Court of Appeal (WA)|2017-11-22|Before: Ms J, Buss P, Mitchell JA, Beech JA

LEMON -v- MEAD [2017] WASCA 215 (22 November 2017)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : LEMON -v- MEAD [2017] WASCA 215

BETWEEN : DAVID JOHN NEALE LEMON (as executor of the Estate of the late MICHAEL JOHN MAYNARD WRIGHT)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : MEAD -v- LEMON [2015] WASC 71

Succession - Wills - Inheritance - Appeal against a decision granting an application made by the respondent under s 6(1) of the Family Provision Act 1972 (WA) for further and better provision from the testator's estate - Value of the Deceased's estate about $1 billion - Testator made provision for the respondent in an amount of up to $3 million under a clause of his will read with the terms of a discretionary trust deed - The master held that the will did not make adequate provision for the respondent's proper maintenance and support within s 6(1) of the Act - The master ordered provision for the respondent in the sum of $25 million instead of the provision made for her in the clause of the testator's will read with the terms of the discretionary trust deed - Whether the master erred at the first stage of the process required by s 6(1) of the Act in that he failed to determine what the needs of the respondent were and he misconstrued the will - Whether the master's exercise of discretion at the second stage of the process required by s 6(1) of the Act miscarried in that he regarded his discretion as unfettered because of the size of the testator's estate - Proper construction and application of s 6(1) of the Act

Master's orders making provision for the respondent set aside

Subject to conditions (including bringing to account $3 million already received by the respondent pursuant to the master's orders) provision be made for the respondent in the sum of $6,142,000 in substitution for the provision made for the respondent under the Deceased's will

Second Appellants : Ms J A Needham SC & Ms A A Gomez

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Barns v Barns [2003] HCA 9; (2003) 214 CLR 169

Borlaug v University of Western Australia [2001] WASCA 425

Bosch v Perpetual Trustee Co Ltd [1938] AC 463

Brennan v Permanent Trustee Company of New South Wales Ltd [1945] HCA 17; (1945) 73 CLR 404

Buckland v Trustees, Executors and Agency Co Ltd (1966) 40 ALJR 164

Chacmol Holdings Pty Ltd v Handberg [2005] FCAFC 40; (2005) 215 ALR 748

Chappell v Hewson [2013] WASCA 15

Coates v National Trustees Executors and Agency Co Ltd [1956] HCA 23; (1956) 95 CLR 494

Collicoat v McMillan [1999] 3 VR 803

Devereaux-Warnes v Hall [No 3] [2007] WASCA 235; (2007) 35 WAR 127

Ellis v Dariush-Far [2007] QCA 398; (2007) 242 ALR 635

Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603

Friend v Brien [2014] NSWSC 613

Goodman v Windeyer [1980] HCA 31; (1980) 144 CLR 490

Gorton v Parks (1989) 17 NSWLR 1

Gregory v Hudson (No 2) (Unreported, NSWSC, 18 September 1997, Library No 9704375)

Gregory v Hudson [1999] NSWCA 221

Grey v Harrison [1997] 2 VR 359

Hedman v Frazer [2013] NSWSC 1915

Hickin v Carroll (No 2) [2014] NSWSC 1059

Hughes v National Trustees, Executors and Agency Co of Australasia Ltd [1979] HCA 2; (1979) 143 CLR 134

Hunter v Hunter (1987) 8 NSWLR 573

Lloyd-Williams v Mayfield [2005] NSWCA 189; (2005) 63 NSWLR 1

McCosker v McCosker [1957] HCA 82; (1957) 97 CLR 566

Mead v Lemon [2015] WASC 71

Permanent Trustee Co Ltd v Fraser (1995) 36 NSWLR 24

Perrin v Morgan [1943] AC 399

Pontifical Society for the Propagation of the Faith v Scales [1962] HCA 19; (1962) 107 CLR 9

Re Buckland, deceased [1966] VicRp 58; [1966] VR 404

Re Sinnott, deceased [1948] VicLawRp 48; [1948] VLR 279

Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201

Taylor v Farrugia [2009] NSWSC 801

Waddingham v Burke [2015] WASC 65

Worladge v Doddridge [1957] HCA 45; (1957) 97 CLR 1

1 BUSS P: The appellants appeal against a judgment of Master Sanderson entered after the master heard the respondent's claim under s 6(1) of the Family Provision Act 1972 (WA) (the Act) in respect of the disposition of the estate of the late Michael John Maynard Wright effected by his will. I will refer to the late Mr Wright as 'the Deceased'.

2 On 26 April 2012, the Deceased died at the age of 74. On 6 March 2012, he made his last will. On 11 March 2012, the will was altered by a codicil. On 10 July 2012, probate was granted to the first appellant, Mr Lemon, who was the Deceased's solicitor. I will refer to the will, as altered by the codicil, as 'the Will'.

3 The respondent, Ms Mead, is the Deceased's daughter.

4 The Deceased made provision for the respondent in the Will in an amount of up to $3 million. The terms of the Will governing this provision were complex.

