Hay v Aynsley

Supreme Court of NSW|2013-11-15|Before: Lindsay J

INTRODUCTION 1Before the Court is a summons for construction of the will dated 31 May 2006 ("the Will") of Patricia Muriel Brook ("the deceased"), who died on 21 March 2012. 2Probate of the Will was granted by this Court to the plaintiff, Louise Anne Hay, and the first defendant, David Jesse Aynsley, on 17 September 2012.

FAMILY CONNECTIONS, AND BENEFICIARIES, OF THE DECEASED 3The deceased had been married to John Arthur Brook. He predeceased her by about three years. He died on 20 April 2009. 4There were three children of the marriage: (a)Peter John Brook (the second defendant), who was born in 1954; (b)the plaintiff, who was born in 1956; and (c)David Ronald Brook ("David"), who was born in 1960 and died on 29 September 2008. 5David was married to Sandra Marie Brook and, by her, the father of three children: (a)Timothy John Brook ( the third defendant), born in 1984; (b)Lisa Marie Brook (the fourth defendant), born in 1986; and (c)Gregory David Brook (the fifth defendant), born in 1988. 6The plaintiff and the second defendant each have children of their own, but it is not necessary to elaborate. 7The first defendant has no interest in the estate of the deceased otherwise than as a co-executor of the plaintiff. Although he is represented by the same solicitors and counsel as the second defendant, he is not to be seen as having the same adversarial interest in the proceedings as the second defendant. 8The first defendant might have taken on the role of representing interests associated with David; but the joinder of David's children as defendants ultimately rendered that unnecessary. 9As it happens, a division of forensic tasks between the plaintiff and the first defendant (as co-executors of the deceased's Will) has seen the plaintiff formulate arguments that might have been presented by David's children, as well as arguments in favour of her personal interests. 10The arguments advanced in the written submissions of the plaintiff appear, at least in part, to have been formulated in a manner designed to ensure that a full range of arguments are placed before the Court rather than as an expression of the plaintiff's personal interests. 11The late joinder of David's children, at the hearing of the summons, skewed oral debate closer towards self-interest than it would otherwise have been located. 12Accordingly, in any attribution in this judgment of an argument to the plaintiff or the second defendant I am primarily concerned to identify one argument set in competition with another argument, rather than to identify an interest associated with the personal interests of the party nominally advancing the argument. 13Unusual as this is, it reflects what I perceive to have been a bona fide attempt, within the deceased's family, to ensure that the substantive interests of all affected family members have had arguments in their favour canvassed before the Court. 14I make no criticism of anybody for the pragmatic course that each party, in his or her own way, has adopted.

THE DECEASED'S POWER OF ATTORNEY 15On 11 December 2003 the deceased granted an enduring power of attorney (governed by s 163B of the Conveyancing Act 1919 NSW) to her husband and, if he was unable or unwilling to act as her attorney, to her son David and her daughter, the plaintiff, jointly. 16Section 163B and related provisions of the Conveyancing Act 1919 were repealed, and replaced, by provisions of the Powers of Attorney Act 2003 NSW on 16 February 2004. 17Consequent upon the death of her father and her brother David, the plaintiff applied to the Guardianship Tribunal for an order, under s 36 of the Powers of Attorney Act 2003, varying the operation of the deceased's power of attorney in terms confirming her entitlement to act as the sole attorney of the deceased. 18Upon consideration of that application, on 6 May 2010 the Tribunal determined, instead, to order that (because the deceased had become incapable of managing her affairs) her estate be subject to management under the NSW Trustee and Guardian Act 2009 NSW and that management of the estate be committed to the NSW Trustee.

SALE OF THE DECEASED'S LAND AT SOLDIERS POINT 19On 21 October 2010 (on the plaintiff's appeal to this Court from the determination of the Tribunal) Palmer J revoked the orders of the Tribunal and, pursuant to s 36(4)(a) of the Powers of Attorney Act 2003, ordered that the operation of the deceased's power of attorney be varied so as to confirm the plaintiff's entitlement to act as the sole attorney of the deceased. 20Exercising her powers as the deceased's attorney, on 19 January 2011 the plaintiff contracted to sell land owned by the deceased at 64 Bayview Street, Soldiers Point, NSW. The sale price was $380,000.00. 21The sale proceeds, net of selling expenses, came in at $366,697.51. That amount was deposited in a St George Bank term deposit. Interest has since accrued on it. 22The deceased lacked the mental capacity necessary to know of the sale or to give instructions to the plaintiff in connection with it. She suffered from dementia.

