Solicitors:
Noel Brown & Associates (applicant)
File Number(s): 2015/238492
[2]
Judgment
The deceased Petar Vezmar died on 19 June 2013, resident and domiciled in Australia and holding dual Australian and Serbian citizenship. He had never married, but he had one son Djordje Vezmar. Probate of his will dated 30 March 2013 and codicil dated 27 May 2013 was granted on 30 September 2013 to Noel Mockett Brown, one of the executors named in the will and codicil, Donna Radojka Nikolic the other executor having renounced. By summons filed on 14 August 2015 Mr Brown in his capacity as executor applies pursuant to (NSW) Trustee Act 1924, s 63, for advice in respect of certain provisions of the will.
The will dated 20 March 2013 relevantly provided as follows:
6. Gift for my half-sister
6.1 If at the date of my death, I own the property at 81 Boze Jankovica, Belgrade, Serbia, then I give this property to my half-sister Vera Acimov of ul. Sv. Save 45, Apatin, 25000, Serbia provided she survives me by 30 days to be held upon the trusts of clause 8 of this my Will.
6.2 If at the date of my death, I do not own the property at 81 Boze Jankovica, Belgrade, Serbia, (or if I do own the property, but this gift cannot take effect for some reason), then I give the sum of 220,000 Euros to my half-sister Vera Acimov provided she survives me by 30 days and this fund shall be held upon the trusts of clause 8 of this my Will.
…
8. Trust for Vera Acimov
8.1 If my half-sister Vera Acimov survives me by 30 days, that part of my estate to which she is entitled shall be held upon the following trusts.
8.2 The trustee of this trust shall be Nenad Milojevic. If Nenad Milojevic is unable or unwilling to act, then the trustee shall be Dejan Milojevic. If neither of Nenad Milojevic or Dejan Milojevic is able or willing to act, then the trustee of the trust shall be such person as is nominated by either of Nenad Milojevic or Dejan Milojevic.
8.3 The trustee shall invest this part of my estate in the manner provided by my Will and shall hold the capital and any accumulated income thereof and any accretions thereto upon the following trusts until the vesting date.
8.4 If the property at 81 Boze Jankovica, Belgrade, Serbia comprises this trust fund, then I direct the trustee as soon as is reasonably possible to sell the property at full market price and to invest the proceeds of sale for the benefit of Vera Acimov. [As will be seen, this provision was revoked by codicil on 27 May 2013].
8.5 During the lifetime of Vera Acimov, the trustee shall pay or apply the income of the trust to or for the benefit of Vera Acimov.
8.6 Upon the death of Vera Acimov, the trustee shall pay or apply the capital and any accumulated income to such of the child or grandchildren of Vera Acimov as the trustee thinks fit and in such proportions as the trustee thinks fit.
9. Trust for Djordje Vezmar and my grandchildren
9.1 If my son Djordje Vezmar survives me by 30 days, or is deemed to survive me by 30 days in accordance with the provisions of clause 7.8, my executor shall hold my residuary estate as referred to in clause 7 on the following trusts with my son being the primary beneficiary of the trust (subject to Clause 9.11)
By codicil dated 27 May 2013 the deceased inter alia revoked clause 8.4 of the will.
Mr Brown was the deceased's solicitor during his lifetime. The will was made in Australia, where the deceased was domiciled, and was prepared by an Australian solicitor. It dealt with Australian assets as well as the Serbian property.
At his death, the deceased owned the real property at 81 Boze Jankovica, Belgrade, Serbia, which was valued for probate purposes at 220,000 Euros (equivalent to AUD$321,402); a more current estimate is said to be 175,000 Euros (equivalent to AUD$250,000). The deceased's half-sister Vera Acimov survived him by 30 days and is still alive. His son Djordje Vezmar also survives.
The executor has received advice from three Serbian attorneys, which is not entirely consistent, as to the applicable Serbian law. Where I summarise these advices below, I have at times paraphrased and rearranged their contents so as to reflect, as best I am able, what I understand them to convey.