5 The respondent contended that the Will did not make adequate provision for her proper maintenance, support, education and advancement in life within s 6(1) of the Act.

6 The first-named and second-named second appellants (Ms Baldock and Ms Burt) are the Deceased's daughters and the respondent's half-sisters.

7 The Deceased's estate was partly distributed before the respondent's claim was determined and, as a result, the third-named second appellant, VOC Group Ltd, is now controlled jointly by Ms Baldock and Ms Burt.

8 The hearing before the master occurred between 2 - 5 February 2015. The master published his reasons for decision on 26 February 2015 and made orders on 24 March 2015.

9 The master decided that the Will did not make adequate provision for the respondent's proper maintenance and support within s 6(1). He made a conditional order, pursuant to s 6(3) read with s 10 of the Act, that a new clause be inserted in the Will, in substitution for the existing clause which made provision for the respondent. The new clause reads:

I GIVE DEVISE AND BEQUEATH to my daughter [the respondent] the sum of $25,000,000.00 absolutely payable by 14 May 2015 and if not paid by that date then so much of the legacy that remains unpaid shall be indexed at the rate of 5% per annum until payment.

10 The master was correct in concluding that the Will did not make adequate provision for the respondent's proper maintenance and support within s 6(1) of the Act. However, the exercise of his discretion to order that provision be made for the respondent in the sum of $25 million was flawed. I would allow the appeal and make lesser provision for the respondent than the provision ordered by the master. My reasons are as follows.

Overview of the relationship between the Deceased, the respondent and the first-named and second-named second appellants

11 The Deceased was survived by his wife, Mary, whom he had married on 2 May 1997, and by his three earlier wives from whom he had been divorced.

12 The Deceased was survived by three adult children born of his earlier marriage to Jennifer Turner. The children were the first-named second appellant, Ms Baldock (born on 28 August 1971), the second-named second appellant, Ms Burt (born on 18 December 1973) and a son, Myles Wright (born on 26 December 1978).

13 The Deceased was also survived by the respondent, Ms Mead, who was born on 3 September 1995. The respondent's mother is Elizabeth Kirkby. Ms Kirkby and the Deceased never cohabited. Their relationship ended when Ms Kirkby was pregnant with the respondent.

14 The respondent grew up with her mother. Her first recollection of the Deceased was from the age of 3 or 4. She wondered why the Deceased did not live with her family. From the age of 6 the respondent had some contact with the Deceased. However, the contact was sporadic and the Deceased appears to have taken little interest in her welfare. He was consistently late when he arranged to meet with her and, apart from one or two nights, the respondent never spent an extended period with him. The respondent did not have a close relationship with the Deceased. That was wholly attributable to his decisions.

15 During the respondent's childhood the Deceased provided little material support to her or her mother. He paid money for childcare in accordance with his statutory obligation. He also paid fees for private schooling and gave the respondent some pocket money. His gifts to the respondent were of nominal value. The Deceased never provided a home for the respondent and her mother, despite the mother having to move on a number of occasions from one rental premises to another.

16 The first-named and second-named second appellants also did not have a close relationship with the Deceased. The master made these observations:

The picture which emerges is of a difficult man more at home in the world of business than dealing with emotions and interpersonal relationships. That is not to say there was not real affection between [the Deceased] and [the first-named and second-named second appellants]. Undoubtedly there was. Moreover, the fact [the first-named and second-named second appellants] had developed the Voyager Estate Winery in such an effective way was clearly a source of great pride to [the Deceased]. But it would be a mistake to suggest [the Deceased] and [the first-named and second-named second appellants] constituted one big happy family [58].

17 The master described the Deceased's estate as 'colossal' [6].

18 The statement of assets and liabilities attached to the first appellant's affidavit sworn on 1 June 2012 in support of his application for probate revealed that:

(a) The gross value of the Deceased's estate in Western Australia was about $865,792,000.

(b) The Deceased had total debts of about $2,000,000.

(d) The principal asset of the Deceased's estate was his interest in Wright Prospecting Pty Ltd, which had an estimated value of $750,000,000.

19 The master noted that counsel for the respondent in his submissions speculated that the size of the Deceased's estate may be in excess of $1 billion. The master said that no issue had been taken by the appellants with that estimate [6].

20 The first appellant distributed the bulk of the Deceased's estate before the hearing. As the master commented, once a claim is made against an estate under the Act an executor and trustee should not distribute or make a further distribution of the estate without obtaining appropriate directions from the court [7].

21 At the time of the hearing before the master the undistributed value of the Deceased's estate was $45,272,231.18. Of that amount, a little over $3 million was cash and the balance comprised inter-company loans.

The entitlement of beneficiaries (other than the respondent) under the Will

22 The Will is a lengthy and detailed document. It confers a variety of benefits on members of the Deceased's family and his friends. Notably, the Will contains the following provisions:

(a) For the Deceased's son, Myles Wright, a home unit together with a capital sum of $15,000,000 to be paid over a five-year period together with an income stream of $649,447 per annum until the capital sum is paid. By cl 3(d)(ii) of the Will, the annual payments 'shall commence not earlier than the 2nd anniversary of the date of [the Deceased's] death'.