THE TERMS OF THE DECEASED'S WILL 23The present proceedings call for interpretation of clauses 7-10 (inclusive) and 28-30 (inclusive) of the deceased's Will. 24Those provisions are in the following terms: "Gift to Louise Anne Hay 7. I GIVE DEVISE AND BEQUEATH all of my right, title and interest in the property situate and known as 9/3 Stonelea Court, Round Corner, being Lot 95 in SP 60835 to my daughter, LOUISE ANNE HAY absolutely. Gift to David Ronald Brook 8. I GIVE DEVISE AND BEQUEATH all of my right, title and interest in the property situate and known as 64 Bayview Street, Soldiers Point, being Lot 2 in DP 215680 to my son, DAVID RONALD BROOK absolutely. Gift to Peter John Brook 9. I GIVE such motor car of which I may die possessed to my son PETER JOHN BROOK absolutely. Division of Estate 10. GIVE [sic] the residue of my Estate remaining after the provisions of paragraphs 7, 8 and 9 hereof to the Trustees on trust to hold such assets as follows: (a) to pay my just debts, funeral and testamentary expenses; (b) to divide the rest and residue of my estate and the shares as follows: (i) one-third (1/3) to be held by DAVID RONALD BROOK or, should he not survive me, then DAVID JESSE AYNSLEY on trust subject to the terms of the DRB Trust; (ii) one-third (1/3) to be held by LOUISE ANNE HAY or, should she not survive me, then WARWICK HAY on trust subject to the terms of the LAH Trust; and (iii) one-third (1/3) to be held by PETER JOHN BROOK or, should he not survive me, then DAVID JESSE AYNSLEY and LOUISE ANNE HAY or, should she not survive me, then WARWICK HAY on trust subject to the terms of the PJB Trust." 25At the time of the deceased's death: (a)She remained registered proprietor of the land (the retirement village in which she lived) at Round Corner described in clause 7 of the Will. (b)The land at Soldiers Point, described in clause 8 of the Will, had been sold in the circumstances earlier outlined. (c)The deceased owned no motor car upon which clause 9 of the Will could operate. (d)She owned property (including the St George Bank term deposit account representing the proceeds of sale of the Soldiers Point land and accrued interest) with an estimated value of $2,115,630.90. 26Clause 10(b) of the Will refers to three testamentary trusts respectively associated with, and named for, her three children. Subsequent clauses of the Will contain machinery provisions relating to them: (a)Clauses 11-15 govern "the DRB Trust" and provide for the contingency (which occurred) of David predeceasing the deceased. (b)Clauses 17-22 govern "the LAH Trust" (referable to the plaintiff) in comparable terms. (c)Clauses 23-26 govern "the PJB Trust" (referable to the second defendant) in substantially the same way. 27Leaving aside these provisions, and other provisions of no current concern, attention focuses in these proceedings on clauses 28-30, inclusive. 28Clauses 28-30 are in the following terms: "Trustees to take into account other payments 28. IT is my intention to ensure that the division of assets under this Will be the aggregate of: (a) the balance of my estate after paying my funeral and testamentary expenses. (b) any entitlements to superannuation or insurance proceeds payable or paid in consequence of my death and to or for the benefit of any of the beneficiaries under this Will (based on the value of such benefit before any tax is deducted), and (c) any amounts in the books of accounts of the trustees of my trusts that are standing to the credit or debit of any of the beneficiaries under this Will at the date of my death. 29. THE expression "my trusts" includes any trusts of which I directly or indirectly hold the sole or joint power to appoint +the trustee and/or to distribute the income and capital of any trust. 30. I DIRECT that any amounts referred to in the two (2) preceding clauses be brought into account upon the division of my estate and the distributions that would otherwise have been made under this Will be adjusted accordingly." 29Clause 63(d) of the Will provides that, in the Will, "[headings] shall be taken into account in the interpretation of the clauses" of the Will.

