JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : MILES -v- PATRICK DAVID MOSTYN HUGHES as Executor of the last Will of MARY MONICA URQUHART (DEC) & ANOR [2002] WASC 116

PATRICK DAVID MOSTYN HUGHES as Executor of the last Will of MARY MONICA URQUHART (DEC)

PATRICK DAVID MOSTYN HUGHES AND JULIAN WRIGHT as Trustees of the MARY MONICA URQUHART TRUST

Trustee - Question as to whether certain trusts have vested and are fully administered - Turns on own facts

Birmingham v Renfrew [1937] HCA 52; (1937) 57 CLR 666

Buckle v Commissioner for Stamp Duties (NSW) [1998] HCA 4; (1998) 192 CLR 226

Clay v Karlson, unreported; FCt SCt of WA; Library No 970466; 21 July 1997

Commissioner of Stamp Duties (Qld) v Livingstone [1964] UKPC 2; [1965] AC 694

Featherby v Grljusich, unreported; SCt of WA; Library No 980238; 1 May 1998

Swain v Merburn, unreported; FCt SCt of WA; Library No 940100; 3 March 1994

Thorpe v Bristile Ltd, unreported; FCt SCt of WA; Library No 960550; 13 September 1996

Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319

1 MASTER SANDERSON: By originating summons dated 14 August 2001 the plaintiff seeks the following relief:

(1) A declaration that the trust constituted by the will of the late Mary Monica Urquhart as admitted to probate on 27 January 1998 has terminated.

(2) A declaration that the trust constituted by a deed of settlement executed by the late Mary Monica Urquhart on 21 October 1992 has terminated.

(3) An order that the defendants render to the plaintiff a proper statement of their accounts.

(4) An order that the first defendant pay into court any money remaining in his hands by reason of his having acted as executor of the estate of Mary Monica Urquhart, deceased.

(5) An order that the second defendants pay into court any money remaining in their hands by reason of their having acted as trustees of the Mary Monica Urquhart Trust.

(6) The defendants pay the plaintiff's costs of these proceedings on an indemnity basis.

2 This is the fourth instalment of a dispute between these parties which goes back a number of years and which has become increasingly bitter and divisive. In Miles v Hughes, unreported; SCt of WA; Library No 990086; 25 February 1999 I outlined the background to the dispute. The facts were also canvassed by Parker J in Hughes v Miles, unreported; SCt of WA; Library No 990009; 11 November 1998. I would adopt the facts as set out in both of these decisions without repetition. For the sake of completeness I also make reference to the decision in Hughes v Miles [2000] WASC 154. I will refer to the facts only so far as it is necessary to update the position as set out in these three earlier decisions.

3 Whatever the outcome of this action, it will not conclude the dispute between the parties. There is still on foot an action Hughes v Miles, CIV 1357 of 2000. The relief sought by the plaintiffs in that action (the defendants in the present proceedings) is as follows:

"(1) A declaration or direction that the first plaintiff is not required to tax his non-legal charges or non-legal charges of Corser and Corser and/or Corsers in respect of work done by all or any of them in connection with the estate of Mary Monica Urquhart and charged under s 98(5) of the Trustees Act 1962 either prior to settlement on 11 June 1999 or at any time;

(2) A declaration or direction that the first plaintiff is not required to seek taxation of his legal costs and/or costs and/or the legal costs of Corser and Corser and/or Corsers in respect of work done by all or any of them for the estate of Mary Monica Urquhart prior to settlement on 11 June 1999;

(3) A declaration or direction that the second plaintiffs or either of them are not required to tax or seek taxation of the non-legal charges of the first-named second plaintiff or the non-legal charges of Corser and Corser and/or Corsers in respect of work done by all or any of them in connection with the Mary Monica Urquhart Trust and charged under s 98(5) of the Trustees Act 1962 prior to settlement on 11 June 1999 or at any time;

(4) A declaration or direction that the second-named plaintiffs are not required to seek taxation of the legal costs of the first-named second plaintiff and/or the legal costs of Corser and Corser and/or Corsers in respect of work done by all or any of them for the Mary Monica Urquhart Trust prior to settlement on 11 June 1999.