(b) For the Deceased's wife, Mary, a capital sum of $10,000,000 to be paid over a five-year period together with an income stream of $865,930 per annum until the capital sum is paid. By cl 4(c) of the Will, the annual payments 'shall commence not earlier than the 2nd anniversary of the date of [the Deceased's] death'.

(d) For the first-named and second-named second appellants, Ms Baldock and Ms Burt, a beneficial interest as primary beneficiaries in a trust fund to which the residue of the Deceased's estate was paid or transferred.

23 The value of the entitlement of each of the first-named and second-named second appellants under the Will, as set out in the statement of assets and liabilities attached to the first appellant's affidavit in support of the application for probate, is about $400,000,000.

The entitlement of the respondent under the Will

24 The respondent's entitlement under the Will is contained in cl 6A(c)(i)(E). Clause 6A provides, relevantly:

all shares which may be registered in my name as at the date of my death in public listed companies (hereinafter called 'my Public Company Shares');
all my real estate as at the date of my death (hereinafter called 'my Real Estate');
the rest and residue of my estate of whatsoever nature and wheresoever situate,

to my Trustees UPON TRUST to sell, call in and convert the same into money with power to postpone such sale, calling in and conversion for as long as they shall think fit without being liable for loss and after payment of my debts, funeral, testamentary and administration expenses out of the money arising thereby or out of my ready money to hold the residue (if any):

(a) to set up a fund (hereinafter called the 'Trust Fund') to consist of:

(i) my Public Company Shares, my Real Estate and the residue of my estate; and

(ii) any income added to the Trust Fund from time to time;

(b) to invest the Trust Fund as authorised by law or any clause in my Will;

(c) subject to sub-clauses (d) and (f):

(i) to pay or apply the whole or any part of the annual net income of the Trust Fund upon the trusts set out in this clause 6A of my Will in order of priority:

(A) ...

(B) ...

(C) ...

(D) ...

(E) Olivia Trust No. 2

(a) I note that I have given to the trustee of the trust called the Olivia Trust No 2 dated 18 April 2007 between Peter Cornelius Beekink as Settlor and me, Michael John Maynard Wright, as trustee (the 'Trust' as amended, supplemented, novated or replaced from time to time), sufficient funds to purchase a commercial building in Peel Street, O'Connor for $720,000 (which I currently rent from the Trust) plus $20,000.00 in cash. I note that periodically I place surplus cash on deposit with the trust at interest but on call;

(b) I propose to make 5 annual payments to the trustee of the Olivia Trust No 2 to increase the trust fund up to a maximum amount of $3 million in cash and/or property. These annual payments will be increased annually by the CPI increase;

(c) if I die prior to making all of those annual payments, and for so long as [the respondent] is a beneficiary under the Olivia Trust No 2, to pay the balance of those 5 annual payments to the trustee of the Olivia Trust No 2 as if I were alive but only up to a maximum amount of $3 million (subject to CPI Increase) in cash and/or property inclusive of any amounts paid into that trust under Clause 3 above, as well as any loans I may have made to the Trust under Clause 6A(c)(i)(E)(a) above to which I waive repayment;

(d) subject to clause 6A(c)(i)(E)(b) and (c), the amount of the last payment I make to the trustee of the Olivia Trust No 2 before my death will be the amount of each of the balance of these payments to the trustee of the Olivia Trust No 2 under my Will;

(e) the amount of each payment referred to in clause 6A(c)(i)(E)(c) will be increased annually by the CPI increase;

(f) it is my belief that the payments contributed generally in support of [the respondent] and to the trustee of the Olivia Trust No 2 during my lifetime (in this regard my Trustees should have my personal records to ascertain the extent of my support to [the respondent] and provide evidence of this support to such persons as they consider appropriate) and the provision for further contributions to the trustee of the Olivia Trust No 2 after my death, are such as to provide for the adequate and proper maintenance, support, education and advancement in the life of [the respondent];

(g) for the purposes of this clause 6A(c)(i)(E) only:

CPI means the Consumer Price Index - All Groups for Perth, Western Australia, published by the Australian Bureau of Statistics, or any index which officially replaces it. If no index officially replaces it, the trustees will arrange for an expert to assess what it would have been

CPI Increase means the figure determined by dividing the current CPI by the previous CPI

Current CPI means the CPI number for the quarter ending immediately before the relevant payment

Previous CPI means the CPI for the quarter ending immediately before the payment immediately preceding the payment to be increased by the CPI increase

AND IT IS EXPRESSLY DECLARED AND PROVIDED that notwithstanding anything hereinbefore contained my Trustees may in the absolute discretion of my Trustees during the whole or any part of the period from the date of my death until my estate has been fully distributed accumulate the whole or any part of the balance of such income and deal with the same as hereinafter provide BUT SUBJECT THERETO:

(ii) the net annual income arising before my estate has been fully distributed in any year ending upon the thirtieth day of June which has not been paid or applied or appropriated by my Trustees pursuant to the provisions of the preceding clause hereof shall be held by my Trustees UPON TRUST to add such income to the capital moneys of the Trust Fund for the benefit of the person or persons who shall eventually become entitled thereto but my Trustees may in the absolute discretion of my Trustees from time to time and at any time or times pay or apply the said accumulations or any part or parts thereof to any of the persons mentioned in the preceding paragraph (i) as if the same had not been accumulated but were income arising from the Trust Fund in the then current year;

(d) to exercise any powers given by law or my Will and, in this regard, the powers given in Clause 8 to apply assets for the maintenance, education, advancement or benefit of beneficiaries shall apply in relation to both capital and income of the Trust Fund, and in addition my Trustees shall until the Date of Distribution (as defined in sub-clause (g) below) accumulate surplus income to the Trust Fund so that it becomes part of the Trust Fund and shall be distributed on the Date of Distribution in accordance with the provisions of sub-clause (f) below;

(e) to determine in my Trustees' absolute discretion what part or parts of the capital or income of the Trust Fund will be resorted to in payment of any income tax or other liability arising under my Will; and

(f) subject to the provisos to this sub-clause, to distribute the balance of the Trust Fund on the Date of Distribution to the following persons in the following proportions:

(i) my daughter ALEXANDRA ODETTE BURT as to fifty per cent (50%); and

(ii) my daughter LEONIE ANGELA MAYNARD BALDOCK as to fifty per cent (50%),

(g) in the interpretation of this Will 'Date of Distribution' shall mean either:

(i) the date being eighty (80) years from the date of my death; or

(ii) such earlier date as my Trustees may in my Trustees' absolute discretion determine.

(The reference to the 'Olivia No 2 Trust dated 18 April 2007' should be to the Olivia Trust No 2 dated 18 April 2008. The parties acknowledged that this was a typographical error.)

25 The trusts created by cl 6A(c)(i) of the Will provide for the Trustees (subject to cl 6A(d) and (f)) to pay or apply the whole or any part of the annual net income of the fund set up under cl 6A(a) for the objects specified in cl 6A(c)(i)(A) - (F). Clause 6A(c)(i) requires that any payment or application of the income be 'in order of priority' as stipulated in cl 6A(c)(i)(A) - (F). So, the trust created by cl 6A(c)(i)(E) in favour of the Olivia Trust No 2 (the Trust) ranks in order of priority after the trusts created by cl 6A(c)(i)(A) - (D) and before the trust created by cl 6A(c)(i)(F).

The provisions of the Trust Deed creating the Trust

26 The Trust is a discretionary trust. It was created by a deed dated 18 April 2008 (the Trust Deed) between Peter Beekink as settlor and the Deceased as trustee.

27 On 6 October 2013, New Motion Holdings Pty Ltd was appointed as the new trustee of the Trust.

28 In the background or recitals to the Trust Deed it is stated that '[o]ne of the main objectives of [the Trust] is to provide for the advancement and benefit of [the respondent]'.

29 The relevant operative provisions of the Trust Deed are as follows.

30 Clause 1.1 of the Trust Deed contains numerous definitions.

31 The term 'Vesting Date' is defined in cl 1.1 as follows:

Vesting Date means the first to occur of:

(a) the date which is 80 years from the date of this Deed;

(b) any earlier date appointed by [the Deceased] personally to be the Vesting Date;

(c) If [the Deceased] dies before [the respondent], and [the respondent] has not attained the age of 30 years, the earlier of the date [the respondent] attains the age of 30 years or the date [the respondent] dies;

(d) The date [the respondent] attains the age of 30 years;

(e) The date of [the respondent's] death.

32 Clause 5 provides for the disposition of the Trust Fund on the 'Vesting Date'. It reads:

5.1.1 The date on which [the respondent] attains the age of 30 years and:

(a) [the respondent] satisfies the Trustee (acting reasonably) that she is the natural daughter of [the Deceased], and

(b) [the respondent] is not an Excluded Person,

the whole of the Trust Fund will vest in [the respondent].

5.1.2 After the date of [the respondent's] death and:

(a) [the respondent] has not attained the age of 30 years; and

(b) [the Deceased] is still alive,

the whole of the Trust Fund will vest in [the Deceased].

5.1.3 After the date of [the respondent's] death and:

(a) [the respondent] has not attained the age of 30 years; and

(b) [the Deceased] is dead,

the whole of the Trust Fund will vest in the executor of the will of [the Deceased] to be held in accordance with the terms of the distribution of his estate.

5.1.4 any other date than those referred to in clauses 5.1.1 - 5.1.3 the Trustee has a discretion to pay or apply the entire amount, in such shares as the Trustee determines, to or for the benefit of one or more of the Beneficiaries (to the exclusion of the others) who are alive or in existence on the Vesting Date and if there are no Designated Beneficiaries then eligible, the whole of the Trust Fund shall vest in the executor of the will or personal representative of [the Deceased] to be held in accordance with the terms for the distribution of his estate.

