HEARD : 22 OCTOBER 2012 & 16 JULY 2013 (ON THE PAPERS)

MATTER : Section 30(1)(k) of the Trustees Act 1962 (WA) and s 14 of the Administration Act 1903 (WA)

The Estate of David Eugenio Tagliaferri, late of 3 Cheviot Way, Eaton, Western Australia, dec

BETWEEN : LYSTRA ALLISON TAGLIAFERRI as Administrator of the Estate of David Eugenio Tagliaferri

LYSTRA ALLISON TAGLIAFERRI and LISA DIANNA SAWYER as Trustees for Hayley Beatrice Tagliaferri and Caitlyn Thelma Tagliaferri

Administration of estates - Intestacy - Appropriation of an asset in satisfaction of intestate entitlement - Effect on other beneficiaries - Infants - Need for valuation - Election to have appropriated dwelling house - Fourth Schedule of Administration Act - Need for approval - Relevant criteria - Scrutiny by court of value - Mode of implementing election - Extension of time for election under Fourth Schedule - Relevant considerations - Relationship of two avenues for appropriation

Trustees Act 1962 (WA)

Administration Act 1903 (WA)

Appropriation or election by widow administrator to appropriate dwelling house of intestate to herself approved

1 EM HEENAN J: The plaintiff, as administrator of the estate of her late husband, David Eugenio Tagliaferri, proposes to appropriate to herself the whole of the estate interest in the family home, owned by the deceased, in part satisfaction of her entitlement to distribution upon intestacy. The only other persons entitled in distribution of the estate are the two children of the plaintiff and the deceased who are both still under the age of 18 years. They are represented in this application by the first defendants, the plaintiff, and her late husband's sister, who have been appointed by deed under s 17A of the Administration Act 1903 (WA) as trustees of the children's interests in their father's intestate estate.

2 Such an appropriation can be made by the plaintiff as trustee pursuant to s 30(1)(k) of the Trustees Act 1962(WA) but, because the plaintiff has a personal interest in addition to her interest as administrator, approval of the court of the appropriation is required - s 30(3). Furthermore, because the only other beneficiaries are still infants, and the value attributed to the asset to be appropriated has the potential to affect their interests in the remainder of the estate, it is necessary to consider whether approval by the court of the appropriation and the proposed transfer of the house and land to the plaintiff is needed for this reason as well. This is so because, not being of full age, the infant beneficiaries are not able to apply to the court, should they wish to do so, to vary the proposed appropriation under s 30(1)(k)(ii) and the only parent or guardian of the children to whom notice could be given under s 30(1)(k)(ii) is the plaintiff herself. Trustees of the infants' interests under the estate have been separately appointed under s 17A of the Administration Act, those trustees being the plaintiff and her sisterinlaw. Although each has acted with perfect propriety in these proceedings, this is a situation where approval of the court in the interests of the infants, in my view, is necessary as part of the court's parens patriae protective jurisdiction - in a manner analogous to the procedure under Rules of the Supreme Court O 70 r 10.

3 Further and alternatively, the plaintiff seeks leave to give a notice of election to the Principal Registrar pursuant to cl 1, 3 and cl 4(1)(c) of the Fourth Schedule of the Administration Act to have the estate interest in the dwelling house that, at the date of death of the deceased, was ordinarily used by the surviving wife as her ordinary place of residence to be appropriated to her under s 30(1)(k) of the Trustees Act. An extension of time to make this election under cl 3(2) of the Fourth Schedule, in the present circumstances, will be required for reasons which are examined later.

4 This relief is sought by an originating summons dated 4 September 2012 issued by Mrs Tagliaferri as administrator and widow of the deceased. The only defendants are herself and one Lisa Dianna Sawyer as trustees for her two children under an inter vivos deed of trust, and Mrs Tagliaferri in her personal capacity as one of the three beneficiaries of the intestate estate. There was no opposition to the claim advanced.

5 Somewhat surprisingly perhaps, there is comparatively little authority available about these two important procedures for appropriation of assets and still less on their relationship to each other.

Appropriation under s 30(1)(k) of the Trustees Act

6 Where an appropriation under s 30(1)(k) of the Trustees Act is proposed and where the trustee may himself or herself be interested in or affected by the appropriation, as for example in the present case where the plaintiff still has a partial entitlement to shared distribution of this estate, then the trustee need not give himself or herself notice of an appropriation under s 30(1)(k)(ii) but the appropriation will not be effectual until it has been approved by the court, on the ex parte application of the trustee or otherwise - s 30(3). This requirement obliges the plaintiff to obtain the approval of the court for the proposed appropriation under s 30(1)(k) regardless of the fact that other persons interested in the appropriation are infants.

7 The reason for this requirement seems to be a precaution arising from the fact that the right to make such an appropriation by a trustee to himself or herself is an exception to the prohibition of a trustee from engaging in selfdealing and, consequently, may require scrutiny by the court to protect interests of others, not only infants. In addition, there may be a potential conflict of interests if the trustee has an interest in the selection of assets which are not to be retained in the trust estate and the maximisation of their value for the purposes of appropriation or for future appreciation - see Lewin On Trusts (18th ed, 2008) at [20.71].