Attorney Samardzija of Popovic Popovic Samardzija & Popovic provided advice, dated 12 November 2013, to the effect that:
Serbian law is exclusively competent in the matter of inheritance of real estate by a Serbian citizen if the real estate is located in Serbia; and
Inheritance proceedings would have to be initiated before the competent court in Belgrade, Serbia.
In a telephone conference with Senior Counsel on 27 November 2013, reported in counsel's letter of 2 December 2013, Mr Samardzija advised:
Emphatically, that the application which might be brought before the Serbian court was one which would be initiated by the heir or beneficiary, Vera Acimov;
Serbian law does not entertain the concept of a trust as contemplated by clause 8 of the will. Nor is there any concept of a life estate with gift over or remainder, nor of a trustee holding legal title in circumstances where there might be a life tenant. The only role of a trustee is for the very limited purpose and time pending the making of the appropriate order in favour of the beneficiary (apparently somewhat similar to the role of the Public Trustee pending a grant of probate in this State); and
A Serbian court would treat clause 6.1 as an absolute gift to Vera Acimov. Once she was recognised by the Serbian Court as the beneficiary she would have the equivalent of absolute ownership and would be entitled to sell and not have to account to anyone. Nor would she be obliged to use only the income or retain any fund for her issue as referred to in Clause 8.6 of the will.
Attorney Nenadovic provided advice to Mr Nenad Milojevic, the trustee referred to in clause 8.2 of the will, who in turn provided that advice to Mr Brown. Aspects of it are difficult to understand, but the following can be distilled from it:
In the Republic of Serbia, the Law on Trusts and Foundations was adopted on 23 November 2010 and came into force on 1 March 2011. This introduced significant innovations into Serbian law by providing for the establishment of trusts for the purpose of benevolent exercise of private interests, defined as activities aimed at achieving individual interests of the trust founder, their family or third parties. The law regulates in detail the procedure for registration, rejection and refusal of a trust. Trusts acquire legal personality by registration and cannot operate prior to entry in the register. An application for registration is to be submitted by a person appointed for the administrator - in this case, since the trust is established by a will, by a final ruling on inheritance;
There are no obstacles for the deceased to establish a trust fund in favour of Vera Acimov. A trust statute could specify in what way the house in Belgrade could serve to benefit Vera Acimov. However, the will does not contain sufficiently clear provisions regarding the rights, powers and duties of the trust administrator. This is a major problem in the existence and operation of the trust.
In a letter of 26 April 2014, Attorney Nenadovic further stated:
The location of property determines that the Serbian court has exclusive jurisdiction: the lex situs doctrine states that the law governing the transfer of title to property is dependent upon the location of the property. There is no other solution in respect of the implementation of the will as to inheritance of real estate by a Serbian citizen, if the real estate is located in Serbia, but to leave the decision entirely to the Serbian court;
An Australian public document must be notarised or formally proved valid and genuine before it would be accepted by a Serbian court;
Serbian law restricts a testator's freedom to dispose of his or her estate, by reserving a portion of the estate for protected heirs. In this case, the testator's son Djordje Vezmar would be a protected heir. Thus to satisfy the Serbian court that his reserved inheritance is not impaired, it will be necessary to disclose the entirety of the estate so that the court can ascertain the reserved portion and the disposable portion.
In the light of those advices, the executor obtained an opinion of Dr Bell SC, dated 30 July 2014, who advised that further answers in relation to Serbian law were required, including in particular, though not limited to:
How is the deceased's ownership of the Belgrade property evidenced;
Under Serbian law, does title in real property held by a deceased pass automatically to the executor or does the executor need to take steps to obtain title, and if so, what are the steps to be taken.
Dr Bell advised that without such further information, it would not be proper for Mr Brown to enter into any agreement with regard to the subject property, other than to permit Ms Acimov to live there for the time being.