33 The term 'Beneficiary' is defined in cl 1.1 as follows:

Beneficiary means any of the following:

(a) [the respondent], [the Deceased], any other person nominated in writing by [the Deceased] personally (Designated Beneficiaries);

(b) any company in which any one or more of the Designated Beneficiaries, either directly or indirectly through one or more interposed entities:

holds a controlling interest; or
holds or is beneficially entitled to more than 50% of the voting power in the company or to rights to more than 50% of any dividends or any distribution of capital either on a return of capital or on a winding up,

(but only until such Designated Beneficiary becomes an Excluded Person) excluding

the Settlor;
any person in the capacity as trustee of any other trust to the extent that a distribution to that trustee would infringe the rule against perpetuities; and
any Excluded Person.

(c) Any trust, association or company formed for charitable purposes.

34 The term 'Excluded Person' is defined in cl 1.1 to mean 'any person who has become ... an Excluded Person in accordance with this Deed'. The definition then states that '[o]nce a person has become an Excluded Person that person remains an Excluded Person for the balance of the term of the Trust'. Clause 14 provides:

Excluded Persons

14.1 Any person whether a Designated Beneficiary or not who:

14.1.1 if [the Deceased] at any time before the Vesting Date, declares that person or class of persons is or are an Excluded Person;

14.1.2 is a child of [the respondent];

14.1.3 has become an alcoholic and/or whose capacity for rational behaviour in a competent and satisfactory manner has been impacted by alcohol;

14.1.4 has at any time suffered a conviction relating to drugs, their use or any other illegal association therewith in any recognised form;

14.1.5 is or has been in the opinion of my Trustees recently suspected or knowingly had any involvement or association whatsoever in relation to illegal drugs;

14.1.6 in the opinion of my Trustees has become a drug addict or become involved with illegal drugs in the manner described in the preceding subclauses as a result of the legal use of drugs for any reason whatsoever;

14.1.7 is in the opinion of my Trustees a member of or in any other way involved with any religious body other than the Roman Catholic, Anglican, Presbyterian, Baptist, Uniting or other similar traditional faiths; or

14.1.8 has been convicted of a felony at any time after the death of [the Deceased] or within 10 years preceding the death of [the Deceased],

will be an Excluded Person and, as such, will be excluded as a Beneficiary under this Deed.

Effect of declaration

14.2 A declaration in accordance with, or exclusion under, clause 14.1 takes effect on the date specified in the declaration or the occurrence of the relevant event (as the case may be) and continues to have effect thereafter. However, such declarations and events do not derogate from any interest in the Trust Fund to which any Beneficiary is indefeasibly entitled on or before the date of the declaration.

Declaration revocable unless otherwise specified

14.3 A declaration or opinion made in accordance with clause 14.1 may be revoked at any time before the Vesting Date, unless [the Deceased] specifies at the time of making the declaration or opinion that it is to be irrevocable.

(a) the term 'Capital' is defined to mean 'that part of the Trust Fund which is not Distributable Income';

(b) the term 'Distributable Income' in relation to an Accounting Period is defined to mean, subject to cl 3.1, 'all amounts of the Trust Fund which are either Trust Income or Tax Income and includes both in respect of that Accounting Period'; and

(c) 'Trust Fund' is defined to mean the sum of $10 initially settled on the Trustee by the Settlor; any other property which is settled on the Trustee to be held on the trusts described in the Trust Deed; any other property which is borrowed or raised by the Trustee to be held on the trusts described in the Trust Deed; and all accretions thereto.

36 Clause 3 is concerned with the income of the Trust Fund. It provides:

Distributable Income

3.1 Notwithstanding the definition of Distributable Income in clause 1.1, the Trustee has a discretion to determine the amount of the Distributable Income of the Trust Fund with respect to an Accounting Period. Subject to the exercise of this discretion, the amount of the Distributable Income with respect to an Accounting Period is whichever is the greater of Trust Income or Tax Income for that Accounting Period.

Trustee's discretion

3.2 In relation to the Distributable Income of the Trust Fund, the Trustee has a discretion either:

3.2. 1 to pay or apply all or part of the Distributable Income as or for the benefit of [the respondent] and in particular for her education (to the date [the respondent] attains the age of 23 years or the attainment of her first tertiary qualification, whichever is the earlier to occur), maintenance, health and medical expenses;

3.2.2 to pay or apply all or part of the Distributable Income, in such shares as the Trustee determines, to or for the benefit of one or more of the Beneficiaries (to the exclusion of the others) who are alive or in existence from time to time; or

3.2.3 to accumulate all or part of the Distributable Income.

Exercise of Trustee's discretion

3.3 On or before the last day of each Accounting Period until the Vesting Date, the Trustee may exercise its discretion under clause 3.2 in respect of part or the entire Distributable Income of the Trust Fund for that Accounting Period.