Appropriation by a trustee or personal representative

8 I addressed the existence and nature of a trustee's statutory power of appropriation in O'Brien as Executor of the will of Hogan v Warburton [2012] WASC 82 [109] - [114] but it is desirable to explain and enlarge upon that here.

9 In addition to powers of appropriation at common law (see Williams On Wills (9th ed, 2008)) there is an express power for the plaintiff as trustee and administrator of her late husband's estate (see the definition of 'trust' in s 6 of the Trustees Act) conferred by s 30(1)(k) of the Trustees Act to appropriate any particular part of a trust property in satisfaction of a legacy or other entitlement of a beneficiary which, subject to compliance with the requirements of the section, would permit appropriation of the Cheviot Way property to the plaintiff. The statutory power is as follows:

(1) Every trustee in respect of any property for the time being vested in him, may -

(k) appropriate any part of the property in or towards satisfaction of any legacy payable thereout, or in or towards satisfaction of any share of the trust property, (whether settled, contingent or absolute) to which any person is entitled, and for that purpose value the whole or any part of the property in accordance with section 50; but -

(i) the appropriation shall not be made so as to affect adversely any specific gift; and

(ii) before any such appropriation is effectual, notice thereof shall be given to all persons of full age and full mental capacity who are interested in the appropriation, and to the parent or guardian of any infant who is interested in the appropriation, and to the person having the care and management of the estate of any person who is not of full mental capacity, and any such person may, within one calendar month after receipt of the notice, or, where the person to whom notice has been given is out of the jurisdiction, within such extended period as the Court may, on the application of the trustee or of any person interested, allow, apply to the Court to vary the appropriation, and the appropriation shall be conclusive save as otherwise directed by the Court

10 This power is analogous to the power conferred by s 41 of the Administration of Estates Act 1925 (England). In Theobold On Wills (17th ed) the learned authors referred to the United Kingdom legislation and observed at [35-038] that:

Such an appropriation must not affect prejudicially any specific devise or bequest, and can only be made with certain consents, unless such consents are dispensed with by the will. The appropriation binds all persons interested in the property of the deceased whose consent is not requisite. In making the appropriation, the personal representative is to have regard to the rights of any person who may thereafter come into existence or who cannot be found or ascertained at the time of the appropriation, and of any other person whose consent is not required.

11 Under the Western Australian statutory power, the ability to appropriate is not dependent upon the consent of any cobeneficiaries or other persons affected although, as the section itself provides, any person with an objection may, after notice, apply to the court to vary the appropriation. The power of such appropriation is further discussed in Ford & Lee, Principles Of The Law Of Trusts at [16,200] where the learned authors explain that the principle upon which trustees have power to appropriate any specific part of a residuary estate towards satisfying a legacy or share of residue is that they have power to sell the particular asset to the legatee, or beneficiary, and to set off the purchase money against the legacy or entitlement: see In re Beverley; Watson v Watson [1901] 1 Ch 681 and Wigley v Crozier (438).

Election under Administration Act Fourth Schedule

12 The provisions of the Administration Act which confer upon a surviving partner of a deceased intestate an entitlement to elect to have appropriated to him or her the family home or dwelling house if part of the deceased's estate are contained in s 14 and the Fourth Schedule. The material provisions in s 14(6) are:

If:-

(a) the surviving husband or wife of the intestate is not entitled to the whole of the intestate property in accordance with this section and section 15; and

(b) there is an interest within the meaning of clause 1(1)(b) of the Fourth Schedule,

then that Schedule applies with respect to that interest.

13 Conditional upon a de facto partner of the intestate having cohabited with the deceased for a period of at least two years immediately before the death of the intestate, the de facto partner shall be entitled in accordance with section 14 to the intestate property to which a husband or wife of the intestate would have been entitled s 15(1). If the intestate dies leaving a husband or wife and a de facto partner then conditional upon the de facto partner having cohabited with the deceased for at least two years immediately before the death of the intestate and on the further condition that the intestate did not, during any part of that period, cohabit with his or her spouse then the de facto partner shall be entitled to onehalf of the intestate property to which the spouse would have been entitled in accordance with section 14 and the spouse shall be entitled to the other half of that property s 15(2).

14 The provisions of the Fourth Schedule deal with rights in respect of dwelling houses. The Schedule is extensive and the following provisions are a selection only of its content.

1. Rights of surviving spouse if dwelling house is residence

(1) Subject to the provisions of this Schedule where -

(b) the whole or a part of the intestate property consists of an interest in a dwelling house that, at the date of the death of the deceased person, was ordinarily used by the surviving husband or wife as his or her ordinary place of residence (in this Schedule called the interest); and

(c) the surviving husband or wife is not entitled under sections 14 and 15 to the whole of the intestate property,

the surviving husband or wife may elect to have the interest appropriated under section 30(1)(k) of the Trustees Act 1962 in or towards satisfaction of any entitlement or entitlements that the surviving husband or wife has under item 2 or 3 of the Table.

15 [The Table of entitlements on intestacy is contained in s 14.]

(2) ...

(3) ...

(4) ...

1. ...
2. Time limit for exercising right under par. 1

(1) The right conferred by paragraph 1 shall not be exercisable -

(a) after the expiration of 12 months from the first grant of administration of the estate of the intestate; or

(b) after the death of the surviving husband or wife.