THE QUESTIONS STATED FOR DETERMINATION 30The questions stated for determination in the summons are found in the prayers for relief numbered 3-5 inclusive. 31Those prayers incorporate questions expressed in terms to the following effect: "QUESTION (PRAYER) 3: Whether, in the events which have happened, the gift by the deceased of the property at 64 Bayview Street, Soldiers Point (being Lot 2 in DP 215680) to the late David Ronald Brook in clause 8 of her Will dated 31 May 2006: (a) passes to the issue of the late David Ronald Brook pursuant to s 41 of the Succession Act 2006 NSW and s 61B(4) of the Wills Probate and Administration Act 1898 NSW; or (b) has adeemed by virtue of the sale of the Soldiers Point property on 19 January 2011 for $380,000 by the plaintiff as the duly appointed attorney of the deceased; and/or (c) falls into residue and is to be divided into the DRB Trust, the LAH Trust and the PJB Trust pursuant to clause 10 of the Will of the deceased. QUESTION (PRAYER) 4: Whether, upon a true construction of the Will of the deceased, the division of the rest and residue of the deceased's estate into the DRB Trust, the LAH Trust and the PJB Trust is to be adjusted pursuant to clauses 28, 29, 30 of the Will having regard to the value of the gift to David Ronald Brook in clause 8 of the Will, the gift to Louise Ann Hay in clause 7 of the Will and the gift to Peter John Brook in clause 9 of the Will. QUESTION (PRAYER) 5: If the answer to 3(c) is Yes, whether the gift to David Ronald Brook in clause 8 of the deceased's Will should be brought into account in calculating the distribution to the DRB Trust under clause 10 of the Will." 32When the summons was called on for hearing the children of David (not then joined as parties to the summons) applied for their joinder as defendants and for an adjournment of the hearing so as to permit them to consider their attitude to the proceedings. 33After their joinder as the third, fourth and fifth defendants, the hearing proceeded (with full argument on behalf of the plaintiff and the first and second defendants), reserving to the newly joined defendants a right to object to evidence adduced on the hearing of the summons, and a right to make submissions in writing and orally, after an adjournment of the hearing on their application. 34After adjournment of the hearing, but before the adjourned date, the third, fourth and fifth defendants filed an appearance said by their solicitor to be a submitting one. That done, there was no appearance by the third, fourth or fifth defendant on the adjourned date. 35Ultimately, therefore, any substantive contest about the construction of the Will was conducted, in the manner earlier described, by the plaintiff and the second defendant. 36Although the arguments advanced by the second defendant were ostensibly advanced on behalf of both the first and second defendants, I pay the first defendant the courtesy of assuming that, as no more than a co-executor, his substantive position is one of neutrality between competing family interests. 37The plaintiff contends, and the second defendant agrees, that question 3 should be answered as follows: Question 3(a) - No. Question 3(b) - Yes. Question 3(c) - Yes. 38The plaintiff and the second defendant differ, at least formally, about how questions 4 and 5 should be answered. 39The plaintiff contends that question 4 should be answered "Yes" and that question 5 should, in substance, be answered "Yes, in the manner set out" in paragraph 28 of written submissions filed on her behalf. 40Paragraph 28 of the plaintiff's written submissions is in terms to the following effect: "The deceased's purpose would ... appear [to have been] to divide her estate (made up of specific gifts in clauses 7, 8 [and] 9 of the Will and the division of the rest and residue in clause 10 of the Will) into three parts. In this way, in determining the size of the benefit to pass to each of the trusts, the deceased's scheme was to deduct from its one third share of the balance of her estate the amount already received by the principal beneficiary pursuant to clauses 7, 8 [or] 9 as the case may be. In the case of the LAH Trust [referred to in clause 10(b)(ii) of the Will], its share of residue is calculated by dividing the balance of the estate in three and then deducting from it the net proceeds of the sale of the Round Corner [property referred to in clause 7 of the Will]. In the case of the DRB Trust [referred to in clause 10(b)(i) of the Will], its share of residue is one third of the balance of the estate. In this way, as the gift to David... has adeemed, the DRB Trust will not have deducted from its share the net proceeds of sale of the Soldiers Point property. In the case of the PJB Trust [referred to in clause 10(b)(iii) of the Will], as the deceased did not own a motor vehicle at her date of death, the PJB Trust will simply receive one third of the balance of the estate after payment of her testamentary expenses [Emphasis added]." 41This construction attributes to the deceased an unexpressed, but implied, intention that her estate be distributed equally between: (a) David and the DRB Trust; (b) the plaintiff and the LAH Trust; and (c) the second defendant and the PJB Trust. 42The effect of this construction is to infer from clauses 28-30 an intention to treat the three branches of the deceased's family equally, and to give effect to clause 10(b) of the Will as if clauses 7, 8 and 9 did not exist. 43The second defendant contends that Question 4 should be answered "No", and Question 5 should be answered "Yes". 44This contention is based on an attribution to the deceased of an intention to effect an equal distribution only so far as concerns her residuary estate.