(5) A declaration or direction that the defendant is not a party charged within the meaning of s 68A of the Legal Practitioner's Act relating to the said legal costs in respect of work done by the first-named second plaintiff, Corser and Corser and/or Corsers for or in connection with the estate of Mary Monica Urquhart as set out in par 2 above; a declaration or direction that the defendant is not a party charged within the meaning of s 68A of the Legal Practitioner's Act relating to the said legal costs in respect of work done by the first-named second plaintiff, Corser and Corser and/or Corsers for or connection with the Mary Monica Urquhart Trust as set out in par 4 above.

(7) Such consequential or other relief as may be appropriate.

(8) An order that the costs of the plaintiffs be taxed and paid out of the estate of Mary Monica Urquhart and/or the Mary Monica Urquhart Trust.

(9) An order that there be liberty to apply generally."

4 In the course of my reasons in Hughes v Miles [2000] WASC 154 I made the comment that, as I then understood the evidence, all trusts the subject of the application by the plaintiffs in CIV 1357 of 2000 had been fully administrated. Following on from that, I raised the question of whether or not the plaintiffs in that action were still trustees and therefore in a position to make application for directions under the Trustees Act. In light of those comments the plaintiff in this action felt compelled to raise in separate proceedings the question of whether or not the defendants are in fact in a position of trustees. That is the reason for these proceedings. They are in effect determination of a preliminary issue. The defendants take the view that even if the trusts have been fully administered and have terminated, they are nonetheless entitled to seek directions. However, they do not accept that the trusts have in fact terminated because, they say, they have not been fully administered.

5 As a reading of the earlier decisions will indicate, the genesis of all the problems between the plaintiff and the defendants were wills made by the parents of the plaintiff. These issues were resolved by a deed of settlement which was entered into between the plaintiff and the defendants and various parties who might have been entitled under various wills made by the plaintiff's parents. This deed was made 11 June 1999. To put the deed in context, it is appropriate to set out the recitals. These provide a snapshot of the dispute and the way in which it was settled. They read as follows:

"A. STANLEY ERNEST URQUHART ('Mr Urquhart') died on 30 March 1987 and probate of a Will alleged by the Executor to have been executed by Mr Urquhart on 18 November 1986 (the 1986 Will) was granted to the Executor by the Supreme Court of Western Australia on the 26 August 1987.

B. MARY MONICA URQUHART ('Mrs Urquhart') died on 15 November 1997 and probate of her last Will dated 21 October 1992 as varied by Codicil dated 22 October 1996 ('Mrs Urquhart's Will) was granted to the Executor by the Supreme Court of Western Australia on the 27 January 1998. The beneficiaries of Mrs Urquhart's Estate include the Claimant in the sum of FIVE THOUSAND DOLLARS ($5,000.00), the Little Sisters, the Society and numerous other beneficiaries not parties to this Deed.

C. By a Deed of Trust ('the Trust') dated 21 October 1992 between PEARL SIBLEY as Settlor of the one part and Mrs Urquhart and the Trustees as trustees of the other part certain funds were settled upon Mrs Urquhart and the Trustees. Various moneys, property and other assets were subsequently transferred into the Trust. The beneficiaries of the capital of the Trust include the Little Sisters, the Society and numerous other beneficiaries not parties to this Deed.

D. By the 1986 Will Mr Urquhart left the whole of his Estate to Mrs Urquhart in the event that she survived him and in the event that she did not survive him leaving his Estate to numerous beneficiaries [including the Claimant in the sum of FIVE THOUSAND DOLLARS ($5,000.00)].