(2) The Court may, on the application of the surviving husband or wife, grant an extension of the period of 12 months mentioned in this paragraph.

(1) The right conferred by paragraph 1 shall be exercisable by furnishing a notification in writing -

(a) if the surviving husband or wife is not a personal representative of the intestate - to the personal representative or to each personal representative, as the case may be, of the intestate;

(b) if the surviving husband or wife is one of the personal representatives of the intestate - to the other personal representative, or to each other personal representative, as the case may be, of the intestate; or

(c) if the surviving husband or wife is the sole personal representative of the intestate - to the Principal Registrar.

Notwithstanding section 50 of the Trustees Act 1962, as respects an appropriation in pursuance of paragraph 1 the value of the interest is the amount determined by a qualified valuer engaged by the personal representative of the intestate to be the market value of the interest.

1. ...
2. Surviving spouse as sole personal representative

(1) Where the surviving husband or wife is the sole personal representative, or one of 2 or more personal representatives of the intestate, he or she may, notwithstanding that he or she is a trustee, acquire the interest under an appropriation in pursuance of paragraph 1.

(2) The power of appropriation under section 30(1)(k) of the Trustees Act 1962 shall include power to appropriate the interest partly in satisfaction of the entitlement or entitlements of the surviving husband or wife under item 2 or 3 of the Table and partly in return for a payment of money by the surviving husband or wife to be applied in or towards satisfaction of the other entitlements under these items.

16 Other parts of the Schedule have been omitted because they are not material to the resolution of the present case. However, they are important because, according to their provisions and the circumstances of the case, they define and restrict the meaning of a dwelling house in certain circumstances; they prevent a notification given under subpar (4)(1) from being revocable except with the consent of the personal representative or each personal representative of the intestate; they confer upon a surviving husband or wife who is not a personal representative of the intestate the right to require the personal representative to have the interest valued and be advised of the value before deciding whether to elect; they restrict the sale by the personal representative of the dwelling house during the election period of 12 months unless with the consent of the surviving husband or wife; and they make provision for circumstances in which the surviving husband or wife is not of full age or of full mental capacity.

17 The entitlement of election under the Fourth Schedule has origins in the Intestates' Estates Act 1952 (England) - see Robinson v Collins [1975] 1 WLR 309; [1975] 1 All ER 321. The history and the policy leading to these statutory provisions are summarised in Dal Pont & Mackie, 'Law of Succession' (2013) 9.54 where the learned authors write:

The common law doctrines of curtesy and dower provided special lifetime rights to the widower and widow respectively in relation to their deceased spouse's real estate. Statutory provision for spouses (and now de facto or domestic partners) to take priority to an intestate's estate dictated the need to statutorily abolish curtesy and dower. Thereafter the Intestates' Estates Act 1952 (UK) gave spouses a further entitlement, namely to require the personal representatives to exercise their power of appropriation in respect of the matrimonial home in or towards the satisfaction of their interest in the estate. Underscoring this initiative was the desirability that the surviving spouse should, if he or she so wishes, be able to remain in the matrimonial home, the concern being that '[t]o be forced to leave the home after the partner's death, and after possibly years of home life there, could be a most traumatic experience'. This proceeds on the assumption, of course, that the home is not held as joint tenants; if the home is held on a joint tenancy there is no need for this form of statutory intervention ... (footnotes omitted)

18 There is no provision in the Administration Act or the Fourth Schedule requiring the spouse of a deceased intestate to obtain the leave of the court to make an election under cl 4 of the Fourth Schedule to that Act, nor does there appear to be any authority or commentary on the question of whether, in the event of such an election, the other parties interested in the estate can apply to the court to vary the appropriation under s 30(1)(k)(ii) of the Trustees Act. However, because any appropriation will be an exercise of that statutory power, I consider that the provisions of that subsection do apply.

19 The value ascribed to the interest in the family home, which by this process would be appropriated to the surviving partner, may have the capacity to affect the interest of other beneficiaries to the intestate's estate. If these include infants there may be a need for the court to approve, not so much the election which the surviving partner has a right to demand, but the value ascribed to it. There may also be other reasons to review the proposed appropriation - see Lewin at [20.71].

20 The most obvious way in which the value ascribed to an asset being appropriated by a personal representative to an eligible beneficiary under s 30(1)(k) of the Trustees Act or as a result of an election by a surviving partner under the Fourth Schedule of the Administration Act would be if there were an undervalue. The result in such a case would be that the person to whom the asset passes on the appropriation would receive a benefit by receiving an asset worth more than the amount that the appropriation recognises. The remainder of the estate, available for distribution among other beneficiaries and, possibly, the recipient of the appropriation if the value of the interest appropriated were less than his or her full share in the estate either under the will (if any) or under s 14 of the Administration Act, would, to the extent of the undervalue, be reduced. That would mean that the remaining beneficiaries would take a share in a reduced residue of the estate, so distorting the proportions for distribution fixed by any will or by s 14 of the Act. Redress for any beneficiary aggrieved by a proposed appropriation which may have this effect is available under s 30(1)(k)(ii) of the Trustees Act which in this case is to be read with the Fourth Schedule of the Administration Act. Where there is a beneficiary who might be so affected who is an infant, and whose interest is not independently represented, I consider that the court can, and should where necessary, scrutinise the proposed apportionment.