QUESTION 3 45I accept that the plaintiff and the second defendant are correct in their agreement as to how question 3, and its component parts, should be answered. 46The key reasons for that are as follows: (a)Although s 41 of the Succession Act 2006 NSW (rendered applicable, by clause 3(2) of Schedule 1 of the Act, because the deceased died after the death of David and both died after 1 March 2008) notionally operates to save, in the interests of David's children, the gift made to him in clause 8 of the Will despite the fact that he predeceased the deceased, the gift for which clause 8 provides has adeemed by virtue of the sale of the Soldiers Point property during the lifetime of the deceased: RL v NSW Trustee and Guardian [2012] NSWCA 39 at [151] and [175]-[176]. (b)As the deceased's power of attorney was executed before the commencement of the operation of the Powers of Attorney Act 2003, s 22 of the Act (enacted to overcome the ademption of a gift of property where that property is sold prior to the death of the deceased through the exercise of a power of attorney) has no scope for operation unless the effective date of operation of the power of attorney is taken to be, not the date of its execution by the deceased (11 December 2003) before the commencement of the Act, but the date of its variation by the order of the Court made on 21 October 2010, after the commencement of the Act. (c)Section 22 of the Power of Attorney Act 2003 does not apply to the deceased's power of attorney as varied by the Court's order because the effect of s 6(1) of the Act is that s 22 only applies to an "instrument" executed on or after 16 February 2004 (the date of commencement of the Act) and, although the deceased's power of attorney was (by operation of ss 6(2), 6(5) and 36(4)(a) of the Act) varied after that date, the instrument itself was executed before the commencement date. The effect of the Court's Order was to vary the deceased's instrument, not create a fresh one. 47Section 41 of the Succession Act 2006 has no scope for substantive operation in these proceedings because, before the death of the deceased, the property in which David had a prospective entitlement was sold by the deceased's attorney. 48The practical operation of s 41 (in combination with s 61B(4) of the Wills Probate and Administration Act 1898 NSW, governing the intestate estate assumed for the purposes of s 41(2) of the Succession Act) is confined to identifying the children of David as standing in his stead by reason of his death before the death of the deceased. 49By its substitution of David's children for him, s 41 confers on them standing to contend that s 22 of the Powers of Attorney Act 2013 operates to confer on them an entitlement to the proceeds of sale of the property which David would have inherited (under s 8 of the deceased's Will) had that property not been sold, pursuant to the deceased's enduring power of attorney, before her death. 50There is no dispute about the effect of s 22, if applicable; where, under the general law, a testamentary gift would fail consequent upon an ademption arising from disposal of property by the deceased's attorney under an enduring power of attorney, s 22 may operate to permit proceeds of sale of the property to pass to the intended beneficiary of the property. 51The focal question in these proceedings is whether upon the proper construction of s 6 of the Powers of Attorney Act, s 22 applies at all. That question turns on construction of ss 6(1), 6(2) and 6(5) of the Act. 52Section 6(1) provides that the Act "applies to any power of attorney created (or purporting to have been created) by an instrument executed on or after the commencement of" the Act. 53Section 6(2) deals with the converse situation, subject to a qualification. It provides that the Act "does not apply to any power of attorney created (or purporting to have been created) by an instrument executed before the commencement of [the Act], except as provided by" s 6(5). 54Section 6(5) provides, so far as material, that the power under s 36(4) to order that the terms of a power of attorney be varied by court order extends "to any power of attorney created (or purporting to have been created by an instrument executed before the commencement of" the Act. The provisions of s 6(5) do not extend to s 22. 55The deceased's power of attorney was executed by her before the commencement of the Powers of Attorney Act, but varied by a court order made after the commencement of the Act. The court order was effective to vary the terms of the power of attorney, but not sufficient to change its character from an "instrument" executed before the commencement of the Act to one executed after commencement of the Act. 56That being so, s 22 of the Act does not operate in the circumstances of this case. 57Since the decision in RL v NSW Trustee and Guardian [2012] NSWCA 39 scotched the idea that a sale made, under an enduring power of attorney, on behalf of a principal lacking mental capacity does not effect an ademption of a testamentary gift of the property sold, a determination that the effect of s 6 is that s 22 does not apply carries the consequence that the gift to David in clause 8 of the Will must be taken to have failed by reason of an ademption under general law principles, leaving any remaining proceeds of sale of the property earlier marked out for David to fall into the deceased's residuary estate.