Failure to exercise discretion

3.4 Where the Trustee fails to exercise its discretion in accordance with clause 3.3 in respect of all or any part of the Distributable Income of the Trust Fund for an Accounting Period (unallocated amount), the Trustee is deemed to have accumulated the Distributable Income.

Exercise of discretion irrevocable

3.5 Where the Trustee has exercised its discretion in accordance with clause 3.3 or is deemed to have exercised its discretion in accordance with clause 3.4 that exercise of discretion is irrevocable.

37 Clause 4 is concerned with the capital of the Trust Fund. It provides:

Trustee's discretion

4.1 In relation to the Capital of the Trust Fund, the Trustee or [the Deceased] has a discretion to pay or apply all or part of the Capital, in such shares as the Trustee or [the Deceased] determines, to or for the benefit of one or more of the Beneficiaries (to the exclusion of the others) who are alive or in existence from time to time.

Exercise of Trustee's discretion

4.2 Without:

4.2.1 limiting clause 4.1, it is the intention and wish of the Trustee and the Appointor as at the date of this Deed that there will not be any vesting of any of the capital of Trust Fund upon [the respondent] until both of the following events have occurred:

(a) [the Deceased] has died; and

(b) [the respondent] has attained the age of 30 years; and

4.2.2 being under any obligation, until the Vesting Date [the Deceased] may exercise his discretion under clause 4.1 in respect of all or part of the Capital of the Trust Fund at any time.

Exercise of discretion irrevocable

4.3 Where [the Deceased] has exercised his discretion in accordance with clause 4.2, that exercise of discretion irrevocable.

Power of advancement

4.4 In exercise of the discretions conferred by either or both of clause 3 or clause 4 of this Deed, the Trustee may pay, apply or accumulate Property comprising or comprised in the Trust Fund for the advancement or benefit of [the respondent].

38 Clause 7 makes provision for the appointment, removal and resignation of the Trustee. The term 'Appointor' is defined in cl 1.1 to mean '[the Deceased], or any person who becomes the Appointor in accordance with this Deed'. Clause 7 provides, relevantly:

Appointor

7.1 The Appointor may resign at any time provided that the Appointor appoints another person to be Appointor. If the Appointor dies, the office and powers of Appointor will vest in the executor of the will of the appointor or the deceased Appointor's legal personal representative. If the Appointor becomes a Disqualified Person, the office and powers of Appointor will vest in the person responsible for managing the affairs of the Appointor.

Power to appoint and remove Trustee

7.2 Subject to clause 7.3, the Appointor has the following powers:

7.2.1 at any time to remove the Trustee, or, if there is more than one Trustee, to remove one or more of them; and

7.2.2 to appoint a new Trustee or Trustees, either in addition to one or more existing Trustee or Trustees, or in substitution for one or more Trustees who have been removed, who have resigned, or whose office has been vacated.

Ineffective exercise of power

7.3 A purported exercise of the power under clause 7.2 is ineffective and void where the Appointor purports:

7.3.1 to remove a sole Trustee or all of the Trustees without appointing a replacement Trustee; or

7.3.2 to appoint himself or herself as a Trustee; or

7.3.3 to appoint a Beneficiary as a Trustee (unless the Beneficiary is a Beneficiary solely in its capacity as the trustee of another trust).

39 Clause 16 makes provision for the resettlement of the Trust Fund. It provides:

Trustee may resettle Trust Fund

16.1 The Trustee may, at any time before the Vesting Date, with or without consideration, pay or transfer all or part of the Trust Fund to the trustee or trustees of another trust under which all or any of the Beneficiaries are beneficiaries (whether absolutely, contingently, presumptively or prospectively), provided that, as a result:

16.1.1 no person who is excluded from the definition of Beneficiary acquires an interest in the resettled property; and

16.1.2 the rule against perpetuities is not infringed.

Effect of resettlement

16.2 Property which is resettled in accordance with clause 16.1:

16.2.1 is no longer held on the trusts described in this Deed;

16.2.2 becomes subject to the terms of the trust on which it is resettled; and

16.2.3 remains subject to the laws of the State, where the trust on which it is resettled is governed by the laws of the State.

40 Clause 18 makes provision for the alteration of the Trust Deed. It provides:

18.1 Notwithstanding any other provisions of this Deed, the Trustee may, at any time before the Vesting Date, by Deed, alter any provision of this Deed except:

18.1.1 clause 5;

18.1.2 clause 7; and

18.1.3 this clause 18.

provided that:

18.1.4 neither the Settlor nor any person who was formerly the trustee of the Trust (other than in that person's capacity as trustee of another trust) becomes a Beneficiary; and

18.1.5 the rule against perpetuities is not infringed.

The master's findings in relation to the respondent's entitlement under the Will and the Trust Deed

41 The master made the following findings in relation to the respondent's entitlement under the Will and the Trust Deed:

(a) The sole benefit to the respondent under the Will was derived by her pursuant to the Trust Deed.