Mr Brown then sought advice from other Serbian attorneys, and Attorney Savic gave advice dated 30 August 2014 to the following effect:
The governing law for probate issues is the law of the country of citizenship, and where dual citizenship is held, only Serbian citizenship is considered in that respect. Thus, the governing law for probate issues concerning the deceased's will is Serbian law, because he held dual Australian and Serbian citizenship, in which circumstances for the purpose of applying probate legislation in Serbia he is treated as if he held only Serbian citizenship;
Moreover, Serbian courts have exclusive competence on issues concerning real estate in Serbia;
Under Serbian law, property held by a deceased passes to his heirs upon death, not to the executor;
Under Serbian law, the Belgrade property could not be put into the name of the Australian executor, or the nominated trustee; the only person into whose name it could be transferred is that of Vera, since the will states that if the deceased is the owner of the property at the time of his death he gives it to Vera;
The institutions of trust and trustees do not exist under Serbian law. As Serbian law does not recognise trusts, the will would be interpreted in a way that the testator's actual wish and intention is determined and carried out in accordance with Serbian law. Since the institution of trust does not exist under Serbian law, the court would apply the provisions of the will partially, disregarding the provisions concerning trusts. It would have regard only to provisions that state that the deceased gives the Belgrade property to Vera Acimov, thus enabling her to become owner of the property, following which there would be no obstacles to her disposing of it;
In order to have the will acknowledged in Serbia, probate proceedings before the Serbian probate court would need to be initiated. Such proceedings are initiated ex officio when the court learns of the deceased's passing, and can be initiated through the proposal of any person (including the executor). In such proceedings, the court would proclaim the will and determine who were the heirs of the deceased's property in Serbia; and
While the owner of a property in Serbia in entitled freely to dispose of it, inheritance rights of certain compulsory heirs cannot be impaired through such disposal.
In a further advice dated 19 September 2014, Attorney Savic confirmed that:
Even if an Australian court determined that the gift of the Belgrade property to Vera Acimov did not take effect, that would not be recognised by the Serbian court, because Serbia asserts exclusive jurisdiction in respect of issues concerning real estate of the deceased located in Serbia;
Even if an Australian court determined that the gift of real estate did not take effect in accordance with the will and that Vera should receive 220,000 Euros, it would still be necessary to determine the inheritor of the Belgrade property, and a Serbian court would determine it to be Vera. Thus, there are no options under Serbian law by which the executor or the trustee could deal with the Belgrade property; and
Probate proceedings should be initiated ex officio.
In the summons, the executor seeks advice to the effect that in the events which have happened and upon the true construction of the will and codicil, he is justified in dealing with the gift of the Belgrade property as if it were an absolute gift to Vera Acimov, and in so doing to disregard the right of any remainderman child or grandchild of the said Vera Acimov, and further in that regard to treat the gift in clause 6.2 of the will as if it has no operation and has lapsed.
In my view, the position is as follows.
The deceased died domiciled in New South Wales, and left property in New South Wales (as well as elsewhere). His will was, according to New South Wales law, properly proved in New South Wales.
The will was intended to operate in respect of the deceased's estate in New South Wales and also in respect of his foreign estate, in particular the Belgrade property in Serbia.
The first question is, what law applies to the devolution of the Belgrade property. At least in the first instance (that is, subject the operation of any renvoi), that is a question to be answered by reference to New South Wales rules of private international law.
Construction of a will, even in respect of immovable property, is under New South Wales law governed by the law of the domicile of the testator when the will was made; however, this is subject to the proviso that the construction so reached must in no way conflict with the law of the country in which the property is situated - as if the disposition is not permitted or recognised by the lex situs, it cannot be given effect [Philipson-Stow v Inland Revenue Commissioners [1961] AC 726, 761 (Lord Denning); Public Trustee v Vodjdani (1988) 49 SASR 236]. The validity and effectiveness of a testamentary disposition of immovable property is governed by the lex situs [Re Piercy; Whitwham v Piercy [1895] 1 Ch 83, 89-90 (North J)]. Thus, under New South Wales law, Serbian law as the lex situs governs the validity and effectiveness of the gift of the Belgrade property in clause 6.1, and also controls - though it does not govern - the construction of that gift.