QUESTIONS 4 and 5 58The subject matter of the intention of the deceased recorded in clause 28 of the Will is "the division of assets under this Will". 59That expression ties in, and is synonymous, with a similar expression found in clause 30, which speaks of "the division of my estate". 60These two expressions appear to relate to the heading immediately before clause 10 ("Division of Estate"). 61Each of clauses 7, 8 and 9 (referred to in clause 10) provides for a specific gift, expressed to take effect "absolutely", without any express subjection to the provisions of clauses 28-30. 62Three particular features of clause 10 should be noticed in considering its relationship with clauses 28-30: (a)First, the concept of payment of "funeral and testamentary expenses" is common to clauses 10(a) and 28(a). (b)Secondly, only after an application of clause 10(a) by the payment of such expenses does one come to the expressed concept of a "division" in clause 10. (c)Thirdly, the division for which clause 10(b) provides has as its subject matter a "balance" that represents an earlier deduction of: (i) property referable to the specific gifts for which clauses 7, 8 and 9 provide; and (ii) the payment of expenses. 63The intendment of clauses 28-30 (and, more particularly, clauses 28(b) and 28(c)) appears to be that property not forming part of the estate of the deceased (but notionally associated with her) be taken into account so as to ensure that the equal division of the "rest and residue" for which clause 10(b) provides, by three one-third shares, only be made after an aggregation of her "actual" residuary estate with her "notional" estate. 64The heading to clauses 28-30 ("Trustees to take into account other payments") focuses attention, particularly, on clauses 28(b) and 28(c). 65The parties are agreed that, as events have unfolded, the only sub-clause of clause 28 that has a dollar amount attaching to it is clause 28(a). 66There are no superannuation or insurance entitlements of the description set out in clause 28(b) to be added to the clause 28(a) "balance". 67Nor are there any amounts recorded in the accounts described in clause 28(c) that are to be added to that "balance". 68The "balance" to which clause 28(a) refers is, on its face, by implication, defined as an amount "after paying my funeral and testamentary expenses". 69That "balance" must be taken, on the proper construction of the Will and as events have unfolded, to be equal to "the rest and residue" of the deceased's estate disposed of by clause 10(b). 70In my opinion, upon the proper construction of the Will, clauses 28-30 have no scope for operation, on the facts of the case, as a qualification on the operation of clause 10(b). 71There is no basis for attribution of an intention to the deceased that (in disregard of clauses 7, 8 and 9) her estate, as distinct from her residuary estate, be distributed equally. Clauses 28(b) and 28(c) are limited, in their intendment and operation, to such (if any) "notional estate" as might have existed to be taken into account by adjustment under clause 30. 72As it happens, there is no "notional estate", to ground an adjustment. 73Question 4 should, accordingly, be answered "No" because there is no "adjustment" to be made (by reference to clauses 28-30) for the purpose of giving effect to clause 10(b). 74I do not propose, in terms, to answer question 5. It is, in form, ambiguous because it turns on a reference to "the gift" referred to in clause 8 of the Will and minds might differ about what is meant by the expression "brought into account". 75Suffice to say that the gift for which clause 8 of the Will provided failed (by ademption) and the proceeds of sale of the Soldiers Point property form part of the "rest and residue" of the deceased's estate which is to be divided, in the manner indicated in clause 10(b), without any adjustment referable to clauses 28-30.

CONCLUSION 76I make the following Orders: (1)Declare that, in the events which have happened, the gift by the deceased of the property at 64 Bayview Street, Soldiers Point (being Lot 2 in DP 215680) to the late David Ronald Brook in clause 8 of her Will dated 31 May 2006, has adeemed by virtue of the sale of the property on or about 19 January 2011, and any remaining proceeds of sale, together with any interest accrued thereon, form part of the residuary estate of the deceased to be divided as provided for in clause 10 of the Will. (2)Order that the costs of all parties be paid out of the estate of the deceased. (3)Order that the costs of the plaintiff and the first and second defendants be assessed on the indemnity basis. (4)Order that the costs of the third, fourth and fifth defendants be assessed on the ordinary basis, not limited to the costs of a submitting appearance.

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: 15 November 2013

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