E. By an earlier Will allegedly executed on 15 February 1984 by Mr Urquhart the Public Trustee was appointed as Executor and the whole of Mr Urquhart's Estate was left to Mrs Urquhart in the event that she survived him and in the event that she did not survive him leaving the whole of his estate to numerous beneficiaries [including the Claimant in the sum of FIVE THOUSAND DOLLARS ($5,000.00)].

F. By Wills dated 7 April 1972 Mr Urquhart and Mrs Urquhart left the whole of their Estates to each other with the survivor leaving his or her estate to the Claimant.

G. By Supreme Court Action 1159 of 1998 the Claimant brought an action against the Executor in his capacities as Executor of the Will of Mrs Urquhart and as Trustee of the Trust and against the various beneficiaries of Mrs Urquhart's Will and the Trust including the Little Sisters and the Society for specific performance of an alleged mutual wills agreement.

H. By Supreme Court Action No 1438 of 1998 the Plaintiff brought an action against the Executor for revocation of probate of the 1986 Will and for a declaration that at the time of execution of the 1984 Will Mr Urquhart lacked testamentary capacity.

I. The combined effect of the two actions is that Claimant is claiming that the Wills dated 7 April 1972 were Mutual Wills, and that inter alia at her death Mrs Urquhart was holding the whole of her Estate and the Trustees were holding all of the assets of the Trust on trust for the Claimant.

J. Further or in the alternative the Claimant as the only child of Mrs Urquhart claims as against the Executor of the Estate of Mrs Urquhart an entitlement to have proper provision made for her out of the Estate of Mrs Urquhart pursuant to Section 6(1) of the Inheritance (Family & Dependants Provision) Act 1972 as amended ('the Act').

K. The parties have agreed to settle the Claimant's claim on the basis set out in this Deed."

6 Against that background there appears as cl 3 what is described as the "Operative Part". The clause reads as follows:

"3.1 The Little Sisters shall receive the sum of THIRTY THOUSAND DOLLARS ($30,000.00) from the Estate of Mrs Urquhart within 14 days from the date of this Deed and shall thereupon assign the balance of their interests in both the Estate and the Trust to the Claimant.

3.2 The Society shall receive the sum of TEN THOUSAND DOLLARS ($10,000.00) from the Trust within 14 days from the date of this Deed and shall thereupon assign the balance of their interests in both the Estate and the Trust to the Claimant.

3.3 The Claimant shall discontinue Supreme Court Actions 1438 of 1998 and 1159 of 1998 with all parties bearing their own costs of those actions subject to the Executors and Trustees rights of indemnity or otherwise against the Estate and Trust assets.

3.4 The Claimant shall withdraw any caveats she has lodged against the Estate of Mrs Urquhart.

3.5 The provisions of this Deed shall be in full and final settlement of all claims by the Claimant against the other parties to this Deed and by the other parties to this Deed against the Claimant the subject of or arising out of the claims the subject of the Supreme Court actions and the Act.

3.6 As a separate covenant and agreement the Claimant releases and discharges the Little Sisters from all and any claims that she may otherwise have against the Little Sisters.

3.7 It is specifically covenanted and agreed that this Deed is between the parties named in this Deed only and shall not affect in any way the rights of any other beneficiaries of the Estate of Mrs Urquhart or the Trust. The Claimant acknowledges that she will need to make her own arrangements with those other beneficiaries for the transfer or assignment of any of their interests in the Estate or the Trust to her."

7 In line with the terms of the deed, the plaintiff in these proceedings discontinued her action against each of the parties named in the deed. These notices of discontinuance in both actions are dated 15 July 1999. That left the plaintiff to resolve the position with respect to the other beneficiaries named in the various wills who were not parties to the deed. This was done by consent orders made on 23 July 1999. The terms of these orders were as follows:

"1. The estate of Mary Monica Urquhart late of 34A Sunbury Road, Victoria Park in the State of Western Australia, widow deceased who died on 15 November 1997 is held by the first defendant on a constructive trust for the plaintiff.