(b) At the date of the Deceased's death, the assets of the Trust comprised about $20,000 cash and a commercial property in Peel Street, O'Connor which had a market value of about $720,000. A debt charged against the O'Connor property had been extinguished by the Will.

(c) At the date of the Deceased's death, the Deceased had not made any of the five annual payments to the Trust for the purpose of increasing its capital 'up to a maximum amount of $3 million': cl 6A(c)(i)(E)(b).

(d) There was some uncertainty as to the operation of cl 6A(c)(i)(E)(c) of the Will. The master explained:

Assuming the property in the Trust together with the cash amount to $740,000 then the executor is to pay into the Trust an amount of $2,260,000. It may or may not be the case [that the Will] requires annual instalments of $452,000. It may require no more than annual instalments of whatever amount the trustee deems appropriate with a final balloon payment bringing the total capital in the Trust up to $3 million (adjusted by CPI).

It is also not clear what the phrase 'up to a maximum amount of $3 million' actually means. Counsel for [the respondent] suggested it provided the trustee with a discretion to make payments up to that amount or to make payments of a lesser amount. Counsel for [the appellants] submitted the intent of [the Will] was clear and the trustee was required to ensure the capital amount in the Trust was $3 million. It is not for me to determine precisely what cl 6A(c)(i)(E)(c) of [the Will] means. But it does appear the position is arguable [22] - [23].

(e) At the date of the Deceased's death, the first appellant and the respondent had never met.

(f) Clause 3 and cl 4 of the Trust Deed conferred on the trustee an absolute discretion with respect to the income and capital of the Trust. According to the master, 'if the trustee decided to retain all of the earnings of the Trust until [the respondent] was [aged] 30 there is nothing she could do to alter that decision' [24]. The master added that the respondent 'has no right to call for any part of the capital' [25]. In short, the respondent 'under the terms of the Trust is at the mercy of the trustee' [25].

(g) The definition of 'Beneficiary' in cl 1.1 of the Trust Deed includes '[a]ny trust, association or company formed for charitable purposes'. Accordingly, the Trust Deed enables 'all of the income to be distributed to [an organisation formed for charitable purposes]', although that was 'most unlikely [to occur]' [26].

(h) Clause 14 of the Trust Deed was '[t]he strangest aspect of the Trust' and operated in 'an entirely oppressive fashion' [27].

42 As I have noted, at the date of the Deceased's death the assets of the Trust comprised about $20,000 cash and a commercial property in O'Connor which had a market value of about $720,000.

43 After the Deceased's death, the rental for the commercial property was increased in about July 2012 to the market rent for the property. Also, after the Deceased's death the first appellant (as executor and trustee of the Will) made two payments of $100,000 each to the trustee of the Trust pursuant to cl 6A(c)(i)(E)(c) of the Will [37].

44 At the hearing of the appeal, counsel for the appellants informed the court that no other payments had been made by the first appellant (as executor and trustee) to the trustee of the Trust pursuant to cl 6A(c)(i)(E)(c) (appeal ts 51 - 52, 79).

45 At the hearing of the appeal, counsel for the appellants also informed the court that since the master delivered judgment in the primary proceedings, no payments of capital or income had been made by the trustee of the Trust to the respondent (appeal ts 115 - 116).

The relevant provisions of the Act and the applicable legal principles

46 In Devereaux-Warnes v Hall [No 3] [2007] WASCA 235; (2007) 35 WAR 127, I examined (Pullin JA agreeing) the relevant provisions of the Act and the applicable legal principles. It is convenient to reproduce and elaborate upon the relevant substance of what I wrote on that occasion.

If any person (in this Act called 'the deceased') dies, then, if the Court is of the opinion that the disposition of the deceased's estate effected by his will, or the law relating to intestacy, or the combination of his will and that law, is not such as to make adequate provision from his estate for the proper maintenance, support, education or advancement in life of any of the persons mentioned in section 7 as being persons by whom or on whose behalf application may be made under this Act, the Court may, at its discretion, on application made by or on behalf of any such person, order that such provision as the Court thinks fit is made out of the estate of the deceased for that purpose.

48 By s 10, an order takes effect as a codicil to the will or, in the case of intestacy, as a modification to the applicable rules of distribution.

49 Section 7 enumerates the categories of eligible claimants. They comprise, in general, a spouse or de facto partner; a former spouse or former de facto partner who, at the date of the deceased's death, was receiving or entitled to receive maintenance from the deceased; children; grandchildren; and parents.

50 By s 6(1) of the Act, the court is required to carry out a two-stage process.

51 The first stage involves the determination of whether the disposition of the deceased's estate effected by will or the law relating to intestacy is not such as to make adequate provision from his or her estate for the proper maintenance, support, education or advancement in life of the claimant. The first stage has been described as the 'jurisdictional question', which means no more than that the court's power to make an order in the claimant's favour is conditioned upon the court first being satisfied of the state of affairs referred to in the opening passage of s 6(1), ending with the words 'made under this Act'. See Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201, 208 - 209 (Mason CJ, Deane & McHugh JJ); Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191 [4] - [6] (Gleeson CJ), [56] (Gummow & Hayne JJ).

