 24 September 2015, Attachment MJBS4, page 51.
[21] Dean v Collins [No 2] [2015] WASCA 151.
[25] Tsaknis as Executor and Trustee of the Estate of Geoffrey Douglas Roland Lilburne (Dec) v Lilburne [82] (E M Heenan J); RSC O 66 r 9(2).
(1988) 13 NSWLR 639