2. The assets of the Mary Monica Urquhart trust as constituted by deed of trust dated 21 October 1992 are held by the defendant on a constructive trust for the plaintiff other than as to:

(a) the sum of $500.00 each for the eighth to fourteenth defendants inclusive;

(b) the sum of $10,000.00 for the twentieth defendant;

(c) the sum of $30,000.00 for the twenty-seventh defendant;

(d) unit 15, 48 Rutland Avenue, Victoria Park being the whole of the land contained in Certificate of Title Volume 437 Folio 120A for the third defendant; and

(e) 34A Sunbury Road, Victoria Park being the whole of the land contained in Certificate of Title Volume 1437 Folio 804 for the fourth to seventh defendants.

3. The first defendant transfer to the plaintiff the whole of the assets of the said estate of the late Mary Monica Urquhart.

4. The second defendant pay to the parties set out in paragraphs 2(a) to (c) the sums referred to therein from the assets of the said trust.

5. The second defendant transfer to the plaintiff the balance of the assets of the said trust.

6. The plaintiff's application be otherwise dismissed with no order as to costs."

8 At that point the plaintiff thought that all disputes in relation to her parents' wills had been settled. Each of the potential beneficiaries under these wills had been satisfied and she was the only person entitled to any of the assets held by the defendants. One might have thought the defendants, for their part, would have breathed a huge sigh of relief, washed their hands of further involvement in the affairs of the trusts by transferring any property they still had to the plaintiff and walking away without a backward glance. Unhappily, that is not what occurred. The plaintiff was unhappy with charges rendered by the defendants to the estate. She called upon them to submit their accounts to taxation. The defendants took exception to this request and hence the proceedings in CIV 1357 of 2000.

9 For their part, the defendants made an "interim" distribution to the plaintiff of some $60,000. However, they retained and still retain and amount of just under $21,000. Mr Hughes (the first defendant and the first-named second defendant) in an affidavit affirmed 7 November 2001 and filed in opposition to this application, at par 26 put the position as follows:

"At the present time I am holding the sum of $10,414.13 as at 28 September 2001 on behalf of the estate and the sum of $10,240.04 as at 28 September 2001 on behalf of the trust, together with a small sum in Corsers trust account of $306.79 as of today."

10 Although Mr Hughes says in this paragraph that he is holding these sums on trust for the estate and the trust, he goes on to claim that in fact these amounts are owed to the trustee as reimbursement for expenses incurred. That was part of the defendants defence to this application. They say they are not obliged to pay any money to the plaintiff, or, as requested in the originating summons, into Court, because the funds will be used to pay costs to which they are entitled. Although it was not entirely clear from the submissions, I understand, based upon this claim for reimbursement, that the defendants say they are in fact not holding any money on behalf of the estate or trust, but that they have a proprietary right to the funds which they hold: see Custom Credit v Ravi Nominees (1992) 8 WAR 42 per Owen J at 53; Octavio Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360 per Steven, Mason, Aitkin and Wilson JJ at 369 - 370. If that is so, how then can it be said that the trusts are not fully administered. If that is so, how can it be said that the trusts are not fully administered? That was an issue which was left unresolved both by the written and oral submissions.

"The said sums of $10,414.13, $10,240.04 and $306.79 are being held pending completion of administration of the estate and the trust. At the present time the estate and trust are not fully administered. The outstanding matters include:

(1) obtaining court declarations and directions as to legal costs and non-legal charges in proceedings 1357 of 2000;

(2) resolving any costs issues arising therefrom and attending to payment of trustees charges, solicitors costs and counsel fees;

(3) attending to the passing of accounts for the estate and the trust if required;

(4) finalising and lodging income tax returns for both the estate and the trust for the year ending 30 June 2001;

(5) preparing and lodging final income tax returns for both the estate and the trust;

(6) attending to final distribution."