52 The first stage involves a question which is strictly one of fact, notwithstanding that it involves the exercise of value judgments. The evaluative character of the decision arises from the fact that the court must determine whether the claimant has been left without 'adequate' provision for his or her 'proper' maintenance, etc. See White v Barron [1980] HCA 14; (1980) 144 CLR 431, 441 - 443 (Mason J), 456 - 457 (Wilson J); Goodman v Windeyer [1980] HCA 31; (1980) 144 CLR 490, 509 (Aickin J); Singer (210 - 211) (Mason CJ, Deane & McHugh JJ).

53 The second stage, which only arises if the 'jurisdictional question' is determined in the claimant's favour, involves the exercise of discretion: the court may order that such provision as the court thinks fit be made out of the deceased's estate for the proper maintenance, etc, of the claimant. See White (442 - 443) (Mason J), (449) (Aickin J); Goodman (501 - 502) (Gibbs J), (509) (Aickin J); Singer (211) (Mason CJ, Deane & McHugh JJ).

54 The question which arises at the first stage must be formulated and determined as at the date of death of the deceased, having regard to all material facts that existed at the date of death, whether the deceased knew of them or not, and all material eventualities that might at that date reasonably have been foreseen by a deceased who knew the facts. See Coates v National Trustees Executors and Agency Co Ltd [1956] HCA 23; (1956) 95 CLR 494, 508 (Dixon CJ), 515 - 516 (Webb J), 526 - 528 (Kitto J); Hughes v National Trustees, Executors and Agency Co of Australasia Ltd [1979] HCA 2; (1979) 143 CLR 134, 147 - 148 (Gibbs J); White (437) (Barwick CJ), (441) (Mason J), (448 - 449) (Aickin J); Goodman (498 - 499) (Gibbs J).

55 In Coates, Dixon CJ observed that, in determining the question which arises at the first stage, the court must look to what is 'necessary or appropriate prospectively' from the date of death, including events which are contingent as well as those which are certain or exceedingly likely to happen (508). Advantage may be taken of hindsight if the subsequent occurrences are within 'the range of reasonable foresight' (508). See also White (441) (Mason J).

56 At the second stage the court exercises its discretion to order adequate provision for the proper maintenance, etc, of the claimant by reference to the circumstances as they exist at the date of the order. See Coates (509) (Dixon CJ); White (441) (Mason J); Goodman (499) (Gibbs J).

57 In Bosch v Perpetual Trustee Co Ltd [1938] AC 463, Lord Romer (delivering the advice of the Privy Council) observed that the discretionary power given to the court at the second stage 'must always be one of great difficulty and delicacy' and 'must always be one largely of guess-work, especially in a case ... which is concerned with children of tender age of whose needs in the future nothing can be predicted with any certainty' (483).

58 The discretionary power conferred by the Act at the second stage is to interfere with a deceased's dispositions when he or she has left a claimant without adequate provision for his or her proper maintenance, etc. The court is empowered to order such provision from the deceased's estate as the court thinks fit, but the court is not empowered to award more than what is 'adequate' provision for the claimant's 'proper' maintenance, etc. See Coates (509) (Dixon CJ); Blore v Lang [1960] HCA 73; (1960) 104 CLR 124, 134 (Fullagar & Menzies JJ). Those propositions are derived from the statutory text. In particular, the words 'for that purpose' at the end of s 6(1) refer to the purpose identified earlier in s 6(1), namely ensuring that 'adequate' provision is made from the deceased's estate for the claimant's 'proper' maintenance, etc. The text and purpose of s 6(1) qualify the court's power at the second stage. The power is confined by the text and purpose to the making of orders which will ensure that 'adequate' provision is made from the deceased's estate for the claimant's 'proper' maintenance, etc.

59 In Blore, Fullagar and Menzies JJ said that where a testator has chosen to dispose of his or her estate according to his or her inclination, 'the generous treatment of a child who has no need of the testator's bounty [must not] be used to determine the provision to be made for a child whose need has been disregarded or overlooked' (134 - 135). Their Honours added:

The measure to be applied is not what has been given to the one, but what the other needs for his or her proper maintenance, giving due regard to all the circumstances of the case. The Testator's Family Maintenance Act is legislation for remedying, within such limits as a wide discretion would set, breaches of a testator's moral duty to make adequate provision for the proper maintenance of his family - not for the making of what may appear to the court to be a fair distribution of a deceased person's estate among the members of his family (135).

See also Pontifical Society for the Propagation of the Faith v Scales [1962] HCA 19; (1962) 107 CLR 9, 19 (Dixon CJ).

60 The word 'proper' connotes something different from the word 'adequate'.

LEMON -v- MEAD [2017] WASCA 215 (22 November 2017)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (608 paragraphs)

LEMON -v- MEAD [2017] WASCA 215 (22 November 2017)

Legislation Cited (2)

Cases Cited (23)