21 A full examination of the Intestate's Estate Act 1952 (UK) and the application of its analogue, the Administration of Probate Act 1919 (SA) s 72L, was undertaken by Gray J in Public Trustee v O'Donnell [2008] SASC 181; (2008) 101 SASR 228. The South Australian legislation is rather different to the statute in Western Australia in that s 72L of the SA Act confers on the surviving partner a right to elect 'to acquire' the interest of the estate at its value at the date of death of the intestate rather than to have that appropriated to him or to her.

Relationship between the two forms of application

22 This originating summons couples an application for the approval of an appropriation made by the plaintiff as sole administrator of her deceased husband's intestate estate under s 30(1)(k) of the Trustees Act with an application for leave to give a notice of election under cl 4(1)(c) of the Fourth Schedule of the Administration Act to have appropriated to her the same interest in the former family home. A question which therefore arises is whether these are two separate and independent avenues which could lead to the same or similar relief being obtained by the plaintiff or whether and, if so, how they are related.

23 The right of appropriation available to a trustee under s 30(1)(k) of the Trustees Act occurs in relation to any trust and not merely a testamentary trust or a statutory trust arising on an intestacy. Subject to the terms of the section, the appropriation is made by the trustee as of right. The power is a fiduciary power and must be exercised with regard to the trustee's fiduciary duties - Wigley v Crozier [1909] HCA 86; (1909) 9 CLR 425. It requires only the consent of the beneficiary in whose favour the appropriation is to be exercised, although notice of the appropriation must be given to other affected beneficiaries who will then have an opportunity within a limited time to apply to the court, if aggrieved, to vary the appropriation. Under s 30(1)(k) no beneficiary has a right to demand appropriation in his or her favour of any particular asset or property of the estate. This does not overlook the rights of specific legatees or the rights of the beneficiaries of specific bequests or devises to demand, where the estate is solvent and there is no occasion for abatement of the disposition because of impoverishment, to demand that the specific legacy, bequest or devise be carried out in his or her favour - s 30(1)(k)(i).

24 By contrast, the right to elect to have appropriated to him or to her the intestate's estate in the dwelling house in or towards satisfaction of any entitlement which the electing party has to distribution on intestacy, is a special form of appropriation, still taking effect under s 30(1)(k) of the Trustees Act, but varying the circumstances and the identity of the person by whom the power to appropriate may be initiated.

25 The first point of importance in this regard is that an election to have appropriated the surviving partner's interest in a dwelling house under the Fourth Schedule of the Administration Act is expressly stated to be a right to have the interest appropriated under s 30(1)(k) - see cl 1(1) of the Fourth Schedule. Second, it is not any asset of the estate of the deceased intestate which may be appropriated under this power but only 'the interest' in a dwelling house that at the date of the death of the deceased person was ordinarily used by the surviving husband or wife as his or her ordinary place of residence. Third, while the power of appropriation is exercised by the personal representative of the deceased intestate, it must be exercised in a manner demanded by the surviving spouse or partner of the deceased if that demand takes the form of an election validly made within the time allowed by the Fourth Schedule or any extension of that time permitted by the court. Subject to these differences, and the need to comply with the other requirements of the Fourth Schedule, an election by a surviving spouse or partner of a deceased intestate under the Fourth Schedule will result in an appropriation (by the personal representative, who may be the same person as the electing party) exercising the power contained in s 30(1)(k) of the Trustees Act.

26 Upon a proposed appropriation a valuation of the portion of the assets which is to be appropriated to the beneficiary will need to be made. The date of the valuation will be the date of appropriation if it precedes eventual transfer - Robinson v Collins and generally Ford & Lee at [60,210]. Where it is necessary to fix the value of the property to be appropriated under s 30(1)(k) the trustee must where necessary employ a duly qualified valuer - see s 30(1)(k) and s 50 of the Trustees Act, cl 5 of the Fourth Schedule and Carr v Carr (1987) 8 NSWLR 492, 492 497.

27 David Eugenio Tagliaferri died on 3 February 2011. His was a tragic and untimely death as he was aged only 44 years, having been born on 24 December 1966. He had been driving along the Old Coast Road in Myalup when he got a flat tyre and pulled over to the side of the road to change the tyre. Another man pulled over to help. They changed the tyre but before both could return to their cars a prime mover, driven by a third person, drifted onto the gravel and collided with both their cars. As a result of this accident both Mr Tagliaferri and the man who had stopped to help him died. The deaths were the subject of a coronial inquiry and the coroner at Bunbury determined on 11 June 2012 that Mr Tagliaferri died of multiple injuries sustained when he was involved in a motor vehicle accident involving unlawful homicide.

28 Mr Tagliaferri left his wife, Lystra Allison Tagliaferri, the plaintiff, and their two children, Hayley Beatrice Tagliaferri and Caitlyn Thelma Tagliaferri, surviving him. The plaintiff is a registered nurse, having been born in Trinidad Tobago and having married Mr Tagliaferri in the United States of America in April 2001. She is currently employed on a parttime basis as a dialysis nurse at the St John of God Hospital in Bunbury and is able to support her two children in their daytoday needs.