12 Upon analysis there are in fact three grounds upon which Mr Hughes alleges that the trusts are not fully administered. First, there is the matter of the action brought by them against the present plaintiff in 1357 of 2000. Second, there is the question of passing accounts. Third, there is the question of income tax returns. Attending to final distribution can hardly be said to amount in and of itself to a reason why the trusts are not fully administered.

13 It is appropriate at this point to say something of the arguments put by the plaintiff. She says that she has called for payment to her of all funds held by the defendants in their capacity as trustees of either the estate or the trust. She says she is the only person entitled and therefore the money should be paid to her. She relies upon the principal in Saunders v Vautier [1841] EngR 629; (1841) 49 ER 282. She says that her interest in the trust property is vested and that she is sui juris and that she has directed the trustees to transfer trust property to her. That has put an end to the trust. In the alternative she relies upon s 78(h) of the Trustees Act. She says she has directed the trustee in writing to pay to her any property to which she is absolutely entitled and the result of that direction is that the trust has come to an end. She further relies upon s 42 of the Administration Act and says that pursuant to that section the court may make the orders sought in the originating summons.

14 Counsel for the defendants articulated a carefully reasoned and lucid argument in support of his clients' position. But with respect, at the end of the day the case put on behalf of the defendants did nothing more than obscure the true position. If it be the case that the defendants are entitled to the funds they hold for reimbursement of expenses they have incurred as trustees, then neither the estate nor the trust have any assets to which the plaintiff is entitled and the trusts must have come to an end.

15 If that is not the position and the defendants do hold amounts on trust for the estate and the trust, then by virtue of the plaintiff's request that the trust property be transferred to her, the trusts have come to an end. In other words the Saunders v Vautier principle applies. In my view, none of the matters which the defendants say are presently outstanding in any way affects the operation of that principle. It is difficult to see how the trustees would be entitled to any indemnity from the trust in proceedings CIV 1357 of 2000. If costs were awarded against them, or if they were successful in those proceedings and an award of costs was not sufficient to cover their costs and expenses, then it is possible that they may seek reimbursement from the assets of the trust. Those assets have passed to the plaintiff in these proceedings and doubtless an order could be obtained in those proceedings against the present plaintiff.

16 The accounts of the estate have been prepared and lodged. It is difficult to see what more the defendants need to do. There is nothing in the evidence to establish what further steps they must take or what costs are likely to be incurred. In any event, the mere fact that accounts have to be passed cannot of itself be a ground for saying that the trusts continue.

17 During the course of the hearings there was much discussion about the obligations of a trustee to prepare and lodge a final income tax return. Whatever may be the obligations of the defendants, it is apparent that the work that would need to be done to finalise the tax position of the estate and the trusts is minimal. But even if something must be done, that would not seem to me to alter the fact that it is open to the plaintiff to bring the trust to an end and that is what she has done. The fact that the defendants have taken no steps to comply with any obligations they may have under the Income Tax Assessment Act and to recover their proper charges for taking that action, is their responsibility. It cannot stand in the way of the trust coming to an end.

18 In all the circumstances I am satisfied that declarations ought be made in terms of par 1 and 2 of the originating process. I am also satisfied that an order ought be made in terms of par 4 and par 5. As I have indicated in these reasons, there seems some confusion on the part of the defendants in what capacity they are presently holding funds. While that dispute is resolved, the funds ought be placed in court. Clearly it would be inappropriate to order that they be paid to the plaintiff. But until the defendants make and substantiate any claim with respect to these funds, it is also inappropriate that they continue to hold them. Accordingly there will be an order in terms of par 4 and 5 of the originating summons.

19 Paragraph 3 deals with the question of accounts. During the course of her submissions counsel for the plaintiff indicated that the plaintiff may not wish to pursue this relief. Even if this part of the claim is to be maintained I am not at all convinced that it is proper to make such an order in the context of this application. I will hear the parties further in this regard.

20 As to costs, I indicated to both parties that these would be reserved. Subject to hearing from counsel, that is the order I will make.