The advices of the Serbian attorneys are unanimous and unequivocal that Serbian law governs the inheritance of the Belgrade property, either on the basis of the deceased's (dual) Serbian nationality or as the lex situs (or both). Accordingly, no question of renvoi arises.
While the evidence leaves the effect of Serbian law unclear in some respects, and while not all the questions raised by Dr Bell's advice have been answered, there is sufficient clarity to permit the proper course to be stated.
Two Serbian attorneys have advised that Serbian law does not recognise the institution of trust and would disregard the trust, treating the gift as an absolute gift to Vera. Another Serbian attorney has advised that Serbian law can recognise trusts, but appears to suggest that there is insufficient evidence to enabe it to do so in this case. Mr Milojevic would not permit the executor to provide Attorney Nenadovic's advice to Attorney Samardzija, and those of the contrary view have not been referred to the Serbian Law on Trusts and Foundations and have not commented on the suggestion that Serbian law might recognise a trust. In those circumstances, it is not possible to form a sensible opinion as to which view is correct.
However, it is unnecessary for present purposes to do so. All the Serbian attorneys appear to agree, at least, that Serbian law is "exclusively competent" in this case, and that "inheritance proceedings" would have to be initiated before the competent court in Serbia. Because Serbia asserts exclusive jurisdiction and would not recognise an Australian decree in this respect, and because there is no means by which the executor (or trustee) can deal with the Serbian property, an application to the Serbian court is inevitable. That court will then determine the question of succession to the Belgrade property, applying its own law.
Although not unequivocal, the evidence indicates that while an application for probate in Serbia is an "ex officio" proceeding, the executor can initiate or propose that such proceedings be taken. In any event, even if such proceedings can be instituted only by the heir, it is the duty of the executor under Australian law to facilitate such proceedings. Thus, in my view, it is manifest that the executor should do whatever is reasonably necessary to cause inheritance proceedings to be commenced in Serbia, and act upon the advice of Serbian attorneys in that respect. That is likely to require full disclosure of the Australian estate and administration in order to satisfy the Serbian court that the reserved portion attributable to Djordje Vezmar will not be impaired.
That course may well result in Vera taking the Belgrade property absolutely, though it may possibly result in effect being given to the trust (although this seems unlikely, as even the attorney who refers to the Law on Trusts and Foundations does not express an affirmative opinion that a trust would be recognised in this case and states that there are difficulties in the way of recognition). In the latter event, the gift in clause 6.1 would plainly have taken effect and no question would arise in respect of clause 6.2. But in the former - apparently more likely - event, a question would arise as to the effect of that outcome in relation to the trusts created by the will. Such question is to be determined by the governing law of the trust [Canterbury Corp v Wyburn and the Melbourne Hospital [1895] AC 89, 96 (Lord Hobhouse)]. In this case, that is New South Wales law.
Prima facie, it seems to me that in that event, although Serbian law did not recognise the trust referred to in clause 6.1, the gift (of the property to Vera) would still have taken effect (albeit not precisely as intended according to New South Wales law). It seems to me, at this stage, that the intent of clause 6.2 was to cover the situation that for some reason or another it might not be possible for the property to pass to Vera, rather than that the trust not be recognised. If that view be correct, then clause 6.2 would remain irrelevant. However, that is a question of construction in which the interests of the potential beneficiaries of the clause 8 trust on the one hand (the child or grandchildren of Vera), and the residuary beneficiary (Djordje Vezmar) on the other, would have an interest and should be afforded an opportunity to be heard.
The court therefore orders that:
1. The plaintiff would be justified in causing proceedings to be brought in the competent Serbian court for administration of the deceased's Serbian estate and doing all things reasonably incidental thereto and acting upon the advice of Serbian attorneys in connection therewith.
2. The plaintiff's costs of the proceedings to date be retained out of the estate of the deceased.
3. The proceedings be adjourned to 12 February 2016 at 9:45 before me.
4. There be liberty to apply in the meantime by arrangement with the Associate to Brereton J.
[3]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 07 October 2015