29 Mr Tagliaferri had bought the land at 3 Cheviot Way, Eaton and built a house on it in about 2001, shortly after his marriage with the plaintiff. It was registered in his name as sole proprietor. Mrs Tagliaferri and the children were living together with the deceased in that house at the date of his death and continue to live there. The couple lived there together with their growing family from about 2001 until Mr Tagliaferri's death, except for a period of about two years in 2007 to 2009, when the family lived in the United States. Hayley was born on 1 January 2001 and was 10 years of age when her father died. Caitlyn was born on 1 July 2002 and was aged 8 when her father died. Both children are attending primary school at Leschenault Catholic Primary School and are doing well, having coped and adjusted to the tragedy of the their father's death. Independent counsel reports that each is now well settled.

30 Mrs Tagliaferri does not have any of her own family living in Australia but she and the children have good friends living in the area. The late Mr Tagliaferri's family lives nearby and helps out considerably with work around the house and looking after the children if the need arises. The cotrustee under the inter vivos trust, Mrs Lisa Sawyer, is the sister of the deceased. She and her husband live in Mandurah and are on close terms with the plaintiff and the children and are of great support in helping with handyman jobs around the house and taking the young girls to outings and going on holidays with them. The plaintiff has no plans to move from Eaton and the life there that they all enjoy.

31 Mrs Tagliaferri was granted letters of administration of the husband's estate on 25 August 2011. The estate consists of a variety of moveable property, including the proceeds of various life insurance policies. At the time of the grant of letters of administration the house and land at Cheviot Way was estimated to be worth $390,000 and the latest available estimate of its value is $395,000. In the opinion of independent counsel, the current net value of the estate should be approximately $1,968,000. Applying the Table in s 14 of the Administration Act¸ the entitlement in distribution of the estate on the intestacy should be:

32 This calculation takes into account interest at the rate of 5% per annum from the date of death until appropriation on the entitlements.

33 Mrs Tagliaferri wishes to have appropriated to herself the house and land as part of her share of the estate - par 1(1) of the Fourth Schedule to the Administration Act and s 30(1)(k) of the Trustees Act. This right of election is exercisable by notice within 12 months of the 'first date of administration' but on the application of the surviving spouse the court may extend the time during which the right can be exercised. The first date of administration in this case is 25 August 2011 and notice was therefore required to be given by 24 August 2012. Notice is to be given by writing to the Principal Registrar of the Supreme Court, par 4(1) of the Schedule. In this case notice was not given by 24 August 2012 so the application must be regarded as including an application for an extension of time. The proposed notice accompanying the originating summons is dated 3 September 2012 but because the relief sought includes leave to give such notice, I consider that time should be extended for a reasonable period (say, 30 days) after the date of my order in this case so that the notice may be given in its final form.

34 The reason for this time limit would appear to be the desirability of concluding the administration of the estate within a reasonable period. That is after allowing for the 12month 'election period' within which the administrator may not dispose of the estate interest in the family residence without the consent of the surviving partner or of the court. It does not appear to be any coincidence that this period equates with the traditional notion of the 'executor's year' for completing administration. This socalled 'rule of convenience' was never fixed but only a guide - see Dal Pont & Mackie, Law Of Succession (2013) [14.26] [14.27].

35 There is no suggestion that the delay would in any way be adverse to any of the parties, and in particular to the children. As the value of the property has remained fairly constant, I do not consider that any minor change in the value, if any, which has occurred since the latest valuation should impede the grant of an extension of time.

Administration Act s 17A deed appointing second defendants as trustee of the infants' entitlements

36 In this case, the gross value of the estate of the deceased as initially estimated by the plaintiff when seeking letters of administration was approximately $2.442 million - s 26 of the Administration Act and r 27 of the NonContentious Probate Rules. With two of the beneficiaries of the estate being infants, it was very likely that sureties for the administration of the estate by way of guarantee would be required in an amount equal to the gross value of the estate. The plaintiff's solicitor, Mr Cahill, has explained in his affidavit that, recognising that it might be difficult for the plaintiff to obtain two such guarantees because of the relatively large value of the estate, he advised the appointment of two other trustees to be responsible for the interests of the infants by a deed to be made under s 17A of the Administration Act. This is the consideration which led to the making of that deed in the present case, although the other advantages which I am about to mention were also achieved.

37 Because each child remains under age, she will not be able to give a valid receipt or discharge for her share of the estate until having attained the age of 18 years. That would leave Mrs Lystra Tagliaferri with the sole responsibility as trustee for her daughters' interests until then. It would also mean that if she became incapacitated or died there might possibly be significant practical difficulties in obtaining or implementing the appointment of a new trustee of the children's entitlements perhaps by the need to obtain a new grant of letters of administration de bonis non - see In re Clover [1919] NZLR 103.

38 Mrs Tagliaferri has availed of the powers conferred by s 17A of the Administration Act to appoint two individuals to be the trustees of the share of the infant beneficiaries. This was accomplished by a deed which she executed on 2 June 2011 (made conditional upon her obtaining a grant of letters of administration of the husband's estate to her) appointing herself and her sisterinlaw, Mrs Lisa Dianna Sawyer, as the trustees of that new trust. It is in that capacity that Mrs Tagliaferri and Mrs Sawyer appear as the first defendants as trustees for the deceased's two children.

39 Section 17A is the equivalent of s 42 of the Administration of Estates Act 1925 (UK) of which Danckwerts J said in Re Kehr [1952] Ch 26 at 29:

The object of that section was to enable personal representatives to get a discharge from all further liability in respect of a legacy or share of the estate to which an infant beneficiary was entitled, having regard to the fact that he could not give a discharge while he was still under the age of 21 years [then, but not now, the age of majority].

40 It follows, therefore, that upon Mrs Lystra Tagliaferri transferring or vesting the property comprising the shares of her children's interests in their father's estate upon the two trustees appointed by this deed (the second defendants) her responsibility as administrator and trustee of her husband's estate in that capacity will be discharged and end (subject to any obligation to account) and from then on that that responsibility will then repose in the second defendants jointly by reason of the June 2011 deed.

41 In Jacob's Law of Trusts in Australia (7th ed, 2006) the learned authors express the view that s 17A of the Administration Act, and equivalent provisions in comparable legislation, are based upon the view that the executors as such do not, after completing their executorial duties, hold the property upon trust for the infant beneficiary or beneficiaries unless they are appointed trustees by the will. At [2075] the authors contend that this does not appear to accord with the view expressed, for example, in Pagels v MacDonald [1936] HCA 15; (1936) 54 CLR 519, 526 that the executor becomes a trustee by merely continuing to hold a property after his functions as executor have been performed. They suggest that the infrequency of appointments under these sections suggests that the view expressed in Pagels v MacDonald is that 'most widely acted upon'. It is unnecessary to make any determination about that point in the present case although its existence requires attention. There would appear to be more convincing reasons for the existence of a provision such as s 17A.

42 This originating summons came on for a directions hearing on 22 October 2012. At that point it was supported by affidavits setting out the history of the death of Mr Tagliaferri; the subsequent grant of letters of letters of administration to the plaintiff; the inter vivos deed of 2 June 2011; the value of the estate under administration; and the family history. This evidence included a valuation of the family home at Cheviot Way, Eaton, the subject of the proposed appropriation in favour of the plaintiff. This showed that the estimated market value of the Cheviot Way property was significantly less than the plaintiff's entitlement to the share of the estate upon distribution on intestacy. At this directions hearing, I considered that approval of the proposed appropriation as sought would require the court to be satisfied that there was not any likely or potentially adverse effect upon the interests of the children beneficiaries.

43 Although it is clear that provisions of O 70 r 10 and r 11 of the RSC do not apply to these proceedings, the underlying principle of the court's role in scrutinising and protecting the interests of infants or persons under a disability was, in my view, nevertheless invoked - Department of Health and Community Services (NT) v JWB and SMB (Marion's Case) [1992] HJCA 15; [1992] HCA 15; (1992) 175 CLR 218 (Mason CJ, Dawson, Toohey & Gaudron JJ (258) (259) and (Brennan J) (280) (281); and generally Cadwallender v The Public Trustee [2003] WASC 72; and DirectorGeneral of the Department of Community and Development v T'Hart [2003] WASCA 110; (2003) 27 WAR 185. Accordingly, I gave directions requiring the plaintiff to obtain an opinion from independent counsel addressing the question of whether the proposed appropriation is adverse to the interests of the infant beneficiaries; to provide evidence as to the current value of the house; and to consider the purpose of the inter vivos trust and when and how it was proposed to transfer the infant beneficiaries' interest in the estate to the inter vivos trust. The matter was thereupon adjourned.

44 Since then a further affidavit has been filed by the plaintiff's solicitor annexing an opinion of independent counsel, a further affidavit deposing to the arrangements proposed for the inter vivos trust, and a further affidavit of the plaintiff concerning the current arrangements for the children, describing the income being derived from the estate and recurrent expenditure. Also, there is a further affidavit from a licensed valuer deposing to his opinion of the market value of the house at the date of the affidavit that is $395,000 as at 31 May 2013, a slight increment upon the value of $390,000 estimated as at 21 August 2012. The valuer's opinion concluded that based on broad market indicators the appearances were that residential property values in the locality should remain steady with potential for minor growth. I considered this additional evidence and have determined the application on the papers without any further hearing. I accept all the evidence contained in these affidavits.

45 Any such appropriation made, as in the present case, would be the equivalent of a sale by the personal representative to herself of an asset of the estate. This raises the question of whether or not the trustee is subject to the purchase rule which prohibits a trustee from purchasing trust property for her own interest. As for an appropriation by a personal representative in favour of himself or herself, and the purchase rule, there is no equivalent in s 30(1)(k) of the Trustees Act of cl 7(1) of the Fourth Schedule of the Administration Act expressly authorising such a 'purchase'.

46 Generally speaking, the purchase of trust property by a trustee is not permitted except with the consent of the court or pursuant to an express power - Williams v Scott [1900] AC 499 and Clay v Clay [2001] HCA 9; (2001) 202 CLR 410 [50] - [53] but this does not apply to an executor or administrator appropriating specific assets in satisfaction of a share in residue - Re Richardson [1896] 1 Ch 512 In the Estate of Gamble (1915) 32 WN (NSW) 121; In the Will of Hinsch (1896) 17 LR (NSW) BOP 21; and Re Pearce [1936] SAStRp 28; [1936] SASR 137 - see Ford & Lee, Principles of the Law of Trusts [60 200] and Jacob's Law of Trusts in Australia [1743].

47 There are, however, other restrictions on the right of an intestate's surviving partner to make an election under the Fourth Schedule which are listed in Dal Pont & Mackie, 'Law of Succession' (2013) at [9.57] which, however, do not need consideration in this case.

48 An appropriation under the statutory power may not immediately effect a transfer of the legal estate in the asset being appropriated. Upon making the appropriation the whole of the legal right to the asset may remain with the trustee but the whole of the beneficial interest will pass to the beneficiary in whose favour the appropriation is made, notwithstanding that it continues to be held on trust for him or her. From then on, any appreciation or depreciation in the value of the asset or the fund which is the subject of the appropriation will be to the credit or to the cost of that beneficiary rather than to the estate as a whole. The legacy, bequest or other entitlement of the beneficiary to whom the appropriation was made will have been satisfied pro tanto from the time of the appropriation even if that precedes ultimate distribution which may not be until much later.

49 One issue which may not yet have been authoritatively resolved is whether a surviving partner of the deceased intestate can make an election under the provisions of the Fourth Schedule of the Administration Act requiring appropriation to him or her of the former family home where the value of the home exceeds the entitlement of the surviving partner to share in the estate on intestate distribution. This point has been the subject of an article by Professor N Crago, 'The Right Of An Intestate's Surviving Spouse To The Matrimonial Home' in (2000) 29 Univ of WA L Rev at 197 where there is discussion of Re Phelps (dec) [1980] 1 Ch 275. In that case, the English Court of Appeal held that the effect of the United Kingdom legislation corresponding to pars 1 and 7(2) of the Fourth Schedule and to s 30(1)(k) of the Trustees Act 1962 was to extend the power of appropriation by an administrator of an intestate's estate to include a transaction that is partly an appropriation and partly a sale; and, in the light of the apparent policy of the Schedule, this confers a right of election upon the surviving spouse where the value of the property exceeds that of the entitlement but in which case the surviving spouse must make a cash payment to the deceased's estate equal to the difference. That author suggested that this case should be followed in Western Australia but that legislative reform is desirable. This question does not arise in the present case but its existence should be noted for the future. The indications, however, from cl 7(2) of the Schedule seem to suggest strongly that the Re Phelps (dec) approach applies in this State - see also Manna v Manna [2008] ACTSC 10 [17].

50 An example of approval by the court to the sale of a former family home to the widow of the deceased intestate is provided by the decision of Cavanough J in Patros v Patros [2007] VSC 83; (2007) 16 VR 182. In this case, as in the South Australian case of Public Trustee v O'Donnell, the matter for determination by the court was whether or not to authorise the purchase of a trust property, being the family home, by an administrator widow notwithstanding that no election to acquire that property at its value at death had been made by the administratrix pursuant to s 37A(2) of the Administration and Probate Act 1958 (Vic). Hence, the question of the approval of an appropriation pursuant to a statutory provision the equivalent of s 30(1)(k) of the Trustees Act or pursuant to an election under provisions equivalent to the Fourth Schedule of the Administration Act did not arise but the principles underlying the determination of the authorisation by the court were similar. In approving this, Cavanough J was satisfied that the proposed sale to the trustee widow was for the benefit of the infant defendants, her children, because:

(a) the valuation of the property provided was a proper one;

(b) there was no opposition to the proposal from the beneficiaries' litigation guardian; and

(c) any risk of financial detriment to the beneficiaries was outweighed by the benefits to them of remaining in the nurturing and familiar environment of their home and their neighbourhood, and the saving to the estate of the significant cost of a public sale and repurchase.

51 These criteria can be applied by analogy in the present case. It is not necessary for me to be satisfied that the appropriation proposed in the present case is for the benefit of the infant children but I do need to be satisfied that it is not adverse to their interests in any material way. I am satisfied that that is the case.

52 As already observed, the children are represented by the second defendants as their trustees under the inter vivos s 17A deed. Section 30(1)(k)(ii) of the Trustees Act contemplates that notice of an appropriation may be given to the parent or guardian of any infant who is interested in the appropriation, but, unlike s 41(1)(ii) of the Administration of Estates Act (1925) (Eng) (which deals with giving consents) there is no provision in the Trustees Act for obtaining the approval of the court or appointing some other person to receive notice of an appropriation on behalf of an infant where there is no parent or guardian or none able to act in that role for the occasion. In this case, because one of the trustees of the infant children is also the plaintiff and electing party, this produces a situation where special scrutiny by the court is needed in the infants' interests. It is for this reason that I directed that the plaintiff should obtain and provide independent counsel's opinion about the suitability of the appropriation as it may affect the children.

53 There are, of course, advantages in Mrs Tagliaferri obtaining sole ownership of the home as it gives her the power to deal with it should there be any financial need, or necessity, or any family desire or advantage to mortgage or sell the property and to move elsewhere. The assets of the estate which will devolve to the two children will, no doubt, soon be transferred to the trustees under the inter vivos deed and the interests of the children will be protected by the duty, responsibility and obligations of the second defendants as trustees under that deed.

54 I am satisfied that all indications and the evidence support the submissions that the proposed appropriation of the house and land at Cheviot Way to the plaintiff will not in any way be adverse or prejudicial to the infant children. Not only is Mrs Tagliaferri entitled to make the appropriation in her favour in her role as administrator but she is entitled to call for the appropriation as the surviving spouse of the deceased. As previously indicated, the principal role of the court is to ensure that the value ascribed to the asset appropriated does not involve any disadvantage or prejudice to the infant beneficiaries. I am satisfied that it does not.

55 For these reasons I am satisfied that the court should approve the appropriation proposed by the plaintiff utilising s 30(1)(k) of the Trustees Act under s 30(3) being satisfied that this is not adverse to the interests of the infant beneficiaries nor to their entitlement to share in the distribution of the intestate estate of their late father. I consider that this approval can occur immediately upon my decision on this application being formally recorded and that it should be treated as relating back to and taking effect from the date of the last valuation of the subject property, namely 31 May 2015.

56 It will be for the plaintiff by her solicitors to decide whether or not to accept this form of appropriation in the present case or, instead, to disclaim the right to do so and rely on the slightly different form of appropriation sought in the second paragraph of the originating summons, namely the alternative of an election to have an appropriation under the Fourth Schedule of the Administration Act.

57 The proposed appropriation under the combined effect of the Fourth Schedule of the Adminstration Act and s 30(1)(k) of the Trustees Act also requires the approval of the court because of the provisions of s 30(3) of the Trustees Act and because the other affected beneficiaries are infants with no litigation or other guardians appointed to protect their interests. Again I am satisfied that this proposed election under s 30(1)(k), demanded as it has been by the plaintiff and widow under the Fourth Schedule of the Administration Act, should be approved and for the same reasons already given.

58 In this eventuality, however, the appropriation will not take effect immediately upon formal entry of the order of the court, nor can it be directed to take effect from any earlier date. This is because, in these particular circumstances, the right to demand that the appropriation be made in the manner sought by the plaintiff electing under cl 1 of the Schedule must, by cl 4(1)(c), be effected by furnishing notification in writing of the election to the Principal Registrar of this Court - a step which has not yet been taken. If and when that step is taken and the Principal Registrar is served with the notice, the personal representative will thereupon be obliged to make the appropriation demanded which would take effect when the personal representative exercises that power. In a case like this, where the person electing and the personal representative of the deceased are one and the same, I would expect those two steps to coincide or for the exercise of the power of appropriation to follow immediately or very soon after the delivery of the notice to the Principal Registrar. The simple point, however, is that the appropriation will not occur until that final step is taken. That would mean that the appropriation would take place on a date later than the latest valuation of the subject property which, as already mentioned, is 31 May 2013. Nevertheless, I am satisfied that it is distinctly improbable that there would have been any material variation in the value of the subject property between 31 May 2013 and the date when this process of election under the combined effect of s 30(1)(k) of the Trustees Act and the Fourth Schedule of the Administration Act takes effect. My approval of the appropriation takes this inevitable short delay into account. To safeguard against any unexpected developments between now and the final date of appropriation there should be liberty to apply by any interested person.

59 From this, it is now apparent that the plaintiff can choose between the two procedures leading to an appropriation, that is, the procedure first sought under the originating summons, a simple appropriation by herself under s 30(1)(k) of the Trustees Act, or the second process for an appropriation under s 30(1)(k) of the Trustees Act demanded by her election to be made under the Fourth Schedule of the Administration Act. As the former would lead to an immediate satisfactory result and because there would appear to be no advantage in preferring the second method to the first, it seems likely that the plaintiff may choose to accept the first form of relief available rather than the second. However, the choice is one for her to make and, if necessary, I will hear from counsel in this regard in due course.

60 In the present case, therefore, I consider that in authorising the proposed appropriation by the plaintiff under s 30(1)(k) of the Trustees Act and also authorising the election under the Fourth Schedule of the Administration Act the court should declare that:

(a) the appropriation of the plaintiff is approved;

(b) alternatively, the election by the plaintiff to have the estate interest in the dwelling house appropriated to her be approved;

(c) for the purposes of either appropriation the value of the asset appropriated, namely the house and land at 3 Cheviot Way, Eaton, comprising part of the estate of the deceased, shall be treated as having a value of $395,000;

(d) in the event of (a) being ordered, the date of the appropriation should be treated as the date of the latest valuation, namely 31 May 2013;

(e) alternatively, the court extend the time within which the plaintiff may make an election to require appropriation to her of the house and land at 3 Cheviot Way, Eaton, under the Fourth Schedule of the Administration Act cl 3(2) to and including a date 30 days after the date of this declaration and order;

(f) in that event, the plaintiff may, within that time, deliver a notice of intention to appropriate under cl 4(1)(c) of the Fourth Schedule to the Administration Act in the form of the notice of 3 September 2012 accompanying the originating summons to the Principal Registrar of this court;

(g) the plaintiff do, within 21 days, file a notice specifying which of the two forms of relief sought by the originating summons she chooses to accept, whereupon final orders will be made without the need for any further hearing;

(h) the costs of and incidental to this application, including the costs of the valuations and of independent counsel's opinion, shall be costs in the administration of the estate to be paid out on a solicitor and client basis; and